FEASIBILITY STUDY FOR THE SUNDA SRAITS BRIDGE MAY BEGIN

            Development of the Sunda Straits Bridge which linked Sumatra and Java might begin its feasibility study which might take 24 months to accomplish, after signing of preparatory plan between initiator company of the consortium PT Graha Banten and lampung Sejahtera. The task would be executed in early May 2012 in tandem with staging of the Indonesia International Infra Structure Conference and Exhibition 2012, this was disclosed by the Deputy Coordinating Minister, Infra Strucrure and Area Development Division Lucky Eko Wurujanto recently.

            He admitted that the case was still being discussed at the ministerial level before arriving at a point of agreement between the two parties. With the signing of agreement, the initiator could begin feasibility study process over a period of 24 month “All must be discussed, hopefully agreement could be signed soonest and feasibility study may at once begin” Eko remarked.

            That the agreement was not signed was on account of the still existing differences in terms of cost of feasibility study between the Government and the consortium. The Consortium estimated that the cost of feasibility study which amounted to USD 250 million or around Rp 3.2 trillion or twice as much as Government’s version of compensation expenses of Rp 1.5 trillion or 1% of total investment of project.

            Previously PT Graha Lampung Sejahtera was hoping the Government would still follow the compensation rules of feasibility study for the Sunda Straits bridge according to the magnitude of cost soon proposed by the consortium. The rule for compensation payment must refer to Presidential Regulation Perpress No. 86 year 2011 on Development of Sunda Straits Bridge Region.

              In the Perpres it was stated that if the project were to be cancelled by the Government, or the initiator failed to emerge as winner of the tender, all cost spent by the initiator for preparing yje project would be refunded by the Government or winner of tender. This means that if the investment were spent by the consortium as executor of feasibility study, the fund to be paid by the Government must be in accordance with the amount previously estimated, i.e. USD 350 million, this was disclosed by Agung R. Prabowo, Director of Graha Banten Lampung Sejahtera.  

BUSINESS NEWS - April 27, 2012

BUSINESSMAN DEMANDED FIRMNESS FROM THE TRADE MINISTRY

            Indonesia Herbs and Traditional Medicine Association (GP Jamu) expected the Trade Ministry to act firmly against foreign companies who distribute goods and services in the local market and who violate the law. As GP Jamu considers that there is frequently an overlapping of authority among institutions/ministries concerning distribution of goods. For example, Larutan Penyegar health beverage that has been decided by the Supreme Court because there are two products with almost similar brands circulating in the market. While, in fact, if there is a Supreme Court’s decision, the losing party is not allowed to distribute its products. But, they argued that they have acquired licence from the Drug and Food Control Agency (BPOM), Charles Ong Saerang, Chairman of GP Jamu, told Business News.

            Circulation of two different brands of larutan penyegar health beverage has spread to shops, retailers, and outlets in some regions in Indonesia. As a consequence, consumers cannot distinguish which one is locally produced and which one is imported. While, Supreme Court’s decision has been issued in October 2011 so that it is decided that the distribution right goes to the local company. Supreme Court’s Decision decided that SBS wins suit against Kino with regard to Larutan Penyegar Cap Badak trademark case which affects distributors and agents of the product in the regions. Finally, consumers no longer care about originality of product and brand. Many bought Larutan Penyegar produced by a Singaporean company. Comsequently, the sales rate of our original brand dropped up to 40 percent. The Singaporean company made attractive offers, like Buy One Get One and other offers.

            The apparatus secured thousands of bottles and cans of larutan penyegar produced by both companies. Even, staff of both companies have been investigated. At that time, the apparatus investigated two products of larutan penyegar as they are deemed illegal. Finally, the Supreme Court issued a decision in October 2011, but both products with different brands are re-circulating in the market. We are waiting for the action of BPOM who issues the license.

            GP Jamu and the company who won the case will file a somasi (reprimand). But, if BPOM has not taken action, the company who won the case will file a lawsuit to the State Administrative Court against the Singaporean company. The foreign company could ruin the reputation of local product. We have also met with Vice Minister of Trade, Bayu Krisnamurthi. He is supportive and will ask BPOM about this matter. BPOM does not pay attention to the market, but on the product substance. While, the Trade Ministry pays attention to the market.

