CALCULATION OF VOLUME OF FOREST BIOMASS BECOMING A BASIS OF FORESTRY MINISTER POLICY

Assumption of volume of forest biomass recently plays a strategic role in the arrangement of government’s policy. Emission rate and carbon absorption will become a consideration of Forestry Minister’s decision in converting forest to other uses, such as plantation and mining. Forestry Ministry Secretary General, Hadi Daeyanto, stated this matter.

The Forestry Ministry is continuously trying various alternatives to prepare for a credible and verifiable national carbon calculation system. One of them is by arranging a monograph of a number of algometric models to assume the capacity of tree biomass on types of tropical forest ecosystems in Indonesia.

Hadi was optimistic that carbon assumption through monographic instrument can achieve accuracy of designation of emission rate. By doing this, the government could optimize Indonesia’s role in reducing world’s glasshouse gases. The role has actually been set forth in Presidential Regulation No. 61/201 on glasshouse gas national action plan. The government has committed to reduce glasshouse gas emission by 26% in 2020 by itself, and by 41% through international support.

In addition to that, carbon absorption will continue to increase if in the future a carbon market in the reducing emissions from deforestation and forest degradation (REDD+) mechanism has been formed. And, the Forestry Ministry could also acquire an indicator of carbon dioxide (CO2) absorption from natural forests and could determine policy on change of forest function. The monograph will be used as a reference in arrangement of policy, for example, land conversion to plantation, he said.

The Forestry Ministry sets to absorb 1.24 giga tons of Co2 through 500,000 hectare planting a year. Increase in carbon stock will also increase economic potency of carbon in the next couple of years. Carbon potency in Indonesian forests is estimated to reach 250 tons per hectare with profit projection at around Rp 20 millions per hectare. The government is currently promoting carbon reference value to be priced at USD 8/ton.

But, carbon trade system by business-to-business not yet obtained a baseline-to-business not yet obtained a baseline agreed at the international level. The reason is that the discussion of REDD+ mechanism is stagnant as it has not been done intensively so that carbon market trade in overseas intensively so that carbon market trade in overseas could not yet be mapped. Until now, Indonesia is still active in some international conferences on mitigation and climate change. Besides participating actively in UNFCC forum, Indonesia is continuously promoting sustainable forest conservation and management business through collaboration of measuring, reporting and verifying (MRV) systems.

Hadi said that his party has issued Regulation of Forestry Minister No. 20/2012 on Forest Carbon Management. In this regulation, there are 14 forestry practitioners who are entitled to receive income from carbon trade. Among them are holders of logging (HPH) concessions, industrial forests (HTI) concessions, community plantation forest (HTR) concessions, conservation forest practitioners, and traditional forest practitioners.

Allocation of utilization of forest carbon for the state will be set forth in Amendment of Government Regulation No. 59/1998, he said. According to him, forest carbon management can be in the form of carbon storage or absorption from state forests or community forests. Carbon management activities consist of seed growing, planting, biodiversity protection, and conservation forest management.

Heru Prasetyo, Deputy I for Planning and International Relations of the Presidential Work Unit for Development Control and Supervision (UKP4) said that his party accepted the Forestry Ministry attempt in recalculating annual carbon emission and absorption rate. Carbon in not expected to be a substitute, but a complementary project, he said.

Business News - August 10, 2012 

INDONESIAN ENTERTAINERS CONCERT MANAGEMENT REJECT SPONSORSHIP BY CIGARETTE BTAND

Some managers of Indonesian Senior and Junior pop singers were still unwilling to accept sponsorship by cigarette producers especially in terms of solo concerts. But on the other hand cigarette advertisements could serve as “short cut” for entertainers to solve their financing problem. “Many cigarette producers are willing to act as sponsor of our show, but we cannot accept because if there are children among the audience during our concert, artist’s managers and promoters could be prosecuted” Lolita Leimena, manager of one of Indonesia’s senior singers disclosed to Business News (3/8).

The dilemma of using cigarette companies as sponsors, very frequently ended up in refusal, so concert managers finally must find non-cigarette sponsors. “On the other hand we are also worried that if ticket prices were expensive, the auditorium would be empty on the other hand if tickets were cheap, we are afraid to lose”.

Lolita was manager of senior singer Harvey Malaihollo who planned to stage a concert next September. The concert would be staged to commemorate Harvey’s 35 year career in music entertainment. This concert was for the second time after holding the same concert 10 years ago at Mulia Hotel. The dilemma of ticket pricing and public enthusiasm was a hard problem for an event organizer. “We cannot reduce price to pay honorarium of artists and musicians. In terms of honorarium we refer to the agreed price with other managers”.

