Monday, 31 August 2015


In accordance with the directives of President Joko Widodo in the Limited Meeting (Rates) on local content (TKDN), Minister of Industry, Saleh Husin, urged so that steel used in infrastructure development projects should be produced in the country. “We’ve been able to produce quality steel with special specifications required by the industry. The factory locations are in Batam, Cilegon, and Bekasi, “he explained.

The use of domestic products is increasingly encouraged by the government, especially for infrastructure projects. Limited Meeting about local content (TKDN) in Infrastructure Projects discussed several things. For example, the background of the increased use of domestic products because there are many products that can be produced domestically.

“Firstly the gas transmission pipeline project from Gresik in East Java to Semarang, Central Java. Although the tender is won by Wijaya Karya consortium, but it is steel produced by South Korea, “said Industry Minister Saleh Husin. The gas pipeline project owned by PT Pertamina Gas (Prtagas) spans 270 km. While, the project construction is performed by state-owned contractors PT Wijaya Karya Tbk (WIKA), Remaja Bangun Kencana, and Kelsri.

The second topic is about the provision of power plant with a capacity of 35 thousand MW. Domestic component will be utilized more optimally, because the national industry is able to produce, among others, turbines, transformers, and transmission cable. The third topic is about the ability to finalize the fulfillment needs for heavy equipment for infrastructure projects. The goal is so that the national steel will be more absorbed in the country, and one sector which is able to revive the steel industry is, among others, heavy equipment industry, “said Saleh Husin.

The Limited Meeting revealed that the Ministry of Public Workers needs about 1,000 units of excavators. On the other hand, state-owned enterprise, PT Pindad, in addition to being a defense industry player, is also cultivating heavy equipment industry. “We will coordinate in this matter, weather with the Ministry of Public Works and PT Pindad. Currently, PT Pindad is preparing a protorype which is ready to be launched in June or July, “he added.

According to the Minister of Industry, President Jokowi has given directives so that the realization of increase of domestic products is accelerated. Other benefits for the government are that it saves foreign exchange, which previously flowed out of the country when import activity is still high. It is also for shake of the establishment of industrial structure from upstream to downstream, the spread of industrialization, and employment.

MoU of the Finance & Development Supervisory Agency

Currently, the Ministry of Industry is drafting a Memorandum of Understanding (MoU) with the Financial and Development Supervisory Agency (BPKP). The MoU is about audit of Local Content (TKDN) by BPKP on agencies and state-owned enterprises that use the state budget (APBN). “This audit serves to sharpen and accelerate the use of local content previously, we had several basic rules so that the use of domestic products can be further optimized, “he described.

The regulation include Law No. 3/2014 on Industry, chapters 85-89 on Increased Use of Domestic Products and Regulation of Minister of Industry No.02/M-IND/PER/1/2014 on Guidelines for increase of Domestic Products in the Procurement of Government Goods / Services. He said that it would perform an intensive coordination, particularly with the Ministry of Energy and Mineral Resources. The Limited Meeting expressed the need to revise Regulation of Minister of Energy and Mineral Resources No.15/2013 on the Use of Domestic Products In the Upstream Oil and Gas Business Activities. “The revision was an opportunity to increase local content in the oil & gas sector. In general, I am optimistic hat the directives of the President and coordination among ministries will become a momentum of independence of the national industry, “he concluded.

The energy sector became one of the mainstays of the Increased Use of Domestic Product (P3DN) program. A number of projects hat are in the upstream oil & gas sector, which is coordinated by Special Task Force for Upstream Oil & Gas Business Activities (SKK Migas) and conducted by Partnership Work Contract (K3S) under the coordination of the Ministry of Energy and Mineral Resources, as well as the construction of power plant and transmission, energy, State Electricity Company (PLN), and the National Gas Company (PGN) under the coordination of Ministry of State-Owned Enterprises. (E)

Business News - June 17, 2015 


Indonesia’s cosmetic products especially essential oils an toiletries was among the commodities to rely on in promoting export of non oil gas products. This was set forth by the Minister of Trade Rachmat Gobel upon inaugurating the head office and new factory of PT Mandom Indonesia Tbk. At Cibitung, Bekasi West Java on Friday (12/6). “The Government is optimistic that this company as one of the biggest cosmetic producer in Indonesia producing essential oils and toiletries would contribute to jack up of Indonesia’s non oil gas products.”

So far the company had exported their products to ASEAN, the Middle East, and even Europe. “This means that Indonesia’s essential oils and toiletries is highly competitive at the global market.” Trade Minister Rachmat Gobel said. export of Indonesia’s essentials oils and toiletries in 2014 had come to USD 301 million”

With inauguration of this factory the company was expected to increase export. The inauguration ceremony was attended by Executive President of Mandom Corporation Japan Motonibu Nishimura, Senior Executive Officer Kajima Corporations Keisuke Koshijima, President Director and Chief Executive Officer PT MI Tbk Tekshi Hibi and CEO of PT MI Tbk Muhammad Makmun Asyad. Considering their quality ad global competitiveness Ministry of Trade Rachmat expected the company would focus marketing on export,

“As producer of diversified cosmetics, I expect the company could focus on export business and be one of Asia’s global company based in Indonesia,” he said, Since 1969 PT MI Tbk continued to develop business in Indonesia. Haircare products and perfumes were already well known among consumers like Gatsby, Pixy, and Pucelle. Brands like Tancho, Mandom, Spalding, lovilea, Mitatone, were produced for export.

