Reducing Overseas Debts, Now Government Focuses on Domestic Credit Resources

In the effort to reduce debts and maintain domestic liquidity, the Government would be more oriented to obtaining credit from domestic financial resources. This was disclosed by the Ministry of Finance, Agus Martowardojo to the press after attending the cabinet meeting at the Presidential office on Monday (12/7).

Furthermore the Ministry stated that beside obtaining local credit the Government also planned to jack up income from internal revenues. The Government believed that borrowing strategy was not just a matter of maintaining liquidity, but also to make sure that foreign debts be lowered in terms of net or gross “So we are more oriented to domestic credit resources if such were needed at all” the Minister remarked.

About the state’s income, whether tax or non tax, the plan was to expand it. The Government strived to increase income; in this case from tax and non tax resources, and natural resources. Debt management was deemed necessary whereby the Government may get credit of longer period and easy term and conditions, and without any political interest of the creditors.

Data of the Ministry of Finance noted that the Central Government’s outstanding position up to Semester I-2010 reached Rp. 1,612,85 trillion or equal to US$ 177.57 billion. The Debt Service Ratio against GDP was posted at 26%.

By end of June 2010, the Ministry of Finance noted that the nominal emittence of State Bonds (SBN) in Rupiah denominations reached US$ 96.81 billion while debts in foreign currency totaled US$ 17.25 billion. The emittence of bonds were mainly in the domestic stockmarket. The utilization would be for financing old debts, reducing overseas dependency and developing the domestic money market.

Electricity Price Increase Poses As A Threat To Development of Modest Apartments

The Government might fail to attain target of development of Modest & Healthy Apartments and Rusunami Flats in 2010, resulting in inevitable backlog, which was predicted to swell up. Fuad Zakaria, Chairman of the Association of Indonesian Housing Developers (APERSI) disclosed to Business News in Jakarta on Tuesday (13/7).

As known, the target for modest and healthy apartments and Rusunami flats developments for 2009 was set at 160 thousand units, but in reality the realization was only 120 thousand units. Supposedly in 2010 the target was bigger than realization of 2009, i.e. around 160 thousand units. This was meant to catch up with backlog which came to 500 units. However, with the increasing prices of commodities it seemed difficult for the Government to meet target.

The unattained target of modest apartments and Rusunami flats development was on account of two factors:

Firstly, the slump of people’s purchasing power caused by increasing prices of certain commodities triggered by the electricity (TDL) price increase.

Secondly, the change of skim in credit provision for modest apartment or Rusunami ownership. The change of skim platform which still remained uncertain up till now made the banks hesitate to extend their loan. On the other hand developers were just as doubtful about building these apartments for the lower income group.

The Government’s decision to increase basic electricity tariff had triggered price increase of goods and services, particularly basic necessities which lowered people’s purchasing power, hence disabling them to buy houses. To the developers, electricity price increase means increasing prices of building materials, especially cement and iron. What made things worse was that although not related to electricity price, some natural building materials like stones and sand were moving up as well.

Under the circumstances the increase of prices of houses was just a matter of time. However, the degree of increase was not to be known yet, being subject to market situation in a week or two. One thing was sure: as far as prices of building materials were concerned, the prices set by the Government for modest apartments and Rusunami flats were no longer relevant and applicable.

Retail Bond, ORI007

The government would issue retail bond, ORI007 on August 2010. The government offered a coupon or yield of 7.95% for ORI007, explained the Director of Government Bonds of the Ministry of Finance, Bimantara Widyajala, on Tuesday (July 13, 2010). “The preparation process was at the stage of stipulation of yield by the Minister of Finance, which was decided at 7.95% a year”.

ORI007 would be offered to the public from July 15, 2010 to July 30, 2010. The public may order from 20 appointed selling agents. “The preliminary target of sales proposed by 23 selling agents to the Government was Rp. 5 trillions. The retail bond was scheduled to be issued on August 4, 2010.

ORI007 was a safe investment instrument because payment of principal and interest was guaranteed by the laws. And, the bond could also be traded in the Secondary Market. The yield was averagely above deposits yield offered by state banks, and it would be paid monthly with a fixed rate. “Some banks already used ORI as loan collateral and were potential to get capital gain, and there were also price quotes from the selling agents”.

New Entrepreneurs Feel The Psychological Impact of Increase of Electricity Cost

With the increase of electricity cost by 10-15%, which, in reality, the percentage is higher or 11-80% depending on the type of industry, it could reduce competitiveness and hamper investment, so, consequently, it was feared that some industries could not be able to continue production.

Franky M.A. Sibarani, Chairman of Forum of National Industries Association as well as Chairman of Indonesian Food & Beverage Association (GAPMMI), when contacted by Business News on Tuesday (July 13), stated that to businessman, the effect would be felt in the few coming months. At present, what happened was the psychological impact of this government’s policy, but the real impact would be felt in the next few months.

Traders already increased prices since they considered this as a good momentum near Ramadhan fasting month and Lebaran. At present, manufacturers not yet increased prices.

We will make a calculation in August. So, producers, especially those in the food & beverage sector, decided to increase prices around October (or after Lebaran) with range of price increase of between 10 and 15%.

This was due to the fact that increase of electricity cost in food and beverage industry reached 30-45%. Small and medium industries in the food & beverage sector would also face a similar condition.

For example, small and medium industries bought raw materials for packaging. There are no plastic packaging producers which are small-scale industries. Averagely, these producers are large and medium corporations. And, if these small and medium industries consume electricity of 1,300 VA, they would feel the impact of the increase of electricity cost”.

On Monday (12/7), a meeting with around 20 associations at the office of the Ministry of Industry was held. Minister of Industry, Hidayat, accommodated all requests of the associations, and would do a recalculation, which was to be discussed in the meeting of the Coordinating Ministry of Economy.

Chairman of NAMPA: The Effect of Meat Processing Industries Varied

Donatus Hartono, General Chairman of National Meat Processor Association Indonesia (NAMPA), told Business News that he not yet knew precisely about the effect of the increase of electricity cost on meat processing industries.

Theoretically, if cost of electricity increased 10%, and other additional electricity costs could be eliminated, it was expected that the effect on meat processing industries would not be too significant. Electricity consumption of meat processing industries varied. For small meat-processing industry that does not use large-capacity freezer, electricity consumption is low. But, for a large industry that uses large freezer to store stocks of raw materials and finished products in large amount, electricity consumption is high.

Prediction of Inflation Jump Up

The Government and Bank Indonesia are alarmed by the inflation upshot in the next 2 to 3 months due to strong driving factors, which are electricity price increase, price increase of food, new school term holidays, the fasting month and Idul Fitri Festivities. “In the next 2 to 3 months inflation would be soaring up”, this was disclosed by acting Governor of Bank Indonesia Darming Nasution in Jakarta on Friday (9/7).

Darming explained that impact of the electricity price increase will directly or indirectly be felt in the next few months. “Made worse by the new school term factor, the fasting month, Idul Fitri, even airline tariff has gone up which means that inflation would soar up high in the next few months. Moreover increasing price of food will have its impact as well. However, price of food is predicted to inch down again by Quarter IV-2010. The inflation would be within Bank Indonesia’s projection of 5% with 1% plus or minus variables. As far as the monetary policy is concerned, it is not felt necessary to take any drasticaction”.

Meanwhile Head of the Board of Statistics (BPS) Rusman Heriawan stated that electricity price increase would contribute 0.2% increase to inflation. This magnitude was still exclusive of price increase in goods and services as reaction of the business world to the increase of electricity tariff. “Let’s say there is room for them to increase tariff but they have to bear the consequences and the pricing structure would be proportional. Let’s not les the electricity price increase trigger multi effects. This is what we expect” Rusman underscored.

About inflation projection the Ministry of Trade Mari Elka Pangestu stated that the Government was ready to anticipate price fluctuation such as price of red chili that the target of 5.3% for 2010 could be attained. “We have to anticipate whatever the inflation level will be: higher or stationary, we will know it by July and August because there are other influencing factors to consider like new school term, the fasting month, Idul Fitri, and impact of electricity price increase which is estimated to be 0.2% on inflation. That’s the direct impact, what is unknown is the indirect impact. The direct impact is the impact on the electricity price itself”.