Other thing was that managers were having difficulty in finding sponsors who sponsored not in the form of money but in facilities and equipments. Many hotels and building owners were unwilling to offer special price for Indonesian singers, which was contradictory to treatment for overseas singers. “There are building owners and managers who dare to offer free rental to overseas artists, but for domestic singers they are not cooperative at all”.

Foreign singers and entertainers were more favored and widely acclaimed than local artists, so it had the effect on sponsorship building and hotel were the most important facilities for staging a concert. In addition to that stage and auditorium were a portent part in staging a concert. “Stage design and arrangement need big budget, starting from decoration, equipment etc. Domestic singers are most particular about stage setting, but for foreign singers stage were often without any decoration because poor stage setting also had the impact on public response”.

Lolita claimed that tickets for Harvey’s concert was low priced. Moreover the concert would be made merrier by guest artists, the young ones and the old ones alike including singers of the 1980’s. Concert of Indonesian singers was for the organizing committee part of the I love Indonesian Product campaign, but even that had no positive impact on stimulating the local audience to appreciate local artists and their creations. “We have to work hard, because the public’s acclaim for overseas singers are bigger than for local singers. Evebtually we think: the Lady Gaga concert was rejected, why not transfer the sponsorship fund to Indonesia singers?”

Some management of Indonesia entertainers were also worried that the I love Indonesian Product campaign was mere lip service because in reality some event organizers of music and film performance still gave convenience and high pay to foreign artists. “In case of foreign entertainers, they are often discerning about hotel, transportation or even types of food and beverages. Organizing committees claim they could not reject demand of foreign artists. In case of Indonesian singers they simply have to accept what has been arranged by the organizer and sponsor”.

In view of the above, the management of Harvey Malaiholo admitted they would sell tickets at low price i.e. Rp 175 thousand – Rp 1 million. This concert was expected to serve as nostalgic remedy especially for fans who were in the age bracket of 40 – 60 years. This concert would also be made merrier by young singers and Malaysian singer Sheila Madjid as guest artist.

In a different location PT BCA stated that development of art and culture in Indonesia was part of Corporate Social Responsibility (CSR) so BCA was supportive to staging national arts and culture featuring their unique features and characteristics. “The way we seen it, our customers also live in lifestyles and are appreciative of art, interior design and music. We keep on facilitating these cultural events so events like the Bazaar Art Jakarta which would be part of program of dedication to art and culture” Adranus W. Senior Manager of BCA disclosed to Business News sometime ago.

The Bazaar Art invited visitors to explore the world of contemporary art, so the expo hall of Bazaar Art was full of artworks in architecture, installation, motor vehicles accessories etc. “We are giving special price as well with price discount of 10 – 15 percent and such are commplace”.

BCA felt sure that the nuance of I love Indonesian Product campaign was inclusive in the expo, so the theme being aired was Celebrating Indonesian Heritage. Nearly all expo participants including interior design also explored the concept of Indonesian culture, for example the Heritage of Iwan Tirta which exposed Batik workpieces in various media of expression. In addition to that presentation of Mahzab Bandung exposed modern art, Wayang in Art, Art galley, encompassing Indonesia’s domain of culture through various materials as medium.

Business News - August 10, 2012

TO REVIEW THE PROSPECT OF AIRLINE BUSINESS

Competition in domestic airline business in Indonesia would predictably heighten. Air Asia Berhad through its subsidiary company Air Asia Investment Ltd. together with PT Fersindo Nusa Perkasa was reported to acquire all shares of PT Metro Batavia Group at the cost of USD 80 million. Based on exchange rate of Rp 9,400 per USD the amount was equal to Rp 7.52 trillion.

As planned, in the next one year Air Asia Indonesia and Batavia Air would merge into one new business entity. So far the two airline were still analyzing the form of merger to be realized.

Tony Fernandez, Chief Executive Officer of Asia Air Berhad stated that this Asia’s step was to expand their market share in Indonesia. Although prevalent overseas, Air Asia’s market share in Indonesia was still relatively small.

Last year, Air Asia Indonesia commanded only over 15% of air routes market in Indonesia, having carried 1.3 million domestic passengers; now the aimed at domestic routes. By this acquisition Air Asia Indonesia set target to command over 20% of domestic routes till end of year.

Most likely the target would be met. The point was that Batavia Air themselves had managed to carry 6.7 domestic passengers in 2011. This year Batavia Air set target to carry 8 million passengers, while Air Asia felt sure to be able to carry 6 million passengers. All in all, merger of these two airline was targeted to carry 14 million of passengers this year.