The Ministry of Trade was committed to increase export through product diversification with emphasis on manufacturing 65% and primary products 35%. Other effort was diversification of export market, and increasing production of value-added products, to intensify sales promotion campaigns and tackle hindrances of non tariff barriers, and enhance role of Indonesian Trade Attaches in Indonesian Embassies abroad.

MINISTRY OF Trade Rachmat expected this new factory would jack up performance of cosmetics industry in Indonesia. Growth of this industry would have its impact on absorption of more workers which would eventually buoyed up Indonesia’s economy. Today PT MI Tbk had exported their products to many countries among others Uni Arab Emirates, Japan, India, Malaysia and Thailand. Through UEA the products were re-exported to countries of America, the Middle East, east Europe and other countries. With far reaching export capacity, the Minister of Trade motivated producers of cosmetics and toiletries products to grab market opportunities in Asean Economic Community.

Export of Essential Oil Products and Toiletries mostly exported by Indonesia in 2014 were mostly soap, organic surf-act prep for soap use, bars etc./HS 3401 (12.18%) beauty, make up and skin care prep, manicure etc prep. HS 3304 (10.45%), odoriferous as raw materials for industry/HS 3302 (8.15%) and perfumes and toilet waters/HS 3303 (8.91%), The main export destination countries of Indonesia’s oil and toiletries in the period of January to March 2015 were Singapore with total export value of USD 38.17%, (12.67%), Thailand USD 27.6 million (9.17%), Philippines USD 23,8 million (7.9%) UEA USD 22.17 million (7.36%) and Malaysia USD 20,8 million (6.9%).

Data of the Ministry of Industry had it that the national jamu herbal and cosmetics and cosmetics industry contributed quite significantly in terms of export, turnover, and workers employment. In 2012, total export of cosmetic products came to Rp9 trillion or triple that of the previous Rp3 trillion. Domestic sales also posted increase, in 2013 it came to Rp11.2 trillion or growing by 15% compared to 2012 at Rp 9.7 trillion. In terms of employment, 760 cosmetic factories spread out all over Indonesia had absorbed 75,000 workers directly and 600,000 workers indirectly. (SS)

Business News - June 17, 2015


The Government continued to spur on use of local components for infra structure projects. The Ministry of Industry Saleh Husin stated in Jakarta on Thursday (11/6) that use of local made products were already produced at home for all sectors. Saleh reminded the urgency of using local products in infra-structure projects in Indonesia, to energize component industry at home to minimize import materials.

Minister Saleh criticized Government owned company Pertamina (Persero) who prioritized use of imported steel for their projects. He stressed that such was contrary to the Government’s policy to enhance use of domestic components. Saleh showed as an example the gas transmission project from Gresik, East Java too Semarang, Central Java. The project belonged to Pertagas, a subsidiary company of Pertamina convering a distance of 270 kilometer and undertaken by PT WIKA, Remaja Bangun Kencana and Kelsri.

Minister Salih said that BUMN should prioritize on using domestic steel as in Batam, Cilegon and Bekasi. If Indonesia was not able to produce steel then import was permissible. “As long as raw materials could be produced, at home, why import?” Saleh said;

Therefore Saleh urged, soon projects should prioritize use of local components. One of them was the 35,000 megawatt powerhouse. Domestic components could be used to the maximum. Moreover national industry was able to produce turbines, travel and transmission cables The same was with heavy equipments for infra structure.

Saleh admitted that use of domestic stall was still limited in projects financed by the Government. For that matter the Ministry of Industry would involve BPKP to audit level of local content (TKDN). He explained that he was scheming up an MoU worth BPKP on auditing of TKDN for BUMN using Government funding.

Saleh again reminded that the iron and steel company was among the prioritized industries playing an important role in the development of other industries considering that steel was the basic raw materials for other industries like marine construction, oil and gas, heavy equipments, automotives and electronics. The demand for domestic steel increased from 7.4 million tons in 2009 to become 12.7 million tons in 2014 and would constantly increase in line with national economic growth.

Therefore, the Minister said, to meet the need for domestic steel and minimize dependency on imported steel, domestic steel producers needed to step up steel by quality and quantity. This was to meet the need of infra structure development in Indonesia which was predicted to be worth Rp.5,529 trillion until 2019 and needed steel weighing 17,46 million tons.

In developing national iron and steel industry, the Ministry of Industry underscored that the Government was adopting some strategies like mandatory SNI certification, trade remedies, import tax, P3 DN and the proposal to reduce gas and electricity cost to maximize performance of national steel industry. (SS)

Business News - June 17, 2015


Continual downsliding of Rupiah value and IHSG was starting to give the creep. Not just the chain effect that could generate everywhere but speculations were appearing here and there over the week.

Marketplayers panicked and clearing sales seemed to prevail the stock hall. The result: IHSG index sank to below the 5,000 level. Now IHSG was at lowest level in the past 12 months since July 3, 2014 while Rupiah value was also critical.

Data of JISDOR last week showed that Rupiah again slipped back to the level of Rp.13,365 per USD. Since early this year, Rupiah had fallen by forex reserves. BI noted that Indonesia’s forex reserve position by end of May 2015 was USD 110.8 billion, lower that that of April 2015 at USD 110.9 billion. This was the side of Rupiah stabilization effort.

