TO REVIEW GOVERNMENT STATE CAPITAL PLACEMENT PLAN IN BUMN

The Government’s plan to spur on infra structure by allocating fund amounting to Rp.48 trillion by inclusion of state’s capital (PMN) to 35 was not running well.

The reason was that there was indication of mis allocation of fund amounting to Rp.3.1 trillion to 14 BUMN as receivers of PMN which were: PT Antam, PT Angkasa Pura,  Bulog, PT Garam, PTPN IX, PT Pelni , PT Pindad, PT KA, PT  Shanghyang Seri, PT Perumnas, Perum Perikanan, PT Industrial Kapal, and PT Pelindo.

Therefore Commission XI of house urged the Government to suspend liquidation of PMN until BPK finding was solved. This was the statement of Chairman of Commission XI of House Fadel Muhammad after Consultative meeting with BPK last week.

The 35 BUMN recommended by the Government to receive PMN in APBN 2015 were: PT Angkasa Pura Rp.3 trillion, PT ASDP 1 trillion, PT Pelni Rp.500 billion, PT Djakarta Lloyd Rp.350 billion, PT Hutama Karya Rp.3.6 trillion, Perum Perumnas Rp.2 trilllion, PT Waskita Rp.3.5 trillion, PT Adhi Karya Rp.1.4 trillion.

Furthermore PTPN III Rp.3.15 trillion, PTPN VII Rp.17.5 billion. PTPN XI Rp.65 billion, PTPN XII Rp.70 billion, PT Permodalan Nasional Madani Rp.1 trillion, PT Garam Rp.300 billion, PT RNI Rp.280 billion, Perum Bulog Rp.3 trillion, PT Pertani Rp.470 billion.

Furthermore PT Sang Hyang Seri Rp.400 billion, PT Perikanan Nusantara Rp.200 billion, Perum Perikanan Indonesia Rp.300 billion, PT Dirgantara Indonesia Rp.400 billion, PT Dok Perkapalan Surabaya Rp.200 billion, PT Dok Kodja Bahari Rp.900 billion.

Besides there was PT Industri Kapal Indonesia Rp200 billion, PT Antam Rp.7 trillion, PT KAI Rp.2.75 trillion, PT Perusahaan Pengelola Asset Rp.2 trillion, PT Pengembangan Pariwisata Rp.250 billion, PT Bank Mandiri Rp.5.6 trillion, PT Pelindo IV Rp.2 trillion. PT Krakatau Steel Rp.956 billion, PT Bahana PUI Rp.250 billion.

Beside low performing BUMN, there were some BUMN not entitled to receiving PMN especially those who already had gone public. The Parliament believed it was not advisable no throw around Rp.72 trillion without strong reason. The Government PMN for BUMN in RAPBNB-P State Budget 2015 be classified into 3 categories, i.e. infra-structure Rp.39.8 trillion, natural resources Rp.14,8 trillion and financing and banking Rp.9 trillion.

Head of BPK Harry Azhar Azis remarked further that BPK’s view was based on examination in 2013 in which there were 14 BUMN categorized as low performing. Previously the Government had injected PMN fund amounting to Rp.48 trillion to 35 BUMN. Besides, the Government also wished to inject capital of Rp.18 trillion for BUMN under the Ministry of Finance.

According to Vice chairman of BPK Achsanul Qosasi, before PMN fund was liquidated the Company was advised to settle all the critical notice made by the Auditor. Achsanul said that PMN was a matter of accountability and transparence of companies to enable commission XI of House to make control.

It seemed very natural that PMN injection to BUMN in fantastic amount would trigger anxiety of possible manipulation. The Government had stated that the PMN was intended for enhancing infrastructure development. This time BUMN was expected to be the Propeller of development so as not to rely too much on private companies, but there was no guarantee there would ne no leaking of fund.

In fact the public supported the Parliament’s stance to be more cautions about approving PMN extention to BUMN. The Government had to make sure that the use of PMN fund was in accordance with the need for mid term development under good governance and accountable management.

Understandable because there had been too many display of state budgeting which was not transparent and not accountable; moreover the nation was disparately in need of economic breakthrough for rebound as expected by the people.