Combination of the two airlines would definitely increase the total number of aircrafts to become 54 aircrafts, 33 aircrafts of Batavia Air. By this combination they would also complement their business line, i.e. medium service normally rendered by Batavia Air and low cost service rendered by Air Asia.

It was not impossible that by this acquisition, Air Asia coule edge aside Garuda Indonesia’s Tbk position as one of the leading air lines in Indonesia. With 94 aircrafts, Garuda flapped their wings to carry 13.7 million passengers in 2011.

The Management of Garuda was not afraid Air Asia’s expansion in Indonesia. Elegantly they stated that corporate act done by the two airline indicated that the potential of airline business in Indonesia was great and the opportunity was open wide, either for low cost service or full service. Last year alone, the number of passengers flown in Indonesia reached 60 million. Each year the total number of passengers were expected to grow by 15%.

What about the prospect ahead? Presumably still bright in line with the betterment of domestic and international economy. The existing data served to confirm the assumptions, at least for the domestic market. Take for example performance of PT Citilink Indonesia, Garuda’s subsidiary company.

By Semester 1-2012 last, PT Citilink Indonesia managed to carry 1.84 million passengers, an increase of 62% compared to same period of the previous year which posted only 1,14 million passengers. The increased number of passengers was thanks to the expanded armada from 8 aircrafts last year to 14 aircrafts this year.

Citilink sets target to carry 4 million passengers till end of year, considering that August was peak season. In terms of earning, the company had managed to pocket Rp 1 trillion of income, an increase of 60% against same period the previous year. By end of year the company sets target of Rp 2 trillion of income.

Citilink sets target of income of Rp 4 trillion in 2013 and would try their best to pursue profit so Citilink could start Initial Public offering in 2015.

Today Citilink was focusing attention on tourists with limited budget (travelers) flying to domestic destinations with flight duration not longer than three hours. Flights of this sort was growing by 20% each year. For that matter this year Citilink sets target to carry 4 million passengers and 16,4 million passengers in 2015.

Today Citilink was concentrating business in Jakarta and Surabaya with eight daily routes from Jakarta and from Surabaya to Batam, Banjarmasin, Denpasar, Balikpapan, Medan and Ujung Pandang. Since the airline business permit (SIUP) was released last November now Citilink had pocketed 70 domestic route permits and 16 regional route permits.

Citilink operated 14 arctafts consisting of 10 Boeing 737 Series and 4 Airbus A 320. By end of year the company sets target to send for six Airbus A 320 so Citilink projected to operate 20m aircrafts.

Citilink planned to increase flight frequency to 120 flights per day by end of year. Considering that productivity in Semester II-2012 was much higher, i.e. today still 72 flights per day, so as per September would be increased to 86 flights per day.

Then, as per October till end of year flight frequency would be 120 flights per day. The plan to increase flight frequency was in tandem with the arrival of a number of new airplanes.

In terms of fleet, last year there were only 8 aircrafts. By end of 2012, Citilink who had chalked up income of more than Rp 1 trillion through Semester 1 this year would soon have 21 units of aircrafts.

Citilink performance was in accordance with data of the Board of Statistics (BPS) who recorded the number of domestic air passengers which in June 2012 had posted 4.6 million passengers, an increase of 2.17% compared to May 2012.

The same was with the number of international passengers which increased by 9.58% to become 1.1 million people. Through the period from January to June or Semester 1-2012 domestic passengers pared to same period of 25.1 million people.

As with international passengers in Semester 1-2012 it increased by 10.84% to become 5.8 million passengers against same period of 2011. The highest increase of passengers in June was in Hasanuddin airport Makassar (7.82%) followed by Ngurah Rai airport Bali (5.33%), Polonia airport Medan (3.27%) and Soekarno Hatta airport Jakarta (0.98%). On the contrary at Juanda airport Surabaya the number of passengers dropped by 2.54%.

Meanwhile the most numerous domestic passengers in June were from Soekarno Hatta airport which posted 1.7 million passengers or 36.44% of domestic passengers; followed by Juanda airport Surabaya with 582,600 passengers or 11.43%. The total number of domestic passengers for Semester I-2012 reached 26.3 million passengers, an increase by 4.68% against same period last year at 25.1 million people.

One thing was sure airline business for an archipelago country like Indonesia, in spite of being capital intensive was appealingly prospective. In spite of being hampered by high price of oil and weakening global economy, airline business was rated as having stable outlook.

Moody’s Investors Service, a rating agency in the Annual Outlook released early July 2012 mentioned that airlines in North America and the Middle East would predictably be able to reap high profit while operators in Asia would be facing heightened competition.