Unfortunately Rupiah remained to lay flat on the ground in general. Now portfolio investment risk had increased. Such was seen in Credit Default Swap (CDS) for bonds of 10 tear tenure which rose from 239 to 256.5. It was not surprising that the SUN Promissory Notes kept sinking. The consequence was yield on SUN last week rose to 8.76. The highest level since 2014.

External factor accounted for slump of Rupiah and IHSG. The Fed’s plan to increase FFR and the crisis in June were the triggers of world’s economic turbulence, Indonesia being no expectation.

Rupiah position was today quite alarming, having fallen by 7.11% since early year. If Rupiah weakening came to 10% in a year, Indonesia could be rated as having entered the phase of monetary crisis. At present Rupiah might be rated as being on the verge of crisis.

Beside external pressures national fundamental economy was just as disheartening. Trade fundamental economy was just as disheartening. Trade balance and Balance of Current Account was not showing any improvement. Besides, market trust in the Government was fading as the Government was still poorly coordinated in facing the present economic turbulence.

BI had taken measures to relax Rupiah turbulence. Since last week BI had made market intervention by buying SBN Promissory Notes. The Government today it was hard to reform national economy for the short term. What could be done today was to improve Government’s performance by enhancing budget absorption batter.

For the short term it was advisable for BI to cool off market temperature, because a panicked situation could be used by speculators to taken advantage and that would be troublesome. It was noteworthy that the World Bank had axed global economic growth on Wednesday (10/6) last. The World Bank reminded economy of developed countries were hurricane stricken, from low commodities to high cost of credit.

Based on Global Economic Prospect (GEP) the World Bank predicted the world’s economy to grow by only 2.8% in 2015. The prediction was a slump against that of last January when the world’s economy growth was 3%. The World Bank maintained growth predictions for 2016 and 2017 at 3.3% and 3.2% respectively.

Economy of the developed countries was the global economic machine in time of financial crisis. However, by the time they have to face more difficult economic circumstances, the World Bank also lowered economic prediction of developed countries for 2015 and 2016 to 4.4% and 5.2% respectively against the previous 6.3%.

One of the reasons was low price of oil and other commodities which triggered economic slowdown in some developed countries highly reliant on export. Not just that, economy of the emerging market would have to face hard times in line with weakening of their currencies. The condition is made worse by appreciated USD due to increase of FFR by the Fed.

The World Bank noted that depreciation of currencies was big problem to developed countries whose economy was commodity based. What made things worse when employment data in the USA was on the upturn through May in line with wages increase which strengthened probability of the Fed in September.

The US Labor Dept. noted that increased number of workers as shown in data of non farm payroll increased to 280,000 Workers last month. The attainment was highest since December 2014. Meanwhile unemployment level increased by 5.5% against 5.4% in April.

The growth was triggered by emerging generation of job seekers and university graduates. Report of payroll data showed that America’s economy was getting better.

The report complemented data of car sales and manufacturing in May which signaled economic betterment in the post-contraction Era of Q 1/2015. The poor data of the first 3months of this year triggered probability of FFR increase by the Fed this year. More over data of GDP was also followed by consumer’s expenditure and industry production which slumped, indicating that US economy was still under pressure.

Analysts rated that the latest employment data eliminated all doubt. The financial market reacted with appreciation of USD. The value of Greenbuck against ¥en even strengthened to highest level in the past 13 years. On the other hand the average income per hour increase by 8 cents.

Meanwhile the US Department of Labor also revised data of increased number of workers through March and April which was higher by 32,000 people than the data released earlier. Marketplayers of the Futures Market reacted by forwarding expectations of increased bank interest which still estimated increase of December.

Investors saw 53% probability that the FED would increase their monetary dosage in October. On June 16-17 the Fed would conduct Federal Open Market Committee (FOMC) to discuss the FFR policy. Since 2008 the US monetary authority kept interest rate at near zero percent to improve economy. At the beginning the market was sure that normalized situation would mean benchmark rate would be increased in June 2015 but the projection kept delayed as US economic data worsened.

At home, BU as monetary authority kept monitoring Rupiah movement which was constantly depreciated since August 1999. BI would respond to every sentiment which governed Rupiah exchange rate value against USD.

Economists rated that Rupiah value was still in the process of depreciation. Therefore BI must put extra effort to stabilize Rupiah so pricing adjustments would not be excessive as it would jack up inflation. Weakening of Rupiah value would push inflation due to the imported inflation factor but also due to oil price factor. Cost of oil importing was quoted in USD and converted to Rupiah, and Indonesia was importer of oil.

The Moneymarket

Rupiah value at inter-bank transaction Jakarta last Thursday afternoon (11/6) strengthened by 25 points to become Rp.13,290 per USD against the previous at Rp.13,315. Rupiah was still in the state of technical rebound, hence the potential of Rupiah to slump once was still open.

Marketplayers were waiting for some data of the USA, among others retail sales of May and weekly jobless claim. If the two data were accepted as positive by the market, the potential for the USD to get stronger was high and might increase US benchmark rate.

On the other hand, marketplayers were watching the development of bailout for Greece. Long and dragging negotiation could bring negative effect on the moneymarket of developing countries.

At home, marketplayers were waiting for data or retail sales of May 2015. BI estimated real Sales index (IPR) of May 2015 was only 181.2, a growth of 20.8% (y o y) lower than the 22.4% (y o y) of April 2015.

