INFLATION IN JANUARI 2012 AT 0.76 %

              Development of prices various kinds of commodities in January 2012 in general shows an increase. Based on result of survey of National Bureau of Statistics (BPS) in 66 cities in January 2012, inflation occurs at 0.76 percent or there is increase in Consumer Price Index (IHK) from 129.91 in December 2011 to 130.90 in January 2012. Inflation rate by calendar year (January) 2012 is at 0.76 percent and inflation rate year-on-year (January 2012 against January 2011) is at 3.65 percent.

            Inflation occurs as a result of price increase of foodstuff index by 1.85 percent; food, beverages, cigarettes, and tobacco index by 0.65 percent; housing, water, electricity, gas, and fuel index by 0.54 percent; health index by 0.51 percent; educations, recreations, and sport index by 0.15 percent; and transportation, communication, and financial service index by 0.23 percent. While, clothing index this month experiences deflation at 0.08 percent.

            Commodities which experience price increase in January 2012 are, amongst other: rice, fresh fish, purebred chicken meat, purebred chicken eggs, cherry tomatoes, cooking oil, filter clove cigarettes, tariff of house rent, rice and side dishes, clove cigarettes, tariff of house contract, air transport tariff preserved fish, spinach, string beans, water spinach, cucumber, carrot, tomatoes, kue basah (deep fried, boiled or steamed cakes), soto, refined suger, white cigarettes, bricks, cement, wage of non-supervisory construction worker, household fuels, and housemaid salary. While, commodities which experience price decrease are: red chili pepper, cayenne pepper, and gold jewelry.

               Commodity group which contribute to inflation in January 2012 are: foodstuff group 0.45 percent; ready-to-eat food, beverages, cigarettes, and tobacco group 0.12 percent; housing, water, electricity, gas, and fuel group 0.12 percent; health group 0.02 percent; educations, recreations, and sports group 0.01 percent; and transportation, communication, and financial service group 0.04 percent. While, clothing group this month is relatively stable and does not contribute to national inflation.

              Foodstuff group in January 2012 experiences inflation at 1.85 percent or increase of index from 152.76 in December 2011 to 155.59 in January 2012.

        From 11 sub-groups under foodstuff group, 10 sub-groups experience inflation while 1 sub-group experiences deflation. Sub-groups experiencing the highest inflation are vegetable sub-group at 3.69 percent, and the inflation is experienced by legumes sub-group at 0.03 percent. While, spices sub-group this month experiences deflation at 5.13 percent.

            This group in January 2012 contributes 0.45 percent to inflation. Commodities which dominantly contribute to inflation are, amongst other, rice 0.18 percent; fresh fish 0.11 percent; purebred chicken meat 0.09 percent; purebred chicken eggs 0.04 percent, cherry tomatoes and cooking oil 0.03 percent, respectively; preserved fish, spinach, string beans, water spinach, cucumber, carrot, and tomatoes 0.01 percent, respectively. While, commodities which dominantly contribute to deflation to deflation are red chill pepper 0.08 percent and cayenne pepper 0.02 percent.

           In January 2012, inflation occurs at a rate of 0.76 percent with Consumer Price Index (IHK) at 130.90. From 66 cities of IHK, 62 cities experience inflation and 4 cities experience deflation. The highest inflation occurs in Banjarmasin at 2.92 percent with IHK at 139.35, and the lowest occurs in Banda Aceh at 0.02 percent with IHK at 127.15. While, the highest deflation occurs in Sorong at 0.38 percent with IHK at 145.47 and the lowest occurs in Manado at 0.13 percent with IHK at 125.94.  