Indonesia Not Provided of Having Done Any Dumping Of Paper Products To Gulf States

Ir. H.M. Mansur, Chairman of the Association of Indonesian Pulp and Paper Producers disclosed to Business News that some Gulf states as members of Gulf Cooperation Council (GCC) namely Saudi Arabia Bahrain, Kuwait, Oman, Qatar, Arab Uni Emirates who made investigations as act of safeguarding for “other uncoated paper and paperboard” on Indonesia, had stopped doing so. Three Indonesian companies who were subject to GCC’ investigations were Sinar Mas Group, Riau Andalan Pulp & Paper, and PT Fajar Surya Wisesa.

Investigation was stopped as there were no sound evidence of any dumping done by Indonesia and injry suffered by the GCC paper industry. Through the Technical Secretariat of Anti Dumping (GCC-TSAD), GCC announced termination of the investigation although the Ministry of Trade have not received any formal notification from GCC. The reason for making an investigation was first demanded by 3 paper producers of the Gulf states namely Union Paper Mills, Aljazeera Paper, and Mill & Union Al Quwain Paper products, who suffered injury due to heavy inflow of imported paper. As investigations did not find any sound evidence, which disproved any dumping or injury, the investigation was stopped.

On the other hand the Indonesian Government through regulation of the Ministry of Finance No. 26/PMK/011/2010 dated February 1, 2010 (BN 7925 page 98-108) have imposed anti dumping tax (BMAD) on import of uncoated writing & printing paper from Finland, South Korea, India and Malaysia. What is meant by uncoated printing & writing paper are paper to write on or for printing, photocopy paper and paper for graphic gramatur purposes 40 – 150 grams. Except carbonizing base paper 20 rams and up, money paper, paper for making gibs planks, computer papers, aluminium base paper, decorative paper & carton (watermark) is included in tariff post 4802.55.90.00, 4802.56.90.00 and 4802.57.90.00.

Wakatobi May Be Developed Into National and International Tourist Destination

The Regency of Wakatobi is a cluster of islands in the Province of Southeast Sulawesi. Today Wakatobi is the world’s tourist destination, thank to the wonderful under water paradise it is endowed with. The underwater corals and bio life of Wakatobi is the most abundant in the world. More than 90% of bio oceanic reefs species of the world are found in Wakatobi, which number 850 species, compared to the Carribean waters which has only 30 species, and the Red Sea 300 species.

The Regent of Wakatobi, Ir. Hugua stated that the Matohara airport had the capacity to accommodate only small aircrafts with maximum 30 passengers, while other means of transportation and infra-structures were still infrerior. Other facilities needed to be upgraded as well, and not less important was development of human resources to support tourism development program.

The Regent urged Central Government to facilitate international scale event in Wakatobi, not just Bali. Events under the theme of Go-to East must be enhanced such as Sail Banda, Wakatobi Festival, Festibal Raja Ampat etc. The challenge now is how to foster synergic action between the central and Regional Government, how to build adequate airports and infra-structure and to organize promotional events abroad.

In response to the question, Vice Chairman of Commission X of Parliament, Abdul Hakam Naja said that Wakatobi had the potential to be developed into national and international tourist destination after Bali and Yogyakarta, because of its underwater beauty. The Parliament will encourage related Ministries to develop infra-structures and tranpsoratation facilities, overseas promotion to sell Wakatobi etc.

Assuming that the Wakatobi airport is expanded and be wide enough to accommodate wide-body 737 aircraft, other supporting facilities need to be build as well, such as hotels, restaurants, souvenir shops etc. On the other hand the local communities must be prepared to display cultural shows, culi nary service, handicrafts, etc in addition to other tourist attractions like historical tourism and natural tourism.

The Prospect of Syariah Bond

Head of the Stockwatch Market and Financial Board Fuad Rahmany stated that Syariah based corporation Bond is highly potential for wider emitence because of its high profitability.

The number of prospect buyers of Syariah Bond at home and abroad made the Government plan to emit more bonds because of its profitability for the Government. Furthermore increasing emitence might accommodate the market demand for sukuk at home and abroad.

“In fact today the domestic potential market is enormous, there are Syariah banks with numerous branch retails including pension funds and insurance. However, the problem now is not a matter of demand but shortage of supply”. Fuad was quoted as saying (6/7) “today Indonesia is not comparable to other Muslim populated states like Malaysia where Syariah develops but the conventional banks don’t. it’s because Indonesia is just a beginner in Syariah banking. We are not in the position to develop yet”.

Control Inflation Rate

President Susilo Bambang Yudhoyono instructed his ministers to monitor and control the magnitude of inflation at home, in response to issues of rising price of some basic commodities. “We must be responsive and take the right measures on the increasing prices of some commodities because they concern the need of the majority people. Inflation in particular, is the one thing we must focus on and properly manage”, the President remarked during limited cabinet meeting involving the domains of politics, law, economy and people’s welfare on Monday (5/7).

The President had been keeping up with the issues of price increase while on an overseas trip visiting three counties, namely Canada, Turkey and Saudi Arabia on June 24 to July 4, 2010 during which time he maintained communication with Vice President Boediono.

In this statement President SBY emphasized on the importance of controlling inflation, to consider that the economic platform adopted by Indonesia was positive synergy between market mechanism and Government’s regulation, so all of the related Government’s executives must monitor price movements “It becomes imperative that we observe price fluctuations, especially of commodities that are needed by the people” the President underscored.

At the same opportunity, the Minister of Finance, Agus Martowardojo stated that the Government was ready to anticipate inflation pressures on Semester II through sufficient supply of basic necessities at the market. In this case the Government was fostering coordination to smoothen pipelining of basic commodities. “We have to be on the alert, because by Semester II inflation pressures seems inevitable”, the Minister remarked.

To maintain sufficient procurement of basic necessity, and safeguard distribution, a number of institutions will be involved, among others the Ministry of Trade, the Ministry of Agriculture, and the Board of Logistics Management (BULOG). All these efforts were to ensure product procurement in all of Indonesia and convince 160 cities that stock of basic necessities were sufficient. Meanwhile, to anticipate inflation, the Government will coordinate efforts with Bank Indonesia whereby increase of prices can be maintained to be at the targeted rate.

Revised Map of Earthquake Zones Signed

The Latest revision of earthquake zone map, as part of the SNI 03-1726-2002 on the Procedures and Techniques of Quake Resistance for Buildings and Constructions have been signed.

In fact the Ministry of Public Works already had the SNI Quality Standard since 2002 for earthquake Zoning. However, with the geological movement of underground fragments, the zoning has to change accordingly.

The Minister of Public Works Djoko Kirmanto stated that the quake-mapping was the initiative of the Research & Development Center for Settlements of PU in collaboration with the related institutions. For that matter, Team 11 was formed in 2009 to draw a revised zoning map. The Team consisted of the Center of R&D for settlements, Center of R&D for Roads and Bridges, the Bandung Institute of Technology (ITB), the Center of Geology, t\The Indonesian Council of Science (LIPI), and BMK.

Indonesia’s map of quake zoning has been renewed based on the latest seismic data and up to date research findings of seismo-technology in Indonesia, which has been analyzed with reference to model of 3-D based on the applicable international standard. For example for International Building Code (IBC-2009) the probability assumption was excess of 2% for serving 50 years of building age (a period of repeated quake 2475 years) on short term period T=0.2 seconds and period T=1 second as basis for determining spectra response, of acceleration at foundation stones. To accommodate planning needs, with 10% of quake risk for serving 50 years and 100 years building’s life, a quake zoning map has been attached as well based on repeat period 475 years and 950 years, using the same format as quake zoning map of 2475 repeat period.

The revision of Indonesia’s quake map has been carried out by updating of quake epicenter relocations, and improving geometry of quake zones by tomography, identification of parameter of quake source, and creating software to be installed at website. After revision of this quake map, there would be revisions of regulations for SNI standard for steel, concrete and wood through formation of similar teams. Soon the outcome would represent many aspirations.