Most marketplayers had high expectations that positive solution of Greece debt would bouy up some world’s currencies including Rupiah. However Rupiah strengthening would predictably be limited since the global moneymarket was still overshadowed by increase of FFR by the Fed.

Meanwhile in BI;s mid rate last Thursday (11/6) Rupiah strengthened to Rp.13,292 against the previous Rp.13,329. Previously USD value soared up as high as Rp.13,400 to be exact Rp.13,423. The highest USD level of all time was Rp.13,423. The highest USD level of all time was Rp.16.650 on June 17 1998 during the Asian monetary crisis. It was right indeed for BI to take sound measures to protect Rupiah.

Now BI would rely on short term strategy to prevent Rupiah from sinking any deeper. Rupiah was somehow under control as BI started to interfere. BI had released vast amount of USD to stabilize Rupiah since early last year.

BI did not only safeguard the moneymarket but also bought SBN promissory notes released by foreign investors. So far, foreign ownership over SBN had been lessing. The Ministry of Finance noted foreign ownership over SBN by last Monday (8/6) was Rp.513.17 trillion or down by 38.27%. the amount shrunk by Rp.2.66 trillion against transaction on Friday (5/6).

Buying of SBN was to ease pressures on Rupiah. Moreover, lately r.o.i of SBN was quite satisfactory. Market data had it that yield of Governments bond of 10 years tenure was posted at 8.71% last Monday (8/6) and inched down to 8.55 on Tuesday (9.6) Yield of last Monday was the highest since February 2014.

Increase of SBN yield has signaled danger; it would increase Government’s burden in managing bonds/ so far the Government had not decided to intervene, the Government had to not asked BUMN to buy SUN.

Behind all this BI reminded there was one other thing that called for alert: currency war. Such outburst could be real treat if FFR increase ran continually over the next 3 years. Rupiah would be a sitting duck if the happening turned to be a world’s phenomenon.

When currency war happened, every country would rush to weaken their currency against USD to jack up export. Under such circumstances, Rupiah might strengthen against currencies of some developed countries which means it was not good for national export. To keep the nation from currency war, BI must accelerate in-depth approach to the moneymarket.

After issuing 3 BI regulations on foreign currency, BI would adopt a new policy as an effort to speed up market intervention. Soon there would be another policy like Loan to Value (LTV) to maintain economic stability. Through one of their regulations, BI made it compulsory for the public to use Rupiah as medium of payment so the need for Rupiah would not expand. The Ministry of Trade even involved the Police to taken action on violators to the rule.

Some transactions at home still using USD was among others for payment of textile by buyer to company. A condition as such was no longer happening in many developing countries, it burdened national economic growth because Indonesia was no producer of USD.

The regulation applied to transactions at home for cash and non cash transactions. People’s obedience was expected so BI did not have to put sanction on violators. The charge put on cash transaction could be Criminal Law while for non cash transactions the convict could be excluded from payment system.

BI had issued a circular latter that made in mandatory to use Rupiah as medium of payment in any transactions within the territory of the Republic of Indonesia. To legalize the rule, BI on June 1, 2015 issued Circular Latter Number 17/11/DKSP on mandatory use of Rupiah as medium of payment in the territory of the Republic of Indonesia.

According to the circular latter, the projects included infra structure for transportation, airport service, harbor service, railway service, transportation infra structure like tol roads and bridge, water reservoirs including pipelining, sanitation, water treatment, wastage handling, garbage collection and garbage disposal, infra structure for telecommunication and information, e-networking, infra structure for electricity distribution, powerhouses based on geo thermal, fossil fuel and gas, and tapping and distribution of oil and natural gas.

However, BI could allow exception to the rule if the projects were declared by the Government as strategic infra structure testified by certificate from the related ministries.

Again, BI’s effort was to anticipate the Fed’s action who might increase FFR by July, August or September 2015.

Rumors was out that BI planned to control volatility of Rupiah against USD around 10% only. However, BI did not the level of Rupiah volatility to be tolerated. BI felt sure that in the next 3 years Currency War would still happen all over the world.

From the above picture Rupiah was predicted to be in the range of Rp.13,200 – Rp.13,300 per USD and continue to be at around Rp.12,950 – Rp.13,150 per USD.

The Capital Market

Last Thursday (11/6) IHSG dropped by 4 points due to selling pressures by foreign investors. Indonesia Security Exchange (BEI) was way behind compact stockmarkets.

Starting transactions on Thursday morning (11/6), IHSG strengthened by 37.635 points (076%) to the level of 4,971.192 being driven by strengthening of premium shares were the investors’ target. Unfortunately acts of selling by foreign investors pushed IHSG down to the red zone after reaching its highest level today at 4,979; index moved horizontally after falling.

During closing session in Session 1, IHSG thinned out by 5.435 points (0.16%) to the level of 4,928.122. strengthening of IHSG was halted as foreign investors decided to release shares. Act of selling by foreign investors again forced IHSG to weaken. Domestic investors hunting shares were unable to bring index back to the red zone.

To end the session on Thursday (11/6) IHSG was closed to inch down by 4,745 pints (0.10%) to the level of 4,928.812. Meanwhile index of LQ45 to the level of 844,7278. Foreign investors released their bank shares. By afternoon foreign investors were seen to make foreign net sell amounting to Rp673.858 billion in all markets.