INDONESIAN CHAMBER OF COMMERCE AND INDUSTRY (KADIN) PREVENTS IJON PRACTICES IN THE REGIONS

           The Indonesian Chamber of Commerce and Industry (Kadin) expects the government to prevent ijon transaction on some commodities in many regions, including paddy, rattan, and other as the transaction is unprofitable to farmers for a long-term. Ijon practices occur when farmers sell their plants directly before harvest to buyer. The would-be buyer gives an advanced payment. And, at harvest time, farmers must give the harvest to the buyer. Kadin attempted to prevent such practices. One of the attempts is by encouraging banks to open branches in the regions so that farmers could rely on credit facility, General Chairman of Kadin, Suryo Bambang Sulisto (SBS), told Business News.

              Kadin also sees that ijon practices also occur on rattan farmers in some regions, including in Cirebon, Solo, Kalimantan, Sulawesi, and other. Many foreign buyers, including buyers from China, are actively seeking to buy rattan. As many of this commodity is used in China for making home appliances, including furniture. Due to ijon practices, local industry will be distorted as many of the rattan has been sold to foreign buyers.

            Kadin cannot say that ijon practice is illegal. But, this is very situational meaning that farmers are frequently left with no choice. When they need money, there are lured by buyers who give them advanced payment.

            Kadin also expects the government to review ministerial regulations concerning prohibition on rattan export. If there is an indication of overproduction, the government must revise the regulations. Moreover, there are many foreign consumers who have shifted to synthetic rattan. If they fail to obtain natural rattan, they shifted to the synthetic one. This condition distorts our farmers and the national economy.

          The government must continuously protect the national industry in connection to expansion of work opportunity. If there is a overproduction, the government must revoke the policy on prohibition on rattan export.

               Some observers consider that there is an unsynchronistic matter concerning prohibition on rattan export. The Industry Ministry is led by M.S. Hidayat who is former general chairman of Kadin. While, kadin under the chairmanship of SBS is contra export prohibition policy. But the fact is that the Industry Minister prohibits export, but Kadin disagrees on the policy, an observer whose name is unwilling to be mentioned, told Businees News.

             If there is a intense and directed communication, this matter could be prevented. A former leader must be able to maintain the vision and mission of a large organization like Kadin. I have concern that there will no more populist policies in Kadin.  

PLANTATION REVITALIZATION TO BE ACCELERATED

            Plantation revitalization of last year, even though it has been attempted by hard work, only 45,035 hectares or 9% of target that has been achieved. While in fact, rejuvenation of farmers? Oil palm and rubber plantations have been urgent as many of the plants have been old and unproductive. While, cacao rejuvenation has been included in the National Cacao Movement, only the second-year maintenance that require plantation revitalization credit. Gamal Nasir, Director General of Plantation of Agriculture Ministry, told Business News.

            The problem of plantation revitalization is the banks which require land certificate, while a major of part of farmers do not have land certificates. Farmers inability to register their land to obtain certification is due to problem of limited fund.

            Other problem is land area which is overlapping with mining area, forestry area, and other. And, Provincial Spatial Planning (RTRWP) which is not yet complete is also a problem. Many regions which are potential for plantation revitalization are hampered by these two problem, Gamal said.

            Technical requirements imposed by banks cause difficulty to farmers. And, the partner company who will become guarantor is facing complicated banking requirements. If the pattern is a non-partnership one where farmers directly requested credit through farmers cooperatives, bank are uninterested.

            Banks consider that plantation revitalization credit, just like other agricultural credits, commonly possesses high risk. There should be a special institution who guarantees credit given to farmers such as in Thailand and France so the banks undoubtedly willing to disburse credit to farmers, he said.

           Plantation revitalization in 2011 reaches 45,000 hectares with total number of farmers of 28,900 household heads and total credit Rp 2.9 trillions. For plantation revitalization in 2012, Rp 19 trillions. For plantation revitalization in 2012, Rp 19 billion dana pengawalan is provided for 147,728 hectare area.

            This year, the Directorate General of Plantation tries to make a breakthrough, namely by making tries to make a breakthrough. Namely by making agreement with the National Land Agency so that land certification for plantation revitalization program can be included in PRONA (national program) for mass certification.

