KADIN SAW THE CASE OF CPO INDUSTRY AS MERE CASES OF LAND DISPUTE

The Indonesia Chamber of Commerce [KADIN] was not careless about seeing the problems in CPO industry in peatland within the context of environmental damage and natural disasters like flood and forest fire. Self reliant plant growers were part of the activities of growers in the peatlands which was sensitive to land dispute. “We have talked about Reducing Emissions from Deforestation and forest [REDD] plus. But the afield showed that land dispute was always problematic. We are throwing a discourse over Conflict Resolution [CR]. Fortunately some palm plantation companies were willing to show examples.” Darsono Hartono, Vice Chairman of Permanent Committee of Forestry, Sustainable Conservation and Climate of KADIN stated to Business News sometime ago.

KADIN’s initiative for CR finally was finally showing benefit. Not just companies but also for self  reliant farmers could benefit. The most thinkable was formation of CD in very company. The working platform anticipated what had always threatened palm plantations. “All officials have to do is to identify one by one the facts and problems afield.”

The difficulty for growers was transaction system with core companies. There was tendency that plasma big companies would be under pressure not to buy fresh plums of palm from plantations on peatland. The banks which channeled credit would be very attentive to the matter. This was the consequences of landscape application of environment orientated plantation in Southeast Asia. “Self reliant farmers are in big dilemma, because some farmers had already planted palm tress on peatlands. But if core companies buy the yield there was fear of pressure from banks. Even ‘big’ players were most unlikely to buy farmer’s palm anymore”

KADIN feared that self reliant farmers were tempted to plant palm tress on peatlands. They felt sure that factories would still buy fresh plums. So even narrow land in the backyard would be used as plantations.

May farmers were being offered the benefits of selling to processing factories. They had traumatic experience with non peatland plantations. The non-peatland plantations were located 20 meters from farmer’s homes. “Now there is new homework for KADIN and all stakeholders including NGO’s. We must constantly publics the best option for self reliant farmers, so they can keep planting palms without land problems, peat land or non-peatland.”

Meanwhile the director of Weatlands International Indonesia I Nyoman Suryadiputra saw that the management of peatland for palm plantation called for great effort, but it was not impossible that small investors were also reaping profit. For example palm independent growers of Tanjung Betung,

extended credit had already made appraisal and assessments.

Bank’s will see to what extent the environmental principles are applied by plantation companies. We have no data of the existing reality. Afield we can see may farmers plants palm on peatland of thickness above 3 meters. This is prevalent in East Java. Some Laws related to palm plantations prohibited it. Peatland above 3 meters are potentially destructive, but investment are prevalent there. Bank Mandiri must observe the matter so credit extention is not identical with deforestation,” Nyoman disclosed to Business News sometime ago.

Meanwhile Bank Mandiri underscored there would be no financing for growers who plant on peatland of 3 meters thickness. “We do not financing palm plantations on peatlands. We only finance plantations already planted. We also observe the feasibility aspect. If there is any financing for plantations peatland, it is given before the moratorium was effective” a Bank Mandiri official who refused to reveal his identity discloused to Business News.

The Government set moratorium for issuing new permits and improved management of primary forest and peatland. Moratorium was effective in 2011 through Inpres No 10./2011 but still spared 6.4 million ha of degredated forest. “I assure that palm plantations on peatland are not of Bank Mandiri Groups.”

Reality showed that growers would find it hard to find mineral land for planting palm, but Bank Mandiri hardly ever Monitored the process of palm planting. Financing was more channeled to ex- Dutch companies who were nationalized. Financing was also given to private companies who had chosen mineral land. Although mineral land had run out in Sumatra, new players were entering to explore peatlands. “Because there was booming. Price of palm reached Rp8,000 per kg, many land were processed by private companies but by percentage, peatland constituted more than 30 percent.”

Financing by Bank Mandiri was addressed to private companies with portofolio in plantation sector. One of them was a plantation company belonging to Sinar Mas Group as the biggest conglomerate palm plantation company on Indonesia. The company applied plasma plantation system. Assistance to Sinar Mas plasma farmers compassed 10 thousand ha of land. Factory operations with management assistance was running well. “at first there were obstacles, but they were overcome. Social hindrances was overcome by leveraging farmer’s capability. Credit was also extended for individuals. We see the land’s condusiveness, capital aspect, technology and so forth.” (SS)

Business New - July 4, 2014

TO REVIEW THE PROSPECT OF NATIONAL CRATIVE ECONOMY

Lately discussions over the Creative Industry were being intensified. In various seminars, and public for a opinions were expressed about the role of creative economy for national economy.

