PARADIGM OF KTM

             Independent Integrated City (KTM) may be called as a breakthrough of the Manpower and Transmigration Ministry in the reformation era. In relation thereto, the transmigration program is better focused on efforts to create new entrepreneurs. Surely, the measure is rational and in line with the present need as most of the poor lives in rural areas. The reality has caused urbanization to continue uncontrollably thus bringing about social and economic impacts in rural and urban areas.

           KTM constitutes a breakthrough expected to be capable of answering national issues. Since the agricultural land is located in rural areas, the development of KTM would be directly related to need of national food security development. How could national food security be realized if more farm land is left by farmers? In relations thereto, KTM must be able to restore attractiveness of the agricultural sector while boosting the birth of new entrepreneurs.

            In addition, KTM should also be projected to become an instrument to ensure the equitable distribution of investment which has so far been centralized in urban areas, mainly Java. Here, the program is also expected to create energy capable of preventing urbanization from broadening. The birth of new entrepreneurs in KTM would contribute positively to poverty alleviation and creation of new job opportunities. In 2011, the number of unemployment in Indonesia totaled seven million. Without new job opportunity, the jobless people are predicted to increase in 2012.

            KTM is a transmigration area expected to become a center of growth. To realize the obsession, it requires support of human resources, capital, infrastructure, natural resources and policies, which are integrated and have spirit of growth and equitable distribution. In the government language, KTM is projected to become an integrated development planning process. For the purpose, dozens of ministries and government institutions are involved to support the realization of the obsession.

            We want to affirm that regardless of the obsession and goal which would be accomplished by KTM, it must lead to the development of national economic resilience fully supported by inner strengths based on communities. It’s the highest expectation we must set. In this context, surely investment is badly needed. However, the investment must be able to ascertain the involvement and accommodate rights and interests of local communities. Conflict costing lives in Mesuji is expected to not repeat anymore.

          Recently, the Minister of Manpower and Transmigration granted award to 12 heads of regions (six governors and six regents/mayors). The award named Transmigration Award was granted to heads of regions becoming origin and destination of migrants. The granting of the award is acceptable because the flow of transmigration is highly determined by commitment of regional governments to boosting people fulfilling the right to migrate. The role of regional government overseeing the destination of transmigration is also ascertain that transmigration is not only movement of location but also life from poor to become alleviated from the poverty. Briefly, KTM should become a new area where the whole residents may undergo better livelihood.

           At the end of this article, we may emphasize on several things. Firstly, KTM should become Unicom wherein social, economic and cultural interactions with other surrounding regions take place, which affirms the nature of Indonesia as an extremely heterogeneous nation. Secondly, the establishment of KTM in remote areas should result in effect of investment distribution from Java to outside Java, mainly Eastern Indonesia. Any of the distributed investment indicators is visible from contribution of region to GDP. Smaller contribution of a region means lower economic activity in the region, as a consequence of low investment and vise versa.  

MINISTRY OF TRADE PREDICT TOTAL EXPORT WOULD COME TO USD 230 BILLION IN 2012

             The Minister of Trade projected export of oil gas and non oil gas products in 2012 would reach 230 billion and Indonesia’s total export to non traditional states would rise by 25 percent next year. In 2012 it was predicted that global economic performance in 2012 would be the same as 2011, growing by 4 percent while some developed nations would only post 1.9 percent growth. This was disclosed by the Minister of Trade Gita Wirjawan upon announcing trade performance of 2011 and trade outlook 2012 on Friday [30/12]

            Assuming that trade volume of goods and services of the world only grew by 5.8 percent it means that growth was slower compared to growth of 2011 which was posted at 7.5 %. Import of developed countries was estimated to grow by 4 percent and export grows by 5.2 %, whilst export of developing countries was expected to grow higher than developed countries was expected to grow higher than developed countries where import was projected to grow by 8.1 percent and export 7.8 percent.

            The projection was that although Indonesia’s economic growth would still be better, but it was predicted that Indonesia would still be pattered by the storm of global crisis. The decline in global demand was visible from the sluggish performance of export, especially over the last months of 2011. In 2011 Indonesia’s economy was estimated to have grown by 6.5 % and the Government was trying to post up economic growth at around 6.5 % to 6.7 % in 2012.

            Gita stated “With downturn of demand in the global market, Indonesia would strive to balance economic growth with focus on domestic growth. The Government would prioritize on domestic market whereby to jack up economic growth. By 2012 domestic Rp 4,124 trillion. The trading sector as propeller of growth played an important role in Indonesia’s economy. The trading sector, hotels and restaurants will be among the sustainers on national economic growth in 2012”.

            The main strategy of the Ministry of Trade was to aim at vital targets with the objective o strengthening the domestic market, of which 95 percent of household consumption was fulfilled by domestic products with targeted ratio consumption of domestic products against household consumption in 2014. According to Gito today had reached 92 percent and set at 95 percent in 2014. For that matter it was deemed necessary to have an indicator which uplifted domestic transaction value like health as parameter, especially in the management of traditional market.

