DRAFT GOVERNMENT REGULATION ON TOBACCO FULL OF IMPORTED TEXTS

To regulate about clove cigarettes in Indonesia, the “legal substance” must be imparted from foreign countries. For the sake of a bill, the legislators countries. For the sake of a bill, the legislators are willing to take a long tiring journey to obtain an illustration about the legal substance and implementation of laws of other nations. With APBN fund of billions of Rupiah, legislators buy the law of foreign nations who have different characteristics and culture.

This is a brief summary of the opinion of university legal observer, Muria Kudus Zamhuri, and Research Director of Indonesian Catalog Research Institution, Andriea Salamun, today in Jakarta.

The bill has been prepared long before by other nations. Scientific argument is also designed in accordance with scientific principles. “There are at least more than 70,000 results that give judgment on clove cigarettes”, Muria Kudus Zamhuri, told Business News (7/25).

There is not a single result of research that comes from research on materials derived from Indonesian clove cigarettes product. Because they are shadowed with imported thinking paradigm, the result of research of foreign nations is applied to judge Indonesian clove cigarettes. “Therefore, clove cigarettes are considered hazardous based on theory and health argument”.

A real example of import regulation is warning label inside clove cigarette’s package. The label reads: “Smoking May Cause Cancer, Heart Attack, Impotency, and Pregnancy and Fetal Disorder” is actually an opinion and result of research which were accepted without reserve.

A question that needs to be conveyed and has not received any answer from research activities until now, whether by regulators, academicians, and clove cigarettes stakeholders because the claim on the cigarette’s package also contains such warning.

At the international level, there is a legal instruments ruling about cigarettes distribution. The instruments ruling about cigarettes distribution. The instrument is the WHO Framework Convention on Tobacco Control (WHO FCTC).

Research Director of Indonesian Catalog Institution, Andriea Salamun, said that Indonesia and America have not signed FCTC. FCTC is a treaty or international instrument made under supervision of WHO. FCTC was made and developed with the aim to respond to tobacco consumption epidemic in the global era.

Strangely, some of the regulations always put more emphasis on tobacco sector and tobacco product industry (IHT). “While in fact, there are other stakeholders, namely the government as the regulator, the public as consumers, and other local or foreign interest groups as pressure group”.

Unfortunately, regulation on tobacco and IHT does not fully describe assurance of those principles.

The fact is that there are still certain groups, domestically or internationally, who have high access to economic and political resources. There accesses could reduce the manifestation of autonomy of law in Indonesia.

According to him, the government only acted submissively and resonantly in the Draft Government Regulation (RPP) and Draft Law (RUU) concerning tobacco and IHT which contain a copied/pasted text of the Framework Convention on Tobacco Control (FCTC).

The substance of FCTC which receives a hard reaction from the Indonesian public and clove cigarettes stakeholders cannot be just adopted to become a legal substance applicable in Indonesia. There is a highly complex problem that may generate a new problem if it the Law or Government Regulation contains a copied/pasted text from FCTC.

“Legal products in Indonesia should be based on the Five Basic Principles (Pancasila) ideology as mentioned by Soekarno the proclaimed as “Philosofische grondslad and must be based on the 1945 Constitution”.   


Business News - July 27, 2012

GOVERNMENT PREPARE ADDENDUM TO AMENDED PRESIDENTIAL REGULATION NO. 86/2011

The Government prepared addendum to amended Presidential Regulation no: 86/2011 yesterday in relation to the Sunda Straits bridge project which would connect Sumatra and Java.

As planned, the Regulation would be released in the form of Ministerial Regulation. The Ministry of Public Works Djoko Kirmato said that the Regulation was meant to accommodate recommendations from the Ministry of Finance who previously proposed revision of the Presidential Regulation.

Furthermore the Regulation also substances not written in the Presidential Regulation signed by the President. “Most likely to be issued by the Minister of Economy in the form of Permenko” Djoko stated in Jakarta on Thursday (19/7).

Substance of the Regulation was to be discussed by the Team of Seven formed as a result of JSS discussion last week, where the Minister of Public Works themselves was one of the members of the team.

Basically there had been some points being agreed upon by the Government in undertaking the project, but the final decision would only be made after it had been submitted by the Team of Seven. Some of the rules which would probably be part of the addendum was the recommendation that implementation of the feasibility study of the bridge be financed by the Government (burdened on the APBN state budget) including development plan for the surrounding areas.

The rules for formation of the Ministerial Regulation including addendum was made possible by the Presidential Regulation no. 86 ear 2011 where one of the articles stated that further arrangement could be included in another regulation.

