PERTAMINA EXPANDS LUBRICANT OIL MARKET TO EUROPE AND AFRICA

Alter its success In the Asia Pacific market, Pertamina Lubricants expands its market to Europe and Africa through primary export to Switzerland and South Africa which have a big potency in lubricant oil business. Switzerland and South Africa are the 23rd and 24th export destination countries of Pertamina’s lubricant oil. Primary export to Europe and Africa in­dicates that Pertamina’s lubricant oil product is well accepted in the global market, Pertamina’s Vice Pres­ident Corporate Communication, Ali Mundakir, told Business News (11/9). 

The opening of European market with Switzerland as its gateway is connected to the attempt of introducing Pertamina’s lubricant oil brand through various marketing activities in Europe, amongst ethers, through the Fastron Euroasia Expedition, World Rally Championship, and participation of Pertamina’s young racer, Rio Haryanto. Export development activity which is quite rampant in 2012 with the opening of new markets accelerated increase of market awareness of the existence of Pertamina Lubricants.

Utilizing market situation momentum in Europe which has started to shift to high-quality and affordable products, Partamina partnered with indon­alclini Group Swiss SA In development of Pertamines lubricant oil In Europe with Switzerland as the primary market. Switzerland has strength from the aspect or customer tax and capacity of marketing officers who commonly master four languages, namely English, Carman, Italian, and French so it will enable introduc­tion of product brand to surrounding countries.

The European market is very potential, espe­cially West Europe where lubricant oil potency reach­es 5.2 million kilo liter a year with the composition of 46% automotive lubricants and the remaining indus­trial, marine and mining lubricants. At the beginning stage, leading products to be exported by Pertamina are automotive lubricants, amongst others, Fastron Series, Prima XP, and Mesran shipped in 2 containers or 32,000 liter through Genova Port, Italy. 

Pertamina’s product being accepted in European market proves competitiveness of Pertamina’s lubricant oil in a highly mature and competitive mar­ket. Gradually, we will increase variety of products to be exported and will move to Industrial and marine lubricants.

And, Pertamina also sees lubricant oil market potency in Africa which has a demand growth of 2.6% a year with current market potency at around 1.8 million kilolitre a year. African countries with the highest lubricant oil demand consist of Nigeria, South Africa, Alegria, Morocco, and Egyp.

South Africa who is the host of World Cup 2012 has a quite significant market potency reaching 300 - 400 million liter a year and with vehicle popula­tion reaching 2.1 million vehicles. Sounding of South African market has been started since April 2012 through trade mission of the Trade Ministry to South Africa.

Marketing cooperation will be conducted be­tween Pertamina and National Plasterer Group, one of the main business groups in Cape Town with the in­troduction of Pertamina’s product in Cape Town and Western South Africa. The strength of Pertarnina’s lubricant oil product in entering the South African market is the use of high quality base oil which is a concern to South African consumers.

At the preliminary stage, Pertamina shipped 1 container of Fastron Synthetic, Mesran-based prod­ucts and Meditran SX 15W-40 based diesel lubricant with total volume of 12,000 liter. Various strategies taken by Pertamina Lubricants in entering South Afri­can market are, amongst others, by utilizing the Black Economic Empowerment (BEE) policy by partnering with native entrepreneurs. And, penetration to South African market will become a leverage in market de­velopment in other regions of the African continent. 

Utilization of gas in Java for power plant is potential to save up to Rp21.4 trillion. Central Pro­cessing Plant (CPP) Gas Area Gundih has entered construction stage. The CPP is part of Java Gas De­velopment Project (PPGJ) managed by Pertamina EP to meet demand of gas supply to steam-fueled power plant (PLTGU) Tambak Lorok in Semarang, Central Java. Gas utilization from this area provides efficiency of cost of oil fuel for power plant which reaches Rp21.4 trillion in 12 years.

The saving potency is the difference between cost of utilization of HSD and natural gas as fuel for electricity generation. Based on calculation of com­parison of heating value, natural gas is 26.31 times higher than HSD. Heating value of HSD per liter is 9,100 Kcal, while heating value of natural gas could reach more than 239,000 Kcal. Based on assumption of 50 MMscfd gas supply for power plant in Tambak Lorok, saving potency could reach Rp5,4 billion a day or around Rp21.4 trillion in 12 years. This is one of the contributions of Pertamina EP to support government’s attempt in conducting gas utilization and cost efficiency in energy sector.