         The Indonesian Brand Association (Amin) urges the Trade Ministry to act firmly against circulation of imported traditional medicines. As there are similar products from China and India that have been circulating in the local market. Even though there have been no significant consequences, Amin feels the need for a firm action from the Trade Ministry with regard to distribution of goods and services in the local market. Fortunately, up to the first quarter of last year, sales still increase by 10-15 percent. But, we not yet know about sales in the second quarter. We must be anticipative to prevent imported products from threatening local products. The unique characteristic of Indonesian herbal medicines must be maintained as national assets. Putri K. Wardani, Chairman of Amin, told Business News.

            Anticipation is required as free trade system could result in distortion of local products. Even, Amin and GP Jamu have identified manipulation of local brands consumers. The manipulation could be in the form of adding a few words behind the patented original brand.

            Value of China’s import to Indonesia in 2006 reaches USD 8.3 billions. In 2010, it tripled to USD 21.7 billions. This year, volume of Chinese products could increase more, including shift of export (from Europe) to Indonesia.    

BUSINESS NEWS - April 27, 2012 

INVESTEMENT REALIZATION IN FIRST QUARTER OF 2012 INCREASES BY 32.8%

            The Investment Coordinating Board (BKPM) announced that investment realization in the first quarter (January-March 2012) is at Rp 71.2 trillions consisting of PMDN (domestic investment) realization at Rp 19.7 trillions and PMA (foreign investment) realization at Rp 51.5 trillions. If compared to the same period of last year, there is a 32.8% increase.

           Concerning investment spread by regions within January-March 2012 period, of investment portion outside Java is becoming larger. Investment realization outside Java reaches Rp 33.6 trillions or 47.2% of total investment realization. If compared to the same period of 2011, investment realization increases by Rp 9.9 trillion or 41.8%.

              Realization of PMDN investment in the first quarter of 2011 reaches Rp 19.7 trillion or increases 39.7% if compared to the same period in 2011. PMA investment realization in the first quarter of 2012 reaches Rp 51.5 trillions or increases by 30.3% from the same period in 2011.

             Attempt to increase even distribution of investment to all regions through various kinds of policies shows a quite satisfactory result. This is seen in investment realization in this period. With acceleration of infrastructure development, including provision of electricity and gas, there will be higher increase and spread of investment in the future. This matter was stated by the Trade Minister/Head of BKPM, Gita Wirjawan.

PMDN Realization

          PMDN realization by 5 large business sectors consists of Mining (Rp 5.8 trillions), Basic Chemical, Chemical Goods, and Pharmaceutical Industry (Rp 2.5 trillions); Food Crops and Plantation (Rp 2.3 trillion); Paper, Goods of Paper and Printing (Rp 1.6 trillion); and Transportation, Warehousing, and Telecommunications Rp 1.4 trillion).

           PMDN realization by project location (5 largest) consists of East Java (Rp 3.8 trillions), DKI Jakarta (Rp 3.1 trillions), East Kalimantan (Rp 2.3 trillions), North Sumatera (1.4 trillion) and Central Kalimantan (Rp 1.4 trillions).

PMA Realization

       PMA realization by business sectors (5 largest) consists of Mining (USD 1.1 billions), Transportation, Warehousing and Telecommunications (USD 0.8 billions); Food Crops and Plantation (USD 0.5 billion); Basic Metal, Metal Goods, Machinery and Electronic Industry (USD 0.5 billion); and Transportation Vehicle and Other Transportation (USD 0.4 billion).

          While, PMA realization by project location (5 largest) consists of DKI Jakarta (USD 1.2 billion), West Java (USD 1.1 billion), Banten (USD 1.2 billion), South Sulawesi (USD 0.4 billion), and West Nusa Tenggara (USD 0.4 billion).

         PMA realization by country of origin (5 largest) consists of Singapore (USD 1.2 billion), Japan (USD 0.6 billion), South Korea (USD 0.5 billion), British Virgin Inslands (USD 0.3 billion), and the Netherlands (USD 0.3 billions).

BUSINESS NEWS - April 27, 2012

MINERAL AND COAL LAW SHOULD BE PRO-PEOPLE, INSTEAD OF PRO-FOREIGN INTEREST

          The Mineral and Coal Law No. 4/1999 has been very accommodative to national interest, while on the other hand, it denies or eliminates foreign interest. Work Committee (Panja) of the House of Representatives, during deliberation of the Law, looks as if they are in the middle of opinion competition arena. We insert Articles 103 and 107 concerning added value. In the implementation, it is very beneficial to national interest. Therefore, the multiplier effects of the requirement to build smelter give 100-400 percent profit to the country. So, the Law is pro-people, cent profit to the country. So, the Law is pro-people, instead of pro-foreign interest, Sonny Keraf, Chairman of Work Committee on Mineral and Coal Law, told Business News.

