DEVELOPMENT OF EXCLUSIVE ECONOMIC ZONE ACCELERATED

The picture of an Exclusive Economic Zone [KEK] is a region packed with massive economic investment and dynamic activities. For that matter the Government had proposed development of three new KEK zones and have their development accelerated for equal distribution of growth nationwide. The proposal was rated by economists as the right step.

The Coordinating Minister of Economy Hatta Rajasa stated that three new regions being proposed were: Tanjung Api Api [South Sumatra], Morotai [Maluku] and Mandalika [East Nusa Tenggara]. The recommendation was submitted to President Susilo Bambang Yudhoyono. Once approved, the KEK projects would begin to realize even distribution of development in the regions.

According to Minister Hatta, the advantage of being KEK had to be equipped with various infra structure facilities whereby to daw investors. KEK regions had strong magnetic appeal to investors of the industrial sector.

It was noteworthy that the three new KEK were located outside Java, considering that Java was already overcrowded so it was hardly possible to serve as KEK base. Politically KEK outside Java was strategic because it was safer since it had support of spacious land and abundant water supply, but Java could still be industrial center.

However, in the future there must be equal distribution of industry in all of Indonesia so as not to be centered in Java. For example, production of motor vehicles this year which numbered 1 million units was still exercised. However, assuming that by 2020 production of automotives would come to 3 million units, it would be hard for the industry to find space in Jakarta and surrounding area.

With KEK, the Government was encouraging the industry to expand and spread out to the far regions. In developing the industry, the Government extended support in the form of facilities, material and immaterial alike such as tax exemptions and other conveniences. It was right for the Government to build KEK outside Java; in Java there was only one KEK, i.e. in Tanjung Lesung KEK in Banten which was a tourist development center.

The Mandalika KEK was one Tourism KEK. For a start, 1,200 hectare of land had been prepared for hotel and resort building, it was reported that some investors had applied to participate like PT Gobel, Mandiri Maju Hotel, and PT MNC Land.

The Tanjung Api Api KEK, was the most ready zone. Tanjung Api Api was proposed to be KEK based on agro business such as palm and rubber which would undergo downstreaming process and where coalmining industry would also be developed.

The total area of land at Tanjung Api Api proposed KEK was 2,030 hectare with initial investment plan of Rp 12,302 trillion. As with Tanjung Api as KEK, the Oceanic harbor in that location was having sea-bottom shallowing problem and must be restored soonest. Many investors were interested in investing, among them was PT Pupuk Sriwijaya [PUSRI] who planned to use 700 hectares of land with investment amounting to Rp2.7 trillion.

Furthermore KEK development in Morotai was divided into some like industry, tourism and resort. The land prepared for initial stage was 1,500 hectares, the land would be divided into zones, i.e. resort, tourism, business, logistics and fishery industry. The total proposed area was 15,000 hectares with total investment of Rp 6.8 trillion.

Mandalika would be developed into tourist resort KEK considering many investors were planning to build resort, hotel and residential area. The total are of Mandalika proposed as KEK was 1,250 hectares with total investment of Rp2.2 trillion.

In short, the areas developed as KEK were areas economically potential for development. This was because the stipulation for KEK had passed several screening and review process before final approval. There were 14 requirements to be met, among others: no land clearing or land dispute problem existing, readiness for supporting infra structure, space planning permit etc.

In that case KEK must be prepared with maximum effort. No compromise to hindrances and obstacles and no procrastination tolerated. There were lessons to learn from previous KEK’s which did not run well due to some technical, social and legal obstacles, cases which emerged only the moment KEK was about to begin. The obstacles were among others Space Planning [RTRW], certainty of land ownership, status of land, and synchronization of provincial law and central Government’s law.

An example was the Semangke Industrial Estate which was designated as KEK and was scheduled for premiere export in September 2014. Semangke in North Sumatra was this year designated as KEK. Semangke would be one of Indonesia’s biggest harbor with PT Pelindo acting as operator.