CPP, which is on construction stage, is planned to become a gas processing facility from Kedungtuban, Randublatung, and Kedunglusi structures in Area Gundih, Blore Regency with a processing ca­pacity of 70 MMSCFD. And, net gas after process­ing is 50 million MMSCFD flowed to PLTGU Tambak Lorok with a12-year contract period. The gas will be flowed through pipes by PT Symber Petrindo Perkasa as buyer.

In the construction of CPP, Pertamina EP pri­oritizes empowerment of local workers as an added value to company operational activity to the local community. In this activity, portion of local workers involved Is around 30% for skilled works and 100% for unskilled works.

The Java Gas Development Project begins from the identification of gas reserve in Kedungtuban, Randublatung, and Kedunglusi structures in Central Java. The aim of this projections to develop, process, and produce gas in Ares Gundih according to field aconornicity to be sold to consumers at a volume of 50 MMSCFD which is scheduled to come on stream by 2013.

Business New - November 14, 2012

PALM OIL FARMERS UNION URGED TO ACCEPT FRESH FRUIT BUNCHES FROM INDEPENDENT FARMERS

Palm Oil Famers Union (SPKS) urged oil palm plantation companies having plasma plots to accommodate oil palm fresh fruits bunches produced by independent farmers. National Coordinator of SPKS, Mansuetus Sarto, stated this matter.

Formers' oil palm fresh fruit bunches have newer bean directly accepted by factories owned by core companies. Therefore, farmers are forced to sell them to tengkulak (middlemen) who buy of cheap price which is below the price decided by the price deciding team at provincial level. If they do net sell them to tongkulak, their oil palm will be rotten.

This situation happens in all regencies across Indonesia. Palm fruits produced by independent farm­ers are not accepted by core companies. While, the central as well as regional governments are unable to solve this problem. Independent farmers have never been managed by the government from the technical aspect of oil palm farming. Government tends to ask oil palm companies to manage farmers under a part­nership scheme.

Size of independent oil palm estate in Indo­nesia reaches 1.4 million hectare, which is larger than number of farmers involved under partnership schema. Farming system of independent farmers has been quite good with production equal to plas­ma farmers at 14 ton/hectare/year. This should have been appreciated by oil palm factories and govern­ment.

Companies who are involved in the Round­table on Sustainable Palm Oil (RSPO) apply sustain­able oil palm system based on sustainable business principles.

“But, independent farmers are the ones who apply more of the sustainable oil palm principles honoring sustainable principles. Unfortunately, companies joined under RSPO refused to accept oil palm fruits produced by independent farmers. They should accept oil palm fruits produced by indepen­dent farmers because farmers have applied sustain­able principles”, he said.

SPKS urged the government to arrange a new regulation concerning independent oil palm farmers so that oil palm factories can buy oil palm fresh fruit bunches from independent farmers. RSPO is also de­manded to renew its principles and criteria by requir­ing its members to accept oil palm produced by independent farmers who honor sustainable plantation principles.

Riyanto Sitanggang, palm oil analyst. said that when price declined last month, price of fresh fruit bunch at independent farmer level in Riau was averagely Rp500 - Rp700/kg even though upon arrival at SPKS, the price was stable at Rp950/kg. The reason is that farmers cannot directly sell to SPKS, but must sell them through tengkulak.

Bungaran Saragih, Social Economic Professor of Agriculture at Bogor Agricultural Institute (IPB) and former Agriculture Minister, said that the prospect of Indonesia’s oil palm lies in the hands of independent community plantation. It will be more and more dif­ficult for oil palm companies to develop oil palm busi­ness through expansion. Oil palm companies will be more oriented toward productivity increase. Research on this matter has been done mostly in laboratories, and if it is applied, production could increase up to 100%.

Area expansion in a large scale will be increas­ingly difficult so that community plantation farmers still have the opportunity to do expansion. “They do not need land of up to 10,000 hectare, they can cul­tivate an area of only a 5-10 hectare size. Among large oil palm estates, there are 5-100 hectare areas located outside the forests, and these areas will be cultivated by farmers”, he said.

