HOUSE’S COMMISSION VI AGREED ON ADDITIONAL BUDGET FOR THE MINISTRY OF STATE ENTERPROSES IN 2010

House’s Commission VI agreed on additional budget for 2010 for the Ministry of State Enterprises for arrangement of state enterprise roadmap, mapping and inventarization of state enterprises’ assets, and repair of buildings. This statement was declared during a meeting with Commission VI and Ministry of State Enterprises’ Secretary General.

Budget Realization List (Dipa) of the Ministry of State Enterprises for 2010 is decided at Rp. 104,203 billions. According to the Ministry’s Secretary General, Said Didu, in Amendment of APBN of 2010, an additional amount of Rp. 52 billions is required. From that amount, Rp. 15 billions are intended for state enterprise roadmapping, Rp. 5 billions for mapping and inventarization of assets, and Rp. 32 billions for building renovation and replacement of elevator modules.

Roadmap is required in facing such a fast-changing business climate in globalization era of AFTA and ACFTA and attempts to increase bargaining position in the form of increase of size through synergy.

Regarding replacement and renovation of old facilities, the office building of the Ministry of State Enterprises was an ex building of Garuda Indonesia which is already 25 years old. So, there are many parts and facilities which are no longer worthy from the aspects of safety and comfort so they need repair.

And, the Ministry has occupied the building since 2007. The Ministry’s employees carry out their duties using old office equipments where many of them are already unworthy. Therefore, they need to be replaced by new equipments.

THE ECONOMIC ALREADY IMPROVED ABSORPTION OF OFFICE SPACE SUB-SECTOR INCREASED

Improvement of national economy was predicted to stimulate increase of sales and development of office space sub-sector in 2010. This estimate was conveyed by Research and Analyst Manager of PT Coldwell Banker Commercial, Dwi Novita.

The occupation rate of office buildings in first quarter of 2010 reached 87.5% or increased 1.2% from 86.37% in the previous quarter. While, stock of office buildings remained unchanged if compared to that fourth quarter of 2009, of 6.1 million m2. This was because the business community regained their confidence to do business expansion. Therefore, demand for office buildings was constantly increasing. “Moreover, in the first quarter of 2010 there was no new stock of office buildings so that demand was estimated to double”, Novita said.

Development of office buildings in 2010 was evident in the second quarter. There would be four additional office buildings in prime areas in second quarter of 2010, and one additional building in fourth quarter of 2010. And, two office buildings in secondary area were predicted to be completed in second quarter of 2010.

As a whole, property sector in 2010 would constantly show a positive sentiment. The increase was due to national economic stability. According to Novita, GDP in this quarter increased 3.90% As a result of this, inflation rate decreased. Interest rate of bank loans also decreased that it caused an increase of sales in almost all units of the property sector.

Decline in property industry in 2008 was due to the global crisis that resulted in a quite fast awakening in property sector in 2009 and 2010 because of Indonesia’s economy which was not too much affected by the global crisis. “It can be said that in first quarter of 2010, property sector had recovered from the effect of the global crisis in 2008. Even though it was still slowly awakening, market sentiment had shown a positive figure.

Novita believed that property sales in the second quarter of 2010 would constantly increase. Currently, growth in property sector in the first quarter of 2010 reached 10-15% and was estimated to increase continuously in 2010.

INALUM PROPOSES CONTRACT EXTENTION AS MARKETING PROSPECT LOOKS GOOD

In seeing the good prospect of aluminium business, in domestic as well as overseas market, PT Indonesia asahan Aluminium (Nalum) proposed extension of contract when it expired by October 31, 2013. Based on the explanation of Chairman of Asahan authorities Effendi Sirait in a discussion with the Forum of Industrial Journalists (Forwin) in Jakarta Friday (14/5) and based on Master Agreement (MA) per November 1, 2013, after operating commercially for 30 years, Water Generated Powerhouse Asahan II (Sigura and Tangga) automatically became the possession of the Indonesian Government, after paying compensation fee as much as the updated value (MA Article VII.1).

“The Management of Inalum has applied for extension of contract to the Asahan authorities (OA) as executor of the Asahan project policies (PA). The proposal would be dissected by the technical team which was in charge of making in-depth study of PA. This team, set up by the Indonesian Government would focus on various aspects of the matter including preparing negotiation materials whereby to optimize benefits of PA to the advantage of the Indonesian Government” Effendi remarked.

In the proposal of collaboration extension, PT Inalum proposed uplifting of factory capacity of aluminium melting plant into ingot bars from 250 thousand tons per year to become 317 thousand tons per annum with investment worth US$ 367 million. He added that Inalum had the right to proposed extension of operational period at least 3 years before period expired. Proposal of extension must include new investment which was significant by amount for innovation and smelter expansion.

“PT Inalum has presented the proposal of contract extension to OA by May 2010. In accordance with Master Agreement, the proposal was submitted to OA to be conveyed to the Government. Therefore OA will bring the matter to the directive body. From the Japanese side, a team representing Japanese Investors called Nippon Asahan Aluminium (NAA) was set up. Most likely they propose to hold share bigger than that of Indonesia; for that matter, an exchange of information has been held twice” Effendi was quoted as saying.

Performance of Inalum

The share composition of PT Inalum, a foreign company (PMA) by status is as follows the Indonesian Government 41.12 percent, Japan 58.88 pecent. Sixty percent of products were marketed in Japan, the remaining 40 percent in Indonesia. Since 2004 Inalum started to show improvement, with production output exceeding the capacity of 225 thousand tons per year to become 250 tons per year. In March 2010, production reached 21,485 tons but the amount sold was 27,523 tons of aluminium.