KEK Semangke had been designated for long but the maximized outcome was only visible lately. The first investor that entered was PT Unilever Oleochemical Indonesia [UOI] and was followed by other investors who developed industry in Semangke.

The Government planned to collaborate with PT Pelindo to build the Kuala Tanjung Oceanic harbor, the biggest harbor in Semangke in 2014. In line with the MP3EI Masterplan, Kuala Tanjung would be the biggest oceanic harbor in that region to anticipate future development. With Unilever participating, and biggest harbor being build, Semangke could quickly grow into an exclusive zone, which would attract more investors to come to Semangke.

Development of KEK was rated as right because it enhanced the process of growth widespreading in line with BO’s plan in many regions to initiate cluster development in the regions. This cluster approach was supported by institutional strengthening, upgrading of farmers’ competence and financing by banks.

Cluster development was focused on food commodities production which contributed to price formation and inflation in the regions and also on commodities which increased people’s income. A strategy as such could up economic growth in the regions.

Cluster distribution was exercised in many provinces with diversified priority of development according to the nature of each province. As with clusters development in Indonesia, clusters in North Sumatra would be focused on intensification of rice production by SRI method in Serang Bedagai; while in Kalimantan cluster development would be based on Pasa Housing joint marketing.

In Central Java province clusters development would be focused on rattan clusters, in the province of West Java clusters would be for development of poultry business. In the province of Bali and West Nusa Tenggara the focus would be on livestock rearing and fish cultivation. In the provinces of Sulawesi, Maluku and Papua the focus would be on seaweed, chilli, Dongga batik and Bandeng fish. The cluster development were sample projects for developing potential industries in the respective regions.

Development of KEK project by the Government and cluster development project by BI would synergize to speed up economic development distribution and to strengthen the Unified Republic Indonesia [NKRI] for narrowing inter-regional, inter provincial and inter-insular gap. Investors might choose the province they felt as right for their projects. (SS)

Business News - February 28, 2014

EFFORTS TO MAKE OIL PALM CULTIVATION AS A MODEL OF SUSTAINABLE AGRICULTURE

In an effort to show the variety of industry efforts to make the cultivation of oil palm as a model for sustainable agriculture in the future that will benefit both the environment and the palm oil industry itself, and also give a special attention to environmental issues through experience-sharing strategy and finding solutions and resources among various stakeholders. PT Smart. Tbk jointly with CIRAD and WWF Indonesia cooperate to hold the fourth International Conference on Oil Palm and Environment (ICOPE), in Bali from 12 to 14 February 2014.

According to Daud Dharsono, Chairman of the ICOPE Steering Committee 2014, on Tuesday (February 11), this year ICOPE chooses a theme “Palm Oil Cultivation: Being a Model for Sustainable palm oil production, while making it as a model of sustainable agricultural development. Some current issues, such as solution to development that minimizes deforestation, greenhouse effect and land use, biodiversity, and plasma farmers will be discussed in this conference.

The development of national palm oil industry is growing rapidly, following the world’s vegetable oil demand which continues to increase. And, with the strengthening of efforts of the national oil palm industries in implementing sustainable agribusiness practice, it encourages the need for holding this conference. Since the first, second and third conference held in 2007, 2010, and 2012, ICOPE has gained international recognition from international experts as a unique and important forum for networking development and sharing of best practices and solutions in accordance with sustainable palm oil production and environmental protection programs both at policy review level as well as its application in the palm oil industry.

The third ICOPE in 2012 was attended by more than 400 participants, they are leading experts and entrepreneurs from 18 countries. Since that time, several key initiatives at various scales have been announced and implemented in various plantation companies and organizations at national and international levels.

“Like the three previous conferences, this year we invite all participants to use this platform to share knowledge and perspectives, express opinions, discuss and formulate future plans that allow for the development of technology and the use of best practices for sustainable palm oil development,” Daud Dharsono added.