As part of the related quake activities, it is felt necessary to conduct further research on fragments that are suspected of being active, but whose characteristics and seismic parameter are still not clear yet. And to install more GPS on cesar active zones to program and to conduct log term research on data analysis and processing on strong motion for the development of Indonesia’s attenuation, and to identify the impact of any basin structure on quake vibrations in settlement areas. Follow up of this mapping is being prepared. Circular Letter of the Ministry of Public Works on nation-wide application especially for guidelines in infra-structure planning and planning of quake-proof settlements.

Credit Target of State-Owned Banks To Be Revised

The Minister of State Owned Companies Mustafa Abubakar planned to revise credit target of four State Owned Banks, i.e. BEI, BNI, Mandiri and BTN. These four Government banks have the potential to grow by more than 20%.

Of the four banks, the growth of bank credit of Bank BTN is lower than that of Bank Mandiri and BRI “but the increase I steep” Mustafa remarked without mentioning the precise target.

In line with credit growth, Mustafa was expecting that credit interest could be downpressed. Some Banks were now giving credit below 10% for reliable target market. It was expected that state owned banks could lower interest to a single digit level, around 9%. “But not to low either, lest the banks could not breathe” Mustafa further remarked.

Mustafa was certain, lowered bank interest could not cause downturn of dividend in banks. Lower interest would hopefully encourage banks to make expansions. Banks would also be more competitive in business.

Separately, Vice President Director of Bank Mandiri Riswinandi, stated his viewpoint that the growth of Bank Mandiri’s credit level could reach that target. “We are analyzing the possibility to go above 20%. Mustafa concluded.

Chairman of the Association of Indonesian Employment Agencies (Himsataki) Questions Regulation No. 7 of The Ministry of Labor and Transmigration

Placement operators of Indonesian private workers (PPTKIS) protested issuance of Regulation of Ministry of Labor and Transmigration No. 7/MEN/V/2010 on Indonesian Workers Insurance which is suspected as serving certain external interest. The new regulation replaced the previous regulation Permenakertrans No. 24/MEN/XII/2008 of insurance for Indonesian workers which was used to regulate provision of protective insurance from pre-placement to post placement of workers abroad.

According to the Chairman of HMSATAKI Yunus M. Yamani, the amended Regulation only touched on figures and amount of insurance value, but the essence of protection was not there.

The new regulation did not exactly give any protection to Indonesian workers who apparently worked overseas moreover any protection of insurance was never received by workers so far.

Supposedly the Minister of Labor and Transmigration observed the law more thoroughly especially about the motives behind it, because as known there were still a good number of problematic workers whose cases were still unsettled supposedly the new law did not protect the interest of certain business sector.

“I only see the change of figures in Permenakertrans No. 07/MEN/V/2010, i.e. in Article 10 it was stated that the insurance company has a deposit of Rp. 500 million and the Head of consortium has Rp. 2 billion”, Yunus remarked.

Article 8 of the Regulation stated that Chairman of the Consortium of Insurance companies were required to posses own capital of at least Rp. 500 million, having the biggest asset among consortium members which totaled up around Rp. 2 trillion and commanding over a network of branch offices in at least 15 embarkation points.

The previous regulation, Permenakertrans No. 23/MEN/XII/2008 did not regulate deposit of guarantee and chairman of insurance consortium, while the number of branch office required was only in 5 embarkation points.

Furthermore Yunus added that protection for Indonesian workers during their stay overseas was not regulated in the new Regulation, meaning that there was no significant change in terms of protection of Indonesian workers.

Supposedly thousand of claims of Indonesian workers that are not settled be settled first, then only the Minister of Labor and Transmigration could work on the revised Regulation.

Himsataki also sees that may statements of Minister Muhaimin which are not being realized, such as withdrawal of workers’ placement permit (SIUP) form 22 PPTKIS up till now none of the Regulations are cancelled, without any explanation at all.

A notable case are Indonesian migrant workers who are returning from Hong Kong and Taiwan, who are supposed to undergo an exercise plan (an experimental procedure) to exit through normal gate upon disembarking at the Soekarno Hatta International airport Jakarta it turns out that this plan is not being realized either.

Operators of workers placement are only hoping that the Ministry of Labor and Transmigration as the highest authority in labor affairs will prove his words and actually put stern sanctions for violators of regulations and breakers of the affective law.

Up till now, the Minister of Manpower and Transmigration have not answered questions of the press on the issuance of the new Ministrial Regulation on workers insurance. Presently Minister Muhaimin Iskandar is accompanying President Susilo Bambang Yudhoyono on an official visit to Turkey.

To Review The Present Situation Toward Abolishing Child Labor In The Future

In the endeavor to enhance abolition of child labor, the ILO office in Jakarta in collaboration with JARAK, a network of national volunteer group plan to conduct a National Seminar on Child’s Labor where by to evaluate the progress made in Indonesia in the effort to abolish child labor and to identify further steps needed.

This national seminar will be carried out in coordination with the Ministry of Manpower and Transmigration and the National Board of Development Planning (BAPPENAS). This seminar under the theme of “Reviewing the Present Condition Toward Abolishing Child Labor in the Future” will be held on Monday and Tuesday, 5-6 July 2010 at Hotel Borobudur Jakarta.

The important issues to step up efforts to abolish child’s labor in Indonesia, and fostering coordination will be discussed in this seminar. This Seminar is held in line with the World’s Abolition Day of Child Labor on June 12.

In tandem with the World Cup football event, the theme of this year campaign is “Go for the Goal End Child Labor” The World’s Campaign on Abolition of Child Labor is focused on national and international endeavors to accelerate abolition of child labor.

The World’s Day to go against child labor practices is also being commemorated in some Indonesian provinces. ILO, in collaboration with Indonesian local partners conducted seminar events in Manokwari, West Papua, and in Jayapura, Papua on 20\9-30 June; the event will continue on 7-8 June to be closed with various events like rally, seminar, and innauguarion of children’s activities in Ambon in 13 and 15 July 210.

As known, since the year 2000 there has been important development in the effort to abolish child’s Labor in Indonesia. Problems of child labor, and the need to anticipate the worst in child labor is now being ingrained in the main policies as well as in policies and programs at regional level.

There has been notable progress as well in the effort to meet Government’s target to conduct Nine Year Mandatory Elementary Education for all children which will contribute significantly to abolishing Child’s labor. Other breakthroughs being made is that the Government has made minimizing of child labor as the main objective of Conditional Direct Cash Aid program or better known in Indonesian language as The Program of Hopeful Families (P-1 H).

In spite of the many progress attained, the problem of child labor is still prevalent in Indonesia. A national survey on child labor carried out by the Indonesian Central Statistics, in collaboration with ILO on August 2009 unveiled that there are around 4 million children of 5 to 17 years of age who are economically active, and 1.7 million of them are categorized as child labor.

9 Out Of 24 Toll Road Investors Have Submitted Financial Report

Nine out of 24 “stagnated” projects had submitted financial report as part of an evaluation process carried out by Board of Toll Road Management (BPJT). The 9 investors were investors of Trans Java and non-Trans Java toll projects. This was disclosed by the Ministry of Public Works, Joko Kirmanto in Jakarta on Friday (2/7).

The nine investors are PT Pejagan Pemalang Toll Road undertaking Pejagan-Pemalang toll section, PT Marga Setiapuritama ybdertajubg Senarabg-Batang toll section, PT Trans Marga Jateng undertaking Semarang-Solo toll section, PT Marga Hanurata Intrinsic undertaking Kertosono-Mojokerto toll section, PT Marga Nujyasumo Agung undertaking Surabaya-Mojokerto toll section, PT Marga Lingkar Jakarta undertaking the Jakarta Outer Ring Road W2 North, PT Marga Sarana West Java undertaking Bogor Ring Road, PT Translingkar Kita Jaya undertaking Cinere-Cimanggus toll sector, and PT Jasa Marga (Persero) undertaking Gempol-Pasuruan toll section.