Meanwhile the Ministry of Finance Agus Martowardojo was reluctant to explain the reason for his visiting the Ministry of Public Works at the Office of the Ministry of Public Works of RI. As told, the Ministry of Finance and the Ministry of Public Works had conducted a closed meeting for about two hours at the Ministry of Public Work’s office.

Meanwhile separately the Director General of Space Planning, Ministry of Public Works Imam s. Ernawi stated that delineation of regions around the Sunda Straits Bridge means to develop eight regencies/cities plus 109 districts in the Province of Lampung including among other Tanggamus, South Lampung, East Lampung, Central Lampung, Peswaran, Pringsewu, Bandar Lampung, and Metro. Meanwhile in the Province of Banten development would be in 59 districts among others Pandeglang, Lebak, and Serang.

In the JSS zone in the Province of Lampung, clusters could be made such as agriculture, industry, and tourism, while in Banten the clusters to be made were for tourism, and other potential economic zones.  

Business News - July 25, 2012

MALL MANAGEMENT CLAIMED TO HAVE BUILT INFRASTRUCTURE AND PUBLIC UTILITIES

Some mall management in Jakarta claimed they had contributed the maximum to Jakarta city construction and denied accusation of being the cause of traffic jam and flood in the mall environment. Meanwhile some citizens expressed their grievances that it was not only flood that troubled them but also neglected public utilities. Among them was the trottoar of S Parman avenue just across the Taman Anggrek Mall. Meanwhlie some citizens complained about stagnated water even though when it was only drizzling at Tanjung Duren street where the Central Park Mall was located. Very S. Setiady, Executive Director of CPM on the contrary claimed that the management had facilitated broader public utilities. “PT Agung Podomoro Land always manage infra structure around our mall location. For example the S. Parman street which was widened first, we built public facilities around it like bus stands, dustbins etc. The ex Bank Dewa Rutji location would be the site for the Learning Center building, and Jakarta icon at the same time” Veri disclosed to Business News sometime ago.

Not just CPM in West Jakarta, the Malls in Northern Jakarta such as the Pluit Emporium was of no difference. Podomoro as a reputable and branded developer claimed to be able to free locations from the annoying flood routines around the locations. “In the past, just before the ex-Bimoli frying oil factory, the place was always trapped in mud, but we designed and planned space and expanded the drainagesewers very mall development by Podomoro was always accompanied by infra structure building” Veri remarked.

Veri also elaborated that mall development at Seasons Mall at Jalan Dr Latumeten had been protected by river dams which dams which separated Jembatan Besi street and Dr Semeru street. The dam consisted of two passages connecting Kyai tapa street Grogol and Jembatan Besi/Latumeten. “So we are still committed to building infra-structure.” Veri remarked.

Meanwhile some communities around the CPM location were feeling the negative impact of mall development. Beside traffic jam, the open spaces which used to absorp rainfall, were now covered with concrete floors and walls of apartment buildings, malls, hotels and offices. “As far as I am concerned, having lived in Tanjung Duren before the Central Park were built there was never any flood. But now even a little drizzle can create stagnated water up the heels or even higher when it rains” Suparman, a citizen who lived near Tanjung Duren real estates.

In the past the Jakarta Mega Integrated Complex covered an area of 22 hectares and occupied by people who had no Jakarta ID card (KTP), they were jobless people or those having no steady job, or even roamers. But on the contrary Podomoro Estate claimed that the accommodated ex occupants of land as security guards, parking regulators, office boys etc. “Infra structure building and Corporate Social Responsibility are our commitment” Very remarked in response to people’s complaints.

During inauguration of the Central Park Mall on September 9, 2009 (09-09-09) the Management’s marketing strategy aimed target at the upper-middle group. As footnote, CPM had won several awards in terms of architecture and function and utility of building. The award-winning shopping centers had won various awards like Highly Commended Retail Development and Mixed-used Development and five-star awards for the categories of Public Service for Asia Pacific level as part of the Asia Property Awards 2012. Furthermore there were the Highly Commended Retail Development in Asia Pacific and the Best Retail Development in Indonesia by the Asia Pacific Property Awards 2011 and has been shortlisted for a World Architecture Festival Award in the shopping (including mixed use) and shopping Center (large) category.

