BEI OFFER BANKING CAPITAL THROUGH CAPITAL MARKET

In the effort to minimize risk in the banking industry as competition heightened, I was felt necessary to inject capital amounting to USD 113 trillion in 2015. Re grouping of bank’s capital by BI made most medium asset banks to increase capital.

The option to obtain additional fund at the stockmarket through IPO was taken by some banks to meet the requirement by 2016 next. However there was an alternative option in 2016 next, i.e. by rights issue and release of bonds; hence the need of around Rp.100 trillion from the stockmarket could be fulfilled.

This was disclosed by President of BEI Ito Warsito in Jakarta on Thursday [174]. He said that in terms of trade liquidity, the Indonesian stockmarket was believed to be able to fulfill the need of financial industry. In 2013 alone Trade liquidity per day came to Rp.6.5 trillion. “To calculate on the basis of 264 days a year, already Rp.1.200 trillion could be reached,” Ito said.

Hence the capacity of trading liquidity reflected the great potential fund to be obtained from the stockmarket. On the average, the fund that could be taken from the capital market came to Rp.300 trillion and that was inclusive of fund for financing APBN through state promissory notes.

However, Ito said, so far there had been limitations of instrument offer like the SUN promissory notes whose tenure was short. He expected that the need to increase capital for 2015 could rely on instrument at the stockamarket instead of overseas credit.

Bank Indonesia made it mandatory for bank’s LDR to be around 78% to 92%. Banks whose LDR were beyond that corridor would be given penalty of additional Minimum Mandatory Giro [GWM]. At the moment OJK was scheming up regulations on Minimum CAR from 8% to 12%.

As per February 2014, the average CAR for national banking industry was 19.91%. The need for capital through 2015 was extremely high and hard to attain. The point was that today Indonesia’s capital market industry only had the capacity to procure additional capital of Rp.30 trillion.

Head of the R&D Division of Perbanas Alviani disclosed that based on simulation run by Perbanas, total accumulated need for extra capital by banks last year till 2015 was above Rp.100 trillion. In 2015 extra capital was mostly needed by BUMN banks.

The 2015 – 2017 period was peak time for banks in seeking for capital need, assuming that growth of find was around 12% - 15%. Meaning as from now banks must see when capital would be needed and be prepared because the tendency to for bond obligation was not easy.

“Moreover, next year there would be liquidity crisis all over the world as the USA is planning to do Tapering Off” Aviliani remarked. In the next few years the banking sector would contract but this was in reverse to non-bank institutions which would increase in number. From 2012 - 2030 banks would diminish in number but non-bank bodies would be necessary to anticipate the growing need for education for the public about non bank financial services. Banks would tend to from conglomerations which was a way to raise capital. (SS)

Business New - April 23, 2014

MRA 2015 MIGHT REGULATE VOCATIONAL SCHOOLS

The Association of Indonesian Businesspeo­ple [Apindo] urged the Government of RI to prepare for the Asean Economic Community 2015, particu­larly the Mutual Agreement Recognition [MRAI. So far the MRA format among Asean countries had not been in the domain of schools. "Technically MRA standardization of competence should be the same at Asean level. In schools, MRA should regulate voca­tional schools," Iftida Yasar, Deputy Secretary Gen­eral of Apindo disclosed to Business News [17/4].

MEA applied the free flow of human resourc­es/people for 12 sectors in the free market. The cat­egorization : 5 service sectors and 7 trading and in­dustrial sectors. The five service sectors included air service, e-ASEAN, health service, tourism and logis­tics. The seven sectors included: trading and industry of agro-based products, electronics, fishery, rubber/wood-based products, textile and automotives. Eight professions included: engineers, nurses, architects, surveyors, tourism, medical practitioners, dentists and accountants. The eight fields had adopted the MRA format, i.e. certification of competence within the multilateral agreement context. "In case of Eng­lish as international language, the problem is perhaps only at home. But technically, without commonly agreed standard of competence, any worker could enter, which would trouble local workers. We cannot prohibit workers from Singapore or the Phil­ippines to work here; but once MRA was in effect, technically the standard should be the same, we can promote competence of our personnel."

MRA was the standard of competence that posed a risk to Indonesian workers, for example AC technicians, car and motorcar mechanics, etc. The condition in Indonesia was still below expectation, because most vocational schools ISMKI were domi­nated by office administration. And yet the local in­dustry was in need of workers with technical skill like motorcar or AC mechanics. "How many companies need administration workers Very few. What we need are mechanics. Apindo was also expecting the Government, especially the Ministry of Education, to know the real need in the labor market."