Apart from evaluating financial report to evaluate investors capability, the Ministry of Public Works will also evaluate investors’ business plan to test feasibility. However, so far only two investors have submitted their business plan, namely PR Lintas Marga Sedaya undertaking Cikapmek Palimanan toll section, and PT Pemalang Batang undertaking Pemalang-batang section.

Evaluation of toll road project undertakings are meant to accelerate development of toll roads which had been stagnated due to various hindrances in terms of land procurement of investors’ financial capacity. Evaluations are made on the basis of Regulation of the Ministry of Public Works No. 0+/PRT/M/2010 on the Guidelines of Toll road management evaluation, in which it is stated that in the event that toll projects undertaker (investor) have signed the report evaluation approval, investors are obliged to submit all the required data. The time frame for provision of supporting data of evaluation, i.e. 90 days at the latest after signing of report. “In spite of the Ministrial Regulation stipulating 3 months time, I hope that data needed for the evaluation could be submitted to the Ministry of Public Works this month” Djoko underscored.

Previously Vice Minister of Public Works Herman Dardak, stated that the aim of evaluation over 24 toll road sections was not to suspend contract with investors, but to detect core of problem including solutions, so that toll roads that are bound to contract may roll once more. Cancellation of contract is but the last choice.

Inflation in June 2010 at 0.97%

Prices of various kinds of commodities in June 2010, in general, showed in increase. Based on observation of Central Board of Statistics (BPS) in 66 cities in June 2010, inflation reached 0.97% or there was an increase of Consumer Price Index (IHK) from 118.71 in May 2010 to 119.86 in June 2010. Calendar-year inflation (January-June) 2010 reached 2.42% and year-on-year inflation (June 2010 from June 2009) reached 5.05%.

Inflation happened due to increase of prices as shown by increase of indices of food by 3.20%; ready-to-eat food, drinks, cigarettes, and tobacco by 0.41%; housing, water, electricity, gas, and fuel by 0.23%; clothing by 0.93%; health by 0.06%; educations, recreations, and sports by 0.06%; and transportations, communications, and financial services by 0.15%.

Commodities which prices increased in June 2010 were, amongst others: red chili, rice, purebred chicken meat, read onion, red pungent chili, gold jewelry, air transportations, purebred chicken eggs, rice and side dishes; fuel for household uses, string beans, kangkung (a kind of vegetable growing in water), potatoes, white cabbages, green chili, darker colored mustard greens, carrots, oranges, rice porridge, clove cigarettes, filter clove cigarettes, tariff of house rent, wages of non-supervisor construction workers, and tariff of drinking water supplied by drinking water company or PAM. While, commodities which prices decreased were: refined sugar, gasoline, and fresh fish.

Groups of commodities that gave contribution to inflation in June 2010 included: food 0.73%; ready-to-eat food, drinks, cigarettes, and tobacco 0.08%; housing, water, electricity, gas, and fuel 0.05%; clothing 0.07%; educations, recreations, and sports 0.01%; and transportations, communications, and financial services 0.03%. While, health category in June 2010 was relatively stable.

Scooter-Matic Market Demand Projected to Increase By More Than 50% in the Next Two Years

In the next two years it was predicted that the scooter matic (scootic) market could grow by more than 50%. Meanwhile the market of premium type of motorcycles was still small, i.e. less than 1%, the volume being around 8 thousand units only. With a total market encompassing 6 million units per month, all of the motorcycle producers strived to grab a 1% market share each month.

Gradually, the domestic automotive industry was developing toward better capacility to uplift technological mastery, production capacity and manufacturing of automotive components. One measure taken by producers of two-wheel automotive was to develop designing technology which would eventually lead to total mastery of motorcycle manufacturing as a whole.

According to the Marketing Director of PT AHM Julius Asian in Jakarta after lunching the Honda PCX (Personal Confort Saloon) which was imported from Thailand, this Honda PCX was exported worldwide. Chief Engineering Honda Research Southeast Asia Fuminori Kamemizu stated that PCX was manufactured in Thailand and thereafter marketed to Japan and European states.

Meanwhile, Indonesia was the four the country which was the target market, and estimatedly as per July this year, the Indonesian market would absorb 250 units of Honda PCX each year. In Europe, President Director PT AHM Yusuke Hori, formerly predicted PCX per year. Surprisingly, this PCX, which was the first scootic based on injection technology, scored sales of 21 thousand units.

Kamemizu added that, with 125 cc power, PCX became a model which was expected to become a global product to penetrate the whole world. In Indonesia, this type of motorcycle only needed to make adjustment of fuel; in Thailand the fuel used was Octane 91, in Indonesia it was Octane 88. This did not imply that additional part of component was needed, all it takes was just to use the standard oil-fuel used in Indonesia.

Yamaha Launches the Xeon

Separately Yamaha Motor Kencana Indonesia (YMKI) previously also launched the same type of motorcycle namely the scootic Xeon 125 cc. According to the statement of YMKI Dyonisius Beti sometime ago, it was expected that sales of this scootic with new type of engine might reach 20,000 units each months.

In conclusion, as from this year on motorcycle manufacturers were striving to strengthen the domestic market by producing easy-to-ride scooters which were expected to strengthen competitiveness at home in Indonesia; on the other hand competence of the human resources were also to be upgraded and the technology would be advanced as well.

Government Urges the Tobacco Industry to Maintain Industrial Relationship

The Minister of Manpower and Transmigration Muhaimin Iskandar expected workers and business people in the tobacco industry to maintain favorable industrial relationship to anticipate negative impact of the plan to restrict use of addictive elements by WHO.

The Government expected workers of the tobacco industry to prioritize on partnership with business people and the Government to maintain harmonious, dynamic, and fair relationship. This partnership was needed to overcome labor problems related to the tobacco industry.

This was set forth by the Minister upon witnessing the Declaration of the Formation of Asian Tobacco Forum conducted by the Alliance of Indonesian Tobacco Community (AMTI) in Jakarta this week. This declaration was attended by 7 nations, i.e. China, India, Thailand, Korea, Malaysia, the Philippines and Indonesia, combined under the guidance of International Tobacco Growers Association (ITGA).

In his welcoming message, the Minister of Labor and Transmigration expressed his high appreciation for the formation of the Asian Tobacco Forum to meet the global challenges faced by the industry.

The Government was fully aware of the complicated challenges faced by the tobacco industry. On the one hand the tobacco industry tobacco was an important source of income and labor facilitator. In Asia, tobacco even helped to enhance advancement of the people and national economic growth.

On the other hand, the tobacco industry was having great challenges with the stipulation of WHO on the Framework Convention on Tobacco Control (FCTC) which regulated use of content of tobacco products for people’s health.

Therefore the Government encouraged workers and business people involved in the tobacco industry in Indonesia to maintain a conducive industrial relationship whereby to minimize the negative impact of the restrictions on additive elements in tobacco stipulated by WHO.

In regard to the formation of the Asian Tobacco Forum, the Minister of Labor and Transmigration expected that the tobacco industry and the tobacco community in Asia might be able to meet all challenges rightly and effectively. This forum was expected to bear a balanced output between the development of tobacco industry, labor opportunities and people’s health.

The role of this international forum was expected to come up with solutions to anticipate the impact of great challenges faced by all involved in the tobacco industry, especially in Indonesia.

Performance of the Board of Deposit Insurance

Since 2005 the Board of Deposit Insurance (LPS) had been liquidating 27 banks. These banks whose permit had been withdrawn were accused of moral hazard of the proprietor and management, who happened to be their own relatives. “Since 2005 we have liquidated 26 BPR’s and 1 bank (Bank IFI) All are cases of moral hazard of the proprietor and management, they are all relatives” this was disclosed by Chairman of the Board of Commissioner of LPS Rudjito in Jakarta (26/6).

Rudjito stated that in liquidating, LPS was only given one night deadline by Bank Indonesia “Bank Indonesia withdraws bank permit and IPS was give one night time to follow up the procedure be liquid dated or bail-out. Bank Century was an example. Rudjito stated that based on the considerations and data given by BI the bank owned by Robert Tantular was in the end being bailed out.