Spontaneously Parliament’s rejection to Commission XI House triggered responses from many circles. One of the protesters demanded BPK to explain the alleged irregularity of the Rp.3.1 trillion. They expected all parties to be objective in making decision because suspension of PMN was feared to hold back national development process.

The protesters said that extention PMN to BUMN was a change in financing mechanism for development financing to capital injection to BUMN. In this case it was BUMN who execute developments. They believed that by injecting PMN the Government did not pay expenses but only rechannel payment to BUMN and BUMN could borrow from banks 70% of project value.

Furthermore they stressed the need for control if PMN were suspended. The Parliament and the public must control the fund so there shall be no program which was not productive or even fund being used for political expenses.

Again BPK stressed the importance of accountability and transparence as prerequirement for BUMN before they could be entitled to receiving PMN. Supposedly BPK encouraged the Government to be more careful about channeling PMN so APBN fund of Rp.72.9 trillion could be more efficient.

Again BPK reminded the public that they had examined 37 BUMN and 40 PMN receivers included in Commission XI of House. 14 BUMN was mentioned as not making any finding and not signed by the said company. So it was not that the BUMN did not deserve to receive PMN but it would be most advisable that before PMN was given to 14 BUMN, the special notice by BPK could be managed by the Management concerned.

Financial examination by BPK BUMN was a form of support to Commission XI of House so they could easily control and maintain Good Corporate Governance in very BUMN. So it was not a matter of rejection by commission XI of House but rater it was some BUMN.

It must be understood that BPK was Auditor of the State and the parliament was Government controlling by the people in taking actions. (SS)

Business News - February 11, 2015

A SECOND LOOK AT INDONESIA’S ECONOMIC CHALLENGES 2015

Toward second month of 2015 it was about time to review all the prospect and challenges of national economy especially in overall appraisal of the Joko Widodo – Jusuf Kalla performance over his 100-day administration.

To begin with, let us highlight on the latest data released by the Central Board of Statistics (BPS) last week. In January there was deflation of 0,24% with Consumer’s Price Index (IHK) of 118.71. Of 82 IHK cities, 51 cities posted deflation and 31 cities posted inflation.

Deflation was posted highest in Padang 1.98% with IHK 123,54 and lowest in Bandung and Madiun 0.05% respectively with IHK 117.05 and 116.77 respectively. Meanwhile highest inflation was posted in Ambon 2.37% with IHK 117.77 and the lowest in Malang 0.04% with IHK 119.21%. deflation was due to price ion, communication and financial service 4.04%.

Meanwhilee other expenditure group which showed increase of index was food 0.60%; ready food, beverages, cigarettes and tobacco 0.65%; housing, water, electricity, gas and fuel 80%, clothing 0.085%; health 0.66% and education, recreation and sports 0.26%.

Deflation of calendar year (January) 2015 was 0.24% and year on year inflation (January 2015 against January 2014) was 6.96%

Inflation pressures tend to ease which means assumed inflation was 5% according to Government’s expectation recorded in APBN-P To use BI’s benchmark of 3% + 1% it was still attainable.

Compared to December 2013 there was downturn of 13.83%. Non oil-gas export in December 2014 was posted at USD 12.27 billion, up by 6.59% against November 2014; while compared to December 2013 export was down bt 9.55%.

Accumulatively Indonesia’s total export per January-December 2014 came to USD 176.29 million, a downturn of 3.43% against same period 2013, the same was with non oil-gas export which came to USD 145.96 billion, a slump of 2.64%.

The biggest increase in non oil gas export was in December 2014 against November 2014postd in jewellery USD 168.6 million (55,00%) while the biggest downturn was in fat an animal/vegetable oil USD 51.6 million (2.94%).

The biggest increase of non oil-gas export in December 2014 against November 2014 happened on jewelry amounting to US168.6 million (55,00%) while the biggest downturn was in fat an animal/vegetable oil USD 51.6 million (2.94%).

Export of non oil-gas in the USA per December 2014 posted highest figure i.e. USD 1.47 billion, followed by China USD 1.33 billion and Japan USD 1.26 billion, contribution of the three came to 33,12% while export to Uni Europe (27 countries) was posted at USD 1.45 billion.

