INDONESIA’S OIL INDUSTRY PIN HOPE ON 20 KKS OPERATORS TO INCREASE PRODUCTION OUTPUT 2012

For 2012, the Government recommended target of oil production amounting to 950.000 barrel per day with 20 main KKKS which were expected to jack up production. The greatest oil production output was still expected from PT Chevron Pacific Indonesia with maximum production target of 357,000 barrels per day.

In the second position was PT Pertamina (EP) producing 135,000 barrels per day and in third position Total Indonesia E&P (East Kalimantan) producing 86,000 barrels of oil per day. Next on the list was Conoco Phillips producing 45.000 barrels of oil per day and Chevton Indonesia Co amounting to 28.300 barrels per day.

Furthermore PHE (ONW) producing 35,000 barrels of oil per day, Medco Sumatera (Rimau & SSE) producing 22,960 barrels per day and BOB Sumatra Bumi Siak Pusaka amounting to 17,000 barrels per day and PetroChina International (Jebung) producing 17.300 barrels per day.

Mobil Cepu Ltd was expected to jack up production to 22,000 barrels per day, Vico (Sanga Sanga) producing 15,000 barrels per day, PHE West Madura offshore producing 23,000 barrels per day and Conoco Phillips Sumatra (corridor blok) producing 12,200 barrels per day and JOB Petro China East Java Tuban amounting to 11,000 barrels per day and Kondur Petroleum 7,600 barrels per day.

Petro China Bermuda (Papua) was expected to contribute 6.190 barrels per day. PT Indonesia Tangguh producing 5,400 barrels per day. Star Energy (Kakap) 4,500 barrels per day and Exxon Mobil Oil (Aceh) producing 2,420 barrels per day.

Beside the said 20 KKKS operators, based on Vice Chairman of BP MIGAS Hardiono, the Government was also expecting additional production from other KKKS amounting to 59.130 barrels per day.

PAYMENT OF BPR DEPOSIT INSURANCE CLAIM

Bank Indonesia through Letter of Decree of Bank Indonesia Governor No. 13/85/KEP. GBI/2010 dated September 2011 suspended operation permit of PT BPR Sadayana Artha located at jalan Babakan no 119 Majalaya, the Regency of Bandung since September 7, 2011. The Deposit Insurance Agency (LPS) would play the role as guarantor and undertake the process of liquidation in accordance with Law No 24 year 2004 on Deposit Insurance as amended by law no 7 / 2009 in regard to the rules of implementation.

In the process of payment of deposit insurance claim to customers of PT BPR Sadayana Artha, LPS would make reconciliation and verification of deposit data and other related information to determine the amount of claim pay-worthy or unworthy of payment. Reconciliation and verification would be executed by LPS in not longer than 90 days since date of cancellation of work permit. This was disclosed by Executive Head of Deposit Insurance Agency (LPS) Firdaus Djaelani on September 7, 2011.

In the process of liquidation of PT BPR Sadayana Artha, LPS would take over and take all rights and authorities of shareholders including right and authority of the General Meeting of Shareholders (RUPS). Furthermore LPS as RUPS of Sadayana Arthan would take the following action :

1)    to dismiss the bank as legal institution

2)    to form a liquidation team

3)    to declare status of bank as “Bank in liquidation” and

4)    to discharge all Board of Directors and Board of Shareholders (commissioners)

All matters related to dismissal of legal institution and liquidation process of PT BPR Sadayana Artha would be accomplished by the liquidation team formed by BPS. Supervision over implementation of the liquidation would be done by BPS.   

BUREAUCRACY PERFORMANCE NOT YET PRODUCTIVE

There is a sharp Increase in the number of civil servants. One of the stimulating factors is regional expansion program that has created new regions. In addition to that, the increase in number of civil servants is also stimulated by the obligation to appoint honorary employees into permanent employees. This will cause state spending to swell. Budget allocation for public services, including salary-allowance- pension-insurance is considered imbalanced with public services account.