As with IFI bank, according to Rudjito further explained that all reconciliation and verification for Bank IFI has been 100% completed. “The case of Bank IFI has been settled and the verification 100% completed. Now they only have to wait for the liquidation team to run the auction, which has come to the stage of finalization. In case of BPR, they need not have to spend great expenses except for BPR Tripicana, which absorbed more than Rp. 300 million. For comparison, fund for Bank IFI did not reach Rp. 200 billion”.

Government Procures Agricultural Machinery of PTPN XIII To Support Program of Domestic-Product Utilization Enhancement

The Government planned to facilitate agricultural machinery to fulfill domestic need especially for PT Perkebunan Nusantara (PT PN) XIII in west Kalimantan region. Subagyo, Director General of Domestic Trading, the Ministry of Trade disclosed to Business News Friday (25/6). The plan to procure such needs was to support the Program of Domestic-Product Utilization (P3DN).

“On the one hand we have our industry and the kind of product being produced are exactly those needed by companies, which are State Owned Companies (BUMN). Supposedly the BUMN who require the products need not to import them because they are being locally produced.

We are trying to facilitate the need and connect producer and buyer. We will talk this matter over with the Ministry of Trade and Ministry of Industry who know about the details of the kinds of agricultural products needed for the project.

We want to make sure that products which are produced at home need not be imported, as long as the local industry need them and this will have the impact of strengthening product competitiveness. The P3DN enhancement project is important because people’s import minded attitude and eventually use of domestic products may create new job opportunities.”

So far the need for agricultural machineries such as sickles and palm pluckers have been notably high such as sickles and palm pluckers, the demand estimated to be thousands of units. So far users have been importing such instruments from overseas, like China.

In fact the need could have been covered domestically. If not all, at least half of them could be fulfilled at home. So far farmers have been fulfilling one hundred percent of their need form import.

Based on Regulations of the Ministry of Industry: Permenperin No. 49/M-IND/PER/5/2009 on the guidelines of use of domestic products and procurement of goods and services, agricultural machines are among the 21 groups of goods and services which are produced domestically. Therefore, by this regulation, if there were any provider of goods and services who offer goods with 40 percent local content, they would be given price preference at least 15% above price of imported products apart from import tax. For this reason it becomes mandatory to prioritize on domestic products.

CONSUMPTION OF DOMESTIC GAS CONTINUES TO INCREASE

Consumption of natural gas continues to increase each year, especially in the industrial sector in the process of down ressing production cost and enhancing machinery efficiency whereby to be more competitive against other nations. The reason of converting fuel energy (from Kerosene) to gas is that the price of gas is highly competitive, relatively stable and environmentally friendly.

In the last 5 years, total consumption of gas has been continuously increasing. In 2005 gas consumption reached 3,514 MMSCFD; one year later it went up to become 3,716,1 MMFCFD and in 2009 it was posted at 4,233.7 MMFCFC. Increased consumption of gas occurred especially in the sectors of fertilizer, electricity, and other industries.

In the fertilizer industry, gas consumption in 2005 was posted at 539.1 MMFCFD. In the electricity sector, the gas consumption of 2005 reached 480.1 MMFCFD, up to the level of 502.3 MMFCFD in 2007 and up again to become 634.3 MMFCFD in 2009.

As with other industries, in 2005 the gas consumption was at zero point, in 2007 it went up to the level of 128.7 MMCFD and in 2009 it increased to become 494.2 MMCFD.

The national strategy of gas management is to prioritize domestic consumption of gas, with consideration of infrastructure building, economic magnitude value of gas, and prioritizing in the following order effort to increase production output of oil-gas, using gas as raw material for fertilizer, using gas for power generator, using gas as fuel or raw materials for other products.

To promote efforts of gas distribution from source of supply to users, the Government enhances development and strengthening of pipelining network and distribution in the operational zones of PT National Gas Company (PT PGN) consisting of Service Center I in Western part of West Java, Eastern part of West Java, Notrhern part of Sumatra, and Sumatra-Java transmission.

Today the main projects underway are completion of the Bojonegara-Serpong distribution line, development of CNG station, development of Medan distribution network and development of Liquid Natural Gas Receiving Terminal in West Java and North Sumatra.

Independent Consumer-Protection Bodies May Use YLKI to Frighten Producers

The Indonesian Consumer Protection Foundation (YLKI) fears that some public sponsored consumer Protector organizations (LPKSM) would use YLKI as an instrument to frighten or intimidate companies. And yet their job is just to report on any worry among consumers about the circulation of certain products which one certified and not appropriate in trend of content or labeling.

Suahartini Hadad, Head of the National Board of Consumer Protection (BPKN) and the Board of Development, Indonesian Consumer Protection Foundation (YLKI) disclosed to Business News after an interactive dialogue at the Indonesian educational Safari for Consumers under the theme of “The Strategy for Making Intelligent and Criticizing Consumer”.

Institutions which handle consumer protection are not too numerous in Indonesia. YLKI, encompassed a wide in big cities like Jakarta. YLKI upholds a high ethics, and this is what keeps its integrity high and its capability well guaranteed. All over the world consumer protectors uphold high ethics and never will they collaborate with any company no matter if it is in the educational sector of publicizing.

“We shall not accept bribery in any form. To complain about a product, for example bottled tea, The company is supposed to pay just one bottle as compensation, but often it happens that the pay in two or more bottles. We do not permit companies to replace by 10 crates of bottled drink however, such is permissible for consumers.”

Often what they benefited was not promotion they deliver beverage products and resell them. They deliver something which made them feel disadvantaged; in case of 1 or 2 crates it is not problematic, but if it s more then one crate we have our objections, such cases are often used by consumer protection foundations.

We anticipate such that it should not happen, so YLKI is only in Jakarta. There are also consumer Protectors who collaborate with us. So the public-sponsored consumers protection institutions and YLKI to respect such ethics. They become our network and run the same line of business as us. Many LPKSM are being established but they tend to scare producers like saying that certain products are expired or accuse shops of putting products at the wrong places. In once occurred in Surabaya, but consumer pro tectors are not supposed to do such practices. To withdraw products, the authority is in the local authorities, and the police. There is no reason for LPKSM to frighten traders.

Five Regions to Be Listed as Exclusive Economics Zones

The Coordinating Minister of Economy Hatta Rajasa informed that 48 regencoes and cities were applying for the position of Exclusive Economic Zone (KEK) to the Central Government. However, of the 48 Regencies and cities only 5 were qualified to become KEK in accordance with the National mid term Development Plan (RPJN) while the rest were rated as not meeting the requirements. Government’s priority was set for 2014. “At least 5 KEK approved applicants are now being evaluated to scheme up the Strategy and Grand Design of the project” Minister Hatta disclosed this at the Ministrial Office on Tuesday (22/6).

As with the 5 regions to be prioritized as candidates for KEK, Hatta did not mention the names yet but one thing was sure the KEK would be evenly distributed over western, central and eastern Indonesia.

KEK would be developed on the basis of premium commodity in the respective areas. Furthermore, KEK would consist of clusters which would be developed into bases of growth.

About the chances of Merauke in Papua to be included as KEK, Minister Hatta was in no condition to confirm yet. Meanwhile Batam would not be included again in the list of 5 new KEK to be set up. Merauke, according to Hatta, was already included in Presidential Insturction I/2010 on acceleration of Merauke Industrial and Food Estate (MIFE).

Five Regions to Be Listed as Exclusive Economics Zones

The Coordinating Minister of Economy Hatta Rajasa informed that 48 regencoes and cities were applying for the position of Exclusive Economic Zone (KEK) to the Central Government. However, of the 48 Regencies and cities only 5 were qualified to become KEK in accordance with the National mid term Development Plan (RPJN) while the rest were rated as not meeting the requirements. Government’s priority was set for 2014. “At least 5 KEK approved applicants are now being evaluated to scheme up the Strategy and Grand Design of the project” Minister Hatta disclosed this at the Ministrial Office on Tuesday (22/6).

As with the 5 regions to be prioritized as candidates for KEK, Hatta did not mention the names yet but one thing was sure the KEK would be evenly distributed over western, central and eastern Indonesia.

