MICRO, SMALL AND MEDIUM ENTERPRISES (MSMEs) READY TO GO INTERNATIONAL

There is no reason for SMEs and cooperatives for not being ready for the ASEAN free trade (ASEAN Economic Community/AEC) which comes into effect in 2015. To that end, the government asked SME players not to be discouraged in facing the ASEAN free market. Because the Indonesian economy which was ranked the second position in the G-20 is the main weapon to compete in the ASEAN market.

Braman Setyo, Production Deputy at the Ministry of Cooperatives and SMEs, in Jakarta, Tuesday (4/3), stated that 58 million Indonesian micro, small and medium enterprise (SME) players are expected to meet that figure in 2014, in the next four years it is expected that they will be able to reincarnate into companies that go international. This expectation is rational because it is supported by the operations of Integrated Business Service Center (PLUT) which has operating 22 locations throughout Indonesia.

As the person responsible for the development of PLUT, Setyo said, with the number of MSMEs, their role is not surprising if in the next four years they turn into companies that go international. The target is facing the AEC 2015 agenda. However, he added, the development of cooperatives and SMEs need a leverage that is able to evoke a sense of entrepreneurship, boost productivity, competitiveness, and performance as well as reduce business operating costs. “What we meant by “Go international” is that at least it is able to reach the ASEAN level. To be sure, it could be a benchmark as one of the pillars of national economic resilience”, said Setyo.

According to Setyo, relating to the implementation of AEC 2015, there will be a threat that could undermine MSMEs and cause MSMEs to become a spectator in their own country. He mentioned that there are at least four things that will happen with the implementation of the ASEAN free market, namely the free flow of services, free investment, free flow of capital and free flow of skilled labor.

It is said, that Indonesian MSMEs must face competitiveness risk, the key is to work together to strengthen branding, innovation and legal aspects, especially the role of export-oriented SMEs. However, to go international, SMEs need to have management and innovation capability. He gave an example of packaging, which becomes an important part of product marketing. Therefore, packaging must be adjusted to market trends in order to attract consumers. Indeed, there is operational increase, but it would be advantageous because it is part of marketing strategy.

Meanwhile, to improve the competitiveness of cooperatives and MSMEs, the government carried out branding development program, design innovation and legal aspects that has reached hundreds of units. Deputy for Marketing and Business Networking of the Ministry of Cooperatives and SMEs, Neddy Rafinaldy, stated that increase in the competitiveness of MSME players has been implemented in four provinces.

The program will be continued to some other provinces which require assistance to improve competitiveness. Especially for design trends and branding, and design development. The four provinces that have been implementing this aspect are Bali, South Sulawesi, West Nusa Tenggara and Yogyakarta.

As for mentoring, development of design innovation and legal aspects of product has been implemented in six provinces, namely West Java, Central java, East Java, Yogyakarta, Bali and South Sulawesi. He said total number of cooperatives and SME players who have got this facility is 340 units and development of product packaging has been done to 500 cooperatives and SME players in East Java, West Java, Aceh, and Riau Archipelago. (E)

Business New - March 7, 2014

BERAU CONFLICT WITH ROSAN AT THE EDGE OF ARBOTRATION

Conflict between PT Berau Coal Energy Tbk (BRAU) with former President Director of BRAU, Rosan Perkasa Roeslani, becomes more exciting and full of twists. The dispute began when Rosan Roeslani was accused of embezzling approximately USD 173 millions of fund while serving as President Director of PT Berau Coal Energy, Tbk. Some of these funds were placed in Chateu Asset Management.

This problem began when Roslan intended to pay compensation in the form of cash and assets in the form of 49% stock of Asian Bulk Logistics (ABL) and 600 hectares of land owned by PT Borneo Prapatan Lestari. Meanwhile, Asia Resources did not acknowledge the appraisal of KPMG Corporate Finance Pte Ltd on ABL because Rosan unilaterally appointed KPMG. While, the total compensation is USD 173 million in cash and assets. Apparently, Rosan did not pay until December 26, 2013. The situation is exacerbated because Rosan was also delinquent in initial repayment (recovery agreement) of approximately USD 30 million.

BRAU was preparing to submit to submit formal charges (formal statement of claim) to Rosan in order to fulfill the obligation to repay funds worth USD 173 million, a compensation for financial irregularities that occurred during his tenure as President Director of BRAU. The charges will also expand the scope of payment liability that must be met by Rosan.

On 8 November 2013, BRAU and its parent company, Asia Resources Minerals Plc (ARM), formerly Bumi Plc, has sent a notice of arbitration through the Singapore International Arbitration Centre (SIAC). The arbitration material at that time only includes Rosan’s obligation to meet the initial payment worth USD 30 million to BRAU. Because Rosan has failed to meet the initial payment due on 26 September 2013.