            After the reformation, the national political structure experienced significant changes, including the one related the lawmaking authority. The society, government, and all stakeholders are able to read the thinking and work paradigm of the lawmakers, including evaluating of the quality and achievement. But, during the deliberation of the Mineral and Coal Law, the atmosphere in the Work Committee is in the midst of political and moral accountability. Therefore, we are confident that the opinion competition to produce the Law which is pro-people has been very accurate.

            Some significant benefits of the Law are, amongst others, requirement for a mining company to use local content so that local workers around the location can be absorbed maximally. And, mining company is required to use local goods and services. So far, there are many companies, like Freeport, who use heavy equipment from overseas, especially from New Zealand and Australia. The provisions on local content are set forth in Article 106 of the Law.

        Besides Article 106, there are some other Articles which refer to political and moral accountability for national interest. The Work Committee inserted Article 147 which requires education and training activity for the society. And, Article 113 stated that all mining companies shall perform divestment through five-year and 10-year stages of production. There are many Articles which are pro-people and not at all pro-foreign interest. There is Article 124 on mining services and Article 5 on Domestic Market Obligation (DMO) which are used simultaneously for production control. Article 107 is about local businesses. There are also some Articles stipulating transition plan from Operating Contract (KK) to Mining Concession (IUP).

            Legislative Body of the House of Representative sees that the House Representative is a legislative heavy institution. The fact is that a major part of members of the House of Representatives (560 members) of 2009-2014 are businessmen. Only a few who have sufficient socio-political background.

        Political liberalization where political powers are conducted through transactional approach by making money as the main variable in politics. Open political system (closed proportional system proposal from the Indonesian Democratic system proposal from the Indonesian Democratic Party of Struggle (PDI-Perjuangan) in General Election Bill was always rejected) and recruitment pattern in every political party in facing general election significantly determines quality outcome of the House of Representatives. Consequently, today’s politicians and leaders are controlled by popularity and capital. Only a few who have high integrity and adequate capacity who are popular and have large amount of capital.

            Regarding controversy on Mineral and Coal Law, the Legislative Body considers that the Law? Substance is already ideal, and it does not favor foreign interest. On the contrary, the Legislative Body considers that non-governmental institutions (LSM) are the ones who frequently interfere with the Law content. While, the approach used in the deliberation of the Mineral and Coal Law is legislation process. I suspected the LSM who commented about the content of the Law. They have gone too far in their interference.

BUSINESS NEWS - April 25, 2012

THE GOVERNMENT IN DOUBT TO RENEGOTIATE OPERATING CONTRACT OF FREEPORT AND NEWMONT

             Mining Advocacy Network (Jatam) considers that the government is infirm in immediately renegotiating some Operating Contracts (KK) on mining, especially because there is some interest of the country of investment origin. Two US mining companies, Freeport and Newmont, have given the biggest gold bar contribution to the national economy. And, both companies have the longest time of operation in Indonesia. “The reason is not because mining is a big industry, but there is some interest of the country concerned. They have felt comfortable here, but feel very disturbed with renegotiation of Operating Contract”, Hendri, Siregar of Jatam, told Business News.

            The government has planned to renegotiate some operating contracts through Presidential Decree No. 3/2012. The Presidential Decree stipulates about Evaluation Team for Adjustment of Operating Contract and Coal Mining Operating Agreement signed early this year.

             The Presidential Decree also stipulates the Coordinating Minister, Hatta Rajasa, as chairman of the team. And, Minister of Energy and Mineral Resources, Jero Wacik is as daily chairman. Some ministers who joined the team will carry out their duties up to December 2013.

           The Presidential Decree sets forth clauses on operating contract and coal mining operating agreement which already exist so it is in accordance agreement which already exist so it is in accordance with Law No. 4/2009 on Mineral and Coal. Besides conducting evaluation of the Articles in the operating contract and operating agreement, the team also has other tasks as set forth in the Presidential Decree. Without the Presidential Decree, the company is still required to renegotiate. As this has been stated explicitly in Mineral and Coal Law No. 4/2009.