Apindo also saw the need for more vocation­al schools in agriculture, fish cultivation etc. Indonesia's trade structure showed that import of horti­culture products kept increasing. The total import of horticulture products had come to trillions of Rupiah. Indonesia must learn from Thailand. “They applied the one village, one product concept. Meaning one village for one type of product. Village A specializing in plantation, and chili plantation. Village B for po­tatoes and so forth”.

Other problems related to MEA 2015 prepa­ration was: Indonesia's workforce was still dominated by low skill labor, which were among others: drivers, cleaning service, stone-breakers etc, Indonesia was also the biggest sender of low skilled workers abroad. Their level of high skill abroad was still below ideal level. “We have to compete against low skill labor from Bangla Desh. Our workers in Malaysia were now branded as hard-headed, more expensive compared to those from Bangladesh”

High skill labor for domestic need at home in Indonesia was also a threat. Now workers from the Philippines were beginning to storm Indonesia espe­cially accountants, many companies were turning to Filipino workers. They mostly did not demand privi­leges like high salary. This was in reverse to TKI atti­tude. “In Indonesia, they demand rights. The working ethos of Philippine workers were also better than Indonesian workers. Apindo kept urging all related parties to be concerned about the matter. Abroad, our low skill workers are edged aside by Bangla Desh workers, at home edged aside by Filipino workers”.

Meanwhile Chairman of the National Execu­tive IDPNI of Apindo Soebronto Laras also saw the same thing. A clear example was Indonesian Migrant Workers [TKI] who impersonated workers from the Philippines. An anecdote had it that a TKI who was learning English was promoted to higher rank: “Our TKI could not speak English, but was trying hard to learn. Armed with some English, they no longer iden­tify themselves as Indonesian. They would say “I'm from the Philippines” Cases as such was already hap­pening in many countries”, Soebronto told Business-News.

The above anecdote proved that a good command of English was part of the criteria of compe­tence Besides, some countries which were previously closed, were now beginning to adopt open door eco­nomic system. The clearest example was Myanmar. Industry and manufacturing in Myanmar was develop­ing fast. Even they close 'relatives' like Laos and Cam­bodia were influenced by Myanmar's progress. The three countries: Myanmar, Laos and Cambodia were also benefiting from the impact of China's economic progress. “We must see Myanmar as a competitor. Competence of their workers and economic stimulus keep progressing”.

The year 2014 was a year full of challenges for the businessworld. Apindo continued to consoli­date, especially after the increase of Regional Mini­mum Wages [UMR]. Worker's demonstrations was unblockable in 2012. Economic growth was reduced drastically. In 2013, the gloom in industrial relation­ship seemed to narrow room for social dialogue. Worker's demonstrations and factory invasion to re­fuse delay of wages increase were haunting specter to businesspeople. Although finally by end of 2013 the situation turned favorable, it did not last long. President SBY issued Presidential Instruction Impress No.9/2013 followed by Regulation of the Ministry of Labor No 7/2013. "but the condition did not turn any better, because Rupiah was depreciated to USD 12,000 against USD."

Projecting the economic development trend 2015, Apindo continued to review various Govern­ment Policy. Businesspeople were expecting there would be a point of agreement with workers by Gov­ernment facilitation. The tripartite agreement was still rated as effective; but academicians, avocation practitioners of industrial relationship were expected to come up with empiric data of the condition afield. “A good format of industrial relationship in the fu­ture is our expectation. This refers to the message of the Law for harmonious, dynamic and just industrial relationship”. (SS)

Business New - April 23, 2014

INDONESIA’S LOGISTIC INDEX UNSATISFACTORY

The Logistics Performance Report Index [LPI] 2014 promoted Indonesia’s position in terms of logistics by 6 graders to level against the previous position of 59. However LIPI’s report which had been spread still had no formal recognition from the World Bank as a body to make logistic survey since 2007. In a report based on the World Bank’s evaluation Indonesia was in the 53th position with average percentage of 66.7%.

Deputy Chairman of the Indonesia Logistics Association [ALI] Mahendra Rianto stated in Jakarta on Wednesday [16/4] that Indonesia was still at the lower-middle income group together with fellow ASEAN country Vietnam. On the other had Promotion of ranking by LPI was still regarded as unsatisfactory by logistics companies. They believed that the promotion could not be referred to as criteria for national logistics progress especially to compare with Asean states. The report placed Singapore in 5^th position, Malaysia 25^th and Thailand 35^th. Indonesia was only close to Vietnam at 48^th level.

Mahendra supported Government’s policy to reduce import consumption. According to Mahendra the Government must be serious about running national logistics system which protected local business people. He said that supply shortage and imbalanced inter-provincial supply caused logistics costs to soar high. The Government was obliged to seek for solutions through full understanding of the implementation of the national logistics system [SISLOGNAS]. Meaning the Government should not focus on strengthening of infra structure but ignore building of industrial centers.

