AGRICULTURAL SECTOR AS THE LARGEST CONTRIBUTOR TO CHANGES IN WHOLESALE PRICE INDEX (WPI)

In November 2014, the agricultural sector is the largest contributor to the change in Wholesale Price Index (WPI), which is 0.88%. Mining and quarrying accounted for 0.02%, industrial sector 0.16%, group of non oil & gas import commodities 0.09%.

Data from the Central Statistical Agency (BPS) obtained on Monday (December 1), stated that based on the results of monitoring of BPS, in November 2014 General WPI of non-oil & gas stood at 131.53, up 1.19% from WPI in October 2014 at 129.98. The increase occurred in all sectors and groups of goods. Agricultural sector rose 7.41%, mining and quarrying 0.43%, industrial sector 0.32%, group of non-oil & gas import commodities rose 0.26%, and group of non oil & gas export commodities 0.50%. Thus, changes in non-oil & gas wholesale price index (WPI) in 2014 reached 7.74% and change of WPI year-on-year reached 9.16%. Some commodities which experienced price increases in November2014 included, among others, cucumber, eggplant, red paper, cayenne paper, anchovies, premium, meat of imported cattle, and aluminum exports.

WPI of building/Construction Materials which consist of 5 groups of building types in November 2014 in general increased by 0.76% compared to the previous month. In November 2014, all groups of building types experienced increase of indexes. General Works Building Group for Agriculture experienced the highest  increase, which is 1.02%, and Residential and Non-Residential Buildings rose by 0.77%, General Works Buildings Group for Roads, Bridges, and the Ports increased by 0.65%, Group of Building and Electricity, Gas, Drinking Water, and Communications Installations by 0.74%, and Other Building Groups 0.85%.

WPI of Building/Construction Materials in Indonesia in November 2014 increased 0.76%, from 122.29 in October 2014 to 123.22 in November 2014. The increase in WPI of Building/Construction Materials in Indonesia was due to the increase in the Group of Residential and Non-Residential Buildings which accounted for 0.37%, Public Works Buildings Group for Agriculture 0.07%, Public Works Building Group Roads, Bridges, and Ports ).14%, Group of Building and Electricity, Gas, Water, and Communications Installations 0.21%, and Other Building Group 0.06%.

 
Building materials group that experienced price increase in November 2014 includes, among others, backfilled soil 3.71%, tubs and tanks 1.75%, sand 1.68%, gravel and sandstone 1.51%, and cement 1.40%. (E)

Business News - December 5, 2014

TYRE INDUSRTY PREDICTED TO STAGNATE IN 2015

Tyre industry in Indonesia would predictably hard to score better performance this year, many hard challenges had to be faced at home and abroad. Azis pane, chairman of APBI stated on Monday [1/12], that sales of tyres might stagnate this year.

He projected that next year sales of tyres was only posted at 1.2 million units, the same as this year. Azis that the challenges to tyre industry at home was slow moving economic growth. Adverse economic condition reduced purchasing power for card with chain effect on tyre sales. Abroad, the pressure originated from low purchasing power of buyer countries.

Azis stated that the sales portofolio was domestic sales 7.52 million units of tyres and export 11.94 million units of tyres. Domestic sales consisted of original equipment [OE] and replacement equipment. Export volume stagnated with same attainment as in 2013. For information, the export destination countries were mostly the Middle East a small portion to Myanmar.

Azis rated that sales of tyre sank as world price was not too favorable. To refer to information from rubber contract at Tokyo Commodity Exchange in Bloomberg, world rubber price was on the downturn. Price of rubber in contract for December 2014, on august 10 2014 was posted at Yen 202.8 kilogram.

According to Azis, the national tyre industry would be subject to internal and external stimulus. at home, many people tend to wait and see before buying a car, just in case money was needed for emergency. Abroad, there was turbulence in Ukraina and the Middle East which had the potential to reduce export. Challenges also came from imported tyres, APBI data it that by May import of tyres was posted at 2.25 million units coming from India and China. “These various challenges make it difficult for us to predict tyre sales till end of year,” Azis said.

The same remark was made by Daud Husni Bastari, Chairman of Gapkino who said that export of Indonesia’s rubber was hard due to increasing supply of rubber from various countries amidst low global market absorption many countries in Southeast Asia and even Africa were posting growth in rubber production.