By sector, export of non oil gas products from processing industry through January-December 2014 increased by 3.80% against same period of 2013 and export of agro products increased by 1.01% while export of mining etc only dropped by 26.67%.

Indonesia’s totall export through December 2014 came to USD 14.43 billion, an increase of 2.80% against November 2014. On the contrary against December 2013 it dropped by 6.61%. Import of non oil gas per December 2014 came to USD 11.05 billion, and increase of 4.51% against November 2013 down by 1.69%.

Oil gas import per December 2014 came to 2014 to USD 3.39% or down by 2.40% against December 2014; compared to December 2013 it dropped 19.71% the biggest non oil gas export in 2014 was machineries and mechanical instruments worth USD 2,02 billion. The value inched down by 0.47% against same type of goods in November 2014.

Non oil-gas supplier countries through December 2014 was china with USD 2,93 billlion (26.55%), Japan USD 1,22 billion (11.6%) and Singapore USD 0.75 billion (6.75). Non oil-gas import from Asean countries formed a market share of 20.59% while from Uni Europe 8.75%.

Total import of consumer goods, raw materials, complementary goods and capital goods through January-December 2014 posted downturn against previous year at 3.59%, 4,05% and 7,7% respectively.

The next indicator was the position of forex reserves which in December 2014 was in the position of USD 111,862 billion and increase of 0,65% against November 2014 while against same period the previous year it posted increase of 12.55%.

The next dominant indicator National Economic Growth, BPS reported Indonesia’s economic growth in 2014 last was 5.02% which was in parallel with Government’s target of 5.5% for 2014.

Meanwhile compared to same period last year, Indonesia’s GDP grew 5.1% based on 2010 calculation of 6.48% while economic growth 2011 was 6.17%.

Economic growth in 2012 was posted at 5.58% while in 2014 Indonesia’s economic growth was only 5.02%. the highest role was processing industry with share of 21.2% and growth 4.63%. the was increase in F&B industry due to electoral campaign.

The printing industry and machinery also posted significant growth. In 2013 processing industry only grew by 4.49%.

In 2014 last, trading which constituted 13.38% posted 4.48% growth while the agro sector with same share by 4.18%. Growth in agriculture lessened against 2013 but still stable, triggered by the subsectors of plantation where demand was still high in spit of falling CPO price. Fishery and horticulture was still well and stable.

The construction sector with share of 9.88% posted growth of 6.97% in 2014 which was due to development of hotels, harbors and bridges. Construction posted 6.11% growth against 2013.

Meanwhile the mining sector with share of 9.82% only grew by 0.55% slow growth of the mining industry was due to the Minerba law No 4 2009. By 2013 the Mining sector still grew by 1.74%.

BPS also reported Indonesia’s GDP per capita based on 2010 calculation Rp.41,81 per capita per annum. There was notable increase of GDP in 2012. Meanwhile GDP per capita in 2012 was posted at Rp.35.11 million per annum. GDP of 2013 was posted at Rp.38,28 million per annum.

To consider Rupiah depreciation factor, there was reduce per capita amount. GDP per capita USD was 3,751.3 per capita per annum. In 2013 there was downturn by Rp.38,28 per capita per annum.

By the main indicators above it might be concluded that the prospect of economic growth 2015 would be slightly better at 5.2% - 5.5% against previous year at 5.02%.

Internationally, economic slowdown in China, Japan and Uni Europe still generated pressures on Indonesia’s economy. What could be done was to put brakes on import of non primary commodities while promotional export.

Meanwhile inflation declined by around 5% although being overshadowed by increase of electricity tariff (TDL) and 12 kg LPG gas and adjustment of Minimum Laborers Wages (UMP). Lastly, assumed Rupiah value at Rp.12,500 per USD seemed reasonable in case the Fed increased Fed Fund Rate. (SS)

Business News - February 11, 2015

EVALUATION OF COOPERATION IN VARIOUS FIELD, EU AND ASEAN HELD JOINT COMMITTEE MEETING

As the implementation of an annual forum to evaluate what has been achieved by the European Union (EU) and ASEAN, the 22^nd ASEAN-EU Joint Cooperation Committee (JCC) meeting was held this year held on February 4 and 5, 2015 in Jakarta, where the ASEAN Secretariat is located. This meeting, as stated by EU Ambassador to Indonesia, Brunei Darussalam, and ASEAN, Olof Skoog, in Jakarta, on Tuesday (3/2), will discuss various cooperation, among others, in the field of integrated economy of the region, connectivity, trade and investment, climate change, human rights, and higher education.