KEK would be developed on the basis of premium commodity in the respective areas. Furthermore, KEK would consist of clusters which would be developed into bases of growth.

About the chances of Merauke in Papua to be included as KEK, Minister Hatta was in no condition to confirm yet. Meanwhile Batam would not be included again in the list of 5 new KEK to be set up. Merauke, according to Hatta, was already included in Presidential Insturction I/2010 on acceleration of Merauke Industrial and Food Estate (MIFE).

Investors Still Careful about Building Railway Projects worth US$ 3.14 billion

Up till now there has been no application or offer to collaborate from any investor to nine railway building projects worth US$ 3.4 billion or Rp. 2.8 trillion offered by the Indonesian Government; the collaboration will be on the basis of public private partnership. It appears that foreign investors would need longer time to make field survey and studies of the projects.

The nine railway projects which was being offered at the Asia Ministrial Conference and Investment 2010 consist of : route Rumbang – Samba – Nangga Bulk at the Province of Central Kalimantan, which will be used for transportation of natural resources products; the project is worth US$ 1.86 million.

Other projects being offered are the monorail project for mass transportation in Padang, West Sumatra, worth US$ 465 million the railway project of Maratuhub - Kalipajak in Balikpapan, East Kalimantan, for coal transportation worth US$ 484.2 million.

Furthermore there would be the railway project covering Kundangan – Kumai in Central Kalimantan for transportation of natural resources worth US$ 890 million. And then there is the railway route covering Kuala Kurun – Palangkaraya – Pulau Pisang – Kuala Kapuas in Central Kalimantan for transportation of natural resources worth US$ 2.07 million.

Not less important is the monorail project for mass transportation in greater Jakarta worth US$ 475 million which would be included in the PPP scheme by request of PT Jakarta Monorail as developer. In Bandung, West Java, there will be building of Gede Bage railway station for mass transportation worth US$ 121.1 million.

Furthermore there is the Bengkuang Lupak Dalam railway in Central Kalimantan, which was used for coal transporation at the value of US$ 1.31 million, and the Puruk Cahu – Bengkuang in Central Kalimantan, which will be used for transportation of natural resources, at the value of US$ 700 million.

About that Double Track train project and the Double Double Track from Manggarai to Cikarang, in collaboration with the Japan International Cooperation Agency, it was reported that the process has not been running smoothly because PT Kereta Api is still having difficulties in land clearing especially in Jatinegara district where people demand high payment for land clearing.

As with the Double Double Track Program, the Government planned to re-route the track by shifting is 5 meters aside from the original plan. If PT Kereta Api was having difficulty in land clearing, the route would be change. Soon the project would be included in to Pacage A of the Double Double Track, namely Manggarai – Jatinegara route which was worth US$ 24.4 billion, Tunjung Herawan, Director General of Railway was quoted as saying.

Apart from Package A of DDT, there is the package B1, which is electrifiction and signaling on the Bekasi Cikarang section worth Yen 21.6 billion (around Rp. 2.1 trillion) and package B2 which includes DDT of Jatinegara Bekasi worth Yen 12.6 billion (Rp. 1.2 trillion).

Secretary General of the Indonesian Businesspeople Association (APINDO): INVESTMENT IS NO COMPENSATION TO RENEGOTIATION FAILURE OF TARIFF POST

The Government was rated as having failed to renegotiate 228 tariff post which had the potential to bear loss due to implementation of ASEAN-China Free Trade. As compensation, the Government of China promised to invest in all sectors in Indonesia whereby to maintain a well balanced trade relationship.

As reported, in April 3, 2010 a 10^th Indonesia-China joint commission meeting was held in Yogyakarta. Each delegation was led by Indonesia’s Ministry of Trade Mari Elka Pangestu and China was represented by Chen Deming. In that meeting the two countries agreed that the two countries would implement the AC-AFTA Agreement comprehensively. This implied that there would be no revision in the agreement made in 2004, while AC-AFTA would be effective as per January 1, 2010.

The compensation promised by the Government of China triggered various responses from the businessworld. It will be hard for Indonesia to draw investments as promised by the Government of China “In short, investments cannot serve as compensation on the failure of renegotiation of tariff posts.”

Djimanto, Secretary General of the Indonesian Businesspeople Association (APINDO) disclosed to BusinessNews on Saturday (19/6).

If China planned to invest in Indonesia, they should clearly specify the plan in what sector, in what magnitude, direct investment or just investment in portfolio ? The Government needed to make a specified calculations and stipulate the pre conditions which would bind the two countries, so China was obliged to keep their promise to invest in Indonesia.

It was not easy to postpone AC-FTA “How can renegotiation be made only between Indonesia and China, it is an ASEAN-China Free Trade Agreement. If re-negotiation were to be made, other countries in ASEAN must be involved.” What the Indonesian Government and private sector could do today was to strengthen competitive edge of Indonesian national industry, whereby to complete against China.

To strengthen competitiveness of the national manufacturing industry, three things were needed:

Firstly, to ensure procurement of energy electricity based on coal, gas, oil and thermal heat. To check competitiveness of energy cost.

Secondly, to upgrade skill and competence of workers

Thirdly, to allow lower bank interest rates. Conclusion Failure of renegotiation of tariff post

must motivate the industry to strengthen their competitive edge.

To invite investors to invest in Indonesia was not an easy matter. Indonesia was still handicapped by problems and obstacles which made investors to remain in a wait-and-see position. “How do you expect investors to come if the electricity black-outs now you and then, workers burst into demonstrations and illegal collections are still at large.”

Chairman of the Indonesian Franchise Association (AFI): SLUGGISH GROWTH OF FRANCHISE BUSINESS IS DUE TO LACK OF PROVINCIAL GOVERNMENT’S SUPPORT

The sluggish development of franchise business in Indonesia, compared to other countries in ASEAN was due to lack of Government support. Anang Sukandar, Chairman of the Indonesian Franchise Association (AFI) disclosed to BusinessNews Friday (18/6). A road show over various cities like Bandung, Yogyakarta, Semarang, Surabaya, Denpasar, Makassar, Manado, Palembang, Lampung, and Medan showed how poor their understanding was about franchise business.

“Even with the several measures taken by the Government, they are not enough because they are not comprehensive, it ia only partial against the development in Jakarta. Meaning, changes for the better are only happening in locations close to the Ministry in the capital city or provincial capital. Many of them are ingnorant so they are not interested in franchise business” thus was stated by Anang Sukandar during the opening of Internation Franchise Licence Concerence inaugurated by the Director General of Domestic Trading Subagyo.

And yet in Bandung aline an expo such as this was entering the fifth year. In Semarang it had been held twice while some regions were conducting for the eighth time. In fact international expos had been well, and had been staged since 1991.

It was a pity that the association only began activities since 2003. And yet Indonesia wiyh the biggest population should be in number one position in this region. Franchis business in Malaysia stated in 1994, Singapore started in 1994 and the Philipines in 1995.

Under the circumstances there was in fact no problem at all in facing the ASEAN-China FTA. Franchise business in Indonesia has been open for the world since a long time ago. The same was with domestic franchising, no problem had ben encountered so far.

In Food and Beverages business foreign operators were not conflicting against local operators because their target segments were different. Culinary wise it never really mattered whether the franchise were foreign or local, because the business line was different. The foreign operators aimed at the upper class, such as real estates or property, with focus on apartment tenants who were the higher income group.

In reply to the question to what extent had the small business (UKM) benefited from franchise business, it could be stated that such was immeasurable because, it have not arrived at the final conclusion yet. Today there were around 1,200 small business which were included in the premium list of franchise if only ten percent out of it emergent it could be regarded as impressive.

The most prevalent business line in franchise business was food and beverages. There were some Franchise business in education but they were few in number, which made F &B still the most outstanding commodity.