Each year Inalum made profit which reduced accumulated loss from US$ 1.255 billion by end of 2003 to become US$ 1.1 billion in 2004, leaving only US$ 72 billion to remain by 2009. In addition to that debt installment had been accelerated, leaving only US$ 122 million of debt by end of 2009.

Therefore based on performance projection of 2009 – 2013 and in accordance with Long Term Projection (LTP) in the future the company was predicted to make profit of US$ 100.6 million on the average by 2013. Meanwhile the company also managed to pay company taxes to the amount of US$ 42 million per year on the average, hence the value of total asset would reach US$ 1.272 million which included cash balance amounting to US$ 628 million.

HOUSE SUPPORTS STATE-OWNED COMPANIES INVESTMENT PLAN

Commission VI of Parliament supported State Owned companies to invest in the real sector, especially in the effort to promote public service and social welfare of customers through infra-structure development, such as building high quality modest apartments (rusunami, rusunawa) that are affordable. This was among the conclusions of a hearing session of Commission VI of House with the Deputy of Banking and Finance, Ministry of State Owned Companies Affairs with PT Jamsostek, PT Askes, PT Taspen, and PT Asabri at the House of Representative.

Furthermore Commission VI of Parliament requested the Deputy of the Minister of State Owned companies to optimize performance in the aspect of management, operational as well as financial. The objective was to encourage state owned insurance companies to maintain efficiency, efectivity and Good Corporate Governance (GCG) in all business operations.

In anticipating the implementation of Law on National Social Welfare System, Commission VI of House had requested the Ministry of State Owned Companies to synchronize roadmap and scheduling of stipulated of the type of legal status of four state owned insurance companies including the aspects of strategy, measures to be taken, and cost and risk calculation of the entire process.

For that matter, State owned Insurance Companies needed to prepare mechanism of public service for the lower income group and Fund Management expected from the State Budget based on the Law of the National Social Welfare System.

INDONESIA SHOULD IMPLEMENT AIR TRANSPORT MODERNIZATION IN ORDER TO GAIN A SIGNIFICANT BUSINESS POTENTIAL

Indonesia must do modernization of the air transport sector to improve services in order to gain a significant potential in this business sector.

Improvement of equipments, infrastructures, and tariffs should be implemented. The Indonesian air transport business has a very significant market potential because currently less than 4 percent of Indonesian population (230 million people) travel by air.

In addition to that, the Indonesian territory which consists of 17,500 islands also gives contribution to the development of air transport business. Air travel could save time. There are many old equipments that must be replaced.

“We know that transportation in Indonesia needs improvement from time to time. Many of our equipments should be modernized because they were already old”, Freddy Numberi, Indonesia’s Minister of Transport, told Business News.

Improvement and modernization have been implemented by Garuda Indonesia. This company has replaced some of its airplanes and will buy some in the framework of improvement of services.

“Garuda has started to implement modernization. We expect that if this could be done properly, our transportation business could improve”.

Tariff should also be increased, but within a range which is not be a problem to the customers. Air transport tariff in Indonesia per kilometer is the lowest in Asia. And, this will hamper business acceleration in this sector.

“Tariff is actually a separate problem, but we do as much as possible to maintain a reasonable cost/tariff so that if there is an increase in tariff, it would not be too much a problem to the customers”. The trend is that the number of passengers will increase in future.

Regarding attempts to free 37 Indonesian air transports from flight ban to European Union, this matter is still in process.

European Union imposed flight ban on 51 Indonesian airlines in July 2007 due to rampant plane accidents that had caused 250 people dead.

There should be coordination with the European Union so that Indonesia will be able to improve standards of flight safety.

European Union had lifted flight ban on four Indonesian airlines in July 2009. These airlines were Garuda Indonesia, Mandala Airlines, Airfast Indonesia, and prime Air.

Preventing Concentration of Residences and Industries in Shallow Water Areas

Spatial plan that puts residence and industry concentration on the Northern Coast Java (Pantura) is a mistake because placement of residences and industries face to face with shallow waters could damage the sea water which is rich in fish. Mohammad Hasroel Thayib, Head of Board of Experts of Indonesian Environmental Intellectuals Association (Perwaku), told business News.

Spatial plans in Indonesia, until this day, put residence and industry concentration face to face with shallow waters, amongst others, Northern Coast of Kalimantan. While, shallow waters are fertile areas for fish.

Fish could well-developed in shallow waters since mineral content only exists in 50-meter depth with sufficient sunlight, sufficient oxygen, and a large amount of phytoplankton which is sources of food for fish. If the condition of the water in that area is damaged, sea biota could not survive. If we look from above, the sea water along Pantura was dirty. It would be difficult for phytoplankton to survive in such area since the sunlight was prevented by mud. And, phytoplankton is sources of food for the fish. Another effect was that income of farmers in the Northern Coast could decrease.

Residences and industries should be facing deep waters. Fear of abrasion could be prevented by planting mangrove trees along the coasts. “Basically, prevent concentration of residences and industries which is face to face with shallow waters. In North Sulawesi, it doesn’t matter because Pacific Ocean is a deep sea. In Papua and East Kalimanatan, this could also be done. But, not in West Kalimantan, South Kalimantan, and East Sumatera because these are shallow water areas.”

Other than preventing concentration of residence and industries in shallow water, inter-regional spatial plan related to management of river areas must also be modified. For example, the Citanduy River area that flows to Segara Anakan lake that separates West Java and Central Java areas. Because the responsibility of government’s administrative unit is based on rivers, it is difficult to decide who will be responsible if Segara Anakan Lake is polluted due to the Citanduy River flow. Therefore, responsibility of government’s administrative units should be decide based on the river basin, or the river it self.