In APBN (State Budget) 2011, total employee spending allocated reaches Rp. 180.6 trillions (14.7%). At the same time, budget allocation to support achievement of priority infrastructure targets is only Rp.67.4 trillions. If we look at regional government’s financial structure, imbalance in the budget allocation is also found. In APBD (Regional Budget) 2011, there are 124 regions that recorded employee spending of more than 60% and capital spending only at 1-15%.

Therefore, there is an urgency to restructure the bureaucracy system, including civil servants performances. In the future, this policy could swerve as a foundation to re-arrange the system and management of civil servants to be more productive. It is expected that civil servants as foundation of bureaucracy will be able to empower transformation toward a modern, more productive, and public-service oriented bureaucracy.

The fact is that our bureaucracy performance is still weak. Even, there is an indication that many of the high-rank officers make use of their position to accumulate wealth for personal and group interests.

In such a condition, Indonesia’s competitiveness never improves as the bureaucracy system not yet shows a high professionalism. Bureaucracy performance in Indonesia is not yet productive. Performance and productivity of Indonesian bureaucrats are low if compared to other countries.

According to Chairman of Indonesian Businessmen Association (Apindo), Djimanto, the existence of bureaucrats is very important in supporting the national economy as they are those who serve the public. “If public services officers are lazy and their competency is low, economic development will be hampered”, he said.

Djimanto explains that there are some reasons behind the low performance and productivity of Indonesian civil servants. Firstly, the recruitment system which is full of collusion, corruption, and nepotism (KKN), and is not based on the merit system or competency, rank promotion and salary payment system are done regularly, not based on performance achievement. Thirdly, internal control system, such as the existence of Inspectorate General, has not been running properly.

Therefore, Djimanto urges the government and the parliament to immediately prepare a legislation which stipulates appraisal and sanctions for civil servants. One of the matters to be stipulated is rank promotion and salary payment system which are based on performance achievement.

To create a productive and public service oriented bureaucracy which is transparent, accountable, and far from corruption, there should be a comprehensive strategy. And, internally there must be a system that creates a positive atmosphere which could stimulate performance improvement. For example, public bureaucracy performance indicator. Performance must be an important consideration in rank promotion system. And, spending must also be balanced with performance.  

FOUR TEA BRANDS OBTAIN LESTARI SERTIFICATE

Four of Indonesia’s tea products obtained the Lestari Certificate. The four tea brands were Sedap Wangi produced by PT Sari Wangi, The Troet and P123 produces by PT Perkebunan Negara (PTPN) VIII and The Kepondong produced by PT Pagilaran.

Rahmat Badrudin, Chairman of the Indonesia Tea Council (DTI) on the occasion of launching the Lestari National Tea Standard in Bogor on Thursday (25/8) said that the measures taken by PT Pagilaran, PTPN VIII and PT Sariwangi were expected to bring a positive chain effect on the empowerment of tea plantations in Indonesia.

Before the certification process, NRG (National reference Group) together with Business Watch Indonesia, DPT and Solidaridad stipulad Lestari National Tea Standard. The standarzation process had begun since 2010 last based on international documents and national policy.

The formulation process involved the NRG task force, together with standardization and certification experts plus consultants and all stakeholders. The standard was tested on farmers plantation and producers. The result was some farmer’s plantations and producers had met certification standard of The Lestari and were allowed to bear Lestari label.

Admittedly the investment for obtaining certification of The Lestari was not small, it also meant extra cost to industry circles. Somehow such was not only experienced by Indonesia, but also tea producers in the world “Because the European market demand tea which is sustainable, so we strive to establish the Lestari standardization system. Or else, Indonesia’s tea market would be taken by other countries.”

Although Indonesia’s tea had obtained the Lestari Certificate, the price at international market only were only priced at premium price 5% of normal price for a year. The condition was dilemmatic because the money spent by the industry to obtain the Lestari Certification was not ignorable.

“At least the cost for certification was paid off by surcharge for a year. We expect that in time to come the international market would accept Lestari tea products from Indonesia.”