In response to the above, a culture activist and famous moviestar Christin Hakim, told Business News that she saw no urgency in rallying to build malls, because city planning was not always identical with physical development, like luxurious malls or sky scrapers Instead, city management with emphasis of cleanliness, orderliness and free of crime was the essence of city building. “A head of state of a small country like Timor Leste personally took part in city management activities in the capital city. Such were the things that reflected success in capital city management,” Christime Hakim concluded.   

Business News - July 25, 2012  

AWAITING FOR THE FED’S ACTION AND PROSPECT OF ECONOMIC REBOUND

The Money market

The value of Rupiah against USD was downpressed by 30 points last Friday morning (20/7) driven by crisis outspread in Europe. Value of Rupiah in inter-bank transaction weakened by 30 points to the position of Rp 9,470 against the previous Rp 9,440 per USD.

Rumors was that risk of bankruptcy that befell on Spain had magnified crisis outspread in Euro and the condition was one of the catalysts of Rupiah to be once again outpowered by USD. The fiscal problem in Spain was far from over and the Government must be responsible to help local banks in solving their financing problem.

Meanwhile economic data of the USA which was not so impressive forced to investors to invest their assets in USD because it was believed to be able to protect value. Investors were seeking for alternative investment which were safe from risky assets which jacked up demand for USD.

Data of US economy i.e. good sales of new houses showed positive result, which signaled economic recovery of the nation. Economic recovery of the USA built investors’ confidence which encouraged them to enter into risky assts in the emerging markets. Moody’s international rating agency which again put Indonesia’s rating at Investment Grade was an catalysts that Rupiah was in a stable position.

Previously USD exchanger rate value fell against Pounsterling and inched down against Euro last Friday (20/7) because weak US data caused suspended sanction on Euro currency. The news that unemployment claim rose energized poundsterling by 0.4% to become USD 1,5722 while Euro inched up to USD 1.2282.

The market’s sentiment heightened last week because data showed that mortgage in America was getting better. Meanwhile for the most part company’s profit had not done anything according to investors’ low expectation. USD value inched down by 0.3% to become Yen 78,59 and inched down to Swiss Franc 1.0074. Meanwhile USD slumped, more than 1.2% against Russian Rubbel at 31.83 due to oil price, Australian dollar inched up by 0,6% to become USD 1.0428.

From the above picture, Rupiah development this week was determined by external factor. However, investors must also internal factor where Bank Indonesia would be the focus of attention. It was believed that BI would still control Rupiah value against USD at home so the pressure would not be felt too hard.

The euphoria of crisis solution in Uni Europe was not materialized at operational level so investors were still pessimistic; a condition as such strengthened pressures of Euro against USD which had its impact on Rupiah.

Demand for USD increased once more after the International Monetary Fund (IMF) cut projection of US economic growth from 2.1% to become 2% as effect of downturing economy of Uni Europe and China. Meanwhile Indonesia’s projection growth was also slashed from 6.5% - 6.7% to 6.1% - 6.5%. It seemed reasonable that Rupiah value would still be slightly under pressure due to prevalent external factor so the range of Rp 9,450 – Rp 9,500 per USD was probable.  

The Capital Market

Index of IHSG and Indonesia Security Exchange (BEI) last weekend (20/7) was opened to strengthen, Index of BEI was opened to rise by 0.06 points (0.99%) to the position of 4,096.26. Indonesia’s stockmarket was predicted to continue strengthening; shares of the consumers sector could be a wise alternative.

During closing session on Thursday (19/7) IHSG rose by 14.561 points or 0.35% to become 4,096.196. Meanwhile index of LQ 45 strengthened by 2.216 points or 0.31% to become 700,124 Index of BEI was getting closer to 4,100 driven by strengthening of regional stockmarket. This was the impact of statement by Ben Bernanke, the number one man in the Fed, that chances were small that the US economy was going to fall into recession. In addition to that there were chances of new stimulus package, quantitative easing of the third phase being released, and positive financial report to be released in quarter two 2012.

At home in Indonesia, it was predicted that Indonesian emitents would book quarterly performance which was propelled by increased net profit of emitents of the banking sector in Indonesia who managed to make profit that grew by 25% - 27% through Quarter II 2012. Thanks to strong growth of domestic emitents, IHSG would predictably continue strengthening by end of July with the potential to rise to 4,200. For this week, the range of 4,100 – 4,250 seemed reasonable.

If index strengthened last week, it could be benefited by investors to realize profit so index could move in the range of 4,075 – 4,150. So far strengthening of IHSG had been going on for five consecutive days. Under such circumstances, some emitents of the consumers sector like Unilever, (UNVR), Indofood Success Makmur and Indofood CPB Sukses Makmur (ICPB) could be investors’ target.

