Wednesday, 25 November 2015


Accumulatively realization of investment project in Semester 1 (January-June) of 2015 was Rp.259.7 trillion or up by 16.6% against same period of 2014. Realization of capital investment in Semester 1/2015 consisted of investment realization of PMDN amounting to Rp85.5 trillion (32.9%) and realization of PMA was Rp174.2 trillion (67/1%). Distribution of investment in Semester 1/2015 showed investment realization in Java was Rp144.5 trillion (55/07%) and investment realization outside Java was Rp115.2 trillion (44.3%). Investment realization outside Java increased by 25.5% against same period of 2014 (91.7 trillion). This was disclosed by Head of BKPM Franky Sibarani to the press on Monday (27/7).

Through January-June 2015 investment realization of PMDN was Rp85.5 trillion (32.9%) against same period of 2014 at Rp72,8 trillion, an increase of 17.4%. in Semester 1/2015 investment realization of PMA was Rp174.2 trillion (67.1%) against same period of 2014 at Rp150 trillion, an increase of 16.1%. PMA and PMDN investment realization through January-June 2015 was as follows:

1.      PMDN Investment Realization
PMDN Investment realization by business sector (top 5) included F&B Rp14.1 trillion; Electricity, Gas and Water Rp11.6 trillion. Basic Chemical Industry Chemical Products and Pharmaceuticals Rp11,0 trillion; Construction Rp8.3 trillion; non metal Mineral Industry Rp6.7 trillion. If all industry sectors were combined, the contribution of processing industry sector was Rp43.0 trillion or 50.3% of total PMDN. PMDN realization based on project location (top 5) West Java Rp15.4 trillion; East Java Rp12.6 trillion; Jakarta Top 8.3 trillion; Central Java Rp7.2 trillion and South Sumatra Rp7.2 trillion.

2.       PMA Investment Realization
Investment Realization by business sector (top 5) were Transportation, Warehousing and Telecommunication USD 2.4 billion; Mining USD 2,2 billion. Basic Metal Industry, Metal Goods, Machines and Electronics USD 1.4 billion; Transportation Industry USD 1.1 billion;
Basic Chemicals, Chemical Goods and Pharmaceuticals USD 0.9 billion. If all the industry sectors were combined they would contribute USD 5.6 billion or 40.1% of total PMA.
Realization of PMA by project location (top 5) were: West Java (USD 2.6 billion); Jakarta USD 1.6 billion; East Kalimantan (USD 1.2 billion); Banten USD 1.0 billion; and East Java USD 0.8 billion.
PMA Investment Realization by country of origin (top 5) were Malaysia (USD 2.6 billion); Jakarta USD 1.6 billion; Japan USD 1.6 billion; South Korea USD 0.8 billion; and the USA 0.6 billion. (SS)

Business News - July 31, 2015


The Ministry of Environmental Affairs and Forestry (KLHK) underscored they would not cancel the SLVK. The Director General of Production Forest Management of KLKH Ida Bagus Putera Prathama stated on Tuesday (28/7) that the discourse on cancellation of SLVK was thrown several times but he made sure that the Regulation would still be in effect

The issue of SLVK Regulation cancellation again emerged, reasoning that small businesspeople were disadvantaged by the rule. The SLVK Regulation was regarded as weakening their competitiveness as they had to pass complicated certification procedure and costly too. In response to the grievances Ida said that she was trying to scheme up a strategy to help small companies undergo the certification process.

Ida further said that today KLKH was even planning to set up a legal trading house for small companies. She said that the process of setting up a Trading House especially for small companies was being discussed with players of the industry, among others The Association of Indonesian Forest Managers (APHI). “The Ministry had not set up the time schedule for establishing this Trading House” Ida said.

This Trading House was expected to jack up wood production and export because all the products traded were legal. The proportion to set up a trading house emerged as President Joko Widodo stated he would cancel SLVK obligation for the downstream wood industry. the Trade Center would guarantee supply of wood for industry players, especially the furniture industry while SLVK would be effective on upstream wood industry including pulp and paper.

Ida also assured that all wood products and by products being SLVK certified could easily enter Uni Europe market by year end. The reason was that the process of negotiation with Uni Europe in the Forest Law Enforcement, Governance and Trade [FLEGT] was entering final stage and to begin next September. When the process of negotiation was completed all SLVK certified wood products would not have to undergo strict due diligence procedures in Uni Europe.