Head of the Board of Toll Road Management: TOLL TARIFF OF WARU-JUANDA SECTION UP BY JUNE, THREE OTHER SECTIONS TO FOLLOW

PT Citra Marga Surabaya (CMS) suspended tariff increase of Simpang Susun Waru-Bandara Juanda toll road section which – based pn Decree of the Ministry of Public Works No 384/KPTS/M/2010 could have been increased since June 7, 2010 last. “They (the toll operators) them selves asked for the suspension. They said that they would increase the tariff one week after the application of the Minister’s Decree. Whether they have increased the tariff or not by now, I have not asked them about it” Nurdin Manurung, Head of the Board of Toll Road Management (BJPT) disclosed to Business News in Jakarta Tuesday (15/6).

The percentage of tariff increase is adjusted to magnitude of inflation over the past two years in the respective areas. Based on the survey of the Board of Statistics (BPS) the inflation in Waru over the past two years was posted at 11,38%. By this calculation, the new tariff for the Simpang Susun Waru-Juanda Airport increases on the average by Rp 500,- so the toll tariff for vehicles of Category I would Increase to become Rp 5,500.- from the previous Rp 5,000. As for the Category II vehicles the price would be Rp 8,000.-, Category III Rp 10,500.-; category IV Rp 13,500.- and category V Rp 16,000.-

Apart from the Waru-Juanda interchange, the Government also planned to adjust tariff of three other sections, namely: Jakarta-Cikampek section, and Makassar Section IV but all still waiting for the Minimum Service Standard (SPM).

Chairman of the Association of Indonesian panel wood (APKINDO): USE OF SENGON WOOD FOR PLYWOOD KEEPS INCREASING

The Association of Indonesian Panel Wood (APKINDO) advised producers of the plywood industry to make diversification of raw materials from forest wood to people’s wood. The diversification was necessary considering that the supply of natural forest wood as raw material tend to diminish in the past few years and the decrease was predicted to continue even till this year 2010.

Nyoto Suhardjojo, Chairman of Marketing Dept APKINDO disclosed to BusinessNews Monday (14/6) the plywood industry

in Indonesia today was beginning to use people’s forest wood, namely Sengon woods as raw material. Lately the plywood industry was using less natural forest wood because the price was too expensive to be absorbed by the domestic market, so the plywood industry turned to the less expensive Sengon woods.

“The motivating factors of increasing use of sengon wood in the domestic pllllywood industry is apart from the diminishing yields of natural wood forest also because of the extremely high price of natural forest wood, so plywood producers choose Sengon as raw materials as alternative” Nyoto remarked.

To illustrate, today the price of Jati teakwood is posted at Rp 3.5 million per cubic meter while the top quality teakwood might reach Rp 9 million to Rp 9 million per cubic meter. All are on account of scarcity of teakwood, to consider that the life cycle of teak wood can reach 20 years. Compare this to the price of Sengon which is only Rp 600,000 per cubic meter while the harvest time of Sengon is much shorter, i.e. only six years. Productivity of Sengon woods are also higher, i.e. 100 cube meter per hectare, compared to natural forest wood (teakwood) which only yields 40 cube meter hectare.

In terms of quality, Sengon-based plywood is not inferior to plywood of natural forest wood. It seems reasonable that the Sengon wood industry grows abundantly in the past few years. Based on data of APKINDO, total utility of people’s (Sengon) wood had risen to 2 million cube meters in 2009against 500,000 cube meter in 2006. By 2010, production of Sengon wood is projected to certainly grow especially with the exodus of industrial players from outside Java to exploit Sengon wood for plywood production.

ADJUSMENT OF BASIC ELECTRICITY TARIFF IS MEANT FOR SHARING BURDEN

The Government’s plan to make adjustment of Basic Electricity Tariff in the near future was an effort to distribute load whereby the national Electric Company (PLN) could build network in the regions not having current supply. This was an explanation by the Ministry of Energy and Mineral Resources, Darwin Zahedy Saleh in regard to the plan to increase electricity tariff, in a press conference at the Ministry’s office, Monday (14/6).

In a press conference preceeding Government’s consultation with Commission VII scheduled for Tuesday (15/6) the Minister of Energy and Mineral Resources explained that the Government proposed to increase of Basic Electricity Tariff (TDK) by Rp 2,000 to Rp 3,000 for 450 VA categories and Rp 5,000 to Rp 6,000 for 900 VA category.

The Government called out the public to share cost burden with other customers including the 450 VA category through tariff adjustment whereby PLN would be enabled to build power distribution network in remote areas, the Minister disclosed. Furthermore the Minister added that the authority of electricity price increase was in the Government’s domain.

The lesser income group who are not having access to electricity constitutes around 35%. Assuming that the number of families was 53 million people by census, there are 18.9 homes who are not having electricity. It would be impossible for PLN to build new networks to serve these groups unless fund is available.

“We are accustomed to think that the lowest group are the 450 Va category, but in fact there is still below that the zero VA category who are not having electricity at all. We are not supposed to forget our fellow countrymen who are in that group, the Ministry underscored.”

Today the biggest consumer group who are enjoying subsidy is the 450 VA category, followed by medium sized consumers and 900 VA consumers.

MONETARY SERVICES AUTHORITY NEEDS TO BE SET UP

Although many people believed that Monetary Services Authority (OJK) was not necessary for Indonesia, Minister of Finance Agus Martowardojo believed that OJK was necessary because it was mission of the Law. Agus stated that making of the OJK Law Proposal was a message ingrained in Bank Indonesia Law Article 34 point 1 which stated that OJK must be formed by December 31, 2010 at the latest. “OJK is already ingrained in Law of 1999, where it is stated that in one of the articles of the BI Law that OJK has to be established” the Minister of Finance underscored; further he assured that he would legislate the Law Proposal because it was a law to be implemented.

Sometime ago a member of the Presidential Advisory Board Jimly Asshidiqie stated that it was not necessary for Indonesia to form a Monetary Service Authority (OJK) which was a waste of money while the effectiveness was doubtful in reforming the banking supervisory system and other financial institutions “I am more inclined not to support this proposition, but the problems that the law has stipulated that the OJK must be formed before December 31, 2010,” Jimly remarked after a discussion with the Association of Indonesian Economists (ISEI) in Jakarta.

Jimly stated that formation of this institutions had been suspended twice, namely in 2002 and again in 2010 “This means we can shift it, in that case let’s decide to change the stipulation, we don’t have to set up the OJK, I believe this is the safest way” he stated. According to Jimly, formation of the supervisory body of financial services was in line with article 34 point (1) Law no 3/2004 on Bank Indonesia and must be viewed cautiously considering its great impact on Indonesia’s economy if the formation of the body did not run smoothly.

“We must be careful because the European crisis can have its global impact. Let us not do something which has its systemic impact that needs a transition period, and suddenly there is a crisis which we have to face, so let’s be cautious” Jimly stated and he further remarked that OJK might be right but we should consider the time factor and the development which occurred over the period of 1999-2010. The idea of setting up OKJ in 1999 must be re-evaluated in view of the experience an circumstances because probably what was just a measure to strengthen Bank Indonesia in the effort to improve the internal control mechanism.

Head of the Board of Toll Road Management: TOLL TARIFF OF WARU-JUANDA SECTION UP BY JUNE, THREE OTHER SECTIONS TO FOLLOW

PT Citra Marga Surabaya (CMS) suspended tariff increase of Simpang Susun Waru-Bandara Juanda toll road section which – based pn Decree of the Ministry of Public Works No 384/KPTS/M/2010 could have been increased since June 7, 2010 last. “They (the toll operators) them selves asked for the suspension. They said that they would increase the tariff one week after the application of the Minister’s Decree. Whether they have increased the tariff or not by now, I have not asked them about it” Nurdin Manurung, Head of the Board of Toll Road Management (BJPT) disclosed to Business News in Jakarta Tuesday (15/6).

The percentage of tariff increase is adjusted to magnitude of inflation over the past two years in the respective areas. Based on the survey of the Board of Statistics (BPS) the inflation in Waru over the past two years was posted at 11,38%. By this calculation, the new tariff for the Simpang Susun Waru-Juanda Airport increases on the average by Rp 500,- so the toll tariff for vehicles of Category I would Increase to become Rp 5,500.- from the previous Rp 5,000. As for the Category II vehicles the price would be Rp 8,000.-, Category III Rp 10,500.-; category IV Rp 13,500.- and category V Rp 16,000.-

Apart from the Waru-Juanda interchange, the Government also planned to adjust tariff of three other sections, namely: Jakarta-Cikampek section, and Makassar Section IV but all still waiting for the Minimum Service Standard (SPM).