            Banks who have stated their commitment to support plantation revitalization program are required to make general guidelines for all their branches.

            Banks are also asked to willing to finance continued maintenance for farmers being the participants pants of National Cacao Movement. For non-partner-ship program, the government will provide guarantee cost in addition to interest subsidy so that banks will be willing to disburse money without very dependent on business partner.

        General Chairman of Indonesian Palm Oil Association, Joefly J. Bachroeny, stated that at present, businessmen who become guarantors for plantation revitalization are facing very heavy requirements.

            The requirements for plantation revitalization credit were very prudent. There must be a location permit and land certificate. If one of these requirements is not completed, credit will not be disbursed.

            Anizar Simanjuntak, General Chairman of Indonesian Oil Palm Farmers Association urges the government to soon implement mass certification for oil palm farmers at reasonable price. Without this, our discussion on plantation revitalization will be in vain as the basic requirements cannot be fulfilled, she said.    

COFFEE EXPORTERS HAVE STARTED TO EYE DOMESTIC MARKET

           National coffee exporters joined under the Indonesian Coffee Exporters Association (AEKI) started to eye the domestic market which is very potential for coffee trade. In addition to the increasing demand for coffee trade. In addition to the increasing demand for coffee, sluggishness of the export market is one of the factors that stimulate coffee exporters to focus more on domestic market. AEKI reported that realization of coffee export in 2011 declines to 250,000 tons from 2010 at 443,000 tons. Decline in the volume of coffee export is because national coffee production in 2011 declines by around 550,000 tons from 600,000 tons in 2010 due to bad weather.

            General Chairman of AEKI, Suyanto Husein, said that decline in the volume of coffee export is also because production in coffee producing countries which is almost complete. And, currently, price of coffee domestically tends to be higher than price in the export market. Suyanto reported that average coffee price in International Coffee Organization (ICO) reaches USD 192.66 per ton. One pound is equivalent to 0.45 kilograms (kg).

          The price declines by 16.6% from highest average price throughout 2011 that reaches USD 231.24 per pound. Even though export is declining, according to Suyanto, the percentage is still higher than businessmen’ estimates. “Businessmen once predicted that coffee export in 2011 will only reach 300,000 tons or declines from 2010 at 443,000 tons”, Suyanto said.

          Suyanto was optimistic that the domestic market will increase in line with domestic demand for coffee which increases, or around 240,000 – 250,000 tons. The increase has been going on continuously since 2009. According to him, increase in coffee demand is due to an increasing number of new coffee shops. In addition to that, he also said that the selling price domestically is higher than selling price in export market. He explained that the present composition is: production 550,000 tons and export 320 tons. And, the remaining is distributed to domestic industries.

          He admitted that at present, coffee trade in international market is not so buoyant. ICO reported that volume of coffee trade in October 2011 only reaches 7.1 million bags or equivalent to 426,551 tons. This rate declines by 3.65% from trade volume in September 2011 at 7.37 bags or equivalent to 442,712 tons. This substantially affects Indonesia’s coffee trade. Sluggishness of international coffee trade is also reflected in the decline of coffee export from Indonesia.

            Sutanto, quoting a report released by ICO, stated that the reason of the decline in coffee production that the reason of the decline in coffee production in Indonesia is also worsening weather in coffee plantation centers. Besides Indonesia, production decline also occurs in India which experiences similar problem. A similar problem is also experienced by Vietnam whose coffee production declines by up to 5% in 2011.

             

          Similar condition also hits some Latin American countries, such as Mexico and Central America whose production declines by around 4.6% from 19.2 million bags to 18.4 million bags. With the production decline, production target fro 2011 set by the Agriculture Ministry will certainly be missed. Coffee production only reaches 550,000 tons or below the target at 690,000 tons.

FORESTRY MINISTRY INVOLVES PRIVATE PARTIES IN ENVIROMENTAL CONSEVATION

              Environmental conservation, such as tiger conservation, requires a very large amount of fund while the Forestry Ministry budget is very limited. Therefore, public partnership conservation is part of conservation attempt. Darori, Director General of Forest Protection and Nature Conservation of the Forestry Ministry, said.