Ida remarked further that in the next negotiation process there were 3 lists to be explained, i.e. Export Declaration (DE), follow up action by the Government on management units which were not in compliance, and periodic evaluation. When the negotiation was ratified, Uni Europe was only committed to accept certified wood.

The Government noted export value of goods increased after certification prerequirements was in effect. Data of SILK unveiled that export of wood in the form of wooden panel, woodworking, pulp, paper, and pre-fabricated materials increased since the SLVK certification requirement was in effect on January 1, 2013.

From January 1, 2013 to June 25, 2015 more than 260,000 V-legal documents had been issued for products exported to 29 countries. Export value also increased gradually. Before SLVK was in effect export of forestry products in 2012 was posted at USD 5.17 billion. In 2013 when SLVK certification was in effect, export value increased to USD 5,74 billion and constantly increased to USD 5.96 billion in 2014. Ida stated that export value would soar up when SLVK was accepted wholly by Un Europe. (SS)

Business News - July 31, 2015


No fooling in the Parliament stance in facing the Ministry of Maritime (MKP) Susi Pudjiastuti and threatened to use Budget Function as final weapon. Commission IV of House claimed they were losing patience in facing hard headed Minister Susi. All the technical meetings of Commission IV got stuck in a dead end. The problems afield in the fishery sector was getting complicated. “We have made it clear that the policy of Minister Susi is wrong. In very meeting we have tried the soft and hard approach but in vain” Member of Commission IV of PKB fraction Daniel Djohan told Business News (27/7).

Commission IV highlighted the MKPO Regulation which was “To kill a mouse in the rice barn by burning the rice barn” Permen of KP No. 57/2014 was an example. The Regulation regulated landing of catch in fishery wharfs. Also Ministrial Regulation KP No. 2/2025 on the prohibition of using trawl in Indonesian waters. The regulation was designed to protect coral reefs but it threatened fishermen’s life. “We have held meetings but Minister Susi refused to change her policy.”

The Parliament planned to send a letter to President Joko Widodo. If the letter was not responded well, House would set up a special Committee to protest Government policy that killed the fishery sector. “Above all no more communication with Minister Susi.”

The way commission IV saw it, MKP’s policy to eradicate illegal fish in Indonesian waters, but at the same time Minister Susi also made rules that disadvantaged local fishermen. “The fishery sector is injured. Yields dropped and fishermen’s welfare dropped. We reacted hard on Minister Susi but she refuses to admit mistakes.”

Minister Susi’s hard action on foreign fishermen was right. The effort to fight illegal fishing was a matter of state’s sovereignty and Indonesia’ liberty “But we still hope local fishermen would be protected. The policy to prohibit trans shipment is in fact against the Law”.

Daniel claimed he had no personal interest and his struggle was not related with Provincial Election in West Kalimantan But fishermen in all of Indonesia, not just in Kalimantan, were suffering: “They all companied about Minister Susi’s regulation”. (SS)

Business News - July 31, 2015


The government was asked to be more aggressive in enhancing credit, especially for infra structure to motivate businesspeople to expand so in the end demand for credit would soar up.

So now it was up to the Government, how serious are they to restore slow-going economy? They were good in planning but how good were they at executing the plan they made? Now the mission was how to encourage and motivate businesspeople.

It was also advisable for the Government to release economic and fiscal regulation which was favorable to business, investors and market. Business people’s anxiety was evident in BI’s data which posted low demand for new credit in Q II 2015 compared to same period last year.

BI’s survey showed that net balance (SBT) was 66.7% which was lower than Q II 2014 which grew by 87.9%. SBT of Q III 2015 was the lowest in 5 years. BI reckoned that adverse condition of business and low need for financing due to economic slowdown accounted for stagnation in extention of new credit.

Evidently bankers axed target for credit growth in RBB which was submitted to OJK last June. Bankers revised credit growth target From the previous 165 – 17% to 13% - 15% only by year end.

By OJK calculations the average target of credit growth came to 2.57%. the lowest credit downturn was posted in banks of the BUKU 1 category 6.5% while target for BUKU 4 category banks slumped by 1.4%

In response to businesspeople’s demand, OJK released 35 stimulus policies with the objective to stimulate growth for banks, the capital market, and financial industry and INKB non bank category.