In parallel with the above picture, the International Airport Association (IATA) projected profit of global airline through 2012 would came to USD 3 billion, slightly down previous estimate of USD 3.5 billion.

For the most part, the profit figure was contributed by airlines of the Asia Pacific region amounting to USD 2.3 billion, up against the previous prediction of USD 2.1 billion. Hence this region was the greatest contributor to profit amount of global airlines. Meaning airline business in Asia in general and Indonesia in particular would be a highly prospective market for the future.

The evident was clear that Air Asia Berhard from Malaysia, in spite of having acquired Indonesia’s Air Asia, stretched their wings to Indonesian skies by acquiring Batavia Air. The reason was simple, i.e. to harness Indonesia’s airline market which was the biggest market in Southeast Asia.

Naturally this was a great challenge for national airline including Garuda Indonesia as national flag carrier to remain to be the ruler of their own territory. A potential of that magnitude must be grabbed by Garuda Indonesia through attainment of maximum performance.

Not ignorable was of course was the role of tourism in this airline business. The Government claimed that tourism industry would keep growing amidst long and dragging crisis of the world. This proved that the tourism industry was crisis resistant. Growth of this sector was supported by inflow of international tourists; which posted growth of around 6 percent per year. Through quarter 1/2012 it managed to grow by 6.3%.

The total inflow of foreign tourism was on the average still stable. The surprising fact was that tourist inflow from the USA and Germany were still high. Tourists from America were prevalent, constituting 12% of total number. Many possible factors were the background of increasing number of tourists to Indonesia from countries troubled by economic crisis.

The increased number of foreign tourists were among Malaysian and Chinese nationalities. Meanwhile tourists of Australian origin were in the process of growing. With high mobility of tour operators and ground attendants to save domestic as well as foreign tourists, growth of airline business was becoming more important and deserves more support.

Tourism was a golden opportunity for domestic, regional or international airline to explore Indonesian skies. This was thanks to Indonesian economy which grew positively with a background of excellent geographical condition, a vast number of rising middle class, increasing purchasing power and high mobility of the people.

Business News - August 10, 2012   

THE PROSPECT OF HOUSING SECTOR

Housing for the lower middle class would still mushroom all over the place. Predictably in the next two years according to research of Coldwell Banker Indonesia (for the period of 2012) residential homes for the lower-middle class would still prevail in the domestic property market in Indonesia.

In view of Indonesia’s macro economy which would predictably be well sustained through 2012, the housing sector would remain prospective. The supporting factors were as follows:

Firstly, Indonesia’s projected economic growth of around 6.5% with Gross Domestic Product totaling Rp 7,000 trillion. A considerably high economic growth would bring optimism to businesspeople to keep expanding business which would jack up performance of the business world.

Secondly, demand for housing kept growing by 12% against previous years. Indonesia’s vast population, around 243 million people of which 50% were the new rising middle class who aggressively seek for shelter.

The growing number of young couples and young executive as buyers and end users contributed to dynamiting process of house building for the lower-middle class. Most of them were first home buyers who buy houses to dwell not for investment. This was some sort of demographic bonus to the development process which would boost demand for homes especially in the big cities in Indonesia. 

Thirdly the Government’s support who offered a popular program of low cost home for the people which was implemented through application of Liquidity Facilities for Home Financing (FLPP) which offered bank’s credit of low interest.

Fourthly facilitation of Mortgage Services (KPR) which was stable and constantly. Some banks even dared to set single digit mortgage interest. Sound and healthy bank’s liquidity contributed to bank’s aggressiveness in marketing KPR facilities.

Fifthly, high accumulated figure of housing shortage known as backlog.

Sixthly, enhanced infra-structure building, especially toll roads in some regions. Development of infra-structure (land, sea and air transportation, electricity and telecommunication) which were widely spread in many regions were contusive to housing development, as indicated by widespread housing development. It came as no surprise that under such circumstances developers were aggressively building houses in many locations.

Survey over property prices carried out by Bank Indonesia unveiled that there was high tendency of growing demand in this sector the high public demand, according to BI’s survey was also driven by offerings of property prices which were relatively stable particularly of the small and medium homes category.

BI had recorded a three-monthly price increase of homes over quarter 1 of 2012 for all types of houses. The highest price increase was on big type homes 0.90%. Meanwhile for the yearly cycle, price of all types of homes increased but the increase rate was slowing down against the previous year.

The highest increase was on small type of house 4.42%. The term “small house” in this survey referred to the type of house less than 36 m2 in area whilst “medium type” referred to types of house in the range of 36 – 70 M2 and “big house” meant above 70 M2.

