STATE’S INCOME INCREASED BY 10,7% IN 2014

To support fiscal policy of 2014, state’s income of 2014 was targeted at Rp1.662.5 trillion consisting of domestic income Rp1,661.1 trillion, and income from grant Rp1.4 trillion. Compared to APBN-P State Budget 2013, the amount showed increase of Rp160.5 trillion or 10.7%. The estimated state income of 2014 was based  on basic macro economic assumption of state’s income policy execution. This was data of Financial Notice and RAPBN 2014 obtained on Monday [26.8].

In the effort to meet national development target and meet economic challenges of 2014, the Government planned to adopt healthy and effective fiscal policy toward strengthening economic growth which was inclusive, sustainable and of high quality. In 2014 the Government planned to run the policy of deficit handling [not more than 1.5% against GDP] and to control primary balance by optimizing state’s income and improvement of expenditure quality. Besides, there would also be control of debt-to-GDP ratio through financing control based on credit, net negative inflow policy and use of credit resources productive means.

As main source of development financing, income from tax still had to meet many challenges and opportunities, particularly as related to tax resources from informal sector and UMKM small business. By mid 2013 the informal sector and UMKM had still not contributed significantly to state’s income, but was being jacked up to increase. Execution of PP no.46 year 2013 on income tax received by tax having certain Gross Income, was one of the key solutions of maximizing tax income in the future.

Meanwhile the effort to increase income from export tax in the years to come still had to face challenges from fluctuative international price of CPO and stipulation of export tax in line with industrial upstreaming level of CPO and their by-products. The objective of upstreaming was to increase added value and comparative advantage of CPO at home so for ex from export of processed products would increase. However the shift of exported products from CPO to upstream CPO and their by-products had the impact of lower export tax which had its impact on lessened potential of income from export tax.

Business News - August 30, 2013

STATE BUDGET 2014 TO BE ORIENTATED TO FOOD SOVEREIGNTY

Spokesperson of the Hanura Party Nurdin Tampubolon urged the Government to focus development strategy of RAPBN 2014 on food resiliency especially self sufficiency in rice, sugar, soy corn, salt, meat and fish. By this way it might be expected to reduce import of food and promote export of Indonesian products. The trend of soaring price of world’s food might motivate the effort to increase production and added value of Indonesian agricultural products. This was the information released by the PR Dept of House on Monday [26/8]

Fraction of the Hanura Party in their review of Financial Report of RAPBN 2014 stated the importance of strengthening food resiliency by increasing budget of the Ministry of Agriculture and other institutions significantly. This was a form of Government’s sound support to the food resiliency program and the effort to enhance farmer’s or companies activities or to expand and to build inter-village connectivity to enhance their marketing campaign.

About the target of oil lifting, the Hanura Party fraction proposed the target of 870 thousand barrel per day set in RAPBN 2014 be increased to 900 thousand barrels per day but on condition that the Government was serious about stepping up production of crude oil by promoting exploration, production and integrated processing to promote production output.

In addition to the above, economic growth of 2014 which was projected at 6.4% or increasing by 0.1% against APBN-P of 2013 which was only 6.3% should be based on the assumption that every increase of 1% of economic growth absorbed 500,000 workers but in 2014 next year only 450,000 workers were predicted to be absorbed.

The Hanura fraction saw that the projected economic growth of 2014 at 6.4% was below the capacity of natural resources and national economic potential; therefore the Hanura Fraction proposed that the project economic growth be inclusive of broader employment and business opportunities.

Indonesia Still Importing Agro Products

Spokesperson of the PPP Party Epyardi Asda in his overview of Government’s Financial Report and RAPBN 2014 quoted President SBY’s report that the Government set target to attain self sufficiency in five food commodities namely rice, corn, soy, sugar and beef for 2014.

Unfortunately all of the said products were still imported. The Government also set target to attain surplus of 10 thousand tons of rice for 2014. For that matter, the attainment called for serious attention. In RAPBN 2014, the Government only allocated fund of Rp2.4 trillion for building roads and irrigation projects in the rural areas. So far, the government’s attention on farmer’s need like farm equipments and production facilities was still at minimum.