He said that the Government should map out the potential of commodities in all of Indonesia. Thereafter the Government could identify the market demand so the commodities would make infra structure relevant. So far infra-structure building were underway but there was no attention in premium commodities in the regions. He recommended the Government to realize the east-gate west-gate policy for export activities.

Data of Supply Chain Indonesia [SCI] had it that growth of logistics service in 2014 was predicted to reach 14.7% with transactions amounting to Rp.8,816 trillion. However, of that amount, national commodities constituted only 23.8%. Mahendra mentioned that national commodities of the processing industry, non oil-gas sector, had the potential to yield transaction of logistics services worth Rp.237.5 trillion. This sector consisted of food and beverages industry, machineries, transportation equipments, and chemical products. The second sector which put added value to logistics services was the agricultural sector. The total transaction was around Rp.183.3 trillion, originating from logistic cost of industrial plantation products, fishery, and plantation.

He said that growing income of the middle class group would increase demand for goods, which eventually jacked up demand for transportation. The condition would advantage sea transportation. This industry was predicted to grow by 4.3% with total transportation volume of 1.04 billion tons per year. Beside the volume of railway cargo would increase by 8.5% to become 25.5 million tons against 23.6 tons. Meanwhile volume of goods delivery also increased by 15.3% to become 1.34 million tons. Soekarno Hatta airport as the main gateway to international trading would post cargo volume growth around 5% - 7%.

He further disclosed that so far, as written in the Blueprint of the National Logistics System [SISLOGNAS], the Government had not stipulated strategic commodities. The point was that stipulation downturn of logistics cost and to supply goods. At this point, national logistics companies had the opportunity to spread wings at regional level as there was public trust to do it. (SS) 

Business New - April 23, 2014

RUPIAH AND IHSG STILL UNDER POLITICAL SPELL

By this week, political atmosphere would still govern the moneymarket and capital market attitude. In the post election period on April 9, 2014, people’s attention was focused on the process of coalition formation among political parties especially those on top three position.

The inter-party coalition structure was predicted to shape up during the Presidential election on July 9, 2014 next. It was presumable that if the candidating package was in line with market expectation, there would be chance for Rupiah and IHSG to strengthen.

The Moneymarket

Rupiah value at inter-bank transaction in Jakarta on Wednesday [16/4] last inched up by 4 points to become Rp.11,423 against the previous position of Rp.11,427 per USD. Rupiah’s strengthening process tend to be limited as marketplayers tend to be in wait-and-see position.

The election was an event of great importance as it determined where the course of Indonesia’s economy was headed for. The next Government was expected to adopt the right policy in securing domestic economic growth. On the other hand Indonesia’s moneymarket was still under the spell pf expectation of increased bank interest and Tappering Off policy by the Fed in the USA, although the domestic factor was not less influential.

As presidential election was approaching, Rupiah tend to move at limited range. Rupiah was consolidating against USD and tend to strengthen as Indonesia’s fundamental economy was signaling upturn like: controlled inflation and contracting trade deficit. This was made better by long week end last Friday which made duration of trade shorter.

For that matter by last Thursday [17/4] Rupiah would be in the range of Rp.11,400 – Rp.11,475 per USD with tendency to consolidate. Meanwhile over the week Rupiah would presumably move better in the range of Rp.11,350 – Rp.11,450 per USD after last week’s long weekend. The coalition map was shaping up toward Presidential election to give assurance to marketplayers.

The Capital Market

To start transaction on Wednesday [16/4] IHSG was opened to inch up by 21.421 points [0.44%] to the level of 4,886.984. Index of LQ45 was opened to inch up by 0.49% to the level of 877.845. US stockmarket bounced up after release of positive sales data. This morning index of Doq Jones Industrial Average was closed to inch up by +91% and S&P 500 was appreciated by +0.82%.

From Asia’s market, index in some advanced countries was also open to strengthen. Upturn in Asia’s market was signaled by Nekkei 225 in Japan which strengthened by +0.74%. Meanwhile index of Kospi Composite in South Korea was open to increase by +022%. At home, the market was appreciating announcement of candidates for 5 Vice Presidents of the winning parties.

AS coalition map was shaping up, it minimized political risk and brought positive sentiment to IHSG movement. The only thing was, toward long holiday investors were reluctant to transact so it was feared that the position of IHSG during closing session last Thursday [17/4] might have moved in the range of 4,875 – 4,900. This could be a good start for IHSG this week at 4,900 – 4,950 when long holiday was over.