            The Evaluation Team formed by the government reports to the President and shall report its work result once in every six months. Evaluation is also conducted on operating contract of large mining companies. So far, profit share of coal mining operating contract is considered too low and unprofitable to the state. The government is intensely reviewing article by article all operating contracts which are considered distorting the country. “If a Law has been issued, Presidential Decree is no longer necessary. The important thing is that the implementation is in accordance with the provisions of the Mineral and Coal Law. The government is more doubtful when there is a member of US Senate who demanded that Freeport and Newmont are not to be messed up.

            Annual General Shareholders Meeting of PT Timah, Tbk (TINS) agreed on restructuring of members of Board of Directors and Board of Commissioners. After the meeting, the shareholders resolved to appoint former President Director of PT Tambang Batubara Bukit Asam (Person) Tbk, Sukrino, to replace Wachid Usman as President Director.

            PT Timah has so far been a strategic state owned enterprise considering that demand for tin in overseas market increases continuously. In addition to that, tin produced in Bangka Belitung (Babel) is still very potential because exporting countries, including Japan, still rely much on tin produced in Babel.

          The new members of the Board of Directors consist of Dadang Mulyadi, Purwijayanto, Ahmad Rosidi, Abrun Abubakar, and Ahmad Subagia. They replace Setyo Sardjono (Operations Director), Surawadi (General Affairs and Human Resource Director), Khisna Syarf (Finance Director), and Gatut Hari Prasetyo (Commerce and Business Development Director).

            The General Shareholders Meeting resolved to change structure of members of the company’s Board of Commissioners by appointing Insmerda Lebang (President Commissioner), Suryadi Saman (Independent Commissioner), and Erfi Triassunu (Commissioner). They are replacing Fachry Ali (Independent Commissioner) and Boni Siahaan (Commissioner). The President Commissioner remains unchanged.

            “Tin mining sector is still foreign to us. Give us time to explain about future performance of PT Timah”, Sukrino, President Director of PT Timah, told Business News.

            Sukrino, who is also former number-one person in coal mining company admitted that he is still “foreign” in tin sector because formerly, he handled coal commodity. But, we are optimistic that with performance and with cooperation with members of Board of Directors, the target can be achieved according to the one resolved in the General Shareholders Meeting. PT Timah will make progress”.   

BUSINESS NEWS - April 25, 2012

THE IMPACT OF BUILDING NEW AIRPORT

               The emergence of new generations of the new-rich in Indonesia had increased people’s mobility and on the other hand bringing advancement to transportation mode hence making the position of airports now more important; moreover with the emergence of new regions (provinces, regencies, cities) as result of re-mapping, increasing need for inter insular or inter provincial transportation.

                The Ministry of Transportation testified the above statement by signaling that they planned to build two new airports in West Java. This was evident in the fact that a feasibility study for building an airport in Karawang and Majalengka as substitute or relocation of the Hussein Sastranegara airport Bandung had been accomplished.

            The Ministry of Transportation had accomplished feasibility study for a new airport in Karawang – Jabodetabek (Greater Jakarta) already had the Soekarno-Hatta airport, but that airport only had two runways. To consider the increasing number of passengers, it was about time that air transportation system in Jakarta was multi-airport. Finally karawang was chosen as site for the second airport.

                Measures as such had been done had been done by big cities of the world who already had more than one airport. The objective was to solve problems of traffic jam. An example was Tokyo who had two airports not far from each other, i.e. Haneda and Osaka airports.

              Beside supporting Soekarno Hatta airport, the new airport in Karawang which was on the eastern side of Jakarta was expected lessen traffic flow to and from Soekarno Hatta Airport on the Western side of Jakarta. Most likely the development of this project would soon involve the private sector within the Public Private Partnership (PPP) scheme.

              The Government planned to work on the air side while the private sector would take care of the ground (the land side). As planned, this project would be offered by tender in 2013 so by 2015 groundbreaking would be started.

             Meanwhile the planned Majalengka Airport as substitute to the Hussein Sastranegara Airport in Bandung would soon be named kertajati International Airport (BIK). According to feasibility study carried out by the West Java Provincial Government, to build such an airport the space needed was 1,800 hectares of land with estimated budget of Rp 5.8 trillion.

            For further development the space needed was 5,000 ha with estimated budget of Rp 8.29 trillion and was expected to be completed in five years and start to operate in 2017. This new airport would naturally activate economic heartbeat around the location, hence the nation’s Grosss Regional Product (PDRB) would be jacked up as economic trade volume rose.