But, Rosan proposed a new argument which claims that the obligation has been extinguished. “Therefore, the arbitration process will be expanded to cover all payment obligations of RR (Rosan Roeslani) worth USD 173 million. Now, the lawsuit continues when Rosan did not fulfill the agreement and obligations. Raden Curt Eko Santoso Budianto as President Director of PT Berau Coal Energy Tbk (BRAU) said that BRAU and Asia Resources have filed formal charges and form an arbitration team according to the rules of the Singapore International Arbitration Centre (SIAC) on December 24, 2013. Furthermore, Asia Resources will not make any the transfer of shares of PT Asian Bulk Logistics (ABL). “The main position of the company (Asia Resources) is that Rosan must make full payment in cash,” said Raden Curt.

Now the management of PT Berau coal Energy Tbk (BRAU) and Asia Resources Minerals Plc filed a formal claim to the former President Director of PT Berau Coal Energy Tbk, Rosan Roeslani, on January 20 2014. President Director of PT Berau Coal Energy Tbk, Raden Curt Eko Santoso Budianto said that Rosan Roeslani has failed to transfer USD 173 millions of cash. Rosan was supposed to repay the funds in accordance with the recovery agreement on June 26, 2013. Until maturity date, the USD 173 million funds have not been paid by Rosan.

The formation of the arbital tribunal has been conducted in accordance with the regulations applicable in the Singapore International Arbitration Center (SIAC) on December 24, 2013. The Company does not  want to do transfer of shares from PT Asian Bulk Logistics. “Rosan Roeslani must make full payment in cash,” Eko said in an information disclosure to the Indonesia Stock Exchange (IDX), Tuesday (March 4).

The company stated that KPMG is not as independent appraiser. Considering that Rosan has appointed KPMG unilaterally. In fact, the appointment of an independent appraiser should be done jointly in accordance with the terms contained in the recovery agreement. “We are currently waiting for Rosan’s plea,” said Eko.

            In addition, regarding the restoration of the remaining loss of USD30.67 million, the company and Asia Resources Mineral have initiated proceedings in France related to Chateau de Bonaban SAS and Chateau de Ia Grenerie SAS. The two French companies are indirectly owned by Rosan Roeslani. Rosan owned the companies through a holding company based in Luxembourg, RCapital holding, which later is the primary beneficiary of every French company sued by the Company. “The cost to acquire the French companies have assets of approximately 15 million euros,” said Eko.

The Company has received a ruling on sequestration of shares held by RCapital in the French companies. The company is currently looking for other ways to obtain a remedy for the remaining  loss. But at the same time, a subsidiary of PT Berau Coal has filed a petition for the dissolution of Chateau.

PT Berau Coal, as a shareholders who has investments in Chateau asks the court in Cayman to dismiss the incumbent directors and appoint a new director as a substitute. The arbitration ruling is expected to be issued in September 2014. “This is done to conduct an investigation into the status of the investment and whether there is still a remaining value of investment that can be recovered,” said Eko. (E)

Business New - March 7, 2014     

INDONESIA TO SEND MORE SKILLED MIGRANT WORKERS IN CONSTRUCTION

The percentage of Indonesian Migrant Workers [TKI] in the construction sector in various infra structure projects abroad, especially skilled workers and experts kept increasing. The proportion of skilled and unskilled labor was 40 : 60. Although skilled labor was still below 50%, the number tend to increase year after year. “The ratio of expert: skilled labor: unskilled labor was 10:30:60 which was the structure of project employment in General. “Head of the Development Center, Investment Resources [PPS-DI] Ministry of Public Works [PU] Mochammad Natsir stated to Business News [4/3].

The Ministry of Public Works [PU] felt the need for development nurturing skilled labor toward AEC next year, so the Ministry of PU would also promote investment resources. The construction sector for infra structure projects involved many institutions in the Ministry. PPSDI encompassed development of institutional business, organizing, investment resources which ran supply chain, investment platform, market, and competitiveness. “We now even operate competence building sector and construction training with Malaysia. We have jut signed MoU last January,” Moh. Natsir said.

The Ministry of PU was optimistic about TKI competence toward AEC 2015. The optimism was not an exaggeration, considering the role of Indonesian contractor companies in Asean. Besides the national private companies and BUMN kept expanding and undertake various construction tasks. “We are doing well in Asean, the Middle East. We undertake many projects there. Our handicap is one: company and capital access. Our construction cost is relatively more expensive compared to that of Asean countries”

The Government had set up the Indonesian Export Financing Body [LPEI] and Exim Bank. The credit interest had been downsized to one digit but still more expensive compared to other countries. LPEI could facilitate credit for national or foreign contractors. For foreign investors, the prerequitment was the project undertaken must use local resources. If the project undertaken by foreign products was dedicated to Indonesia credit could be extended by Exim Bank or LPEI. Project which were export oriented could also have access to LPEI and Exim Bank.