Chairman of the Association of Indonesian panel wood (APKINDO): USE OF SENGON WOOD FOR PLYWOOD KEEPS INCREASING

The Association of Indonesian Panel Wood (APKINDO) advised producers of the plywood industry to make diversification of raw materials from forest wood to people’s wood. The diversification was necessary considering that the supply of natural forest wood as raw material tend to diminish in the past few years and the decrease was predicted to continue even till this year 2010.

Nyoto Suhardjojo, Chairman of Marketing Dept APKINDO disclosed to BusinessNews Monday (14/6) the plywood industry

in Indonesia today was beginning to use people’s forest wood, namely Sengon woods as raw material. Lately the plywood industry was using less natural forest wood because the price was too expensive to be absorbed by the domestic market, so the plywood industry turned to the less expensive Sengon woods.

“The motivating factors of increasing use of sengon wood in the domestic pllllywood industry is apart from the diminishing yields of natural wood forest also because of the extremely high price of natural forest wood, so plywood producers choose Sengon as raw materials as alternative” Nyoto remarked.

To illustrate, today the price of Jati teakwood is posted at Rp 3.5 million per cubic meter while the top quality teakwood might reach Rp 9 million to Rp 9 million per cubic meter. All are on account of scarcity of teakwood, to consider that the life cycle of teak wood can reach 20 years. Compare this to the price of Sengon which is only Rp 600,000 per cubic meter while the harvest time of Sengon is much shorter, i.e. only six years. Productivity of Sengon woods are also higher, i.e. 100 cube meter per hectare, compared to natural forest wood (teakwood) which only yields 40 cube meter hectare.

In terms of quality, Sengon-based plywood is not inferior to plywood of natural forest wood. It seems reasonable that the Sengon wood industry grows abundantly in the past few years. Based on data of APKINDO, total utility of people’s (Sengon) wood had risen to 2 million cube meters in 2009against 500,000 cube meter in 2006. By 2010, production of Sengon wood is projected to certainly grow especially with the exodus of industrial players from outside Java to exploit Sengon wood for plywood production.

ADJUSMENT OF BASIC ELECTRICITY TARIFF IS MEANT FOR SHARING BURDEN

The Government’s plan to make adjustment of Basic Electricity Tariff in the near future was an effort to distribute load whereby the national Electric Company (PLN) could build network in the regions not having current supply. This was an explanation by the Ministry of Energy and Mineral Resources, Darwin Zahedy Saleh in regard to the plan to increase electricity tariff, in a press conference at the Ministry’s office, Monday (14/6).

In a press conference preceeding Government’s consultation with Commission VII scheduled for Tuesday (15/6) the Minister of Energy and Mineral Resources explained that the Government proposed to increase of Basic Electricity Tariff (TDK) by Rp 2,000 to Rp 3,000 for 450 VA categories and Rp 5,000 to Rp 6,000 for 900 VA category.

The Government called out the public to share cost burden with other customers including the 450 VA category through tariff adjustment whereby PLN would be enabled to build power distribution network in remote areas, the Minister disclosed. Furthermore the Minister added that the authority of electricity price increase was in the Government’s domain.

The lesser income group who are not having access to electricity constitutes around 35%. Assuming that the number of families was 53 million people by census, there are 18.9 homes who are not having electricity. It would be impossible for PLN to build new networks to serve these groups unless fund is available.

“We are accustomed to think that the lowest group are the 450 Va category, but in fact there is still below that the zero VA category who are not having electricity at all. We are not supposed to forget our fellow countrymen who are in that group, the Ministry underscored.”

Today the biggest consumer group who are enjoying subsidy is the 450 VA category, followed by medium sized consumers and 900 VA consumers.

MONETARY SERVICES AUTHORITY NEEDS TO BE SET UP

Although many people believed that Monetary Services Authority (OJK) was not necessary for Indonesia, Minister of Finance Agus Martowardojo believed that OJK was necessary because it was mission of the Law. Agus stated that making of the OJK Law Proposal was a message ingrained in Bank Indonesia Law Article 34 point 1 which stated that OJK must be formed by December 31, 2010 at the latest. “OJK is already ingrained in Law of 1999, where it is stated that in one of the articles of the BI Law that OJK has to be established” the Minister of Finance underscored; further he assured that he would legislate the Law Proposal because it was a law to be implemented.

Sometime ago a member of the Presidential Advisory Board Jimly Asshidiqie stated that it was not necessary for Indonesia to form a Monetary Service Authority (OJK) which was a waste of money while the effectiveness was doubtful in reforming the banking supervisory system and other financial institutions “I am more inclined not to support this proposition, but the problems that the law has stipulated that the OJK must be formed before December 31, 2010,” Jimly remarked after a discussion with the Association of Indonesian Economists (ISEI) in Jakarta.

Jimly stated that formation of this institutions had been suspended twice, namely in 2002 and again in 2010 “This means we can shift it, in that case let’s decide to change the stipulation, we don’t have to set up the OJK, I believe this is the safest way” he stated. According to Jimly, formation of the supervisory body of financial services was in line with article 34 point (1) Law no 3/2004 on Bank Indonesia and must be viewed cautiously considering its great impact on Indonesia’s economy if the formation of the body did not run smoothly.

“We must be careful because the European crisis can have its global impact. Let us not do something which has its systemic impact that needs a transition period, and suddenly there is a crisis which we have to face, so let’s be cautious” Jimly stated and he further remarked that OJK might be right but we should consider the time factor and the development which occurred over the period of 1999-2010. The idea of setting up OKJ in 1999 must be re-evaluated in view of the experience an circumstances because probably what was just a measure to strengthen Bank Indonesia in the effort to improve the internal control mechanism.

INDONESIAN-IRAQ JOINT COMMISION AGREE ON FORMATION OF INDONESIAN CHAMBER OF COMMERCE

Comprehensively, the Indonesia-Iraq Joint Committee session agreed on the formation of an Indonesia Trading House in Baghdad, and to build Indonesian-Iraqi Business Council. Furthermore according to Minister of Trade Mari Elka Pangestu in Jakarta Saturday (12/6) after signing the 6^th joint committee with Iraqi’s Acting Minister Safaldeen Mohammed Abdulhakeem Al Safi, both parties agreed on the key points of the two-day meeting.

Also present at the meeting were representatives of the Ministry of Foreign Affairs, Ministry of Information, Ministry of Transportation, Ministry of Public Woks, Coordinating Board of Investment, the Indonesian Chamber of Commerce, Bank Indonesia, Bank Mandiri, Pertamina, Bank Exim, and PT Wijaya Karya. According to Minister of Trade Mari Pangestu, Indonesia pled Iraq to give more opportunities to the Indonesian private sector in the “Republic Iraq” plan to build important projects like infrastructure and telecommunication.

Other points being agreed at the Joint Committee were to multiple the trading value attained by the two nations in the past five years and to set up a Task Force within three months, whose duty was among others to exchange information, to monitor obstacles and to identify problems in bilateral trading and investments.

Furthermore in investment collaboration, both sides agreed to exchange draft of Agreement on Promotion and Protection of Investment of the two nations. Some Indonesian companies like PT Tipati International and PT Multistrada Arab Sarana stated their readiness to be engaged in investment collaboration in tea plantation and tyre factory manufacturing to Iraq.

In industrial collaboration Indonesia, in the eyes of Iraq had experiences in developing Small-and Medium Business and Indonesia responded positively to the proposition, and was willing to share experience in Small Business Development, tyre industry, textile, petro-chemicals and other sectors. WIKA, and Indonesian company, also stated readiness to participate in water treatment projects.

Furthermore in health, housing and construction, energy and mineral resources, infra-structure, electricity technology, education and sciences, both sides agreed to promote cooperation’s, with State Owned Enterprises (BUMN) and the private sector.