Financial sector in urgent need of reform: Sri Mulyani

Governments urgently need to improve the regulatory framework and supervision of the financial sector, as loopholes in the financial services industry led to the global economic crisis. During the G20 meeting that concluded in London last week, Finance Minister Sri Mulyani Indrawati said Monday there should be “significant corrections” to supervision and regulation in the financial sector to avoid the kind of “careless behavior and excessive risk-taking” by those operating in the financial services industry that triggered the economic crisis. Such behavior has caused governments worldwide to spend taxpayers’ money to bailout failing financial institutions to avoid worsening global economic conditions.
Source: PA Asia, The Jakarta Post, p.13, September 08, 2009

RI moves to improve defense in trade disputes

As the global trend of trade protectionism becomes more apparent, the government, in cooperation with the private sector, is moving to prop up its defense in facing disputes under the WTO. The government, via the Trade Ministry, is currently in the process of setting up a team of legal advisors comprising both local and international lawyers to assist local companies battling dumping accusations from importing countries. The initiative to set up the team was the result of continuing pressure from Kadin, Hidayat said. The situation was equally complicated when local businesses wanted to sue foreign businesses that had allegedly dumped products in the Indonesian market. The government should not only set up a team, but a special agency to take care of trade disputes.
Indonesian Textile Association (API) chairman Benny Soetrisno said the government’s legal assistance might not be necessary “because we are the ones who understand the matter, and the government needs only to talk to its counterpart”.
Source: The Jakarta Post, p.13, September 09, 2009

Legislature unplugs PLN’s monopoly on electricity

The legislature has ended the monopoly of state-run PT Perusahaan Listrik Negara (PLN), paving the way for regional management of electricity rates. The new law stipulates that the electricity business, ranging from power generation to distribution, can be carried out by state enterprises, state regional companies, private companies and cooperatives and further stipulates that PLN and regional cooperatives are given first priority to provide electricity for public consumption. For areas that are not connected to a power provider, the central government or regional government will appoint or establish state regional companies, private companies and cooperatives to provide electricity for them. The new electricity law also provides room to adopt a new rates system that involves decision making at a regional government level. The law states that regional governments will determine power rates based on benchmarks from the central government and with the approval of regional legislative councils. Since the new law requires several implementation regulations, region-based rates will not be introduced until 2010 or 2011.
Source: The Jakarta Post, p.1 , September 09, 2009

Rabobank Indonesia sees growth in lending, assets

Rabobank International Indonesia, which has an extensive lending portfolio in the agriculture sector, expects assets to grow by between 10 and 20 percent this year, having recorded a fairly healthy first half-year performance.
“We believe we can achieve this by deepening relationship with existing clients and delivering services to new clients from corporations and small-medium enterprises,” said president director Hank Mulder. The trend would continue in the second half on the back of fairly strong economic growth. At the moment, the agricultural sector comprises 60 percent of loan product in the bank’s portfolio and as part of the effort to boost lending to the agricultural sector, the lender is rolling out several programs to help empower farmers and small companies operating in the sector including the horticulture niche market. A specialized research body is going to be established for researching on specific sectors that benefit corporations and small-medium enterprises in the country, including those involved in agriculture.
Source: The Jakarta Post, p.14, September 10, 2009

Indonesia Rises Again in Ease of Business Ranks

The country was ranked as a “star performer” and moved up to 122nd place from 129th in the global “ease of doing business” rankings, published in the Doing Business 2010 report by the World Bank and International Finance Corp. on Wednesday. “Indonesia has made its rules more efficient to help increase opportunities for local firms by, among other things, cutting the time required to start a business and register a property,” said Joachim von Amsberg, the World Bank country director for Indonesia, following the release of the report.
Over the past year, the nation also strengthened disclosure requirements for transactions between affiliated companies, in a bid to protect investors, and has attained remarkable achievements with democratization, decentralization and economic and financial stability, even in the face of the global financial crisis.
The rankings in the report are based on a set of indicators and business factors, such as the climate for launching businesses, dealing with construction permits, and ease of property transactions, getting credit and investor protections. According to the report, Indonesia was now one of the leading performers in East Asia and the Asia-Pacific region.
Source: The Jakarta Globe, p. section B, September 10, 2009

Standby Loan Facility may be extended to 2011

Indonesia may extend the remaining unused US$4.75 billion in standby loans by a further year to 2011 as the country may not use all the facility for budget financing during 2010, Finance Ministry says.
The government has received $5.5 billion in standby loans, sometimes referred to as deferred drawdown options (DDOs), from the Australian government ($1 billion), the Japanese government ($1 billion), the Asian Development Bank (ADB) ($1.5 billion) and the World Bank ($2 billion). Of the $5.5 billion set aside, Indonesia has so far used only $750 million to guarantee its first ever issue of yen-denominated bonds (samurai bonds) in Japan, Finance Minister Sri Mulyani Indrawati told a press conference Wednesday.
This year, the budget deficit is estimated to reach Rp.129.8 trillion (US$12.77 billion), or 2.4% of the GDP – while in 2010 it is predicted to be lower only Rp.98 trillion or 1.6% of GDP.
Source: The Jakarta Globe, p. 13, 3 Sept.09

Government insists on marine concession plan for fisheries

The Maritime and Fishery Affairs Ministry will go ahead with plans to introduce cluster-like territorial water areas for fisheries where concession rights will be allocated to firms by tenders, arguing that this will not be detrimental to small-scale fishermen.
The planned cluster division system would in fact facilitate healthy competition among fishermen and fishing companies. The system is based on the Ministerial Regulation No.5/2008 and may take effect as early as next year. Further, the system is similar to that of Forestry Ministry concessions for rights where holders can exploit a certain area of forest for a certain period of time, would be based on the concept of environmental sustainability. It will let big-scale and small-scale fishermen exploit water resources to a certain extent only, based on certain related research which will be published by end of this year. The research will also determine details on the sizes of clusters, the maximum period of the fishing rights in each cluster, detailed mechanisms for the tenders, arrangements between central and local administrations, monitoring systems and related systems.
The Indonesian Fishery Industry Association (Gappindo), however has already voiced its objections on concerns that the proposed system would pave the way for big industry players to dominate the country’s proposed territorial water divisions.
Source: The Jakarta Post, p.3, 3 Sept. 09