The Creative Economy was a concept in the era of new economy which intensified information and creativity that stems from Man’s creative juices as the essence of production commercial value.

As time goes by, economic development had come to creative economy after previously the world was dominated by Information Economy where information was the core of business. John Howkins in his book The Creative Economy How People Make Money from Ideas was the first person to introduce the term Creative Economy.

Howkins realized the emergence of a creative-based economy when in he saw that in 1997 America produced products of Intellectual Wealth acknowledged as Intellectual Rights [HKI] worth USD 414 billion, making it number one export commodity of the USA.

Howkins defined Creative Economy as “The Creation of Value as a Result of Idea” In an interview with Donna Ghelfi of World Intellectual Property Organization [WIPO] Howkins elaborated on Creative Economy as “economic activities among the people who spend most of their time creating ideas instead of doing the same thing repeatedly. To these people, to create ideas is something to be done for progress”.

Meanwhile the United Nation conference on Trade and development defined creative economy as “an evolving concept based on creative assets generating economic growth and development, Furthermore the Department of Culture, Media and Sport [DCMS] defined creative economy as “Creative as those industries which have their origin in individual creativity, skill and talent and which have potential for wealth and job creation through the generation and exploitation of intellectual property and content.”

In fact the Creative Economy was often seen as a concept which enfolded other concepts which was also becoming popular on the eve of this 21^st century i.e. the Creative Industry. In fact the term ‘Creative Industry’ already popped up in 1994 in the report “Creative Nation” released by Australia” but this term was only uplifted in 1997 when DCMS United Kingdom set up Creative Industry Task Force.

So if the Government of RI set up the Ministry of Tourism and Creative Economy, it was indeed right. In the blueprint of development of Indonesia’s Creative Economy 2009 – 2015 Creative Economy was defined as “the new economic era after Agriculture, industry and information economy which intensified information and creativity by relying on ideas and knowledge of people as main production factor in the economic activities” with further elaboration elaboration as follows:

Firstly to promote increase of income, creation of employment and income from export and at the same time to promote social care, cultural diversity and human talent development.

Secondly to enhance the social aspect, culture and economy in the development of technology, Intellectual Rights and Tourism.

Thirdly economic activities based on knowledge with trans-sectoral connectivity within the dimension of development at micro and macro economic level as a whole.

Fourthly, a choice of development strategy which needed trans ministerial action and policy which was innovative and multi disciplinary.

It was presumable that Creative Economy in relation with Creative Industry was economy activity which relied on industry with human creativity as main asset to create economic added value. The only thing was to refer to the statement of the Ministry of Tourism and development of Creative Economy was still obstacle by many factors, in spite of the rich potential in that sector.

Having run Creative Economy for many years Indonesia had estimated data that the sector constituted 7% of national economy and divided into 15 sub-sectors of creative economy, of which 3 main sectors were culinary, fashion, an handicraft – while others were relatively less sizable but had high growth potential like the information Technology sectors.

Beside, access to technology by players of the Creative Economy was hard.  The same was with access to financing, access to market especially the global market and a conducive climate for the Creative Industry to grow including legal protection for Intellectual Right, and incentive and Government’s support. The last handicap was quality of Human Resources as related to formal education.

In fact Indonesia had great advantage compared to other countries like Singapore and Malaysia especially in terms of domestic market which was immense and strong. Indonesia must make the best of local asset found elsewhere.

The ministry of Tourism and Creative Economy themselves had schemed up long term plan in regard to development of National Sub-sector 2015 – 2019 15 sub-sectors like architecture, design, cinematography, and culinary. Besides also handicraft, fashion, music, publication and printing, interactive games, advertising, Fine Arts, entertainment, Information Technology and Broadcasting [TV and radio].

In the future, Creative Economy must be seen as a strategic sector in national development. This was because Creative Economy contributed significantly to national economy, i.e. 7% against GDP inclusive of multiplier effect.

Besides, the Creative economy could employ 11.8 million workers or 10.72% of total national workforce, create 5.4 million business units or around 9.68% of total national companies contributing Rp. 119 trillion to states’s forex reserve or 5.72% of total national export.

In 2013 last, growth of creative economy was posted at 5.76% or comparable to national economic growth at 5.78%. This was because Creative Economy stems from creativity, skill, and individual talent to contribute to the pursue of people’s welfare and job opportunities.

In some countries, Creative Economy played important role. In England, the pioneer in Creative Economy development, Creative Industry grew by 9% on the average per year, way above economic growth of 2% - 3%. The contribution to national in come was 8.2% or USD 12.6 billion and was the second biggest source of income next to Financial Sector – it exceeded income from manufacturing industry and oil gas. In South Korea, the Creative Industry contributed more than manufacturing since 2005. In Singapore Creative Industry contributed USD 5.2 billion or 5% of GDP.