            Furthermore it was expected to stabilize price of food based on indicator of average varied co-ef-efficient of 10 main food commodities was not more than 7 percent. In addition to that contribution of the trading sector increased based on real annual GDP growth of big traders and retailers was at least 7 percent. Deputy Minister Bayu Krisnamurti admitted that sizable domestic economic growth would serve as magnet to overseas exporters.

           With the downturn of demand in the global market, Indonesia would strive to maintain balance of economic growth resources; the Government would prioritize on domestic market to propel Indonesia’s economic growth Economic Performance of 2011.

            Indonesia was a country whose total export would soon come to USD 200 billions and would be posted at USD 211 billions this year 2012, although it was still not calculated how much was the actual trade surplus, Gita was quoted as saying. Indonesia was also a country which had been able to multiply export volume in five years. In 2011 Indonesia’s main export destination countries were China, Japan, the USA, Singapore and Malaysia.

INFLATION IN DECEMBER AT 0.57 PERCENT

          Commodity prices in December 2011, in general, show an increase. Based on result of survey of the National Bureau of Statistics (BPS) in 66 cities in December 2011, inflation occurs at a rate of 0,57 percent or there is an increase of Consumer Price Index (IHK) from 129.18 in November 2011 to 129.91 in December 2011. Inflation rate by calendar year (January – December) 2011 and inflation rate year-on-year (December 2011 against December 2010) reaches 3.79 percent, respectively.

              Inflation occurs as a result of price increase as reflected from increase of all expenditure indexes, namely foodstuff group. 62 percent; index of ready-to-eat food, beverages, cigarettes, and tobacco group by 0.50 percent; index of housing, water, electricity, gas, and fuel group by 0.28 percent; index of clothing group by 0.20 percent; index of health group by 0.17 percent; index of education, recreation, and sports group by 0.07 percent; and index of transportation, communication, and financial service group by 0.14 percent.

            Commodities which experience price increase in December 2011 are, amongst other, red chili pepper, cherry tomatoes, purebred chicken meat, fresh fish, purebred chicken eggs, tomatoes, fee of non-supervisory construction worker, air transport tariff, mustard green, carrot, cayenne pepper, oily cookies, rice and side dishes, beef rending, clove cigarettes, filter clove cigarettes, white cigarettes, cement, tariff of house rent, housemaid salary, and jean trousers.

            While, commodities which experience price decrease are: gold jewelry, red onion, string beans, French beans, potatoes, cucumber, sweet corn, garlic, and gasoline.

            Commodity groups which contribute to inflation in December 2011 are: foodstuff group 0.37 percent; ready-to-eat food, beverage, cigarette, and tobacco group 0.09 percent; housing, water, electricity, gas, and fuel group 0.07 percent; health group 0.01 percent; education, recreation, and sports group 0.01 percent, and transportation, communication, and service group 0.02 percent. While, clothing group is relatively stable this month.

            Foodstuff group in December 2011 experiences inflation at 1.62 percent or increase of index from 150.33 in November 2011 to 152.76 in December 2011.

            From 11 sub-groups under the foodstuff group, 9 sub-groups experience inflation while 2 sub-groups experience deflation. Sub-groups which experience the highest inflation are condiment sub-group at 3.96 percent, and the lowest inflation is experienced by preserved fish sub-group at 0.13 percent. While, sub-groups which experience deflation are oil and fat sub-group and legume sub-group at 0.12 percent and 0.02 percent, respectively.

DIRECTOR GENERAL OF TAX PLAN TO ISSUE TWO REGULATIONS ON TAX HOLIDAY

            In the effort to ease procedures on the facilitation of tax holiday, the Directorate General of Tax had issued two regulations on the execution of tax holiday this December 2011. The two regulations regulated the beginning of commercial production for tax subject [WP] who were entitled to tax holiday and the procedures of reporting of fund utilization and realization of capital investment for organizational tax subject getting tax holiday.

            Regulation of the Directorate General of Tax No: PER-45/PJ/2011 stipulated that by subjects [WP] which already had approval from the Ministry of Finance to have tax holiday was when they had realized all capital investment and had sold their production to the market. Only when such requirements were fulfilled, the tax subjects were allowed to benefit from the holiday.

            To make sure that the two requirements were fulfilled, the Directorate General of Tax would carry out field examination based on written request of WP. To ensure accountability of examination, the Director General of Tax planned to issue a decree on the stipulation to commence production commercially within at least two months since issuance of notification letter addressed to tax subject.

            Regulation of the Directorate General of Tax no: PER-44/PJ/2011 stipulated that report on fund utilization by tax subject having access to tax holiday must be submitted every quarterly. Meanwhile report on the realization of capital investment which had been audited must be submitted to annually. The two reports must be submitted to the Director General of Taxation and the Committee for Verification and Issuance of Tax Holiday facilities.

            In the event that receiver of tax holiday failed to report within the given time, the Directorate General of Tax could propose to the Committee of Verification of Tax Holiday extension whereby to issue recommendation to the Minister of Finance to cancel the given tax holiday.   