In the future, oil palm plantations will he owned by farmers, while oil palm companies will operate CPO factory and the downstream sector. In such a condition, oil palm farmers will become a new middle class in Indonesia.

Business New - November 14, 2012 

ECONOMY DON’T GROW BY PALM ALONE

So far development of plantation at nation­al scale had always been confined to palm, rubber, cacao and sugar, end yet regional wise many other commodities were motoring people’s economy. M Syekir, Head of Plantation Research Center, Board of Agricultural R&D made this statement.

Therefore the Puslitbun R&D Center would never cease to conduct research on coconut, sugar palm, areca nut etc. “In the past we never had the mandate to research coconut palm, rubber, sugar­cane, cacao, coffee as there was other institution having the mandate i.e. the Indonesian Plantation Re­search Center which was a BUMN State Owned Company belonging to PTPN. But after LRPI changed name into PT Nusantara Plantation Research and changed status into subsidiary company of BUMN We had the new mandate to survey commodities surveyed by RPN. Nevertheless we ignore the com­modity which we had been surveying” Syakir was quoted as saying.

Admittedly there had been many commodi­ties being ignored. Other Palma Research Center for example so far had produced 11 premium varieties of coconuts while other species of Palma were non existent.

Surprisingly Sugar Palm also had high economic potential. In palm plantation zones i.e. East Kutai, East Kalimantan there were farmers who were prosperous without having to plant coconut palm. They planted sugar palm. Demand for sugar palm was lately extremely high to meet the need of ketch-up factories. Now ketchup factories were having difficulty in obtaining sugar palm. Sugar palm trees were growing as tall as 10 meters so growers were having difficulty in tapping sugar essence of sugar palm.

Sugar palm of East Kutai were only 3 meters high while production was high. Beside at the age of 5 years the essence could be tapped. Therefore sugar palm of East Kutai were used as premium variety of sugar palm. After sugar palm was verified as premium variety, farmers, whose trees were stipulated as mother trees now changed into seed producers. Many investors were interested in opening sugar palm plantation to meet the need of ketchup factories. As shorter period of harvesting was not possible the choice was on sugar palm from East Kutai. Today demand for sugar palm seed from Riau and North Sumatra to East Kutai was high. In times when price of palm was down as it was now, it was strongly felt that economy in palm centers like Riau and North Sumatera was losing steam, but in Jambi the weakness was not too strongly felt.

It turned out that cause was Areca nut.

Many farmers in Jambi were growing Areca nut as bush-fence or just plant them in the back­yard. Today demand for Areca palm from India, Malaysia and Thailand were extremely high. The regency of Tanjung Jabung every week exported dry Areca seeds as mony as 50 containers to the three coun­tries. Tanjung Jabung Timur was Areca nut marketing center for the surrounding regencies.

The price of fresh plumes of palm today was Rp900/kg against the previous Rp1,500 whilst price of Areca nut was Rp4,000 against the previous Rp2,000/kg. “Areca nut had been most supportive to palm-growers’ economy in Jambi” he said.

Pursuant to that matter the R&D Center had proposed Tanjung Jabung Timur as national premium variety. The national Seed Board had agreed to the proposal and still waiting for the Ministerial Decree of the Ministry of Agriculture. Other commodities being the center of attention was clove. Whatever people’s perception of the cigarette industry, it was undeniable that the contribution to national economy was high, hence clove had become one of the most important commodity. The Gorontalo clove today was the best of cloves and during harvest time big cigarette companies like Gudang Garam, Djerurn and Sampoerna were rushing tg get their share.

Very often Sampoerna missed their share so they bought clove seeds from growers and sprees them out to other regencies. As there was no rule of the Ministry of Agriculture which regulated transactions were regarded as illegal. To melee it legal the R&D had recommended premium variety from Gorontalo. It was approved by the National Seed Board and now still waiting from Ministerial Decree.  

Business New - November 14, 2012 

NO ADDITIONAL BUDGET FOR ELECTONIC ID-CARD PROGRAM

The Ministry of Internal Affairs (Kemendagri) underscored there was no additional budget for Bud­get Year 2013 for recording of 172,426,571 Elec­tronic ID-Card (e-KTP). The State Budget (APBN) 2012 for making e-KTP reached Rp5.8 trillion, but due to limited state budget, the amount available was only around Rp4.7 trillion for 2012. The rest would be carried over to budget year 2014 as follow up of the said program with the consortium. “Again we underscore there is no additional budget, but there is still left over budget of Rp1.04 trillion which was not being used for budget year 2012” the Minister of internal Affairs Gamawan Fauzi disclosed to Business News (9/11).