Meanwhile Cathalia F. Randing, Quality Manager of Sari Wangi Group stated that up till now only one brand of the Sari Wangi range which had obtained the Sustainability certificate. “So far only one of our brands had been Lestari certified. In the future we hope that all of our products would obtain the certificate.”

To obtain the certificate was not easy, because the standard and criteria were based on the grievances of international buyers. Moreover, the specific meaning of sustainability itself was getting higher because buyers urged producers to adopt the certification system. The trend strengthened since the emergence of Ethical Tea Partnership in 2007 adopted by certification bodies like UTZ and Rain Forest Alliance.

To illustrate, the requirement for obtaining certificate include no excessive use of pesticide and must be withed accurately, laborers wages must be in accordance with regulations, water consumption must be efficient and mush more.    

BE WARY OFF US AND EUROPEAN CRISIS

Economic crisis currently hitting the United States and Europe has resulted in mixed perspectives in the mind of the government. In the verbal domain, the government combines self-confidence with anxiety. Finance Minister Agus Martowardojo, for instance, said that national economy would remain stable up to the third quarter of this year with the growth rate minimally equivalent to the first and second quarters, namely 6.5%. Simultaneously, the government also claimed that it has prepared mitigating measures as anticipation. Principally, there is self confidence and worry.

Coordinating Minister for Economy Hatta Rajasa recently said that the government and Bank Indonesia would continue to be wary off the latest economic condition and the worst scenario potential to arise there from even though national economy remains solid and safe. Hatta even said that the crisis preventive and mitigating instruments owned by Indonesia now are better than 2008.

However, the government simultaneously asks all parties to be wary off and anticipate global economic uncertainties. Prudential domestic economic management is any of the measures to prevent the crisis from expanding. The wariness and anticipation of the government may be observed in policy to provide crisis mitigation funds amounting to Rp 103.1 trillion in APBN-P 2011, distributed in items, such as fiscal risk funds and stabilization of budget price of social assistance, PNPM Mandiri, PKH, Jamkesmas, natural disaster, food and rice subsidy for the poor, management and supervision in financial industry, capital market and things naturally preserving prudence so that economy is still preserved well and buyback of state bond (SBN) as well as application of crisis protocol management.

Principally, the statement of the government related to threats and anticipation to economic crisis hitting the United States and Europe leads to an opinion that though the crisis does not influence significantly, the government won’t be silent but wary off of the threat by preparing measures.

For the public in the country, the really convincing explanation from the government reflects anticipatory measures deserving appreciation. In relations thereto, the public or the whole people reserve a right to remain optimistic that the government and all authorities thereof could preserve national economy. However, it’s important to remind that the most important thing is not only strategy and measure prepared by the government in anticipating the threat of the crisis but the government must also be capable of understanding properly why the United States and Europe plug into the crisis.

For Indonesia, the crisis currently jolting the United States and Europe spews a fundamental thing that the crisis should be observed as a bad consequence of the rapid growth of debts above Gross Domestic Product (GDP). In the other word, the issue encountering Europe may be called as economic disaster triggered by excessive debt. In this side, Indonesia may be categorized safe because debt to service ratio is only 25%. However, such a view may not be preserved in a long time because debt is still debt. In a simple language, we may say that hand above is indeed always better than hand below.

Therefore, it is necessary to observe three issues. Firstly, it’s important to ensure that every action already prepared by the government is applicable if national economy is unable to evade from the crisis. Here, we talk about the application of strategy, not plan in words “would” and “would”. Secondly, opinions of experts outside the government should also become reference in policy making. Economists remind that the ongoing crisis is more devastating than the 2008 one. Thirdly, the government relying on image building politics so far should not be trapped in excessive self-confidence.