          So far, partnership program has been frequently performed in rehabilitation and planting, while in conservation it is low, including in tiger conservation. Conservation of the and protected animals require a large amount of fund. Therefore, the government invites private sector to set aside their CSR (Corporate Social Responsibility) fund for conservation activity, Darori said.

            At present, total CSR fund of companies in Indonesia is estimated to reach Rp 20 trillions, while Rp 1 trillion for conservation attempt has already been very helpful. The involvement of private sector in Bukit Barisan Selatan National Park, which is tiger conservation by Artha Graha Group who is also the management of Tambling recreational part and construction of tiger observation pen by Asia Pulp and Paper (APP) Group in Siak, Riau.

            Preserved forest area managed by Tambling Wildlife Nature Conservation has successfully maintained Indonesia’s biodiversity assets, such as Sumatera tigers and elephants.

            In addition to that, tiger conservation attempt is also performed collaboratively with non-governmental institutions such as Forum Harimau Kita, Wildlife Conservation Society, WWF Indonesia, Taman Safari Indonesia, Fauna & Flora International, Zoological Society of London, and conservation activists or other conservation donor organizations.

              Public partnership conservation is one of the attempts to preserve protected species during low budget. For tiger conservation attempt, there is budget available through PPA at USD 10.8 millions, and Indonesia receives Rp 300 billions for protecting and increasing their population two times by 2024.

               Indonesia is still seeking a way for tiger conservation which is beneficial to humans. For this purpose, a tiger park will be constructed and it will require a large sixe of area. We are seeking for 300 hectare area for conservation of Sumatera tiger and for protecting them from hunters. This area could become an eco-tourism site that could absorb local workers, said Darori.

           Meanwhile, to support national conservation activity, the Forestry Ministry receives assistance from Australia Zoo who will construct the first Wildlife Hospital in Way Kambas National Park, Lampung. The mechanism is like this: we lend them 5 Way Kambas elephants and they build the hospital, the first foundation stone will be laid on January 31, he said.

              Several partnerships in management of conservation area and national park with private sector that have been going on are construction of rhinoceros pen in Ujung Kulon, tiger release facility in Bukti Barisan Selatan National Park, and Jalak Bali bird conservation in Bali Barat National Park.

            We will also offer the management of Komodo National Park to private sector, he said. The government opens partnership with foreign private parties who will contribute in the management of conservation area and national park. Indonesia has around 50 national parks.

            With many partnerships in conservation management with private, parties, the country will be benefited as it will enjoy foreign exchange revenue from national park tourism activity. But, Darori could not yet calculate the amount of the potential foreign revenue. We have just started and are on investment stage. Probably in the next 5 years we will receive large amount of foreign exchange revenue.

GOVERNMENT REGULATE TAX IN SYARIAH FINANCING AND BANKING

            The Government had issued two regulations, respectively Regulation of the Ministry of Trade no. 136/PMK/03/2011 which regulated income tax on Financing Business of Syariah, and Regulation of the Ministry of Finance no 137/PMK.03/2011 on the imposition of Income tax on Syariah Banking Activities.

            In the Regulation of the Ministry of Finance No. 136/PMK.03/2011 on Financing Business of Syariah, it was underscored that taxation on operation lease based on Ijarah was treated the same as financial lease without option, while financial lease of Ijatah Muntahiah Bittamliq and the same treatment as financial lease with option rights.

          In case of Wakalah Bil Ujrah accounts receivables and consumers’ financing based on Akad Murahabah, Salam and Istrishna, income tax would be imposed on the profit in accordance with regulations of income tax on interest. Furthermore ob income from credit card business and financing based on other Syariah business, income tax would be imposed in accordance with the stipulations in the Law of Income Tax.

