MINISTRY OF INDUSTRY AND MINISTRY OF TRADE STILL FINALIZING REGULATIONS ON THE ENTRY OF BORON STEEL

Ministry of Industry (Ministry of Industry) considers that imports of boron steel or alloy steel for infrastructure projects are very detrimental to the national steel industry.

"Currently, imports of boron steel is free from import duty and it threatens the national industry", said Director General of Manufacturing Industry Basis of the Ministry of Industry, Harjanto, in the "Discus­sion on the Opportunities and Challenges for the Na­tional Steel Industry" in Jakarta, on Monday (May 5).

That is why the Ministry of Industry and Min­istry of Trade were finalizing regulations that will re­strict the entry of alloy steel whose purpose is solely because the industry wants to enjoy lower import duty (duty-free). However, the government also ob­served this rule, so that in the end, the downstream and intermediate industry can be accommodated to get an exception to obtain boron steel as their raw materials, he said.

The steel industry is one of the strategic in­dustries that play an important role in supplying raw materials for construction sector, pipes, machinery and defense equipment or automotive sector. "In an effort to increase investment in the country, we will provide a special tax holiday for industries in priority sectors, such as pellet and sponge iron industry", he said.

Meanwhile, member of the Standardization and Certification Committee of the Indonesian Iron and Steel Industry Association (USIA), Basso Datu Makahanap, in the same occasion, said that the gov­ernment needs to control the imports of boron steel because its presence makes the domestic steel mar­ket to decline.

"The flood of boron steels causes the local steel industry to face difficulty in determining the selling price. Price of boron steel is cheaper than lo­cal steel, and it causes a decline in demand for local steel", he said. Therefore, a permanent solution to solve the problem of invasion of boron steel im­ports is by requesting safeguard in accordance with the rules of the World Trade Organization (WTO). "To protect local boron steel products, safeguard instru­ment should be used. In addition, import manipulation practices should be addressed immediately", he said.

Previously, Import Director of the Directorate General of Foreign Trade at the Ministry of Trade, Su­medi Didi, said that there will be restrictions of regula­tions on trading system for imported steel containing boron, and finalization stage is still on the way. In the near future, it is expected that the regulations will soon be signed, because this time, both the Ministry of Trade and the Ministry of Industry are still review­ing and discussing the mechanism for the implemen­tation of the regulations.

"In future, the rules concerning trading system of boron-containing steel will be applied to import­ers, whose status will be distinguished whether they are Registered Importer (IT) or Importer Manufacturer (IP). Currently, the relevant technical ministries are still completing a review of a number of tariff lines for this kind of steel, associated with HS (Harmonized System) code number, whether it is worthy or not to be included in the category of boron-containing steel, IISIA: Boron Steel Import Value RP 439 Billion.

Based on data of IISIA, due to illegal imports of boron steel or alloy steel for infrastructure projects of 400,000 tons every year, the state suffered a loss of Rp439 billion of three HS (Harmonized System) codes. "There are some steel business operators who incorporate boron steel element when doing imports to reduce costs. If importing pure steel, the price of the product is much cheaper", Basso added.

In 2012, imports of the national steel indus­try reached 2.02 million tons with an import value of USD13.4 million. The imports are to cover domes­tic consumption which still experienced a shortage of 2.6 million tons of national production, which is only 6 million tons. "National steel production is only 6 million tons, while domestic demand reached 8.6 million tons. National per capita consumption in 2012 reached 29.6 kilograms", he said.

It is projected that by 2015, steel consump­tion per capita to reach 49.6 kg with steel demand per year at 13.8 million tons_: Arid, by 2025 it is esti­mated that gross domestic product (GDP) will range from USD 4 trillion to USD 4, 5 billion, so that steel consumption per capita will increase up to 100 kg and national steel demand 26.2 million tons.