Transactions were running moderately with frequency of 207,637 transactions with volume of 5,389 billion shares worth Rp.4,805 trillion. 142 shares went up, 128 went own and 101 stagnated. Asian stockmarkets were compact to close session stronger. Japan’s stockmarket soared up highest among regional stockmarket.

Index of Nikkei 225 soared by 336.61 points (1.68%) to the level of 20.97. Index of Hang Seng rose by 192.15 points (0.72%) to the level of 26,879.79. Index of Composite Shanghai strengthened by 15,56 points to the level of 5,121.59, Index of Straits Times gew by 25.71 points (0.77%) to the level of 3,351.48.

In general performance of Indonesia’s stockarket from early year to last week end (y t d) was seen as behind global stockmarket in response to economic slowdown in Q 1/2015. Marketplyers were expecting Government’s action of building infra structure would show its fruits and pose as positive sentiment to the domestic stockmarket.

According to BEI data performance of Indonesia’s stockmarket was left behind compared to world’s stockmarket. Indonesia’s stockmarket posted negative performance i.e. minus 2.62%. Globally, China’s stockmarket and Japan’s stockmarket excelled, both postes growth of 55.2% and 17.25% followed by Hong Kong and South Korea which posted performance of 15,46% and 7.96%.

In the Asean region the Philippines stockmarket performed better than other stockmarkets with increase of 4.10% over the same period. Furthermore followed by Thailand stockmarket 0.6%. the rest were Malaysia, Singapore and Indonesia which posted negative performance.

Negative performance of Indonesia’s stockmarket was on account of investor’s disappointment of Indonesia’s economic slowdown. Capital outflow from the domestic market was triggered by rotation and switching of capital to other regions especially China. The stockmarket of China was performing significantly being advantaged by falling world’s oil price.

China was one of the biggest oil importer country. Besides strengthening of USD had its impact on increase of China’s export to the USA. Beside the two external factors, positive sentiment was also supported by the People’s Bank of China which was more stimulating and dovish.

In terms of Price Earning Ratio, China’s stockmarket was higher compared to PER of Indonesian stockmarket. The same was with Debt Equity Ratio (DER) of China’s stockmarket which was higher than that of Indonesia, meaning investor in China were buying companies having bigger debt.

Allocations for investors’ shares was in fact smaller, considering that companies that companies must prioritize payment to creditors. Somehow investor’s perception of Indonesia was still negative as indicated by increase of Credit Default Swap (CDS). In fact investors feared Indonesia’s economic slowdown, beside depreciation of Rupiah.

Performance of Indonesia’s stockmarket was bad due to economic slowdown and Government’s performance which was against public expectation. Stockplayers could not predict when corrections would end. They expected Government’s performance would be better in Semester II.

The cost of failure of Indonesia’s stockmarket would be high unless there was betterment in economic performance as indicated by better rating given by rating agencies.

Betterment on the macro side could bring higher expectations among emitents whose shares were posted at the stockmarket and valuation of the Indonesian stockmarket could be less expensive.

So far the OJK had not run any policy to relax the Indonesian stockmarket as it was still at the stage of observation. OJK stated that the market condition might be rated as fluctuating significantly if IHSG for three consecutive days dropped by 10% or more.

Relaxation could be by way of making regulations on buy back without shareholders Extraordinary Meetings (RUPS). However if downturn of IHSG in 3 consecutive days dropped by 10% relaxation was not automatically in effect. OJK would review further the cause of the downturn. The downturn of index was not only happening to Indonesia’s stockmarket but also elsewhere in the world.

The case was regulated by the regulation of OJK Number 2/POJK.04/2013 dated August, furthermore written in OJK circular letter Number 1/SEOJK.04.2013 and the Regulation was lifted on May 2014 as the condition of capital market was then normal.

One thing was sure that after the banking sector was the main propeller of IHSG, since 2014 the plantation sector kept continuing strengthening of performance where growth was highest on the profit side, nearly 125%. The emitent which made significant net profit was PT Astra Argo Lestari Tbk, PT Smart Tbk and some other plantation emitents.

Although there were some plantations that posted loss, in terms of total asset the agro sector was always on the upturn. It was believed that the plantation sector would always score increase of performance as there were projections that global commodity prices.

Growth of the plantation and agro sector always tend to follow the dynamics of global commodity and capital market. Analyst rated that increase oil price which soared abode USD 60 per barrel would not last long. Predictably price of oil would again be corrected as US economic recovery was signal for the Fed to normalize monetary policy and the fund normally used or speculations would return to the moneymarket.

US economic recovery would be responded by the Fed increasing FFR by 25 basic points to above 100 basic points. As USD strengthened it was almost sure that in the future demand for commodity would lessen.

Beside normalization of US monetary policy by the Fed, Iran’s plan to double their oil production output would affect demand. Beside data of China’s import-export which posted downturn would influence oil price in the future. As known, China was the biggest importer of oil in the world.

Finally, although the risk of portfolio outflow tend to continue due to increase US benchmark rate, happened in Semester 2 being supported by stronger economic growth cycle and bettered current account deficit and continuing structural reformation.