The conference which will be officially opened by the Minister of Agriculture accompanied with a briefing by the Forestry and Environment Minister will be divided into several sessions in three days. The first day of the conference features a panel discussion titled “Seeking Models for Sustainable Agriculture in the Future,” followed by a session, namely session 3: “Greenhouse Gas Emissions”, session 4 and 5 will discuss “Ecological Intensification in Oil Palm Cultivation”. On the last day, the discussion will be focused on a quite challenging topic, namely “Diversity of Sustainability Certification System in Palm Oil Industry.”

Based on data processed by the Ministry of Industry, as one of the priority industries to be developed into higher value-added industries such as oleofood, oleochemicals, energy and pharmaceuticals, prognosis in 2013, investment in oil palm cultivation in 2013 reached Rp27.8 trillion with 98 business units.

With the entry of investment in palm oil manufacturing industry from Sinar Mas Group, Musim Mas Group, Wilmar Group, Domba Mas (Bakrie Group), PTPN III, Salim Ivomas, Asian Agri Group, Unilever, and Golden Hop which is estimated at more than Rp24 trillion, then the level of capacity fulfillment of the domestic cooking oil industry increased from 45% in 2010 to over 70% in 2012.

In line with the downstreamization program, there was a shifting trend the exports from CPO (crude palm oil) and CPKO (crude palm kernel oil) upstream products to downstream products (oleofood and oleochemicals). For comparison, in 2007 the volume of CPO and CKPO exports reached 51.54%, and in 2012 dropped to 37.93%. And, volume of exports of CPO derivative products in 2007 reached 48.46%, and in 2012 increased to 62.07%. (E)    

Business News - February 14, 2014

TOWARD AEC 2015 GOVERNMENT WAS ASKED TO GUIDE SMALL BUSINESS

Toward Asean Economic Community [AEC] 2015, the challenges faced by Indonesia was not easy, including the business sector. For that matter change of paradigm and mindset of UMKM players would be necessary. The Government was playing strategic role in upgrading competitiveness of Indonesian goods and services.

In AEC blueprint which was signed by all Asean countries, it was stated that small business [UKM] was one factor which was regarded as economic propeller factor. There were 4 main priorities for promoting the role of ASEAN small business. Starting  from accelerating UKM development, strengthening competitiveness of ASEAN UKM by facilitating information access, market access, human resources competence, finance and technology. ASEAN UKM also needed assistance in facing macro economic problems, financial difficulties or challenges in trade liberalization. UKM contribution for economic growth in the region was to be enhanced.

Franky Sibarani, Secretary General of the Association of Indonesian Food and Beverages Producers [GAPMMI] in Jakarta on Tuesday [11/2] stated that in facing AEC 2015 players of the F&B industry of middle and upper level were stating their readiness. However, the small industry was far from being ready. For that matter, the Government was asked to set up a roadmap whereby to render counseling. By the time AEC was effective in December 2015, goods and services would be free to move in and out. Inter Asean trading was estimated to constituted 25% of all.

In Indonesia, around 90% of food & beverages industry belonged to the small-and-medium business category, but the production output contributed only 15%. Based on data of the Food and Drug Control Broad [BPOM], of 10,000 UMKM who were subject to survey for anticipating AEC, only 600had their data recorded. “Of that number, 400 were very ready to face AEC, 173 were ready, and the rest needed guidance.” Franky remarked.

The Government also had to run census of UKM ad UMKM. Franky said that the census was run last in 2008. Thereafter the Government had no run any census. Some factors that made small business hard to face AEC was unclear roadmap, low human resource quality, limited market access, increasing labor cost, and low access to capital.

Gapmani recommended to foster inter-ministrial coordination to agree on roadmap of reference for UMKM development, to integrate UKM centers in the regions toward one national objective, to ease business permit application, subsidize raw material, to obtain per sector priority and to actively publicize knowledge to UMKM.

