LOGISTICS COSTS EXPENSIVE BECAUSE INFRASTRUCTURE IS NOT DEVELOPING

Logistics business operators estimated that the national logistics services industry in 2014 will maintain double-digit growth trends and is projected to reach USD170 billion, equivalent to Rp1.951 trillion. Projection of logistics services next year is also supported by an increase in the distribution of goods related to the 2014 general election. The estimate is higher than the estimate by the end of this year which will reach USD 150 million, equivalent to Rp1,722 trillion. The projected growth in the next year is in line with the development of network and supply chain of logistics companies operating in Indonesia.

However, Chairman of the Indonesian Logistics Association (ALI), Zaldy masita, in Jakarta on Monday (November 11), believed that the development of infrastructure which has not been significantly implemented by the government will keep the national logistics cost high in the next year. In addition, the implementation of the national logistics system (sislognas) will not run as its should be, will suppress growth of the national logistics industry in the next year. Not to mention the rules and regulations which are so numerous and overlapping. “In this country, logistics costs are very expensive, because there is no significant development of infrastructure”, Zaldy said.

He explained the industry competitiveness remain a fixed price in order to win the business competition in ASEAN and the global arena. Therefore, logistics problem, which is increasingly acute and cripples competitiveness, should immediately be fixed. Handling of logistics problems which has not been optimal until now will make the national industry a loser. In the past year, the World Bank put Indonesia’s competitiveness in logistics at 59th position out of 155 countries. This rank is far below Singapore, Malaysia, Thailand and Vietnam. He saw that weak domestic logistics competitiveness is visible from a number of indicators such as customs, infrastructure, international shipments, quality, and logistics  competence. There are also aspects of tracking, tracing, and time management.

According to him, poor planning and government’s commitment in infrastructure development triggered a slowdown in Indonesia’s competitiveness. Government planned to focus more on the development of ground infrastructure, such as toll roads, which sometimes lead to problems of land acquisition. He added that the disparity in the development of transportation and logistics infrastructures triggers a slowdown in Indonesia’s competitiveness. In fact, inter-regional connectivity and intermodal integration should be government’s attention, not just focusing on land acquisition for road infrastructure.

Entrepreneurs urged the acceleration of improvement of port, railway, airport and land transportation infrastructures to encourage the national logistics competitiveness. He said that in addition to logistics support infrastructure which is urgently needed, protection from the central government to local logistics business continuity is needed in the midst of intense competition in the business sector currently and ahead of the implementation of the ASEAN Economic Community 2015.

He said that national logistics connectivity is absolutely necessary considering that Indonesia is an archipelagic country, and of course with the support of good transportation infrastructure in all modes. Although it is already mandated in Sislognas, but he saw that the preparation of logistics infrastructure was not in accordance with the expectations of the businesses.

He considered that high logistics cost is a serious problem that inhibits the growth of Indonesian economy. According to a report published by Bandung Institute of Technology based on inputs from World Bank experts, national logistics costs in Indonesia is 24% of gross domestic product (GDP) or higher than the neighboring countries. The annual report analyzes and provides an overview of the progress in the tackling of logistics problem in Indonesia. 

Business News - November 13, 2013

MINING COMPANIES IN ALL OUT STRUGGLE TO INCREASE SALES AND JACK UP PROFIT

State Owned Companies [BUMN] of the mining sector were urged to increase sales volume toward end of 2013 to jack up profit. In the event that by quarter III-2013 sales volume was not showing any progress, most likely profit would still be measly. “Therefore mining operators must increase their sales volume so profit would increase by quarter IV” Head of Trust Securities Reza Priyambada made statement last week in Jakarta.

Record had it that BUMN performance in the mining sector was down by quarter III-2013 due to unfavorable global macro economic condition. Besides unprospective price of gold, nickel, steel and tin had downsized their performance.

It was reported that PT Bukit Asam Tbk [PTBA] by September 2013 had their profit drop to Rp1.24 trillion, followed by decreased net profit of PT Aneka Tambang Tbk [ANTAM] by 44,56% to become Rp347.99 billion, lower than the same period of previous year at Rp627.78 billion.