Daud mentioned that in 2013 based on data of International Rubber Study Group [IRSG], rubber production in Thailand came to 4.414 million tons, Indonesia 3.08 million tons and Malaysia 820,000 would continue till end of 2014. As production grew, Gapkindo was expecting new markets in the map. He remarked further that most of the exported rubber was absorbed by the tyre industry.

 
He was expecting to sell tyres to India, China and Japan but the there countries were having their own problem so this year there was notably no increase of demand while there was no new market, Daud said market opportunity abroad for rubber was limited, while the domestic rubber industry was not making advancement in downstreaming. (SS)

Business News - December 5, 2014

THE ROLE OF LABOR INTENSIVE INDUSTRY DIMINISHING

The portion of labor intensive industry in GDP was constantly contracting as investors were more inclined to use machines instead of manual ways. Benny Soetrisno, Vice Chairman of KADIN Indonesia, Labor Division stated in Jakarta on Tuesday [2/12] that today labor intensive industry in GDP constituted only 40% of total industry. This figure could even continue to contract to 30%. Benny said that automation in many industry lines was inevitable in industries where manual ways normally needed like textile, leatherwork, footwear, tobacco, and F&B. high business competition forced businesspeople to go the efficient way.

Benny rated that application of technology ensured high efficiency compared to manual ways. Automation might axe half of production cost. The raw material factor constituted around 60% of total cost. The two factors separated, there would be 40% left for electricity cost, manpower, and automation. Benny further stated that in labor intensive industry, energy saving could be half the cost but in labor intensive industry 30% - 40% would be spent on labor.

He disclosed that the Ministry of Industry set target of employing 400,000 to 500,000 workers in industry each year. Benny said that it was not impossible to meet the target provided investment was jack up. Now the ratio was : for every one percent of economy growth only 200,000 workers were employed against the previous 400,000 workers. Through January-September investment in manufacturing was Rp.148 trillion originating from domestic and foreign investment. The Coordinating Board of investment [BKPM] posted domestic investment at USD 10.1 billion.

Total investment targeted today was Rp.210 trillion and for the next year set at Rp.270 trillion, this investment increase was Government assumption basis that there would be employment of 500,000 workers next year. The Ministry of Industry set target for labor next year at 15,44 million people. Over the year the number was projected at 14,88 million people which was not easy to realize due to automation.

The same opinion was set forth by Arryanto Sagala of BPKIMI of the Ministry of Industry. According to Arryanto labor intensive industry must not be seen from the viewpoint of labor but also productivity. He showed as an example the textile industry in Vietnam posted higher productivity than Indonesia. In Vietnam the industry could produce 8 trousers per day with 44 hours per week. In Indonesia 6 trousers per day with 40 hours of working hours per week.

Under the circumstances the Ministry of industry wished to show that workers should not merely demand high wages. When company’s productivity was high, workers’ salary would be high. BPKMI noted that increase of production cost had always posed as obstacle. The cost was for labor and electricity. Arriyantio said that the labor intensive sectors. Minimum wages in Indonesia was one of the Top Three Highest in Asean. In Vietnam USD 113, Cambodia USD 80 and Indonesia USD 226 per month. (SS)

Business News - December 5, 2014

MINISTRY OF TRADE UNDERSCORE PLAN TO INSPECT TRADING

The Ministry of Trade again underscored their plan to inspect trading regularly, by team or by crash program. In case of horticulture products, the rule referred to the Law in the domain of the Ministry of Agriculture but the execution afield was related to Law of the Ministry of Trade no 7 – 2014. “Because the Government Regulation is still being fine tuned while the Law is already effective and would be completed in 2 years, including the distribution side.” The Dir. Gen. of SPK Widodo disclosed to Business News [2/12].

In case of chilli management, the Ministry of Trade collaborated with trading offices at provincial level. In applying Standard Operating Procedure the Trade Offices were on the frontier line to collect data on price fluctuation. Horticulture products were sensitive to foul weather, heavy rain would reduce harvest and the fruit would rot easily. On the other hand the Indonesian people were addicted to chilli so demand for chilli remained high. The condition was every similar to red onion.

On the other hand, the Minister kept enhancing consumption of domestic products. The intelligent Consumer Campaign was related to the Inspection Plan. They were different but inter-complementary. “We ask very Governor just to focus attention on the products being inspected. They must participate in analyzing process, the correlation with supply and demand.”