SUPERVISING THE UTILIZATION OF APBD

The use of regional budget (APBD) by incumbent candidates in regional executive elections actually has been long disclosed by parties. The finding of Indonesia Forum for Budget Transparency (Fitra) related to the issue affirms the truth of the allegation. Reportedly, a study by Fitra concludes that the funds allocated through APBD are vulnerable to misuse by incumbent candidates and other parties for their interests regional executive elections. Fitra mentions that budgetary items potential to misuse by certain candidates as political instrument are grant expenditure and social assistance. The research executed in 18 regions executing regional executive elections in 2008 shows that the grant expense and social assistance increased drastically. Besides Fitra, Indonesia Bureaucracy and Service Watch (IBSW) also shares of the same opinion (www.koran-jakarta.com, 2/9/2011).

             

The rampant misuse or corruption of funds of ABPD in regions following the enforcement of regional autonomy is attributed to factors and result in serious consequences continuously diminishing state finance. The large and rising amount of funds flowing to regions from year to year, without tight supervision, has sparked irregularities here and there. If the studies by Fitra and IBSW find irregularities, the findings only affirm what has taken place so long and been identified by the public. The reality proves that most of the corruption cases implicating heads of regions and members of regional legislative council (DPRD) are related to APBD.

Here we want to spotlight two main issues. Firstly, the high cost politics already becoming a part inherent in the power struggle becomes the main factor contributing to the misuse of budget in every regional executive election. In a number of the visited regional, incumbent candidates are almost unable to differentiate their functions as heads of regions from their ambition to hunt the position for the second term. It is visible in the use of official vehicle and facilities of regional governments in campaigns which are executed obviously. Secondly, at the same time, supervision by the public authorities established by the government does not function properly. A number of parties ascertain irregularities but only few are processed in accordance with the law. Simultaneously, mass media not exercising its function as a pillar of democracy cause the irregularities to continue without proper settlement. In addition, the issue is increasingly complicated when local officials are polarized into sides of the competing candidates thus causing civil servants to be polarized into camps created by candidates. In regions, regional government officials obviously act as success team of certain candidates.

                  

Poor supervision over the use of budget causes corruption parasite to follow in every flow of funds. More funds are distributed and further distance is passed, corruption threat is greater. It is not wonder if corruption is also rampant in line with the rising ceiling of APBN and APBD. Incumbent candidates even take advantage of their position to force regional service and working units as dairy cow in financing their campaign.

                  

The commitment to preventing the misuse of APBD must be done by tightening the function of supervision. However, since internal supervisors of the government (Inspectorate, Bawasda even BPKP) is not reliable to exercise the function, central authority supported by creditable personnel is absolutely needed. In this context, the function of BPK must be strengthened. Another important supervisor is local people organizing themselves into non-governmental organizations and universities in every region.

                   

We can affirm that supervisor authorities established by the government are not reliable anymore to supervise the use of APBD. How could the supervision function properly if the supervisors and the supervised parties have close relations, even familial relations sometimes. 

PLN RENDER SPECIAL SERVICE FOR DWIMA AGUNG CEMENT FACTORY

The State Electronic Company PT PLN (persero) was engaged with PT semen Dwima Agung cement factory (SDA) to provide power high voltage 150 KV to SDA cement factory located in the village of Merkawang, District of Tambak Boyo, Tuban, East Java. The agreement of power transmission was signed by the Director of Business and Risk Management if PLN Murtaqi Syamsudin and the Director of Operational Java Bali PLN Ngurah Adnayana and President Director of PT SDA Unggul Rahardjo Junus O, Hutapea (one of SDA directors).

By the agreement PLN would transmit electricity of 40 Mega volt ampere (MVA) to the new SDA cement factory with premium service above the standard service. The special service included among others certainty of continuous power supply and special network configuration which guaranteed quality of power supply.

“The agreement indicated that businesspeople have high confidence in PLN capability to channel out power for factory operations at high degree of quality as expected” the was disclosed by Murtaqi Syamsuddin. PLN showed their commitment to serve as propeller of economic growth through fulfillment of electricity need for the industry.

The power needed by SDA would be in early 2013 and PLN was optimistic to able to channel out power by Quarter IV 2012. Selling price of electricity was agreed at Rp 810/Kwh based on single tariff where selling price during Peak Time (WBP) was the same as selling price during off-peak time (LWBP).