The policy was released by the financial authorities as locomotive of national economic train. Hopefully economy could stabilize and grow faster. The policy package would allow room for the financial industry to grow without relaxing control.

The policy package consisted of 12 policies of the banking sector, 15 policies of the capital market sector 4 policies in the IKNB sector and 4 policies in education and consumer protection.

For the banking industry there would be 4 policies which was to underscore 8 temporary policies in 2 years. The following were 12 regulations related to the banking sector.

Firstly, on outstandings of credit guaranteed by the Government, risk of 0% would be imposed in asset calculations based on ATMR risk.

Secondly risk content for automotives (KKB) was set at 75% in ATMR calculation for credit risk.

Thirdly application of Business Prospect Evaluation as one of the preconditions for credit restructurization regardless of market condition or industry of the debitor’s business sector.

Fourthly execution of credit restructurization before degradation of credit quality.

Fifthly lowering of credit with house as guarantee was set at 35% regardless of LTV in ATMR calculation for credit risk.

Sixthly lowering of KPR risk for RSS type of settlement in the Central Government policy set at 20% regardless of LTV value in ATMR calculations.

Seventhly, lowering of risk for KUR credit guaranteed by JAMKRIDA risk of 50% could be imposed.

Eighthly, evaluation of credit quality for one debitor or project was only based on right payment of capital and/ot credit increase by Rp.1 billion at the most to Rp.5 billion at the most only based on proper payment of capital interest.

Ninthly, evaluation of credit quality after restructurization (a 2 year temporary policy).

Eleventhly appraisal of credit quality after restructurization with grace period effective through grace period.

Twelfthly Precondition of Composite Health Level Ranking for banks making capital placement in the process of company establishment which would take over NPL of the same bank with maximum possession of 20% and was not decision maker or additional capital placement for rescuing subsidiary company.

In case of IKNB Sector, the authority would exercise relaxation policy called non performing financing (NPF) in the effort to propel financing growth by the financing agency. In the policy package for the capital market, the authorities would persuade UKM to go public.

OJK also strengthened access for UMKM to financial resources. For that matter OJK also enhanced capacity buiding for UMKM in finance management.

The banking circles rated that the ATMR policy in the UMKM sector would promote the real sector. OJK’s decision was rated as right because credit for UMKM and KPR energized small and medium industry.

Noteworthy was the fact that OJK was also paying attention on agriculture insurance to strengthen farmer’s access to financial resources and the agro sector could develop. Agro industry could pose as solution to low insurance industry today.

The agro sector was the real sector with highest impact on economy. Ricefields were today not only owned by personal farmers but also private companies, corporations and BUMN. If the agro industry project ran, budget absorption in the agro sector could be accelerated. General insurance companies would be motivated to embark on this business line.

OJK confirmed that the agro – insurance project would be realized next year. The insurance companies combined in a consortium would immediately start administrative data compilation. OJK also probed on the possibility of insuring animal farming. Seven companies already ready to run ago-insurance, among them was Jasindo.

OJK founded the UMKM rating agency to minimize the asymmetric information issue in financing and toward facing AEC. OJK also founded micro financial institution for UKM to encourage UKM to set up a legal company so they apply for confirmation letter.

However OJK stressed that all of the relaxation policy was temporary, it would only be effective for the next 2 years. In fact there was nothing new about the policy. It was just some sort of underscoring when economic process slowed down.

It was always possible that the OJK relaxation was only effective by next year in promoting credit growth. But at least for this year – since there was only six month left – the effect could be credit growth of 1% to 2% only. All in all the projection of credit growth could be slightly jacked up in the range of 13% - 15% only.

OJK had to make sure that relaxation of banking regulation would trigger moral hazard; it must be constantly monitored because it might start moral hazard which means window dressing if it was let to happen for too long.

To anticipate moral hazard OJK underscored that relaxation of regulation could only be enjoyed by banks having good risk management applying Good Corporate Governance (GCG). One thing was sure bankers were most happy with OJK policy. Relaxation could save financing in the loss potential sector.

The relaxation also had impact on lessening of provision size on credit extended so it would increase bank’s profit. (SS)

Business News - July 31, 2015