So IHSG moved in the range of 5,025 – 5,075 last week (12/6) and continue to the range of 5,075 – 5,150 triggered by upgoing shares from local and foreign investors since the price was too low. (SS)

Business News - June 10, 2015


Regarding laws on plain packaging of tobacco imposed by Australia, Indonesia sued Australia to the world trade Organization sued Australia to the World Trade Organization (WTO). This is the biggest trade dispute handled by WTO until today, where there are three other WTO members who also sued Australia, namely Honduras, the Dominican Republic, and Cuba, and 36 WTO members become third parties who have participating interest in the lawsuit. Director General of International Trade Cooperation of the Ministry of Trade, Bachrul Chairi, confirmed that the obligation to use plain packaging for tobacco products has harmed the right of WTO members under the terms of Trade-Related aspects of Intellectual Property Rights (TRIPS).

“Consumers have a right to know the products that will be consumed, and on the other hand, manufacturers have the right to use the trade mark freely without any baseless barriers. The lawsuit is filed to safeguard national interests. Because the laws on plain packaging for tobacco products imposed by Australia’s have a wide implication on world trade, especially that it could potentially hamper Indonesia’s cigarette exports that will affect the lives of tobacco farmers and tobacco industry nationwide, “said Bachrul in the first meeting between the plaintiff, defendant, and panelists at WTO office in Geneva, Switzerland, Thursday (June 4).

Bachrul said that the tobacco industry accounted for 1.66% of total Gross Domestic Product (GDP) of Indonesia and foreign exchange revenue through exports to the world whose value in 2013 reached USD$ 700 million. besides, the tobacco industry is also a source of livelihood for 6.1 million people working in the tobacco and clove farmers. Intellectual Property Rights Protection Policy for the laws on plain packaging of tobacco products is aimed at reducing tobacco consumption and restrictions on smoking access for young and novice smokers. The purpose of this law is also consistent with the policy applied by many countries, including Indonesia.

However, Australia’s policy to achieve these goals through the implementation of plain packaging of tobacco products is considered not protecting intellectual property rights (IPR) on tobacco product trademarks owned by cigarette manufacturers. This can be detrimental of the manufacturers and will affect competition in trade of tobacco products sold in Australia, because of the loss of distinguishing characteristics between one and other tobacco products. He explained that if the laws on plain packaging were allowed, it is feared that it will have a more extensive implications, because other WTO member can issue a policy that negatively impacted the IPR protection of trademarks of other imported products, such as automobiles, electronics, clothing, shoes, and other products.

Furthermore, he also confirmed that the dispute is not a debate on the negative impact of tobacco products on health or the justification of freedom of sale of products that can have a negative impact on health, but it is a struggle for the protection of IPRs on the trademarks owned by the businesses. “This dispute should give legitimacy for the protection of health of consumers without eliminating the protection of intellectual property rights of a marketed product,” he concluded.

On a national scale, the government puts the tobacco industry in a strategic position and includes in Presidential Decree No.28/2008 on the National Industrial Policy. “Tobacco product industries are developed by taking into account balance between health, employment, and state revenues. The industry is also a local wisdom that has been able to compete and survive, “said Minister of Industry, Saleh Husin.

Throughout 2014, tax revenues reached IDR 111.4 trillion, or increase from 2013 which reached IDR 100.7 trillion. The current market share for machine-rolled clove cigarettes (SKM) is 66.26 percent, hand-rolled clove cigarettes (SKT) 26 per cent, machine-rolled white cigarettes Machine (SPM) 6 per cent and others, namely Klobot, Cigars, Klembak Menyan, and hand-rolled cigarette filters 1.74 percent. In 2012, export value of cigarettes and cigars reached USD$ 617.8 million, increased in 2014 to USD$ 804.7 million, or an average annual increase of 14.1 percent.

According to Saleh Husin, smoking regulations are increasingly tight, both domestically and internationally, due to consideration of consumer protection and health. “It is a challenge for the tobacco industry. Additionally, tax increase is also a factor affecting the development of the tobacco industry,” he added. (E) 

Business News - June 10, 2015


The government admitted that it found that many products are not in accordance with Indonesian National Standards (SNI) or are using materials hazardous to consumers. Therefore, there are still many circulation of goods which is not in accordance with SNI, so the government called on consumers to have more knowledge of the condition of products, among others, by paying attention to the labels and the expiry data. Consumers should begin to become a subject in trade and should be aware of their choices in buying goods and services. In addition, consumers are also expected to be responsible for themselves, their families, and the environment.

Head of the National Standardization Agency (BSN), Bambang Prasetya , in Jakarta, on Friday (May 6), promised that the government will further tighten supervision of SNI application downstream is conducted by the Directorate of Standardization and  Consumer Protection of the Ministry of Trade, but it also supports control in terms of sampling (uji petik). Thus, if there are products that do not conform with standards, it will be reported immediately.

BSN will also strengthen supervision from the upstream sector, which is in the process of SNI certification given by Product Certification Institution (LSPRO). If a product did not comply with standards, but escaped SNI, there will be a warning to LSPRO and the possibility that the certification to be revoked. Nowadays, there is a lot SNI forgery on domestic products. Electronic products are one of the categories of goods which violations are quite easily found in the application of standardization.

According to Bambang, the tightening of the implementation of product standardization is becoming increasingly important to improve competitiveness of domestic products ahead of the ASEAN Economic Community (AEC) by 2015. Without this, Indonesia will face problem in facing competition with countries in facing competition with countries in Southeast Asia. However, Bambang said that facing MEA at the end of 2015, for almost all the products required, all the standards have been met.