The PPP fraction also criticized budget for infra-structure which constantly increased – but the betterment itself was still way below the standard to step up infra structure quality. The PPP Fraction also questioned the program of mass transportation at there was no clear underlying reference of the program. How many kilometers of road to be built, many villages would be electrified, and how long the road surface to be asphalt covered. All the progress should be clearly countable and measurable.

 
In regard to education, for which 20% of budget was allocated from APBN which had been underway to what extent the budget had brought progress to the of human resources in Indonesia was still questionable. Reality had it that school fess were still expensive, collections in schools was still happening, school infra structures damaged, and quality of human resources was still lo.

Business News - 30, 2013

GOVERNMENT APPLIED FOUR ECONOMIC POLICIES

The government implemented four economic policies to maintain economic growth and minimize the impact of economic shocks on the business world, so job creation can be maintained. “with these attempts, it is expected that current account deficit in the third and fourth quarter will decline, and economic growth can be maintained. We also combine this policy package of Bank Indonesia and the financial services authority (OJK), which is mainly to stabilize the financial sector and the exchange rate. These packages will be announced separately by Bank Indonesia and OJK”, said Coordinating Minister of Economy, Hatta Rajasa, acting on behalf of President Susilo Bambang Yudhoyono in a announcing the four economic policies at the Presidential Office on Friday (August 23).

The first package, said Hatta, who was accompanied by Finance Minister, Chatib Basri, and the Governor of Bank Indonesia, Agus Martowardojo, is made to improve the current account deficit and Rupiah exchange rate against the dollar. In this package, the step to be taken is to encourage export and provide tax breaks to the export-oriented industries. Then, the government will also reduce oil & gas imports by increasing level of biodiesel in diesel fuel to reduce diesel fuel consumption that comes from import. The government will also establish a higher luxury tax on CBU cars and imported branded goods from an average of 75% to 125%-150%. And, the government will also improve mineral exports.

The second package is to maintain economic growth. The government will ensure that 2013 State Budget (APBN) deficit remains at 2.38% and financing is safe. In this regard, the government provides incentives to labor-intensive, including tax breaks.

The third package is to maintain purchasing power. The government, in this case, coordinates with Bank Indonesia to control price volatility and inflation. In connection with this, the government plans to change the trading system of beef and horticulture, from quota-based imports to price based imports mechanism.

The fourth package is to accelerate investment. The government will streamline the integrated one-stop service for investment licensing. For example, it has formulated the trimming of process of up-stream oil & gas licensing from 69 to 9 permits. The government will also accelerate the revision of regulations on Negative List of Investment (DNI), accelerate investment in export-oriented sectors by renegotiation of mining contracts.

Furthermore, strategic infrastructure projects will be accelerated. It was all done so that the current account deficit will decrease and economic growth can be maintained this year.


Business News - August 28, 2013

GOVERNMENT TO BE REALISTIC ABOUT INCREASING MINIMUM WAGES

Business players were asking for assurance that minimum wages at resident/city level each year be reasonably measurable. Certainty of pay was today necessary to save labor intensive industry in Indonesia. If there was no certainty of wages standard, labor cost in Indonesia was no longer competitive compared to that of other countries. Government urged the Government to be realistic in increasing salary level of small business [UMP/UMK] could be realistic or be considerate about company’s condition.

As told, labor unions demanded salary in crease of 50% in 2014. The demand was made as compensation on increasing commodity prices in 2013. The increase was rated as jacking up 30% salary increase of works. However, sofjan Wanandi of Apindo stated in Jakarta on Friday [23/8] that UMP could not possibly increase by 50% in 2014. If UMP increased at that amount companies would go out of business and mass dismissal of workers would continue. “increased wages of 50% was most unrealistic at the present condition” Sofjan said.

According to Sofjan, increase of UMP would be discussed by workers and some big  labor  unions. Apindo would not stop labor unions who refused company’s condition to stage demonstrations. In principle, Apindo would not come to terms with labor unions considering companies’ condition at the moment. He disclosed further the increase of oil price had not only reduce workers’ purchasing power, but also companies’ capacity. Sofjan said that increased oil price had also increased production cost.

           

About tax incentives, Sofjan claimed that workers might feel that the incentives offered no benefit for them. This was because taxes had always been paid by the company for the workers, so it seemed as if workers receive their salaries in full. From the company’s viewpoint, tax incentive would only be known to be beneficial after the company calculated profit and loss account. He also asked that the Government’s plan to offer incentive to labor intensive industry be accompanied by legal certainty in terms of salary.