The Ministry of Internal Affairs admitted the numerous complaints of Government servants at the District Offices (kelurahan), so the Counseling Pro­gram of the Ministry for the Provincial Governments would be prioritized until next year. This was in ac­cordance with Law no 32/2004 (BN/no. 71512 page 98 – 288) and Government Regulations no 38/2007 (BN no 7576 page 1B-6B) on distribution of duties between the Central Government, Provincial Gov­ernment and Regencies/Cities. “So if there was any official who addressed complaints to the Ministry of Internal Affairs, they could be asked to refer the Rules and Regulations” Minister Gamawan was quoted as saying.

The Minister also denied accusations of fail­ure of his Ministry in managing e-ID Card. Recording of elementary data for a-ID Card was in the beginning difficult even to reach the target of more than 172 million citizens. Germany once did the same thing, but Germany’s population was much less than Indonesia. To serve 60 million Germans, it took them 6 years to accomplish. Moreover, Indonesia’s geographic condi­tion was more difficult in which to access the people. The process of making e-ID Card started from the eastern tip of Indonesia, Papua, North Maluku until Aceh in the West. “Evidently in the first 55 days we had accomplished 14 thousand recordings. Now it is up to the people to judge” Minister Gamawan re­marked.

Recording of e-KTP had met target. The Min­istry of Internal Affairs announced that target to re­cord 172,015,400 people was accomplished on No­vember 6, 2012, In terms of completion deadline, originally target was set for December 31, 2012. Until November 7, 2012, recording of e-ID Card hard reached 172,426,571 citizens. “For those who had not signed in, we give them time till end of this year, so don't worry” Gamawan said.

The Ministry of Internal Affairs noted there were 206 regencies/cities which bad exceeded e-ID card recording target. Meanwhile there were 74 re­gents/cities who had not fully accomplished. The Minister also felt sure of the physical quality of e-ID card. One of the most essential thing was that e-ID Card could minimize or even eliminate double card ownership. However, during the entire recording process many people signed in for two or even three recordings. “But all had been detected. Falsifying of elementary data included various aspects starting from original name to date of birth, photo, etc. We have a data Center so applicant could not falsify data” the Minister remarked.

An example was an Indonesia citizen of Chinese origin had his original Chinese name in Jambi. When he moved to Medan, he used another name which was Indonesian name; but since the photograph was the same data could not be falsified. The same happened with citizens who falsified their pho­tograph. In the first photography they used moustache, beard etc. Even falsified data of birth could be easily detected. “All were recorded from the finger­print, and eyes on the face. So any effort to falsify data would be useless. In fact they are charged with criminal law, but we cannot their data, ex­cept in case of emergency such as proving in the court etc”.

Eighty nine million of a-ID card had been printed and distributed. Those which were not printed were expected to be printed end distributed by May 2013. Distribution of e-Id Card was free of charge. Any official who impose and charges would be sanc­tioned and legally processed. But by Business News observation in many District offices there were still many officials who were arrogant and authoritative. An official in the Kelurahen of Kebon KJosong Ke­mayoran was reported by the citizens for his attitude. The reported who refused to have his name mentioned came to the as for his e-Id Card and was told to come back the next day. He came back the next day as he was told, the officer said that his Card had been delivered to RT/RW. “But the official offered his service to take the card at the District of­fice with his help. I came back the next day and the official said the card ‘was not ready’. I think this is too much, they table-tennised me to carne back and forth. Meanwhile I sent an SMS but was not replied, I came to the District office at the cost of leaving my office. In addition to that the official was arrogant, there was no sense of serving the public at all as he was supposed to, it was very annoying. I begin to think to report the case to the Ombudsaman Body” the citizen said.