"Master Plan for the Acceleration and Expan­sion of Indonesian Economic Development (MP3EI) requires large amounts of steel with a significant in­crease of demand. This will encourage an increase in investment and other multiplier effects that will ulti­mately drive economic growth", he said. (E)

Business New - May 9, 2014  

BUSINESSES QUESTIONED THE READINESS OF SUPPORT AREAS OF JAKARTA IN FACING AEC 2015

The business world questioned the readi­ness of support areas around Jakarta, such as Bogor, Depok, Tangerang, and Bekasi, associated with the readiness to face the AEC (ASEAN Economic Com­munity) in 2015. It was conveyed by Vice Chairman of Finance, Banking and Investment of the Indonesian Chamber of Commerce and Industry (KADIN) of Ja­karta Province, Irwan Hutasoit, on Monday (May 5).

With the position of the Greater Jakarta area, Jakarta is very strategic as a financial and government center, including the availability of skilled workforce to fill important positions. Procurement of skilled la­bor becomes one of the challenges that must be pre­pared to face AEC in 2015.

Why is that so? Because one of the challeng­es faced by Indonesia in general, and Jakarta in par­ticular, is among others, because there are fears over unemployment increase in Indonesia if Indonesian workers do not have an international-standard profes­sional certification. In the end, positions or important positions in Indonesia will be occupied by profession­al workers from the Philippines, Thailand, Vietnam, or other ASEAN partner countries.

KADIN of DKI Jakarta is the most concerned about the influx of workers from Vietnam and Myan­mar, because workers of the two countries have a quite high productivity. Even, nurses from Malaysia have much higher skill than Indonesian nurses. Ironi­cally, they are willing to open training school for Indo­nesian nurses, Irwan added.

Hence, there is also concern that Indonesia will only be a market for the entry of foreign workers. They will master a number of business activities in the production of goods, services, investment, skilled labor and capital, and business people. That's why Indonesia needs to fortify itself by holding more inten­sive training for skilled workers.

The establishment of AEC 2015 is an oppor­tunity for the people of Jakarta to expand their busi­nesses more broadly to the ASEAN region. ASEAN is a powerful force with the potential population of 600 million people, with GDP reaching USD 2.3 trillion, abundant natural resources, integrated production base, geographical closeness to one other, relatively affordable wages, qualified resources, and relatively progressive liberalization policy.

According to Vice Chairman of Organizational Division of KADIN DKI Jakarta, Berry B. Purba, the government is expected to publish policies that can facilitate the flow of trade and human mobility, infra­structure development, and the readiness of the busi­nesses to face AEC. Because in entering the ASEAN single market, the government is no longer able to provide protection to businesses. Thus, if the busi­nesses were unprepared, the position of Indonesia will be left behind, and this country will just become a market for the entry of other ASEAN products.

Regarding doubts about the competence of Indonesian workers, it was once stated by Chairman of the Indonesian Textile Association (API), Ade Su­drajat. According to him, with a free circulation of people in this country, it will be a problem because In­donesian workers do not have sufficient competence and there is also a cultural friction among the differ­ent communities in the country. It will be a problem because the Indonesian people not yet have the skills needed to face AEC 2015.

And, to deal with the implementation of AEC, the government through the Ministry of Industry had conducted a variety of preparations by cross-sectoral efforts and policies, among others, intensifying so­cialization of AEC 2015 to industry stakeholders, adding test laboratories, improving human resource competence, preparing Indonesian National Work Competency Standards (SKKNI) in each industry sec­tor, including strengthening SMEs and developing new entrepreneurs. (E)

Business New - May 9, 2014

HARBOR INFRASTRUCTURE NEED RESTORATION URGENTLY

To an archipelago country like Indonesia, in­ter-insular connectivity and overland transportation were most important. Moreover one of Indonesia's weak spot in competitiveness was poor logistics sys­tem. In this case, poor infra structure support would affect domestic economis growth, which worsen competitiveness of national products. Therefore har­bor experts could play their role in developing harbors at home.

The Association of Indonesian Harbor Experts [HAPI] rated Pelindo must spur on development of sea transportation system to keep up with growing sea transportation at home. Chairman of HAPI Wahyono Bimarso stated in Jakarta on Tuesday [6/5] that the growing traffic of passengers and goods must be accompanied by development of harbors and ships. Today harbor infra structure seemed outdated and in­adequate.

Very frequently harbor infra structure was having problem such as the Ferry Crossing shuttle service in Merak, Banten which very frequently had infra structure damages; a condition which would degrade quality service for passengers. The Government must have a long-term concept to develop load­ing and unloading system of goods in seaports including small harbors.