“We learned from a case of inspection at Pekanbaru, Riau last November where illegally distributed products were found, i.e.

At Tuanku Tembuai street the TPBB Team detected 88 polytanks of various sizes [500 litres, 1,000 litres, 2,000 litres, 3000-5000 litres containing products not SNI certified. There was also 8450 low quality LHE lamps without label in Bahasa Indonesia.

At H Imam Munandar Street the inspection team had detected 9,550 LHE lamp which were not SNI certified or without labeling in Indonesian language. In the two detections lab test on product sample had been exercised to check whether product specification was in accordance with SNI. Coordination between TPBB and Barantan and the Quarantine Center of Pekanbaru and Tax Dept was exercised to detect smuggling of 4,050 bags [40 tons] of red onions suspected to originate from Malaysia by Rompang Yan ship. “The red union had been submitted to the Pekanbaru Quarantine Board by the Tax Dept and the crew arrested.”

Baratan was taking action based on Law no 16 1992 on Animal, Fish and Plantation Quarantine as implementation of Law no 23/2014. Based on meeting with the Ministry of Internal Affairs on the duty and authority of the Central and Local Government in Law no 23/2014 BPSK was under the authority of the Central Government, inspection of goods was under the Central and Provincial Governments. Delegation of meteorologal affairs was at regency or city level. Distribution of Authority was based on appendix to Law no 213/2014. “The cases of SNI and labeling were all in Riau. Yesterday 40 tons of red onions had been confiscated in Bengkalis. Chilli was already submitted to the Quarantine Center in Bengkalis and 7 of the crew were arrested.” (SS)

Business News - December 5, 2014

CIRCULATION OF ILLEGAL MEDICINES GETS MORE ALARMING

Each year, circulated illegal Jamu herbal in Indonesia was estimated to be worth Rp.2 trillions; it made national jamu industry hard to develop. Beside illegal jamu, the development of jamu industry was also hindrance by imported herbal products especially those marketed by Multi Level Marketing. Tragically the MLM system also aim their sales at non MLM members.

Head of BPOM Roy A. Saparingga stated in Jakarta on Thursday [27/11] legal traditional medicines were selling well among the low class people. Roy stated that supplement drugs and pain killers were prima donna products. They were pain relievers, rheumatic medicines, potassium. Rejuvenators and muscle pain. Those medicines consisted of chemicals which must not be carelessly consumed as the risk was high. “Circulation of illegal drugs are really alarming”

BPOM observation unveiled that in all of Indonesia from November 2013 to August 2014 the detected 51 traditional drugs, 42 of them were illegal. By Post Market Alert System 62 traditional drugs were detected to contain unsafe elements. Roy said that in cracking on illegal products he involved law enforcers to act on products without permit.

Roy also reported that BPOM had cancelled permit for traditional medicines as they contained dangerous elements. They were: Jamu Rematon Two Wings Bird brand, as it contained Fenilbutason, Keio Kiet Bang Eng San containing Sulfametokazol, Raga Prima Umbrella brand powder containing Dekasmetason  and Herbal Plus capsule containing Sildenafil Sitrat and Tadafil. Furthermore, Herbal Man Powder containing Sildenafil Sitrat, Antoyo Golden Key, Internal Medicines containing Paracetamol, Dekametason and Fenilbutason, Diabetes Capsules 919 containing Glibenkamid and Uri Cacida containing Antalgin.

In case of products circulated with fictitious permit, BPOM collaborated with the Police to crackdown on them as they were criminal cases. About the easy way o obtain fictitious permit, Roy did nor deny that such was easy to do. Roy pled the public to make use of other communication channel to inquire or report suisoected cases. BPOM had released warning for the public based on information from other countries by Post Market Alert System.

Effort by BPOM to eradicate illegal jamu products and illegal products had been well responded by MIAP. With support of the Police and Tax Dept. BPOM hads launched STROM V operations from June to August 2014, by recommendation of IBCP Interpol.

Chairman of MIAP, Wydyaretna Buenastuti rated BPOM effort as sound measure and commitment of stakeholders to crackdown on fake products to the root. BPOM operations nationwide was exercised through 31 POM workshops and had succeeded to detect illegal drugs containing dangerous chemicals worth Rp.31,66 billion broken down as : 173 items of illegal medicines, 1,520 illegal medicines with chemical contents and 1,963 illegal cosmetics. (SS) 

Business News - December 3, 2014