Business New - November 14, 2012 

TO REVIEW INVESTMENT PROSPECT OF 2013

Over the year it seemed apparent that Direct Investment process in Indonesia was most hearten­ing. Of the targeted Rp 211 trillion, lit wag predictably surpassable to around Rp 300 trillion. This was based on the calculation that every quarter, direct investment was predictable at Rp 75 trillion to Rp 80 trillion.

The question was would the good perfor­mance in investment this year continue next year? I As known. There would be a series of plans to be im­plemented next year; one of them was the increase of basic electricity tariff (TDL). In addition to that, to­ward year end of 2012 there were demonstrations by workers which tend to be anarchic in some industrial zones.

As known, the plan to increase electricity tar­iff for 2013 was already approved. Players of industry expressed their grievances over Government's policy which they rated as being unpopular. The point was that next year, a number of tariff increase would be exercised simultaneously and such was a burden for industry and business players.

Some big industries even planned to walk out of Indonesia and relocate their industries to Vietnam, Bangle Dash, and Malaysia. One of the causes was the plan to increase electricity tariff (TDL) proposed by the Government through RAPBN State Budget 2013. Among the industries to walk out were footwear, garment, electronics etc. Some automotive producers even planned to relocate their factories to Thailand.

Word was out they could not stand it any longer being tormented by various tariffs. Beside increase tariff of electricity and gas, they were also burdened by Provincial Minimum Wages (UMR). In addition to that, amidst increase of various tariffs, they believed the Government remained to be permis­sive to imported products that stormed Indonesia.

                                                                                                

Furthermore, industrialists and businesspeo­ple pled that increased price of electricity not be gen­eralized at 15%. The increase must be adjusted to subscribers’ capacity. In a discussion between businesspeople and the Government, businesspeople pled increase of TDL in the industrial and small business (UMKM) sectors not be fixed at 15% but only 10%. The reason was that if TDL increased were fixed at 15% for small industry (IKM) and small business (UKM) it was feared that their business would be injured or they might even go bankrupt.

Business people believed that should not sim­ply try to be popular in the eyes of the public but sacrifice business people’s interest at home so many industries were unable to compete at the local mar­ket, not to mention in overseas market. If business people’s voice ware unheard, they were considering to lock out their factories nationwide.

The threat was also triggered by the fact that the Government and the judicative were unable to enforce law especially in controlling workers’ dem­onstrations which tend to be anarchic lately. For that matter they urged the Government to give security assurance to the industry in line with acts of intimi­dation and threat by demonstrators.

Not just strike and demonstrations, workers mobilized by certain labor unions were doing anar­chic acts which stagnated factory operations or even stopped them completely. Unless there was firm ac­tion by the Government, locking out of factories at national scale as last resort would be Inevitable.

So far there was never any firm action by the Government and law enforcers on workers’ demon­strations whose actions disturbed peace and order and disadvantaged companies in Indonesia. Supposedly there was serious effort to enforce law on anarchic workers who clearly broke the law.

It was reported that some industries were planning to relocate their factories, among them were garment industry, footwear, electronics, heavy equipments and food and beverages. Workers’ up­roars were developing toward criminal act. Strangely security forces did not do anything to stop them. The situation tend to trigger horizontal conflict and might lead to chaos, such as conflict between workers who were complaining against the communities who felt disturbed by the riots.

Furthermore the impact of legal uncertainty was felt in labor intensive activities. The restless at­mosphere also discouraged companies to expands business. Since October 2012, there were already six companies which closed and relocate their business oversees, all were on account of legal uncertainty and poor security assurance. The companies which relo­cated their business were from Central Java and East Java, four of which were foreign companies.

Textile producers united in the Indonesian Textile Association (API) stated, security uncertain­ty and legal uncertainty was a threat to Indonesia’s economy. If many factories were closed, it would mean increased unemployment which would be the root of problems.

Companies closed their factories not Just by order of the association, but because they felt there was no security assurance and no legal certainty. Supposedly the Government was consistent about striving to increase employment to implement the pro-job principle. The uncertainty of security and legal assurance indicated that the Government was net supportive to the overall plan to increase employ^­ment.

Strike which were often lanced launched by labor unions or sweeping of factories were truly unfair and unethical especially in times when Indonesia were in the effort to drum up foreign investors. It would be impossible for this nation to attain the tar­geted investment unless supported by healthy invest­ment climate.