Today Creative Industry in the world was growing fast. Creative Economy at global level was projected to grow by 5% per year and grow from USD 2.2 trillion to USD 6.1 trillion in 2020 next. In Indonesia Economic Creative posted notable growth in national economy, only trouble was that in Indonesia there was lack of Government support. Awareness among Government high officials in this regard was still low. The Government was still focusing attention on manufacturing, fiscal, and agro-business.

Mapping out of the Creative Industry by the Ministry of Trade in 2007 unveiled that the contribution of Creative Economy to national economy in Indonesia was seen in 5 main indicators, i.e. GDP, employment, number of companies, export and impact on other sectors.

Data of the Ministry of Trade had it that Creative Industry in 2006 contributed Rp104.4 trillion or 4.75% on the average of national GDP through 2002 – 2006. This amount exceeded contribution from electricity, gas and clean water. There subsectors contributing most were fashion [30%], handicraft [23%] and advertising [18%].

This sector also employed 4.5 million workers with growth level of 17.6% in 2006. This was way above growth of national workers which was only 0.54%. However, this industry only contributed 7% to export; in other countries like South Korea, England and Singapore above 30% on the average.

In the future creative economy was generally believed to be future prima donna of industry. There were 3 underlying reason for it: energy efficient, less dependency on natural resources, and promised higher profit margin.

The above factors were supported by massive Human Resources, although they still needed upgrading by quality. Today Indonesia’s population was around 251 million. People of 15-29 years of age numbered 40.2 million or nearly 18.4% - was a fat market for creative products.

The Ministry of Trade had schemed up long term plan development of the Creative Industry. The target was to increase contribution to GDP. In 2009 – 2015 was targeted at 7% - 8%. In 2002-2006 they contributed 6.2% worth Rp 100.7 trillion. Indonesia’s position was below that of England [7.9%], but better than New Zealand [3.1%] and Australia [3.3%].

The year 2009 – 2015 was mentioned as a phase of consolidation, contribution of the creative Industry to national export to become 11% - 12% while employment increased between 6% - 7%. The 2015 – 2025 period was a phase of acceleration, where contribution to GDP increased to 9% - 11%.

To develop Creative Economy was not as easy as imagined, due to obstacles emerging from the Creative Industry itself; not just in Government policy but also the businesspeople themselves.

They were rated as not having good entrepreneurship and bad management such as mixing company’s cashbox with personal pocket and recruitment of employees on the basis of friendship and no legal ground in regulating company’s ownership and profit distribution, so in case of company break up the industry would die. The business run by young entrepreneurs must be navigated with strong mentality and motivation since the very start.

Personnel upgrading through trainings in the Creative Industry must be promoted by the Government and schools, universities. Trainings in skill development and management was most important to support businessplayers in the Creative Industry.

It would be necessary to set up business associations for companies of the creative industry to promote innovations and creative among members. Art-based creative industry run by young entrepreneurs in Indonesia generated fresh energy amidst exhausted big industries in Indonesia today.

The handicap in Creative Industry was among others low awareness among Government officials of the potentials of the Creative Industry which brought forex reserves to national economy. The integrated policy needed would be among others to promote creativity among young Indonesian entrepreneurs and facilitate easy access for them to register their copyright of product to be mass produced and marketed.

This integrated policy would be applicable not just for small and medium industry like clothing but also for music industry and pure art: painting, handicraft, natured-based creative industry like bouquettes and flower arrangement, recycle of disposed materials and other small industry lines based on innovation and creativity. (SS)

Business New - July 4, 2014

TRIMMING OF BUMN TO STRENGTHEN COMPETITIVENESS

The Ministry of State Owned Enterprises [BUMN] planned to reduce the number of BUMN from 141 to around 80 by several ways, among others by forming holding companies or marger of companies, all to step up efficiency.

Trimming of BUMN which was rated as successful was Indonesia Fertilizer Industry and Cement Industry. Pupuk Indonesia commanded over some fertilizer companies among others Pupuk Sriwijaya in South Sumatra, Pupuk Kalimantan Timur. Petro Kimia Gresik and Pupuk Kujang Jabar, and non fertilizer products.

Semen Indonesia was another example of a formation of a successful holding company. Under Semen Gresik, this mother company had some subsidiary companies, i.e. Semen Padang and Semen Tonasa, and a company factory in Vietnam.