           To speed up building of this new airport, the Government, though of the Regulation of the Ministry of Transportation no. 34 2005 on stipulation of site for the location of the airport at the District of Kertajati, Regency of Majalengka in relation to financing of the project. With revision of the regulation of the Ministry of Transportation, development in Kertajati would be within the responsibility of the Central Government.

           The Indonesia Air Carriers Association (INACA) as body to accommodate national air transport companies supported the Government’s plan to build this new airport whereby to anticipate growing number of passengers in the future. According to INCA, it was about time to have airport in Jabodetabek.

            Driven by population growth of 15% on the average per year, and Indonesia’s economy which grew 6% or more on the average, very soon the Soekarno Hatta airport would not be able to hold passengers explosion in spite of airport expansion.

            So building of this new airport was most appropriate to meet the need for air infra structure. Jakarta as one of the busiest citie in the world should have more than one airport. With passengers growth rate as it was now, it was predicted that by 2010 the Soetta airport would be unable to cope with passengers growth.

            It was noteworthy that not only the Ministry of Transportation had the idea to build an airport, but also the Government of the Special Province of Yogyakarta (DOY) who planned to build an airport in the regency of Kulonprogo; they believed that the proposed airport at Kulonprogo would create a positive impact in the industrial sector, housing, and tourism. A new airport would even sustain local economic growth.

            Apparently building of a new airport was more than just a discourse. This new airport was planned to be built at Kulonprogo. The estimated fund for building this new airport was around Rp 1.2 trillion; the space needed for building this airport was 50 hectares of land. This did not mean that the Adisutjipto Airport would be closed, but it would be re-functioned into a VIP airport, the airport for very important persons and special occasions.

            The building of a new airport would generate a multiplier effect for the local communities, i.e. change of lifestyle due to increased income of the people as probably many people changed their profession or benefit from the new environment as a place to make a living.

            A situation as such would be beneficial to the banking sector as many people needed fund to open new business, or expand their business or deposit their money. Banks should be eagle eyed to detect business opportunities. Building of airport at Kulonprogo was expected to contribute positively to the changing behavior of people in this region.

            As with matters related to building permit, it should not be difficult at all. Permit for building airport had its legal ground, i.e. Law no. 1 year 2009 on Aviation; Government’s Regulation no. 3, year 2001 on Safety and Security of Flights; Government Regulation no. 70 year 2001 on Airport Building; Decree of the Ministry of Transportation no KM 11 year 2010 on National Airport system; decree of The Ministry of Transportation no. 48 year 2002 on airport management and Government’s Regulation no. 6 year 2009 on types and Tariff of non-tax revenues applicable at the Ministry of Transportation.

          There were also preconditions for building new airport. Firstly, building of spreading-center airport and non spreading center airport the surrounding space of which was controlled and could only be done after stipulation of building execution by the Ministry was issued.

            Secondly, building on non spreading center airport where the space around was not controlled, could only be done only after stipulation for execution of development was made by the Regent or Mayor.

            Thirdly, the airport management executed development of airport building one year at the latest since stipulation for airport building was made.

            As with the process of permit application, the procedure was as follows Step One: to obtain execution permit of airport building, builder must for ward application to the Ministry through the Director General by enclosing copy of stipulation of location permit, masterplan of airport, proof of land possession, document of technical plan of airport including initial plan and pecifiec technical plan according to the applicable standard; and analysis study of environmental impact legalized by the authority.

           Step Two to obtain stipulation of building execution, the builder must forward application to the local Regent by enclosing copy of stipulation to the local permit, masterplan of airport building, proof of land possession, technical consideration by the Government as deconcentration duty, document of airport technical plan in accordance with the applicable standard, and analysis study of environmental impact approved by the authorized official.

            Step Three the Director General submitted evaluation outcome to the Minister at the latest 30 working days after document was completely accepted. Step Four The Minister Stipulated execution of development by observing evaluation outcome of the Director General at the latest 14 days after documents were completely received. Step Five the regent/mayor stipulated execution of development at the latest 30 working days after documents were completely received.

            What was being awaited for now was completion of building masterplan for the new airport in Jakarta, West Java and Yogyakarta in the coming years building of new airport would spread out wider even beyond Java, not just to carry passengers but also goods. All in all, the economic machine would be smooth and efficient, which had the positive impact of increased GDP and regional GDP and people’s welfare.    

BUSINESS NEWS - April 25, 2012