The economic machine would be stagnated if investment were stuck. Therefore, workers must contribute to the effort of creating a conducive invest^, merit climate. Obviously sweeping end intimidation by labor unions lately posed as disturbance to 150 companies in Bekasi. Activities of 150,000 workers were held back - acts of sweeping had affected performance of labor intensive projects.

The Indonesian Footwear Association (Aprisindo) estimated there were 600,000 workers in the footwear industry who were threatened by discharge in the event that national lock out actually happened. Some shoe factories already closed since the climate was not conclusive to activities. The num­ber of workers in the footwear industry was posted at 600,000 people and they were threatened by dis­missal if national lock out actually happened.

The number of people to be victimized by lock out were not just 600,000 workers but also their families and surrounding communities like restaurants where the workers eat. The option of walk out had to be taken because so far Cher was no security assur­ance and loyal certainty by the Government. It was herd for the shoe producers to comely with workers’ demand because the characteristics of footwear in­dustry was high volume, low margin.

Relocation of factories was also necessary if production climate was not healthy. It was impossible for companies to stay in Indonesia if productivity were low. The export target of shoe industry which was worth USD 5 billion would this year not be met. This was on account of unfavorable domestic condi­tion and miserable world's economy. The most fear­ful thing was that factory lock out would be done by a combination of 23 local factories of law enforcement was not exercised by the Government and law enforcers.

On the other hand, the Government through the Minister of Labor and Transmigration Muhairnin Iskendar had asked Governors and Provincial Remu­neration Board (Depeda) to speed up discussions on stipulation of Minimum Provincial Wages (UMP) 2013.

Based on data up to November 3, 2012, there were only six provinces who had stipulated UMP 2013, i.e. Papua, Bengkulu, Bangka Belitung, North Sumatra, South Kalimantan, and West Kalimantan. For UMP 2013, the Province of Papua had stipulated Rp 1.79 million, Bengkulu Rp 1.2 million, Bangka Be­litung Rp 1.266 million, North Sumatra Rp 1.305 mil­lion, South Kalimantan Rp 1.337 million, and West Kalimantan Rp 1.06 million.

Minister Muhaimin had also asked the Governors of Greater Jakarta, West Java and Banten to immediately stipulate and synchronize UMP 2013. Synchronization and alignment was necessary so UMP 2013 could be mutually agreed upon so employer-employers frictions could be eased,

Stipulation of UMP 2013 must consider vari­ous conditions. However, for common interest stipu­lation of UMR 3013 mast be immediately realized so it could be exercised by all related parties, especially employers and workers. The stipulation of minimum wages was not only a matter of reference to the components of decent living (KHL).

Ideally, based on Ministerial decision Kepmen 226/Men2000 Minimum Regional Wages was stipu­lated by the Governor in 6.0 (sixty) days et the latest before effective date of UMP; meanwhile minimum wages for regencies cities was stipulated 40 (forty) days before effective date of minimum wages of Re­gencies/cities i.e. on January 1 next year.

After the Permenakertrans Regulation No. 13/2012 there were other variables as benchmark in stipulating UMP, i.e. productivity, economic growth, condition of labor market and the least capable business, workers welfare etc. Even the inflation and in­centive factor and housing and transportation incen­tives for workers might be considered thoroughly so laborers’ wages could increase significantly.

Dissecting and stipulation of UMP/UMK was recommended by the Remuneration Board in the re­spective regions consisting of representatives of labor unions, businesspeople, the Government, experts, observers and academicians. In stipulating UMP/UMK, the Regional Remuneration Board were running market research an prices of 60 components of de­cent living (KHL). Thereafter they formulated preposi­tions, set forth recommendations and consideration to the Governor/Regent/Mayor in stipulating minimum wages. Recommendations made by the Remuneration Board must serve as reference in stipulating minimum wages in each region.

As soon as UMP 2013 was stipulated, there would be massive illumination to inform stakeholders of industrial relationship on the size of minimum wag­es; and all parties were expected to comply to the rules on minimum wages and to synchronize properly and consistently.

From the above picture it was visible that next year the prospect of investment might not be as bright as this year unless the plan to increase elec­tricity tariff end laborers uproar be tackled the el­egant way to create investment climate which was conclusive to growth and stable whereby to create investment friendly climate.

Business New - November 14, 2012