Meanwhile other stockmarkets in Asia also strengthened. Many of released emitent’s report showed positive outcome. Index of Shanghai rose by 15.74 percent or 0.73% to become 2,184.84. Index of Hang Seng soared up by 319.17 points or 1.66% to become 19,559.05 Index of Nikkei 225 strengthened by 68.81 points or 0.79% to become 8,795.55. The development influenced IHSG ands BEI to continue strengthening and trying to return to the level of 4,100.

Until 09.30 wib the local stockmarket last week (20/7) was opened strong, following the regional stockmarket where the majority of shares were posting increase. IHSG inched up by 11.35 points (0.28%) to become 4,092.99.

The positive sentiment from the fact that companies in the USA and Europe had been able to make profit breezed out hope amidst negative sentiment from the threat of global economic slowdown. Investors were also anticipating release of emitents’ financial report of Semester I/2012. If companies’ financial performance were good, IHSG would move up.

The Wall Street stockmarket was signified by strengthening for there consecutive days, driven by strengthening of shares of the technology sector. Marketplayers were also expecting additional stimulus from the Government following weakening of USD. During financial reporting season this time, many emitents reported higher performance, better than market expectations. Even emitents like IBM, e-Bay and Qualcom revised their target performance this year to higher level.

Europe was slightly at ease while reports disclosed that emitent’s performance, although not soaring high, had surpassed market’s expectation. The factor that held back stockmarket’s movement was poor manufacturing data and employment data in addition to downfall of Morgan Stanley which made shares drop more than 5%.

Somehow America’s poor economic data made marketplayers expect for additional stimulus (QE-III) of the Federal Reserve Bank. Governor of the Fed, Fred Bernanke in his speech early last week promised to do that if deemed necessary. All in all, on Thursday local Time (19/7) index of Dow Jones Jumped up by 34.66 points (0.27%) to the level of 12,943.36. Index of Standard & Poor’s 500 rose by 3.73 points (0.27%) to the level of 1,376.51. Index of Composite Nasdaq strengthened to the level  of 23.30 points (0.79%) to the level of 2,965.90 points.

Now investors were focusing attention on two world’s figures. Firstly China’s Prime Minister Wien Jiabao who was a key figure in regional condition as observed by investors, who reminded that the weakening of employment projection and n\bad outlook of Asia’s corporate performance as the effect of crisis that befell on Europe.

Secondly, global investors were also waiting for further testimonial by Governor of US Central Bank Ben Bernanke. Previously Bernanke stated he would prepare a policy to stimulate market growth if the employment market was not getting any better. If the QE-III policy were released, supply of USD would abound which would bring positive impact on Asian currencies including Rupiah, as well as giving positive sentiment to the global stockmarkets, including Indonesia’s stockmarket.

Business News - July 25, 2012

STABILITY OF THE BANKING SECTOR IN A GROWING ECONOMY

It was interesting to observe the relationship between stability of the banking sector and economic growth of a nation. By theory or common senses, stability of the banking sector was in parallel with economic growth. A strong and healthy banking sector indicated high economic growth. The question was were the theory and logic applicable in Indonesia, a deeper insight would be necessary for that matter.

So far stability of the banking industry up to June 2012 was still strong enough, although slightly under pressure compared to same period last year. The central bank and bankers rated that Capital Adequacy Ratio (CAR) of the banking sector by end of year was still above minimum standard set by Bank Indonesia, in spite of high credit expectation.

Data of Bank Indonesia (BI) showed that Financial Stability Index/FSI which indicated stability of the banking sector, stockmarket and bond market in June 2012 was at level 1.7 points or up by 0.05 points compared to December 2011 at 1.65 points. To compare against same period of 2011 at 1.68 points increase of index was only 0.02 points.

However, the index was still below maximum level of safety of the banking sector which had been stipulated by the banking sector which had been stipulated by the banking sector by 2 points. As footnote: the lower the index the more stable the national financial industry.

Condition of the banking sector this year was indeed better than that in 1997 – 1998 when FSI was at the level of 3.23 points and 2.34 points when the subprime mortgage smashed America in November 2008. BI record had it that the national banking sector was relatively more resistant because exposure of portofolio credit to foreign investors was only 14%, mostly from America, Singapore and China.

 According to data of the Indonesian banking sector the average CAR of general banks up to May 2012 was posted at 17.88%. Stress test conducted by BI showed that if economic growth were at standstill, CAR of the banking sector would drop by 237 basic points to become 15.51%. When worse comes to worst if economic growth was -5%, CAR of the banking sector would drop by 614 basic points to become 11.74%.