The Central Board of Statistics [BPS] dis­closed development of sea transportation in terms of passengers number January- March 2014: the num­ber of sea passengers at home was posted at 3.0 million people, an increase of 76.71 % against same period last year. increasing number of passengers was posted in Tanjung Perak Harbor and Belawan, i.e. 42.03% and 0.4%. On the contrary, the num­ber of passengers in Balikpapan, Tanjung Priok and Makassar harbors dropped by 29.12%, 25.29% and 3.76% respectively.

Meanwhile the volume of goods transported through January-March 2014 came to 56.0 million tons, an increase of 12.32% against same period of 2013. Increased volume of goods transported was posted in Makassar harbor 25.02%. On the con­trary the volume of goods transported in Balikpapan, Panjang, Tanjung Perak and Tanjung Priok harbors dropped by 23.66%, 15.78%, and 3.71% respec­tively.

She stated that building of infra stricture which was not being run seriously by the Government was the root of logistic problem. She elaborated that burden on the road today was extraordinarily heavy. Road damage that happened during natural disaster or hometown rush during !du Fitri - such as cracked road surface or bridge damage were disturbances to logistics. She disclosed that logistics infra structure like harbors became most important to businesspeo­ple. The Government seemed to have no commitment to improve things.

Meanwhile according to Ina Primiana Syinar, a CORE Researcher and Professor of the University of Pajadjaran Bandung, upgrading of infra structure could lessen logistic cost burden on GDP. She stated that although Indonesia's Logistics Performance In­dex [LPI] increased, the Government must still build and upgrade infra structure such was because Indo­nesia's logistics-to-GDP ratio was high. i.e. 24.6%

To improve the condition, the Government must accelerate renovation and upgrading process of harbors and transportation system, because this sector constituted 60% of production cost. She remarked that to improve logistics cost, there must be repositioning of industrial strategy and fostering inter­institutional coordination as this was allegedly the root of national logistics system.

Inna rated that the Government needed to appoint a coordinator to synchronize all ministries/ institutions so there would be no one going his own way like it was happening today. Strengthening of competitiveness, she said, was needed toward im­plementation of the ASEAN Economic Community [AEC] in 2015 and Regional Comprehensive Partner­ship [RCEP] in 2016. (SS)

Business New - May 9, 2014

GOVERNMENT UNDERSCORE THE STRENGTH OF BLUE ECONOMY PRINCIPLE

The era of industrialization with Blue Economy Approach proclaimed by the Ministry of Maritime and Fishery [K K PI had evidently enhanced management of marine and fishery resources. In short, development of marine and fishery by Blue Economy principle had been fruitful.

For that matter, it had been KKP's commit­ment that Blue Economy be implemented in various policy execution, especially in the development and acceleration program of KKP where industrialization would be prioritized in minapolitan zones. Synergy of minapolitan development, industrialization and blue economy was for acceleration and strengthening of added value toward sustainable blue economy.

The Minister of KKP Sharif Cicip Sutardjo stated in Jakarta on Tuesday [6/5] that he under­scored the principle of Blue Economy in line with pro­motion and industrialization in maritime and fishery business. The Minister stated that blue economy became a corridor so the process of industrialization being exercised would stick to the concept of natural resources conservation. Blue Economy is a new approach to continued development and fine tuning of the concept.

Sharif explained that the Blue Economy Con­cept was among others learning from nature espe­cially the process of eco-system or known as the logic of eco-system, creativity and endless innova­tion. Sharif also elaborated on the principle of Blue Economy among others efficiency in natural resource exploration, the zero waste concept, and social inclu­sion.

Sharif also disclosed there were eight factors which determined success in development of the maritime and fishery sector, namely continuity of fish resources, infra structure availability, development of innovation and technology application. Furthermore high quality marine and fishery, competent Human Resources, potential market and investment support, supportive Government regulation.

On broader sense, Sharif elaborated the Gov­ernment was determined to spur on pro-Green policy which was rated as part of the sustainable develop­ment strategy and Green Economy implementation which was pro-growth, pro- jobs and pro-poor. He said that one of the points was the glass house effect reduction and to increase carbon reserves. The pro­gram was implemented by way of tree planting and prohibition of primary forest deforestation.