Some Indonesian contractors’ offering were uncompetitive in terms of price. But in terms of Human Resources, skilled or unskilled, Indonesia was better. Indonesian contractors were able to finish construction projects faster than foreign contractors, while the quality of end result was also good. “We can finish one floor of building construction in one day, so we are getting more reputable in Dubai, Algeria, and Saudi Arabia because our personnel are competitive.”

Over the past 10-15 years Indonesian contractors had been winning projects in the Middle East. Wika Waskita contractor company was undertaking 2 huge projects in Saudi Arabia. i.e. Financial Center and King Saudi University in Ryadh. The number of workers employed in each project could be between 200 – 300 workers; they were skilled labor and expert staff. “All are skilled for all level of tasks, non are unskilled. But it has nothing to do with the Zero Housemaid plan by the Ministry of manpower. We are focusing on development of investment resources and construction.”

Indonesian contractors once had to undertake the tower construction project before the Burj Khalifa Dubai. Besides also the Monorail project in Algeria carried out by WIKA. Wika’s success was also in tandem with operations of asphalt and concrete in this oil rich state. So far TKI employment had been concentrated in Algeria. Some years ago during high season, the number of TKI employed came to 1,400 workers. “We are optimistic. But in countries like Iraq we are still waiting for the right moment. Many potential project were unexplored. We observe the security factor as war and terror are not totally gone”

Meanwhile the 41^st IFAWPCA (International Federation of Asian and Western Pacific Contractors) Sudarto saw the need of meeting demand for infra structure building. Infra structure growth did not only affect economic growth but also social life. Various models of financing had been exercised to promote infra structure building. Investment could be done by state owned companies or regional companies and also the private sector. One of the platforms adopted was joint operation for infra structure asset. The payment scheme would be carried out by private investors in collaboration with operators. “This could be applicable through long term agreement or other models of public private partnership” Sudarto disclosed to Business News [3/3]. (SS)

Business New - March 7, 2014  

MARKET OF PACKAGING INDUSTRY NOW GROWING

The Federation of Indonesian Packaging Agency [FPI] stated that increase of packaging industry 2013 did not meet initial target; this was due to Rupiah depreciated value against USD. Besides all buyings of packaging raw materials were quoted in USD. The loss incurred due to Rupiah depreciation against USD came to 25%-30% against 2013. FPI questioned the application of Law no.7/2011 on currency which made it mandatory to use Rupiah in every transaction.

However, FPI predicted attainment of turnover in 2014 could break through Rp55 trillion or growing by 6% compared to previous year at Rp52 trillion. Director of Business Development FPI, Ariana Susanti in Jakarta stated on Monday [3/3] that growth of turnover depended on demand for packaging from players of F&B industry. Over the past 5 years, growth of consumer goods business was always above 10% being jacked up by modern retail business and traditional market.

Ariana disclosed that Indonesia’s economic condition was unpredictable. He said that infra structure problem at home had its effect on packaging production. Moreover, flood that swept nearly all over the country had stagnated product delivery. He said that depreciated Rupiah put players of industry under pressure, it made producers increase selling price. Since October 2013 producers of packaging had increased selling price by 12% - 18%. On the other hand, application of BMAD PET would drive producers to once again increase selling price as price of raw materials increased. The effect was that sales would drop.

To minimize loss due to production cost, Arena said, producers had to axe promotion expenses. Packaging producers were enhancing efficiency by being selective in prioritizing tasks. For example, promotion cost which was suspected as high, was transferred to production cost. Producers refused to produce anything until there was order. The condition jacked up growth packaging industry as packaging was an essential element in consumer goods production.

He remarked further that raw materials for packaging could be obtained at home. Abroad, raw materials was available in China, Korea and the Middle East. Ariana disclosed that today 40% of plastic raw materials in Indonesia was imported. Therefore weakening of Rupiah had its impact on packaging industry; he said that increased price of imported raw materials could not jack up selling price of products.

Meanwhile the Director General of Small-and-Medium Industry [IKM], Ministry of Industry, Euis Saedah said that F&B Industry must observe packaging quality that consumers might be attracted. Packaging must be attractive so buyers would be attracted at first sight. Most consumers judge a product by its packaging because that was what he would take home.

He remarked further that, as data showed, food products of small industry were still prevalent so the chances to grow was great. To promote packaging quality he planned to facilitate trainings to make skilled workers. However product quality must still be maintained in spite of good packaging. To promote small-and-medium industry, quality of human resources must be promote as well through trainings. (SS)

Business New - March 7, 2014