Data of some developers showed that small and medium types of houses still had great potential to sell in the property market where demand exceeded supply.

Real estate circles in Indonesia (REI) projected many developers at home would be actively engaged in building middle and low cost homes. This year the number of medium and small house to be built in Indonesia was projected to be around 120 thousand to 150 thousand units nationwide.

One of the regions where building of medium houses was underway was for example Depok. The building of Cinere-Jagorawi and Depok-Antasari toll roads jacked up price of land in Depok city. In spite of increased price of land due to toll road projects, increased price of land in Depok was not as drastic as in other supporting areas of Jakarta like Tangerang. The reason was because in Depok houses being built were more of the middle and lower types.

The region where price of land rose significantly was Tangerang, which might be rated as exceptional compared to other regions. Although Tangerang was densely populated, demand here was still high due to development of exclusive real estates like Bumi Serpong Damai (BSD) where increase could be 50% and in the surrounding areas around 35%.

The Government’s support in the form of infra structure building additional appeal for developers and investors to that area. Hence combination of Government’s support, participation of banks as financial institution, strategic planning of developers and great consumer’s potential, plus sound underlying infra structure were the reasons for optimism for the prospect of property sector till end of year. 

Business News -  August 10, 2012

THE ROLE OF BANKS IN PROMOTING DIRECT INVESTMENT

As an intermediary institution, i.e. raising fund and pipelining credit to promote economic growth, the banking sector played a strategic role in promoting direct investment.

Direct investment either by domestic investors (PMDN) or by foreign investors (PMA) were manager by the Coordinating Board of Investment (BKPM). What was the relationship between banking institutions with BKPM in energizing investment activities in Indonesia?

It was interesting to observe collaboration between Bank Mandiri and BKPM lately in the effort to promote direct investment. As a destination country for investment amidst unimpressive performance of developed nations, it was indisputable that Indonesia played an important role in the world’s economy which was being promoted by Bank Mandiri by supporting BKPM.

Recently PT Bank Mandiri (Persero) Tbk was engaged with BKPM in a joint promotion effort and enhancement of banking services toward rendering ease and convenience for foreign investors in investing in Indonesia.

Signing of Memorandum of Understanding was done by leaders of both institutions on August 1, 2012 last. Through this collaboration, Bank Mandiri would support BKPM to exchange information on investment projects in Indonesia which were potential and prospective for foreign investors. In addition to that Bank Mandiri would also render banking services needed by investors to maximize their investment in Indonesia including treasury products such as products related to conversion of foreign currency or even hedging.

According to Bank Mandiri, this collaboration ws most beneficial to banks considering that BKPM was a strategic institution which could serve as partner to Bank Mandiri whereby Bank Mandiri could enhance their role in promoting direct investment in Indonesia. With projected economic growth which remained steady at around 6.5% and elevated rating by international rating agency, Indonesia was predictably an attractive invitation destination especially for overseas investors.

Naturally it would be most ideal if the investment were in the real sector which was labor intensive instead of portfolio investment which employed limited manpower.

Meanwhile BKPM who had learned from their experience in collaborating with reliable banks like Bank Mandiri was aware and most obliged to foster collaborations toward enhancing investments. In the process of communication with candidate investors who were interested in investing capital in Indonesia, one of the questions often raised to them was “who is your partner bank”.

To BKPM, a customer-based bank like Bank Mandiri which was also strong in corporate linkages served as selling point in the process of promoting Indonesia to foreign investors. BKPM was expecting there would be a room for bilateral relations overseas investors and local investors where they could meet and negotiate with Bank Mandiri acting as mediator.

As mediator, Bank Mandiri could connect or arrange meetings between their debitor customer and candidate investors of other countries. Relationship between national businesspeople and foreign investors would be an excellent business synergy worth developing.  

One the other hand Bank Mandiri continued to collect funds to be pipelined to the real sector in the form of credit facilities such as productive credit either as working capital or investment.

Bank Mandiri could also render financial services to local and foreign investors listed at BKPM such as cash management, bank guarantee, currency swap, hedging, payroll system, safe deposit box, custody, trade financing, money transfer, pension fund of financial institution (DPLK) etc.

Beside transactional activities, the bank would also earn non-interest income known as Fee Based Income. Somehow interest based income through credit facilities remained to be the bank’s main source of income, which was still strengthened by fee-based income. All in all, bank’s total income would soar up sky high. A brilliant step taken by a bank with the biggest total asset in Indonesia.   

Business News - August 10, 2012