Premium Service was a form of service rendered by PLN including good quality, guarantee and endurance and certainty of connection inaccordance with the agreed Service level Agreement (SLA) agreed between PLN and customers. In case of power blackout at SDA on account of PLN’s failure, PLN was obliged to pay compensation to PT SDA. Hence to ensure transmission of power to SDA factory which was based on special service, PLN planned to expand installation including periodic maintenance of the main network system and supporting facilities.

The trade agreement between PLN and PT SDA would be valid for ten years and extendable. This premium service proved that through business-to-business scheme, actually PLN had the capability to transmit power of high quality including guarantee of service as expected by major customers.

PT SDA is subsidiary company of PT Holcim specializing cement production. By estimate this factory would have definite production capacity up to 1.7 million ton per annum. This factory is build at the expense of USD 450 million which at construction phase alone was able to accommodate 3,000 workers, and at operational stage might employ around 200 workers. The target market is domestic market.

Technically, soon power transmission of power to PT SDA would be operated by East Java Distribution System of PLN which today serve 18 customers of 150 KV with total capacity of 659 MVA. Beside PT SDA, the East Java PLN also serve 2 high voltage clients based on premium service. 

WITH RP 1 TRILLION IN HAND, MPPA TO BUILD 20 HYPERMART

PT Matahari Putra Prima Tbk (MPPA) planned to open around 15 units of hypermarts till end of 2011. Over the period of January July this year, the company had built 5 hyermarts.

“Our focus this year was to expand hyermarts,” Director of Matahari Putra Prima Danny Konjogian disclosed in Jakarta on Tuesday night.

Danny stated that that the company had been aggressively opening around 19-20 hypermarts in various regions in Indonesia. The target locatons were around 65% in Java, 35 percent outside Java among other in Sumatra and Kalimantan. Five units being opened through this year were among others in Lippo Karawaci, Serang, Surabaya until Kediri. In the near future this Lippo-Group Affiliated Group planned to open hypermarks in Gresik, Kudus, and Sidoardjo.

So far, the company had possessed 55 hypermarkets in all of Indonesia. If target of this year were realized, the total number of hypermarkets by and of 2011 numbered 70 units. “In the following years we planned to expand by opening 8-10 hypermarkets a year” Danny remarked.

According to Danny, the total investment for corporate plan amounted to Rp trillion. So far for realization of the plan Rp300 billion of fund had been spent. The source of capital financing was internal cashbox “Investment for hypermarket business based on rental shopping amounted to Rp 40 to 50 billion” Danny remarked.

Today the company was in possession of cash amounting to Rp 2 trillion. In addition to that MPPA had standby facility amounting to Rp 1.8 trillion from 6 banks. Danny predicted that turnover through this year could exceed Rp 10 trillion, up by 25 percent against that of 2010 amounting to Rp 7.6 trillion. To support performance of semester I/2011 he estimated income would grow by 25 percent against same period of the previous year.

Chairman of Indonesian Businessmen Association (APINDO) : SMALL AND MEDIUM BUSINESS (SMB) SECTOR IS THE MOST TO SUFFER FROM ELECTRICITY PRICE HIKE

The government planned to raise electricity price by 10% in 2012 to increase efficiency of electricity subsidy. Some businessmen consider it a normal thing. But, the government must also give solution to bad infrastructure and incentive given to private sector. Currently, businessmen complain about bas infrastructure which end in traffic congestion and cause high-cost economy. This condition is considered distorting to businesses in the midst of tighter global competition.

General Chairman of Indonesian Businessmen Association (APINDO), Sofjan Wanandi, stated that the plan to raise electricity price in 2012 will have a less profitable effect on businesses, especially small and medium businesses (SMB). Therefore, APINDO will negotiate with the government concerning the electricity price hike plan. National businessmen propose the electricity price hike to not only be applicable to the businesses.

With the increase of electricity price applicable only for the business sector, the businesses will bear the subsidy for 35 millions of low-income people. This is because the government planned not to increase electricity price for the poor, and the businesses must bear the electricity cost of the poor. Sofjan explained that he will negotiate some options, like lower price hike for SMB.? This is important as SMB is the most to suffer from 10% price hike?, Sofjan said.