Sofjan was of opinion that three Government proposition to allow exemption for income tax for workers would have no significant impact on the effort to prevent mass dismissals. He said that today industrial players needed certainty of formula on minimum wages each year. If this was not made clear, if was feared that Indonesian companies of other countries. The result was that investment might drop. To illustrate the average wages in Cambodia was only one third of that in Indonesia.

Previously the Ministry of Industry M.S. Hidayat the Government was today considering three options of incentive giving for labor intensive industry. The three options were: the Government temporarily take care of workers taxes, making tax cuts of company’s tax income, and increase level of nontaxable income [PTKP]. The Ministry of Industry tend to tend to chose the option of tax suspension by Government.

This proposal was in the process of fine tuning at the Ministry of Finance and was to be released soonest so it could be put in effect as payroll formula next year. Sofjan did not deny that the three incentive proposal could enlighten business people’s burden. However, tax incentive would only be effective if companies considered profit and loss. He added on that increase of minimum wages early this year, had caused 60,000 workers employed at Korean companies to be dismissed. The workers were of three industrial sectors: electronics, footwear, and textile.

 

Business News - August 28, 2013

FOOD AND BEVERAGE INDUSTRY PROFIT DECREASES

Fasting month Lebaran momentum is a blessing for the food and beverage industry. The reason is that during the fasting month and Lebaran, the sales turnover of food and beverage industry can increase up to 30% compared to regular months. How ever, the rising prices of subsidized fuel (BBM) make the industry’s profit margin decreases. Chairman of the Indonesian Food and Beverage Association (Gapmmi), Adhi Lukman, in  Jakarta (Monday, August 26), said that during the fasting month and Lebaran, demand  for food beverage products has historically increased by approximately 30%compared to normal months. Turnover during the fasting month and Lebaran this year could reach Rp100 trilion-Rp150 trillion.

However, the fuel price hike makes cost of production increases. On the other hand, producers could not immediately raise prices of their products. The reason is that food and beverage producers have contracted modern retailers for three to five months ahead so it is difficult for them to raise prices. Not only that, earlier this year, growth in the food and beverage industry turnover is not as fast as expected. Thus, the food and beverage industry tries to maintain selling prices in order to maintain the turnover.

Adhi said that in the first quarter of 2013, sales turnover of the food and beverage industry is around Rp152 trillion. Until the end of this year, he estimated that the turnover will grow around 8%-9% over the past year to around Rp756-Rp763 trillion. AS an illustration, in 2012, sales turnover of food and beverage industry in Indonesia reached Rp700 trillion.

           

On the other hand, Adhi said that home industry, and catering industry will make efficient use of raw materials in line with the rising prices of 12 kg LPG in May 2013. The 12-kg LPG price increase would be very burdensome to home industry, restaurant, and catering industry. Because, since the beginning of the year, food and beverage industry has begun to raise prices by 5%-10% due to increase in provincial minimum wage (UMP), electricity tariff, as well as prices of industrial gas.

If 12-kg LPG prices go up, the selling price is predicted to be more than 10% but by considering that the purchasing power is still low, the selling prices may not rise too high. At lleast, the restaurant and catering industry is making efficient use of raw materials of foodstuffs, is volume is reduced. According to him, what can be done by the industry is simply adjusting the volume of goods sold. Because, at the beginning of the year, there is not a few industry that has raised selling prices ranging from 5% due to the increase in electricity tariff and UMP.

Meanwhile, according to the Marketing and Commercial Director of Pertamina, Hanung Budya, the government will implement a new distribution system by raising the cost of delivery of LPG to consumers who are considered financially capable. Almost every year, Pertamina suffered losses due to the sale of 12-kg LPG. According to him, it does not need to happen if 12-kg LPG users are those who are financially able.

So, restaurant and cafe businesses should be subsidized. And, for consumers who are less financially able, the government has prepared a 3-kg LPG subsidy. He said that he has applied for permission to the government for a price adjustment. This is also the findings of the Supreme Audit Agency (BPK) that Pertamina has lost several trillions for something that does not need to be subsidized. 

 

 

Business News - August 28, 2013