Minister Sharif explained that to support the program KKP had legislated Regulation of the Min­istry of KKP No PER.12/MEN/2012 on Hooked Fish Business on Open Sea in Indonesian waters. As known, open sea fishery included the Indian Ocean and Pacific Ocean which could be exercised by us­ing ships of 30 GT which should be registered by the Government.

Sharif underscored that the development of industrialized hooked fish must be synergized with the blue economy application. This platform was expected to be a transformation process to promote productivity and added value of fishery subsector the sustainable way. Moreover today production output of hooked fish came to 5.5 mil­lion tons/year. Certainly not only the production volume which increased but also the added value as well as the positive impact on people's employment and welfare.

The Government, Sharif said, would facilitate convenience to fishermen to support fishing in the open water; such as among others to allow catch to be unloaded in foreign harbors on condition that they report to the headquarters port in Indonesia and present document of transaction. This policy was adopted in accordance with data collecting of fish resources and to anticipate over fishing [above quota] as regulated internationally. (SS)

Business New - May 9, 2014

INTEGRATED INFRA STRUCTURE SUPPORT MINERY INDUSTRY IN CHINA

The Ministry of ESDM saw that the success of mining industry in China was on account of well integrated infra structure of various sectors including electricity, harbors, roads, bridges etc. And yet Chi­na started minery processing only since 2000. "The Government of China bought aging factories and re­build them with advanced technology," The Director of Mineral Business, Dir. Gen. of Minery-and-Coal [Minerba], Ministry of ESDM Dede Suhendra stated to BusinessNews sometime ago.

Mining was the locomotive of development. Beside electricity supply, the Government of China also built harbors and roads on sharing basis. The communities around the construction location were involved in the project. China intensively processed various mineral products. "So Indonesia's export of nickel, bauxite etc to China increased by 100% in ten years till 2013. We have screened tightly, but they escaped."

The Ministry had made balance sheet for rev­enues, target and realization. Report unveiled that there was difference of IUP permit issued. In 1999 the Ministry reported there were around 600 permits. The Ministry only had 10% of the permits issued. "In 10 years from 1999 to 2009 there had been no development and there were many IUP issued by the Regents."

The Ministry finally issued a circular letter to all regional heads, which was ecpected to motivate them to make a report. It contained among others the number of IUP issued, production reserves, process­ing level and end result. "but there was no response. So we stated that companies which were not listed at the Ministry were 'unofficial' [illegal]. Thereafter only the truth was unveiled. There were 8,000 IUP permits reported against the initial IUP s in 1999. We as makers must know the data." Dede remarked.

Thereafter since 2009 the number of listed increased to 10,000. The Ministry was still selecting and classifying based on operational category and exploration. The Ministry was still not in a position to decide which companies were obliged to process ores before exported. "Apparently it would take a long time. We found that a company may posses 2 or 3 permits, so we apply the Clear-and-clean procedure. Region wise, it did not end up in overlapping" Dede Suhendra concluded. (SS)

Business New - May 9, 2014

PROPER ELECTRICITY PRICING IS BLESSING IN DISGUISE

Wrong pricing policy had its impact on ful­filling electricity need, including electricity for the industrial sector and household. Lesson leant was that wrong pricing policy of electricity might cause two third of a nation to collapse. For comparison was electricity problem and average economic growth of the Philippines. Economic growth fell from 7% to 4%. The Directorate General of Elec­tricity, Ministry of Energy and Mineral Resources [ESDM] Jarman disclosed to Business News some time ago.

The Ministry of ESDM was stepping up in­tegrated electricity supply management. Operational Management permit application for powerhouse build­ing was also made efficient. 40 percent of the need for generators was managed by the Government. The system applied in the past to meet electricity need was subsidy. ""The industry pays only 60 percent because the rest is subsidized. But the problem is that companies tend to be reluctant to build their own powerhouses. I see it as a sign of wrong policy. We are trying to subsidize the engine to ensure sustain­ability of the industry."