Meanwhile PT Timah Tbk [TINS] was noted to have reduced net profit by 62% to become Rp141 billion against Rp369.9 billion over the same period last year. Financial performance and shares value of Antam would be weakening although the management had been struggling all out to build a nickel factory in Sulawesi. “We have anticipated downturn in financial performance and price share of Antam, but when Antam plan to build a news factory it was expected to serve as positive sentiment” Reza underscored.

Meanwhile shares of PT Timah and PTBA were said to always be the subject to negative sentiment. This was because fundamentally TINS and PTBA shares were unprospective as product’s price was determined by global market price. 

Business News - November 8, 2013

SMALL INDUSTRY MUST INNOVATE TO BE COMPETITIVE

The Ministry of Industry asked Small and Medium Industry [IKM] to enhance innovation and creativity whereby to rise and contribute more to state’s revenues. Such was also to enable IKM to prepare for the AC by increasing quality and competence to meet the great demand. The Director General of IKM, Ministry of Industry, Euis Saedah in Jakarta on Monday [4/11] said that the IKM industry played a strategic role as they were able to contribute significantly to national industry especially the Creative Industry.

Euis said that in 2013 the number of IKM in Indonesia was posted at 3.9 million units which were able absorb 10.3 million workers. With that number of units, IKM would be able to contribute significantly to national export at USD 19.58 million. Meanwhile total production value of IKM came to Rp735 trillion, contributing 10% national GDP. Somehow IKM players must continue to make breakthroughs by strengthening competitive edge, efficiency and productivity, especially in facing AEC 2015. “If we wish to compete at the ASEAN market, we must be armed with innovative and high quality products” Euis remarked.

Euis was optimistic that IKM was highly potential for development, and the potential must be developed to be competitive. She mentioned that there were 3 IKM sub-sectors like fashion, food and handicrafts which were prospective as national economy’s backbone. AEC was a great challenge and opportunity for UKM to penetrate into the Asean market without any obstacle or tariff barrier of any kind.

Meanwhile in the effort to step up quality of IKM products to be up to the standard of orders in the near future, Euis said that the Ministry of Industry was constantly upgrading IKM human resources through various trainings and to facilitate machineries in revitalization program whereby to promote IKM’s productivity.

On the other hand Erwin Aksa, Vice Chairman of KADIN UKM section stated that to face 2015 KADIN had special strategy especially in relation to Small and Medium Business [UKM] and cooperatives. At least KADIN had two ways to step up quality of Indonesia’s IMKM toward AEC. Firstly, KADIN would collaborate with the Ministry of Cooperatives and UKM to set up a special financial institutions for serving and facilitating UKM all over Indonesia.

According to Erwin, by 2015 there would be at least a fast market of 591 million buyers posing as market opportunity for Asean marketers. Of all Asean population, 80% were people below 45 years of age. As second step, KADIN would run transaction procedures for UKM the electronic way. Besides KADIN as one of UKM leaders woild promote development of E-commerce. 

Business News - November 8, 2013

TO EVALUATE PERFORMANCE OF THE BANKING SECTOR

The National banking industry still had the strength to withstand various risks of macro economy like economic slowdown, increase of bank interest and Rupiah depreciation.

The healthy condition of banks was evident in the state of liquidity, credit, or capital. National CAR was still at 18.02%, way above the minimum standard of 8%; whilkst the ratio of NPL remained low at 1.94%; in some banks even declining.

By August 2013 the national banking industry booked net profit of Rp70.74 trillion, growing by 18.45% [yoy] compared to same period last year at Rp59.72 trillion.

The profit company bank group grew in the banking sector to reach 19.6% [yoy] from Rp25.56 trillion to become Rp30.49 trillion. The regional development bank [BPD] growing from Rp6.03 trillion to become Rp7.37 trillion.

Banks of the National Private Bank category [BUSN] non forex and forex posted profit growth respectively 16.65% [from Rp22.45 trillion to Rp26.19 trillion] and 25.53% [from Rp1.75 trillion to become Rp2.20 trillion] . Meanwhile banks of the mixed category grew by 25.84% from Rp2.28 trillion to become Rp2.87 trillion] and foreign banks growing by Rp3.40 trillion to become Rp3.82 trillion.