He said that the sectors which are included AEC standardization include electronics and electricity, wood and wood products, rubber and rubber products, automotive products, health products related to pharmaceutical products, cosmetic, and medical devices. Bambang said that in fact there are 12 priority sectors of standardization by 10 ASEAN countries, but at the moment, the agreement has just been implemented in six sectors mentioned above. The other six sectors will follow in the next agenda with the existence of the final draft of the ASEAN blueprint 2025.

Bambang said that BSN is now intensifying socialization of SNI to the community in order to increase understanding and awareness of the importance of standardization. BSN has a variety of socialization programs, ranging from competition up to placement of information media in public places.

The understanding of standardization, he added, has also been inserted in various lecture materials in the universities. On the lower level, BSN frequently prepares a game that implements standardization activities as one of its elements. Then, at the government level, the agency continues to promote the application of standardization in the areas covered by the ministries. “To synchronize coordination related to standardization only takes a common vision,” said Bambang.

Although Bambang admitted that his agency has a lot of homework, but from year to year SNI application by business showed an increase. If in 2011, SNI has been applied by 48,327 companies, in 2012, the number increase to 56,971 companies, and in 2013 to 57,530 companies.

In addition to fostering and facilitating SMEs in applying SNI, until the first quarter of 2015, BSN has made a breakthrough, i.e. repositioning and revitalizing the organization in BSN. He also drafted government regulation on Standardization and Draft Government Regulation on Conformity Assessment as the implementation of Law No. 3/2014 on Industry, Law 7/2014 on Trade, and Law No. 20/2014 on standardization and Conformity Assessment. (E) 

Business News - June 10, 2015


Increasing demand for building materials at home, in line with the Government’s plan to run development at titanic scale toward the Asean Economic Community by end of 2015 demanded players of the building material industry to anticipate upjump of demand. The vast amount of need for construction materials called for effective strategy for increasing output capacity of the industry. The Government motivated national businesspeople in the industry including collaboration with foreign industrialists.

Indisputably, the building material industry was now the Government’s new source of income to meet the 300% export target for the next 5 years. Evidently export of building materials to many countries had been able to score a 2 digit growth each year. Nus Nuzulla Ishak, Director General of National Export Development, Ministry of Trade stated in Jakarta on Thursday (4/6) that the Government was encouraging national businesspeople not just to meet domestic need but also to promote export of building materials.

Data of the Ministry of Trade had it that through 2010 – 2014, export of building materials grew on the average by 11.13% per year from USD 1.55 billion to USD 2.45 billion (around Rp.31.8 trillion) per year for market of Singapore, Thailand, Australia and the USA.

According to Nus Nuzulia Iskak, the growth potential for export of building material industry in Indonesia was remarkably high. This was because Indonesia had abundant resources of natural raw materials.

Today the market potential of building materials for the world worth USD 400 billion not including Saudi Arabia where infra-structure building was going on remarkably fast. Nur rated that product quality was advancing as well. Indonesian building materials products were well. Indonesian building materials producers were making expansions abroad.

Nur elaborated that beside the export market, of building materials product at home had been growing significantly, being driven by fast growing property projects and real estate at home, increasing private investment and Government’s expenditure. The contribution of construction sector to national GDP at home had grown from around 7.07% in 2009 to become 13% in 2014 which had jacked up growth of building material industry in Indonesia.

The construction sector played its important role in the economy of a nation because it influenced most of other sectors and was important contributor to infra structure building as storng physical foundation for national development.

Therefore in tandem with all the effort to build the construction sector, this year the Government of RI set economic growth target at 5.8% with infra-structure sector as the main propeller of growth.

Meanwhile in terms of need for cement as building material, the Ministry of industry estimated total national capacity of cement in 2017 would come to 102 million tons to meet total need of 70 million tons per year in line with high investment in the cement industry. harjanto, the Director General of Chemical Industry stated that although there would be over production of cement, he would not propose the industry to be categorized as negative list of investment. Besides, other technical requirement was that production capacity of a cement factory must not to be more than 3 times the need for cement in a province.

Furthermore the technology being applied must be environmentally friendly and energy efficient. Hence the investment entering the industry must be really competitive, green and be located outside Java. Furthermore there were some technical specification to be fulfilled by investors. (SS)

Business News - June 10, 2015


Infrastructure was believed to be accelerator of Indonesia’s economic development. Indonesia’s economic growth process relied much on infra structure like, roads, bridges, drainage system, electricity and water supply.

The Government’s role as facilitator and mobilizer in development was most strategic in promoting people’s welfare and economic growth. Economic development was one of the indicators of achievement and served as guideline in determining the course of progress for the future.

Positive economic growth was indicated by activities of economic advancement. By theory, economic growth of a country was determined by accumulation of capital, i.e. investment in land, equipment, facilities and infra structure and human resources in quality or quantity, advancement in technology, access to information, willingness to innovate and develop, and working ethos.

So far the Government of RI had issued some policies to support the businessworld in executing development in all of Indonesia.

The first priority was the Government of RI would ask the Provincial Governments to facilitate an assure convenience for investors to do business well. The second priority was to step up infra structure development in all of Indonesia like roads, bridges, harbors, airports, housing and powerhouses which would contribute to the process of minimizing unemployment.

Beside employment, infrastructure projects also made economy to move more dynamically. Infra structure development means signal that the Government would seriously propel economy to be responded positively by marketplayers. For that matter financing for infrastructure should be allocated in APBN of APBD state budget.