The formation of a holding company would be the underlying concept in trimming BUMN. The concept would predictably have positive impact on performance, and such was evidently true. Today they were proposing a holding company for plantation. The scheme would blend a number of BUMN into one single company which was strong by capital.

The Ministry of BUMN admitted the mother companies of plantation and forestry was still facing problems, and the case was being evaluated. Trimming of BUMN was on account of the fact that nearly half of the Government-owned companies were always losing and burdening the Government, because they had had to be injected in order to keep running.

On the other hand, some BUMN with high potential to make high profit, had always been the prey of parasites who were high ranking officials, the ruling elite or businesspeople having connections with high officials.

The question was how these BUMN could bring benefit to the nation, contribute to state’s income, and finally improve people’s welfare. So trimming was necessary so the companies would not burden APBN state budget but strengthen it instead. BUMN must not be bread and butter for retired officials but be the propelling force of development.

One of the restructurization programs was by doing rightsizing, i.e. to make the number of BUMN right. To refer to BUMN Masterplan, the basic rightsizing strategy consisted of 5 points, i.e. formation of holding, acquisition, consolidation, privatization and liquidation.

By scale, the performance of 141 BUMN were not proportional. Date of infobank Bureau of Statistics had it that 20 biggest BUMN alone had contributed 97.62%  of total net profit in 3011 or equal to Rp112.89 of total BUMN profit of 2011 amounting to Rp115.64 trillion.

The 20 BUMN already encompassed nearly all economical sector which was the Government’s focus of attention like energy, telecommunication, agriculture, transportation, infra structure and banking. The condition did not change much since 2012. It means that if 141 BUMN was shrunk to 30 – 25 BUMN, it would not affect the composition of BUMN significantly.

Even if the Government focused attention on 25 BUMN alone, it already represented the entire 100% BUMN. So there was 116 BUMN which could be the leading group in this restructuriation program. Although right sizing had been exercised since 2005 the result had not been to the maximum.

It was still a long way before arriving at 25 BUMN. In 2014 alone the Ministry of BUMN had set target to restructure at least 50 BUMN till end of year. the target : BUMN became 114 companies in 2012, 104 BUMN by end 2013 and BUMN and 91 BUMN by end of 2014.

In 2013 last, in accordance with the Masterplan of the Ministry of BUMN, only 4 BUMN were to be liquidate, i.e. Perum PFN, Balai Pustaka, Perum Pengangkutan Penumpang Djakarta [PPD] and PT Djarta Lloyd.

Perum PFN was liquated because this company had stopped operating, Perum PPD was liquidate considering that business was no longer worthwhile, while PT Djakarta Lloyd was no longer

prospective and the company had no change the Management with more competent leaders.

It was identified that one of the hindrances to rightsizing of BUMN was lack of leadership coordination to synchronize corporate structurization plan run by the Ministry of BUMN and technical ministries of sectors related to BUMN. Less synergy means less profit.

It must be understood that BUMN were orientated to technical Ministry and Counseling Ministry. For example, Pertamina and the State Electricity Company [PLN] were energy producers so technically they were under the Ministry of Energy and Mineral Resources [ESDM]; as both BUMN were under the guidance of the Ministry of BUMN.

Very frequently there was disharmony between the two ministers in managing BUMN due to difference in vision, mission strategy and experience of the two ministries. The result was that BUMN were “kept hostage” by the dilemma.

One more obstacle in BUMN management was regulation, sectoral or regulation in state financing. Such indicated reformation in the Government was not widely spread, especially in terms of BUMN. A condition as such made restructurization process to run draggingly slow.

In fact the Ministry of BUMN had already set up a formula making consisting of [1] Internal Policy for the Ministry of BUMN and [2] Policy for BUMN development.

Firstly, policy for the Ministry of BUMN. The policy was Reformation of the bureaucracy. The Ministry of BUMN as executor of Government policy did the controlling and developing of BUMN had the mission to implement Law no. 19/2013.

Therefore, the Ministry of BUMN must be supported by adequate resources and instruments, among them Human Resources which was competent, of high integrity in realizing a workplan and capable of executing the mission written in the Law.

Preparation for reformation of the bureaucracy at the Ministry of BUMN in the process of finalization as applicable at the ministries/institutions which had implemented reformation of the bureaucracy. The measures to be taken in finalizing reformation of the bureaucracy was among others to speed up all the paperwork producers for reformation. To communicate and coordinate intensively with the Ministry of State Apparatus Empowerment and Reformation of the Burreaucracy and the Ministry of Finance to accelerate the reformation process; to prepare a recruitment mechanism system of the Ministry of BUMN to cover up shortage of personnel of certain skills speed up the process of stipulation of personnel status as permanent employee of the Ministry because at the moment their status was still free lance workers; and to prepare the system of Performance Indicators [KPI] of employees.