PERTAMINA UNABLE TO SUPPLY GAS BASED ON CONTRACT

               The Working Committee for Upstream Electricity Sector of Commission VII of House in their technical visit to Belawan had detected a case where a gas powered generator did not get sufficient supply of gas from PT Pertamina as agreed in contract. This was disclosed by Head of Team of Commission VII of House, Drs. Azwir Dainy Tara during meeting with PT Pertamina and PT PLN at PLTG Meeting Hall in Belawan.

           PLTG Belawan obtained gas supply from PT Pertamina based on Gas Trading Agreement [PJBG] in December 19, 2005 for a contract period of 10 years including gas supply of 151.90 BSCF. However realization of gas supply from Pertamina to PLN in 2009 had always been below contract, and since December 2009 to December 2010 gas supply from Pertamina was stopped due to application of gas specification.

                Gas Supply from the Glagah Kambung oilfield [operator of Salamander gas] was unrealized as agreed in contract because PLN Belawan generator was malfunctioning as the being supplied was of the wrong specification. Additional gas supply was being sought after by PLN Belawan from floating storage and degasification unit of FSRU Belawan which was being built by the State Gas Company PGN. FSRU needed LNG amounting to 1.5 -2 MTPA but now the supply being realized was only 1 MTPA from BP Tangguh.

                The State Electricity Company PLN had asked PT Pertamina EP to pipeline gas from Pangkalan Susu and the specification should be in accordance with PJBG. Taking and sampling of gas should be done by Pertamina EP regularly every 2 weeks and to be witnessed by official of PLN Powerhouse of North Sumatra.

IN ASIA, PRICE OF UNCOATED WOODFREE PAPER STILL EXPERIENCING PRESSURE

           Information received by Indonesia Pulp and Paper Association (APKI) from various sources stated that in Asia, especially in China, price of Uncoated Woodfree (UWF) paper distill experiencing pressure, even though price decrease has been slowing down. Price decrease is due to oversupply. In China, price of UWF paper decreases from RMB 6,000/ton in September 2011 to RMB 5,700/ton in October 2011. While, price of Coated Woodfree (CWF) paper also decreases from RMB 6,200/ton in September 2011 to RMB 5,700/ton in October 2011 and to RMB 5,500/ton in November 2011.

            Ir. H, Mansur, Head of APKI Presidium, told Business News that in North America in October 2011, demand for UWF paper is stable at 1.9 million tons. But, it is lower than in October 2011. In October 2011, paper factories operate 89 % of installed capacity, but are able to sell 92 % of the utilized capacity, Therefore, paper factories have successful in controlling their production, which has a further implication on stability of paper price, and/or paper price tends to increase.

            In October 2011, demand for mechanical UWF paper is 9.5 % lower than in October 2011. Sales also decline due to limited supply as a result of closing down of Port Hawkesbury factory that has a capacity of 375,000 tons/year, and cease of operation of 2 paper machineries in Sartell factory with a capacity of 95,000 tons/year.

            In October 2011, demand for UWF paper is stable at 758,000 tons or down 3.3 % if compared to October 2010. UWF paper factories operate 84 % of installed capacity. Capacity use at such a rate is considered unprofitable as paper factories wish to operate at least 90 % of installed capacity.

            In West Europe in October 2011, demand for UWF paper reaches 1.9 million tons, or down 5.1 % from September 2011. The highest demand occurs on CWF paper which declines 6.1 % if compared to September 2011. Economic sluggishness and overcapacity of UWF paper has put pressure on price of CWF paper.

            It is hard for CWF paper producers to expect paper price to increase, especially due to a very high oversupply. Even though paper factory in Europe (Sappi) has closed down its CWF paper factory in Biberist with a capacity of 435,000 tons/year, Lecta paper factory reduces production, Kymi paper factory temporary closes CWF paper factory with a capacity of 450,000 tons/year, Stora Enso paper factory changes from CWF paper production with a capacity of 140,000 tons/year to specialty paper production, and M-real paper factory will close down Paper Machine No. 2 in Aanekoski factory with a capacity of 200,000 tons/year, but market is still experiencing oversupply of CWF paper.

INVESTMENT GRADE RATING FOR INDONESIA

         One of rating agencies for Indonesia, i.e. Fitch Rating, on Thursday (December 15) upgraded Indonesia’s sovereign rating for foreign currency long-term senior debt at BBB- with stable outlook.

            Rapid progress in overcoming structural weaknesses and sustainable economic growth which is even better than Fitch’s projection and without causing external imbalances or high inflation pressure will strengthen Indonesia’s economic fundamentals and promote increase of Indonesia’s further sovereign rating. Fitch still highlighted on structural weaknesses such as low per capita income and fiscal revenue, shallow domestic financial market, and problems in infrastructure quality and corruption eradication. But, these factors do not become obstacles to rating upgrade. This is explained by Bank Indonesia’s Public Relations Bureau, Dyah N.K. Makhilani.