Powerhouses for industry based on Power Wheeling [PW] which did not rent PLN transmission for distribution, was still permissible provided by open access. PW operation belonging to private compa­nies prevented non-open access. Power generating in open air environment must be with open access. "For operational permit, the power wheelingh model must serve industrial estate.

The Ministry was also was also trying to in­crease power supply for the mineral-and-coal [Miner­ba] industry. According to the Law No. 4/2009 on Minerba, companies were obliged to build smelters. Clearly the Law encouraged industrial downstream­ing and processing of value added mining. "Develop­ers can operate smelters with low system, using PLN transmission."

Electricity could be transmitted through PLN transmission by power wheeling system, which was a system run by private generators to industrial es­tates using the existing network, operated with power regulators to ensure efficiency of system. The Power Wheeling Scheme had been applied in Water Powered Generator [PLTA] Sungai Kayan 600 MW in North Kalimantan innaugurated by Susilo Siswou­tomo, Deputy Minister of ESDM in January 2014 last which was designed to serve cement industry in East Kalimantan.

If there was no transmission, the private sec­tor could still build but with open access system. The Ministry was still scheming up regulation, including rules for power wheeling because the facilities would soon motivate industrial estates to build their own powerhouses. Power Wheeling was an operational model in which the owner acted as captive power. He rented PLN transmission transmit the electricity generated. Current was transmitted to different locations includ­ing factories. The permit holder of integrated areas rented PLN transmission.

The transmission system was built outside the business area, or the company bought the system from other companies through PLN networking rent­al. "For example power wheeling run by a smelter owner in the middle of an island. At the same time they had water resource in another location. The dis­tance is far, but on the same island. So power wheel­ing could be put at work and there must be a trans­mission. PLN can hold command afield" Siswoutomo said.

The Ministry would apply the private equity system for assurance of power supply, which could support industry with environmental control. "Indus­trial activities must be in industrial estates. Environ­ment could be supportive, logistics be effective and efficiency be enhanced and current supply need not be subsidized."Siswoutomo remarked.

The Ministry planned to withdraw electricity subsidy for industry. This was in accordance with Law No 30/2007 on energy. The law on subsidy only applied on marginal people. Household consumers of 450 - 900 ampere category would not be subsidized. Wirhdrawal of subsidy would be run by stages. "We already had cancelled subsidy for middle category subscribers: hotels, offices, luxurious homes etc."

The Ministry admitted that cancellation of subsidy must be gradual. Electricity subsidy was giv­en because the industry was not running their own powerhouses, while in fact it could increase cost ef­ficiency because industries consumed power in high quantity the new system would manage cost by transmitting power to companies in one area. "Other countries had applied this system."

Electricity transmission to industrial estates including smelters had run, the system located on the coastline in Kalimantan. The ministry was encour­aging other industries to build the same facilities. In­dustries with their own generator should attain break even or make profit in four years; they could even sell power to third parties. An example was PT Tambang Batubara Built Asam/PTBA in Tanjung Enim, South Sumatra was already able to enhance efficiency in electricity financing. "Other coal miner companies like Adaro had run survey. The need for electricity was close to the available resources they must be used or else the current from existing resources would be idle or wasted. Power utility might bring profit up to 20 percent."

In case of industrial estates located in the middle of an island, electricity was not impossible to procure. In the past, generators In an archipelago location was only possible with gas powered gen­erator, but such was very costly. The expense for building Steam Powered Generators was still more efficient in the regions.

The overall picture of national electricity in­dustry was as follows: Total capacity of generators by March 2014: 49.630 MW [ PLN 72%, IPP 21%, PPU 4 % and non oil- fuel 3 % The growth of electricity consumption in 2013 came to 7.8% of capac­ity. In the previous year growth increased to 8.5%. The electrification ratio for 2013 was 80.51%.

Electricity consumption for 2013: 188 kWh [household 41%, industry 34%, public 6%] Energy mix generators in 2013 consisted of: coal 51.6%, gas 23.6%, oil-fuel 12.5%, water powered 7.7%, thermal heat 4.4%. Next year by Electricity Procure­ment Plan [RUPTL]. PT PLN increased electrification ratio to 85% by ministrial approval. (SS)

Business New - May 9, 2014