On the other hand, growth of banks in August 2013 posted slowdown at 22.18% [yoy] down against July at 22.31%. This slowdown was among others influenced by economic slowdown and increase of bank interest. The result: growth of consumptive credit and investment credit were posted to slowdown on August 2013 compared to the month before.

Investment credit of national banks grew by 32.53% [y o y] to become Rp729.41 trillion per August 2013 compared to same period last year at Rp550.38 trillion. The highest investment growth was posted by company bank at 60.44% [yoy] to become Rp251.43 trillion against the same period of last year at Rp156.71 trillion. Furthermore followed up by mixed bank and foreign bank at 31.62% [yoy] to become Rp90.36 trillion against same period the previous year at Rp68.66 trillion.

Meanwhile private banks [forex and non forex] posted investment growth of 19.17% [yoy] to become Rp359.08 trillion against the previous Rp301.33 trillion. Meanwhile the Regional Development Bank Group [BPD] posted investment credit growth at 20.47% [y o y] to become Rp28.53 trillion, against the previous Rp23.69 trillion.

Growth of Consumption credit by August 2013 came to 16.87% [yoy] from Rp749.86 trillion to Rp876.39 trillion. The growth was noted to slowdown compared to July 2013 at 20.03% y o y. Growth of Labor Capital Credit increased by 20.75% [yoy] from Rp120,41 trillion to become Rp1,461.60 trillion, compared to previous month at 18.70%.

Sector wise, slowdown in credit growth was happening in the business sector, electricity, gas and clean water, while credit growth in transportation sector and trading were still high.

By August 2013, fix deposit interest rose by 29 bps, while credit interest tend to be stable. Credit rate for working capital dropped by 3 bps to become 11.63%, investment credit rose by 8 bps to become 11.3% and credit interest for consumption dropped by 1 bps to become 13.05.

Net interest Margin of the banking industry in August 2013 settled at 5.46% compared to July 2013 which was also experienced by company bank group at the level of 5.93%. Meanwhile NIM of company bank group rose from 5.86% to 5.93%. Other performances of the banking sector like ROA inched up by 3.03% from 3.00% [yoy] in July 2013. Meanwhile LDR was posted to increase from 88.68% in July 2013 to become 88.88%.

Sector wise, increase of credit in August 2013 was influenced by increase in trading sector at 32.49% [yoy] to become Rp605.35 trillion and the processing industry sector increased to the level of 26.27% [yoy] to become Rp500.98 trillion against previous month 24.91%.

In August 2, 2013 growth of Third Party Fund [DPK] increased by 15.29% [yoy] or reaching Rp3,440.21, higher than June 2013 was driven by increasing giro growth and fixed deposit 14.77% respectively [yoy] to become 15.35% [yoy] against the month before. Meanwhile saving account grew by 13.14% [yoy] lower than June 2013 at 15.55% [yoy].

Hence market share of fixed deposit in DPK became 44.16% while market share of savings account and giro was 31.9% and 23.92% respectively; while CASA in August 2013 dropped to 55.84% compared to previous month at 56.28%.

Generally speaking the banking sector as one of the main pillars of Indonesia’s financing sector had been able to make its mark amidst inflation pressures and bank interest, and global economic uncertainty. Good performance was maintained through August-September 2013.

To observe financial performance of quarter III-2013 as published by high strata bank, the fundamental strength of banks was cearly visible as evident in the indicators.

First tier banks still managed to grow by 2 digits in quarter III-2013 compared to same period the previous year. Apparently credit of Third Party Fund [DPK] increased between 20%-30% while asset grew fast. As the only bank in the Asean top ten list, Bank Mandiri posted asset that exceeded Rp700 trillion.

Big banks were also able to enjoy NIM above 5% some even 8%-9%. The good news was that net NPL was still controlled amidst increasing bank rates, on the average below 1%.

BI projected credit growth dropped from around 20% this year to be around 15%-16% next year. The consequences was that the projection of net profit tend to decline expect fee based income which was jacked up to compensate downturn in net interest income. Meanwhile growth of third party fund was posted at 14% with tighter liquidity which stimulated rush for public fund. 

Business News - November 8, 2013