IHSG BEI was safeguarded in positive zone, among other supported by inflow of foreign capital to the domestic stockmarket. Apparently inflow of foreign capital to the local stockmarket last Wednesday [16/4] as seen from act to buying was around Rp.344.526 billion. One thing was sure that today IHSG BEI was in the state of consolidation.

Technically, the handicap to BEI’s increased index was still relatively small. So the shares being recommended were among others: Bank Central Asia [BCA], Bank Negara Indonesia [BNI], Waskita Karya [WSKT], Unilever [UNVR]. Beside those shares, probably investors would also look at shares of Bank Mandiri and Bank Tabungan Negara [BTN]. This was related to the rumors about the decision of the Ministry of BUMN who finally designated PT Bank Mandiri Tbk to take over shares of Bank Tabungan Negara Tbk.

An official of the Ministry of BUMN stated that previously the Government had appointed Bank Mandiri and PT Bank Rakyat Indonesia Tbk as candidate buyer of BTN; but it seemed that Bank Mandiri was more convincing, so Bank Mandiri was chosen to acquire BTN. The bank selection process was very much determined by the offer made. The offer was among others the financing structure to support BTN capital after being acquired; but the offer was never specified.

As planned, the follow up process of BTN acquisition by Bank Mandiri would be stipulated at the Extraordinary Meeting of Shareholders [RUPSLB] of BTN and Bank Mandiri. In this case, decision would be made by minority shareholders. Besides the acquisition must be approved by the Privatization Committee.

Although this was a case of inter-BUMN acquisition, the take over was categorized as privatization. Today the Government commanded over 60 percent of shares at BTN. As the news spread out, shares under the BBTN code strengthened significantly and settled at Rp.1,395 per share or an increase of 9.84 percent against the previous Rp.1,270 per share. The Management of Bank Mandiri did neither deny nor confirm the case.

Unlike the BUMN shares which remained glorious, private shares needed investor’s attention. PT Bank Danamon Indonesia Tbk booked after-tax profit in quarter I/2014 at Rp875 billion, down by 16% against previous period at Rp.1.005 trillion.

The reduced net profit was on account of increased interest burden going up to 51% - such was because BI’s benchmark rate, which was today at 7.5%, was not being adjusted. The impact of profit-and-loss of the majority with cost of fund was that interest burden increased by 51% so in following quarters this bank would adapt itself in terms of credit interest.

The downturn was predicted to happen only in quarter I this year. He expected the downturn of profit would not continue to the next quarter of 2014. Meanwhile LDR credit which bettered became 94.1%; credit growth of 16% became Rp.136 tril­lion while total financing was went up by 22% to become Rp.139 trillion against quarter I of this year. Credit growth of Bank Danamon was reflection of a stable economy.

Inflation pressures had subsided, while other economic variables was within expectation, in line with the process of recovery among advanced na­tions. Bank Danamon's credit growth was attributed to credit growth of the mass market which consti­tuted 52% of the bank's total credit.

Credit of the mass market consisted of cred­it through Danamon Deposit & Loan IDSP1 to mi­cro businesspeople customers of Automotive credit through dira Finance and household credit through Adira Credit. By end of March 2014, credit of the mass market grew by 6% year-on-year to become Rp.70.4 trillion.

Meanwhile credit of the non mass market con­sisting of among others credit for small-and-medium business, commercial and wholesale, booked growth of 27% against same period the previous year to be­come Rp.65.5 trillion. Credit for UKM grew by 15% to become 21.3 trillion, while credit for micro business through DSP grew by 4% against quarter 1-2013 to become Rp.20 trillion.

On the external side, the Russia-Ukraina ten­sion and economic slowdown in China did not discour­age investors to invest their capital in the emerging market. At least nearly USD 2.5 billion of fund flew in to the emerging markets by early April, according to EPFR global data. This was the first backflow of capital since October 2013 last.

Re-entry of foreign capital signaled grow­ing appetite among foreign investors to invest their capital in the emerging market. Last January inves­tors were made anxious by the so called Fragile Five i.e. Turkey, Brazil, India, Indonesia, and South Africa. The central banks of the said countries were strug­gling hard to tackle currency exchange rate problem with the effect on the "walkout" of foreign capital. In many countries, investment was closely related to risk originating from political atmosphere.

Global investors were expecting the General Election in India, Indonesia and Brazil could lead to reformation which made economy more efficient. However, there was no guarantee that legislator can­didate or elected leader would be able to continue economic reformation. In general foreign investors were not fully rest assured about developing coun­tries, who were struggling a long way to solve their structural problems.

Generally speaking developing countries were rated as more risky due to higher political risk and very frequently developing countries were having volatility of commodity prices. However, by history economic growth was faster in developing countries due to growing middle class population. (SS)   

Business New - April 23, 2014