In terms of market risk, there were three points of consideration i.e. increase of Rupiah bank interest, depreciation of Rupiah exchange rate value, and price of SBN bonds. If Rupiah bank interest rate were increased to 10%, CAR position of the banking sector would drop by 197 basic points to become 16.91%. If Rupiah were depreciated by 50% CAR would only drop by 21 basic points or at the level of 17,67%. If downturn of SBN price reached 35%, CAR dropped by 238 basic points to become 15.50%.

Based on worse scenario, there were some banks whose CAR dropped to below the minimum margin set by Central Bank of 8%. However, most of the banks were still resistant, because CAR of average industry was above 8%. In this case BI must ask bank owners and shareholders to inject more capital.

Showdown of global economy and uncertainty in crisis solution in Europe was predicted to start affecting demand for (Indonesia’s) credit in Semester II – 2002. Credit for export was the payment segment most potential to be affected by global economic slowdown. Credit for working capital (KMK) would also slowdown in line with weakening of domestic economy. Credit for consumption would predictably not as impressive as in Semester I-2012. The Loan to Value (LTV) rules could cause credit for consumption to slowdown.

Credit for investment was the credit sector growth of which was promotable in Semester II-2012. Credit for investment could grow especially in infra structure development. Initiative in infra-structure projects would drive credit for investment (KI) to grow, although land clearing was still a hard-to-solve problem.

To anticipate credit downturn, it was advisable for banks to re-address their credit from export oriented companies to companies oriented to the domestic market. To anticipate CAR downturn the banking sector could take various measures such as releasing rights issue, issuing subordination bonds or asking for capital injection from shareholders.

Hence it seemed reasonable if bankers were optimistic that the banking industry could still grow higher. Credit through Semester II could still grow by 20%. Through Semester I 2012 credit growth was posted at around 25\8%. The only thing was that upon entering this Semester II banks should be careful in responding to economic slowdown as projected by many international institutions like the World Bank, IMF and ADB.

The banking industry should focus attention on premium economy that dominated prevalent contribution in forming Gross Domestic Products (GDP). The sectors of communication, trading, hotel & restaurants and processing industry became were four of the greatest contributors to GDP.

Unexpectedly and surprisingly the agricultural sector were lowest in terms of contributors due misperception of banks that these sectors were high risk sectors. For that matter bank regulators and the Government must give comprehensive portrayal and understanding of the agricultural sector to the bankers so that the ingrained perception could be changed.

In accordance with the belief of “bank follows industry” it was best for the banking sector to abandon the wrong philosophy. The economic sectors of high potential and sustainable growth were the sectors worth financing because the risk was controllable.

Beyond other sectors the sectors of hotels & restaurants, processing and services were the greatest users of credit facilities. This was still good because the three sectors were tradable sectors as well as labor intensive by nature. In the future, other labor industry sectors like agriculture, mining, and infra structure must be spurred on by injecting more credit so they could sustain better economic growth.

With credit growth through Semester I-2012 at 28%; while the projected economic growth of Semester I-2012 around 6.3%, it indicated that support of the banking sector to economic growth was not maximized. Why? At least there were two contributing factors. Firstly, part of credit facilities were still addressed to non tradable sectors. Secondly, part of the credit facilities extended by banks were not or not yet liquidated by the debtors (know as undisbursed loans which was 30% of total given credit amounting to Rp 2,050 trillion or equal to Rp 600 trillion) due to liquidation phasing factor and difficulty in clearing land for developing infra-structure projects.

With credit pipelining being more oriented to the labor intensive sector, contribution of the banking sector to economic growth would be even greater. By theory, every 4% of credit growth would sustain 1% of economic growth. So if Semester I-2012 size of credit growth was 28%, supposedly it was able to sustain economic growth of 7%.

Somehow in reality the realization of credit growth was only 6.3%. This means there was a missing link between credit growth and economic growth because of credit distribution being more aimed at tradeable sectors or labor intensive sector. Therefore, banking regulators together with the Government must direct and encourage banks to be more aggressive in financing tradeable sectors so economic growth could be jacked up higher.

Business News  - July 25, 2012

PROSPECT OF THE PROPERTY SECTOR AFTER INCREASED CREDIT DOWN PAYMENT

Over quarter I this year, performance of property business in Indonesia had been on the spotlight in the Asia Pacific region. Sales of property were soaring high just when property in other economy.