Sofjan understands if the industries, especially SMB, has objection to the plan. Electricity price hike is not balanced with compensation that could enhance competitiveness. He explained that the mindset of the electricity price hike is so that budget policy could go on more efficient and have an impact on increase of business competitiveness as subsidy could be allocated on infrastructure and public service development. The fact is that after experiencing several times of increase, SMB did not enjoy any compensation, but the burden increases sharply.

Electricity price increase should be balanced with provision of easiness and incentive to the real sector so it moves the economy, and the electricity price increase will be compensated with business volume. He added that so far, the businesses consider that the government has not workd seriously in solving infrastructure problem.

Previously, Minster of Finance, Agus Martowardojo, said that the government will review the plan to raise electricity price. This is done so that it will not burden energy subsidy budget in RAPBN 2012. In RAPBN 2012, the government decreases energy subsidy budget for electricity from Rp.65.6 trillions (APBN-P 2011) to Rp.44.96 trillions (RAPBN 2012). The government also conveys that for electricity subsidy policy for 2012, the government will maintain electricity provision efficiently and will maintain sustainability of interest of electricity provision and consumers.

The Minister of Trade : TWENTY PERCENT EXPORT GROWTH, A MOMENTUM TO BE SAFEGUARDED

Indonesia’s export in 2012 was projected to grow by 15 percent; this target was in accordance with assumptions inscribed in the accordance of State Budget Notice of 2012. This was set forth by the Minister of trade of RI Mari Eilka Pangestu after opening cheap market at the parking lot of the Ministry of Trade’s building on Thursday (18/8).

As benchmark, the condition of 2012 would be based on the condition of 2011. As long as conditions were stable, growth would reach 18 percent by value. Meanwhile inflation was assumed to be 6 percent, and by next year was predicted to be close to 5 percent.

“Export growth by Semester I of 2011 was 36 percent, an normally and usually by Semester II was better than Semester I. We estimated that our export by this year could break through USD 200 billion. If export could surpassed USD 200 billion, this means export of 2011 rose by 25% against that of 2010. It means there was a need to maintain growth momentum of 20 percent by 2012, Minister Mari was quoted as saying.

In spite of sluggish traffic of trade to Europe and the USA destinations, Indonesia’s economy was predicted to remain stable, so even if there were downturn at all, it would not have to be total crumble. SO far export to destination countries in Europe reached 12 – 13 percent to the USA 10 percent while the remaining 70 percent were to Asian countries including China, India, Korea, Taiwan, Japan, Australia, New Zealand and ASEAN countries.

Those were the reason why export would grow by 25 percent or close to USD 200 billion. This was homework for the Ministry of Trade to make sure that price of food was stable, and distribution well managed; and to maintain coordination with the Ministry of Industry” Mari remarked.

The commodities needed by Asian countries were coal, palm also food products like cacao, coffee, and fishery products. According to Minister Mari, those products were still highly prospective just as manufacturing products because Indonesia was a destination country for industrial relocation by other countries; Indonesia was also advantaged by diversification policy in buying by some countries. China had stated that the would relocate their manufacturing industry to Southeast Asian countries.

As with agricultural products, and their by products like petro-chemicals like frying oil, they would be enhanced through down streaming program and formation of industrial clusters in palm. Such were part of the masterplan to be supurred on further more also to promote mineral industry up to the stage of smelting mineral raw materials would be processed domestically.

Market diversification would still be exercised to anticipate crisis in Europe and the USA. In the effort to maintain market stronghold, Asia was still important and would remain to grow. Furthermore the Government would enhance market diversification further beyond Asia whose growth were prospective, such as South Africa of Nigeria.

Those countriea promised highly prospective trading with Indonesia. The products to be exported to Africa were among others palm, manufacturing, food and medicine. As planned before and of year, the Government planned to send trade mission to Africa, Mari explained.