            As with the Regulation of the Ministry of Finance No. 137/PMK.03/2011 it was mentioned that on Syariah banking business activities, income in the form of bonus, profit sharing, profit margin, income tax would be imposed in accordance with stipulations of imposition of income tax on interest. Meanwhile on other on other incomes, income tax was imposed in accordance with the regulations which regulated transactions between Syariah banks and facilities – receiving customers.

            Financing of Syariah funding activities and Syariah banking referred to the Law and Regulations on Income Tax. In case of transfer of assets or leasing of assets which was mandatory to fulfill the principles of Syariah, it was not understood as transfer of assets as stated in the Law of Income Tax. Therefore, such transfers were regarded as direct transfers by the third party to the customers to whom income tax was imposed in accordance with the applicable tax regulations.

           With the release of two tax regulations, it was expected there would be synchronized perceptions about the application of taxation rules and business practices based ob Syariah principles. This was message of the press release made by the Director of Service Illumination and Public Relations, Dedy Rudaedi in Jakarta on Monday (16/1).

TECHNOLOGICAL R & D NEEDS ENORMOUS FUND

            The National Committee of Innovation (KIN) welcomed Government’s intention to be more focused on three industries for the future i.e. communication and telecommunication, agro-business, and transportation. Chairman of KIN Zuhal Adul Kadir in Jakarta (Monday 16/1/2012) rated that the development of three industries as recommended by the Ministry of Industry needed to be supporter by a research agency. Business and industry, he said, relied on this research agency who would propose new innovations. According to Zuhal, a research agency was important for the progress of industry. New inventions made by this agency would support development and growth of industry.

            Zuhai disclosed that KIN planned to set up an institution known as the National Research Center which would serve as legal financing agent for the Government, or industry of the private sector and BUMN which were willing to spare a chunk of their fund for research and development. However, as Zuhai had it, to make KIN a sound research center, a vast amount of fund was needed.

              According to Zuhai funding was a classical problem which was never solved till now. Zuhai illustrated that the portion of budget allocated for R & D was still measly, i.e. 0.08% of GDP.

         Big manufacturing companies also of the industrial group with low R & D activities included food & beverages, textile, and furniture. Zukai said that increase of budget for R & D should at least reach 1% of GDP. The expected funding contribution was 30% - 40% from Government, 30% from state owned companies (BUMN) and the rest from the private sector. “There is no other choice except to collaborate, because the fund needed for R & D in technology is enormously big” Zuhal was quote as saying.

         Moreover, Zuhai remarked, Indonesia had proclaimed the Masterplan for Planning and Expansion of Indonesia’s economy (MP3EI) which obviously needed support of technological innovation. He further elaborated that to step up national competitiveness, the Government had proclaimed the MP3 EI to keep up with advanced countries like South Korea and China. Among the strategic focus of this masterplan was upgrading of human resources, and national science and technology. He underscored that it was not easy to attain 100% success in R & D efforts as long as the classical problem of budget shortage was not overcome.

            Beside the budget factor, Zuhal was quoted as saying, regulations and incentive system were also not supportive to innovation climate. The regulation related to research development, i.e. law no 18/2002 on the national system of research, development, and application of science and technology was Perpres No 35/2007 and PP no 20/2005. As with budget financing, according to Zuhal KIN had taken the initiative to increase budget for R & D for science and technology to 1% of GDP. This, according to Zuhal was accommodated in MP3 El based on the formula of 1:747. This formula was an initiation of innovations precedeeded by increasing R & D fund amounting to 1% per PDB up to 2014.

             

              Zuhal estimated that Indonesia’s national GDP in 2014 would come to Rp 1,200 trillion. Hence fund for R & D could reach Rp 120 trillion. Zuhal rated that the condition national R & D could not convince industrial and manufacturing circles to use local technology. Yet it was most important to keep the industry and manufacturing from fleeing overseas because the local climate was not conducive to growth, in addition to the incentive system which lacked Government’s attention.