Research outcome of Knight Frank property consultant last June unveiled that performance of property in Indonesia in quarter l/2012 was the highest in the Asia Pacific region; the growth even excelled over Malaysia, India, China, New Zealand, South Korea or even Australia.

Research of Knight Frank also disclosed that Indonesia had been able to grow remarkably in times when global economic crisis tormented the property sector in the Asia Pacific region. A property consultant from England believed that property sales in Indonesia would soar high at double digit this year in spite of threatening global crisis.

Property in Indonesia would be having price increase on account of increased income, strong and stable economy and high urbanization. However, the increased property price in Indonesia brought anxiety to Bank Indonesia especially when the price increase happened in time when banks extended their credit to the property sector.

BI noted that in January 2012 last, mortgage (KPR) being liquidated by banks reached Rp 188.288 trillion or an increase of 33.1% compared to January 2011 which posted only Rp 141.408 trillion. All in all, high mortgage growth jacked up property prices which did not represent its real value (bubble) so it could increase risk borne by banks.

Based on that argument, BI released a policy related to Loan to Value (LTV) for mortgage and credit for apartment ownership (KPA). BI increased the minimum down payment from 20% to become 30%. Credit that could be extended was maximum 70% for Mortgage.

Beside the risk of bubble in property, BI was also trying to minimize the risk for non performing loan in mortgage (KPR) and apartment (KPA). It seemed reasonable that the property sector was the focus of attention in many countries, not excepting Indonesia. Moreover, in many countries including America the property sector was the root of problem such as the case of Subprime Mortgage which shocked America in 2008.

To make sure that the property sector would not pose as some sort of a time bomb in the future, many countries were scheming up strategies for the property sector. There were at least notably three countries who were making intervention on property namely Malaysia, Taiwan and Singapore. These three countries were adopting the policy of credit limitation, imposition of extra taxes and protecting the property assets from foreign investors which made sales of houses to decrease.

Singapore was now trying hard to restrict property ownership by foreign citizens, i.e. by way of imposing multiple taxes, more over Potential buyers investing in property business that country were only investing for short term.

The measures take by some Asian countries was to anticipate the possible domino effect of troubled global economy. In case of Indonesia, it seemed that over-demand with prices that tend to be unrealistic was the reason why BI restricted pipelining of credit for mortgage (KPR) and apartment (KPA).

However, BI concluded revision of policy for credit down payment had the objective to minimize banking risk and risk of non performing loan. By this regulation, banks were asked to be cautious about facilitating KPR and KPA.

From BI’s viewpoint, the rule for KPR and KPA credit were only effective to suppress down pouring of property credit for a while until new balance was attained and consumers who wished apply for KPR or KKB could afford to pay down payment. This new regulation could not hold back pipelining of bank credit it for too long.

Simulation by BI concluded that increased of DP from 20% to 30% could make customers to postpone their application for KPR for 7 to 8 months. Until then customers would save their money for paying DP. However, outcome of BI’s simulation businesspeople concluded that business people were never absolutely sure about the simulation itself.

Businesspeople rated that increase of DP for mortgage only had the effect of applicants postponing their application for six months. Some even believed it was around three months. The most affected were the lower-middle group because they were the ones who buy houses by mortgage, especially of the category below Rp 500 million. In this case the uppermiddle were not affected at all because most of them bought units by cash or gradual cash.

To developers who aimed at the upper middle class, the BI policy had hardly any effect this target market did not mind at all if the DP were increased which means that the property sector in Indonesia would move ever onward in spite of the regulation.

The obligation to pay higher DP could be tricked by allowing buyers to pay the DP by installment. Developers were rated as being keen eyed in arranging this payment platform but the trick was considerably effective. Many developers simply did not care about BI’s policy.

In the secondary market, or the market of second hand products such a trick was not applicable. The property secondary market had no other choice but to obey BI rules. However downturn of property sales in the secondary market would be only temporary, before arriving at a new equilibrium.

Although the secondary property market was shaky, broadly speaking the BI policy did not make the property market. The way it had been, creditors of the secondary market had already applied the 30% DP anyway.

Besides, many of the secondary market were not buying property on mortgage (KPR) basis, perhaps only 10% were doing so many of the consumers were paying by hard cash or cash by stages. In short, the DP policy only interrupted the secondary market for a moment.

The only thing was that for 2013, the property sector had the potential to weaken due to the 5 year cycle factor. A saturatedmarket of the property sector would be felt by next year. So a projection as such should be watched out by players of the property sector.  

 

Business News - July 25, 2012