Thereby unemployment was expected to be minimized and economic infra structure needed to propel the real sector could be developed so the real sector could be energized. The third priority was to protect and help the low income group in their struggle for better welfare.

In view of the above priorities it was most relevant to maka analysis of the impact of infra structure building on Indonesia’s economic growth. The result obtained was expected to support prioritizing of infra structure projects. Since infra structure projects were capital intensive, employment of workers would be the determinant factor in the process of economic growth.

Basic infrastructure had its positive impact on Indonesia’s economy as infrastructure facilitates played their important role in the process of marketing, i.e. production, distribution and sales. The policy to build infra structure was right indeed and therefore called for support from all stakeholders.

In this case physical asset and human capital were the key factors economic growth. Physical readiness was complementary to capital investment.

In case of Indonesia’s economy, although growth performance had not reached the pre-crisis level, sound fundamental economy in tandem with betterment of micro and macro risk had caused some international rating agencies to give positive rating to Indonesia, thankfully Indonesia was again given the rating agencies. Amidst the said positive state, at the medium term level Indonesia’s medium term level had to face hard challenges, i.e. handicap in the production of complementary components which held back the process of economic advancement.

In their latest report, World Economic Forum (WEF) disclosed that Indonesia’s competitive edge was still low especially on the infrastructure side, technological readiness and innovation. WEF evaluation showed that the most binding constraints faced by Indonesia was still in those there areas over the past few years.

More specifically the constraints in the infra structure side was indicated by low quality of roads, harbors, airports, railway, and power supply while the minus point in technological readiness and innovation was in terms of technological mastery and innovation capability which was still low.

In terms of infra structure rehabilitation, the obstacles faced financing and legal assurance. The allocated Government’s budget for infra structure in the past few years was only around 1,6% of GDP. The ratio was relatively low compared to other countries to China and India, which came to 5.3% and 7.3% of GDP.

The effort to restore infra structure was admittedly important in minimizing imbalance of income and its long term effect to per capita income. Infra structure building would contribute to increasing structure building would contribute to increasing productivity to support long term growth.

Report in World’s Development Report 1994 by the World Bank underscored that infra structure played its important role in enhancing economic growth. Higher economic growth was posted in areas where infra structure were better.

Review of infra structure development program in some countries concluded that most programs were targeted for the mind term program with focus on fulfillment of basic need and people’s connectivity including water, energy, electricity and transportation (roads, railways harbors and airports)

The conclusion was that economic growth correlated significantly with infra structure quality in a certain region by quality and quantity. In Indonesia many research studied correlation between infra structure and economy and the result was varied.

The only thing was that infra structure development policy concentrated in Java and West Indonesia had caused disparity in percapita income among provinces. In the future policy for infra structure development which was evenly distributed should be the reference in the effort to narrow down inter-provincial gap.

Indonesia had strong growth demographic factor, Government’s economic policy which was pro-growth, growing middle class population and Government’s focus on infra structure development. Room for fiscal had been widened and budget for infra structure had been increased from Rp190 trillion to Rp.290 trillion in APBN-P Budget 2015.

The Ministry of Public Works an People’s Housing, the Ministry of Transaportation and Ministry of Agriculture had sizable budget allocation broken down as follows: the Ministry of Public Works Rp.33 trillion, the Ministry of Transportation Rp20 trillion and the Ministry of Agriculture Rp.16 trillion.

Besides there was other additional prioritized budget for infrastructure and connectivity Rp.12,9 trillion allocated transfer of fund to the provinces Rp.20.5 trillion. Meanwhile budget for infra structure development for economic growth Rp.49.8 trillion, fulfillment of basic need Rp.20.8 trillion and bridging Rp.43.5 trillion.

The fiscal reformation policy was basic step and important part of structural reformation of strengthen Indonesia’s fundamental economy among others by enhancing infra structure building to strengthen national competitiveness.
APBN-P 2015 budget was also designed to bring stimulus t Indonesia’s economy to constantly grow amidst tight regional competition.

Infrastructure was the propeller machine of growth; infra structure was seen as locomotive of development and national and provincial level. From the macro economy viewpoint, infra structure influenced marginal productivity of private capital while in the micro production cost.

Infra structure also had Its influence on quality of life of Man, among others in promoting consumption quality, increase of manpower productivity and access to employment and betterment of welfare and macro economy stabilization i.e. fiscal sustainability, development of the credit market and the impact on the labor market.

In a survey run in the USA, return on investment level in infra structure against economic growth was 60%. Study by Dunai Bank 1994 mentioned that elaticity of GDP against infra structure in a country was between 0,07% to 0.44% which means that increase of 1% alone in infra structure might cause GDP to grow by 7% to 44%.

The vital role of infra structure to propel economy had been proven by success of economic program relying on infra structure. One of them was the New Deal Program run by US President Franklin D. Roosevelt during the Great Depression of 1933.

The policy adopted by the US Government then was to spur on infra structure building whereby to create positive impact on economic growth and the result was that more than 6 million jobless people were put to work once again.

So priority for infra structure building economic growth and strengthening competitiveness in anticipating regionalization and globalization. For that matter all stakeholders must foster synergy to support infrastructure building of high quality and had the power to energize other sectors to grow. (SS)

Business News - June 10, 2015