The strategy to be adopted was to step up competence and performance of personnel of the Ministry of BUMN. To step up capacity and capability of the Ministry of BUMN and to enhance implementation of Good Corporate Governance of the Ministry of BUMN.

Secondly, the strategy for developing BUMN companies was rightsizing, restructurization. revitalization and profit making of BUMN gradually and sustainably. The rightsizing was exercised in 5 actions, i.e. stand alone, merger, consolidation, holding, divestation and liquidation.

The sectors prioritized for rightsizing of BUMN in 2012 – 2014 were the paper industry, Printing and Publication, plantation, Forestry, Mining, Pharmacy, Excavation, Mix Industry, so the number of BUMN by end of 2015 became around 116 BUMN.

In 2013 last, rightsizing was exercised on the sectors of Airport Management, Land transportation and Railway, Agriculture, Trading, Energy, Construction, and Construction Consultant, Logistics, and Appraisal Services so the number of BUMN would come to 105.

Furthermore in 2014 there would be rightsizing on the sectors of Defense, Technology-based Industry, Docs and Shipping, Steel and Steel Construction, Insurance, and Construction so the number of BUMN by 2014 would predictably be around 95 BUMN.

The policy of rightsizing was completely and overally written in Masterplan 2010-2014 which was inseparable part of the Strategic Master Plan of the Ministry of BUMN. All were aimed at posting an ideal number of BUMN for stronger competitiveness, Maximize BUMN value and bring utmost benefit for the nation. (SS) 

Business News - July 4, 2014

COMPETENCE OF WORKERS IN THE INDUSTRIAL SECTOR STILL LOW

In facing the ASEAN Economic Community (AEC) 2015, Indonesia should prepare itself in various aspects and fields in order to compete and be the main actor in the free market among ASEAN countries. The fundamental thing that should be prepared by the government is competent, reliable and skilled human resources.

The government through the Ministry of Industry will continue to increase human resources in the industry field in order to compete, even be the main player in AEC. Indonesia should not only be a spectator or target market of industries of other countries because it is considered potential as the most populous among the other ASEAN countries, so that it becomes a challenges for Indonesia.

Ansari Bukhari, Secretary General of the Ministry of Industry, in Jakarta, on Wednesday (July 2), admitted that the competence of the workforce in the industry sector is still low because the educational background is equal to junior high school or lower than that, with the percentage of 60.77%. In fact, he said, the level of labor productivity in Indonesia, which is calculated based on the gross domestic product (GDP) per worker, is still very low.

According to him, labor productivity in Indonesia is USD 9,500 per worker per year, and this figure is still far below three ASEAN countries, namely Singapore, Malaysia, and Thailand. In fact, labor productivity level in Indonesia is still below the average of ASEAN countries which USD 10,700 per worker per year. “this condition is our concern considering that implementation of AEC at the end of 2015, so the labor market in ASEAN will be open to all Southeast Asian countries”. Ansari said.

Ansari admitted that this must be anticipated by the government by providing integrated training so that they can develop and so that productivity can be increased. The condition is also a focus of attention of the government in facing AEC 2015, because at that time the labor market will be open to all ASEAN countries, so that improvement should necessarily be done in order to compete with workers from other countries.

To that end, he said, the Ministry of industry will do some anticipations, one of them is by setting up and developing community collage (Akademi Komunitas) within the Ministry of industry in order to meet the needs for workforce in the industrial sector. Another important thing to consider in organizing the industrial community is by facilitating the placement of graduates in industrial companies. This needs to be done to transfer knowledge and use technology so that industry workers can have good skill and can use the technology to support their performance that will have an impact on productivity increase.

For that purpose, Ansari said recently that the Ministry of Industry and the Ministry of Education and Culture have signed a memorandum of understanding (MoU) on the establishment and development of community college for the development of competent human resources in the industrial sector. He explained that in Law No. 3/2014 on Industry, there are 14 chapters which mandate the need for the development of competent human resources in the industrial sector.

Therefore, he said, the government is preparing a regulation on the implementation of development of industrial workforce, among other, through competency-based vocational education, industrial training, apprenticeship, and the application of a competency certification for industrial workforce.

The MoU mentioned several tasks of the, Ministry of Industry, among others, to facilitate the development of community college as a local advantage of a region to community college graduates in the Ministry of Industry in industrial companies. While, one of the tasks of the Ministry of Education and Culture is to foster academic training on the organization of community college within the Ministry of Industry. (E)

Business News - July 4, 2014

Happy Idul Fitri 1435 Hijriah