Meanwhile the Ministry of Cooperative and UKM set target for export for small-and-medium business could reach 20% of total export value of 2015 to keep imported products, especially consumer goods, from invading the domestic market. Deputy Assistant of Ministrial Cooperatives Research Syamsuddin said today UMKM products were export oriented and were handicraft goods like footwear, leather were and electronics spareparts.

Beside handicraft goods, Syamsuddin claimed there were other products being developed to meet export standard like food, fruits, and vegetables. He further remarked that this product was designed to compete against same product of China and Thailand which had penetrated the market sooner. However, there were some things to be observed to make sure that the product could compete against same products of other countries. (SS)

Business News - February 14, 2014  

AMERICA PLED INDONESIA TO ENHANCE LAW ENFORCEMENT ON ENVIRONMENTAL DESTRUCTION

The Government the USA again reminded Indonesia the importance of law enforcement to trouble shoot environmental problems, nature destruction and extreme climate in Indonesia, because one of the important aspects in Indonesia-America collaboration was law enforcement. “This is an important aspect of the entire collaboration. America collaborated with various institutions and ministries including the Corruption Eradication Commission [KPK] to enhance law enforcement,” the US Ambassador to Indonesia Robert Blake told Business News [11/2].

President SBY and President Barrack Obama agreed on bilateral collaboration between the two nations within the framework of US-Indonesia Comprehensive Partnership. The agreement was made in year 2010 to stipulate Acrtion Plan. It incorporated among others six working groups i.e. education, defense and security, energy, democracy and social affairs, trading and investment and anomalous climate.

The activities proclaimed by the two nations were among others formation of Climate Change Study Center in Indonesia, which was follow up action of the working group on climate change and environment. “We do not wish to focus on one aspect only, although Law enforcement is important, but inclusive of all aspects to handle various problems. The case is multi-dimensional,”

The US Government was expecting there would be progress in the activities of the working group on climate change. The US Government was proud of the performance at home in managing climate change problems. “The effort of the Working Group in the USA had succeeded in reducing Glass House effect caused by carbon emission by more than 7 percent. This is most significant compared to the time when the group started to work in 2005. There is no other way but to work hard, among others by enhancing partnership program with Indonesia.”

Meanwhile the Research and Development [R & D] Division of the Ministry of Maritime and Fishery [KKP] would continue to step up collaboration with F A O, the UN’s Food body. One of the objectives was to reduce emission of carbon, including CO2 on mangrove. This was most important in conserving Indonesia’s marine resources in Indonesia. “CO2 carbon absorption in the air includes mangrove and peatland. Our collaboration with FAO would reduce CO2 concentrations” Head of KKP R & D Achmad Poernomo disclosed to Business News[11/2].

Peatland was getting more attention in the effort to reduce carbon emission. The Government of RI announced target of carbon emission reduction by 26% - 41% in 2020. One of the determinant factor was peatland and mangrove in Indonesia. One third of the world’s earth carbon was found in Indonesia, all were great potential for increase of carbon emission.

Reduction of carbon emission in peatland and mangrove could prevent damage and restore coastal environment. As planned, an FAO team would come next week to realize collaboration with R & D of KKP. The collaboration to reduce CO2 emission was in tandem with strengthening of food resiliency. “We would develop mina rice and fish nursey. We are trusted in our capability by FAO. So it would be advisable to share research outcome with the countries in Asia and Africa.” Achmad said.

The way it had been, Indonesia only took over research outcome from abroad. Now it’s time for Indonesia to pass on research outcome to other countries. The collaboration only involved Indonesia’s Science & Technology Center [LIPI]. “In terms of financing, not yet. We are still finalizing the plan” Achmad remarked.

From past experiences we learned that financing had always been well balanced. Meaning, expenses for foreign participants was borne on fifty-fifty basis with the counterparts. “FAO sent for participants and they paid their own expenses, but we bear the training expenses here. We share financing. We want to show them that we are credible and able to support FAO. Survey outcome of research and collaboration need no patenting. In terms of intellectual rights, we share.” (SS) 

Business News - February 14, 2014