As he largest partener of ASEAN, this meeting is considered crucial, and Vietnam is now acting as coordinator, so that in the 22^nd ASEAN-EU JCC meeting, ASEAN will be led by Vietnamese Ambassador, Vu Dang Dzung, and Permanent Representative to ASEAN. While, European Union will be led by Raniere SAbutucci, as Head of Southeast Asia Division of EU Foreign Services, and Jean Clude Boidin as Unit Head of International Cooperation and Development Directorate of the European Commission.

In more detail, the essence of the meeting that will be attended by the members of the Permanent Representative Committee of ASEAN, the ASEAN Secretariat and EU officials as well as representatives from EU member states, will discuss the latest developments in ASEAN and EU; evaluate trade and investment relations between ASEAN and EU; including reviewing the progress of ongoing cooperation programs. And the progress of the implementation of ASEAN-EU Plan of Action; cooperation in the face of security opposition as well as EU support in the implementation of the Master Plan of ASEAN Connectivity, said Skoog, who mentioned about the imposition of death penalty on drug dealers and the like, which is applied in Indonesia. While, the death penalty policy has been abandoned by a number of countries, including in the entire European Union region.

In the field of trade, the relationship between European Union and ASEAN countries has been strong enough, where trade between the two regions developed further since the last few decades. In 2012 the total volume of trade of goods between the two regions reached € 181.4 billion. European Union is the second-largest trading partner of ASEAN, while ASEAN ranks third as EU trade partners.

It can be describe that during the period of 2014-2020, development cooperation from EU to ASEAN reached more than € 190 million which is divided into three major cooperation frameworks consisting of economic integration; climate change and disaster management; and facilitation of dialogue comprehensively (thoroughly).

Former Director General of Information Industrial Cooperation of the Ministry of Industry, Agus Tjahajana. Stated that the progress of the discussion of comprehensive Economic Partnership Agreement (CEPA), which has been ongoing since 2010, resumed in 2012, was halted in 2013 and has not reached an agreement, Since the end of last year, it seems that there is an attempt to hold negotiation more comprehensively, especially related to the products to be liberalized.

Likewise, EU is more concerned with environmental aspects, products, and services, and will encourage Indonesia to accelerate  pro-environmental products, if negotiation is reached. Agus also highlights EU’s insistence on a number of Indonesian exports to EU, which are quite significant, such as textile products and fishery products. Indonesia sees that, whether EU has been prepared with both of these products, and the fate of other Indonesian export products there. Therefore he believed that EU needs to look at other compensations of the cooperation when CEPA will be negotiated further. (E)

Business News - February 6, 2015

EXPORT PROMOTION TO BE IN TANDEM WITH PRODUCT CERTIFICATION

The Ministry of Trade was planning to consolidate to meet export target of 300 percent until 2019 by way of playing International product certification. Standardization would include proper labeling, packaging, and good agricultural practice (GAP) and Good Manufacturing Practices (GMP) in the Provinces. The products exported must meet international standard but it did not imply that Indonesian products automatically comply with standardization in export destination countries.

For example in terms of fishery products, Indonesia had adopted the Cognitive Disorders Examination (codex) although Indonesian Products had not fulfilled requirements of the private sector.

Other conclusion was that supply of raw materials, auxiliary materials and energy was most important. Electricity output up to 35,000 megawatt. Electricity was part of infra structure of investor’s concern beside complex bureaucracy in many areas. BP2KP also proposed the need to reform the logistics system, including storage, distribution, terminal handling and shipping.

Export platform would be focused more on manufacturing, reducing primary industry. This was in line with the analysis of BP2KP of the Ministry of Trade. The effort must be more on changing of export platform, i.e. 65% for manufacturing industry. “We are only presenting analysis outcome. It’s manufacturing industry needed by the world”.

The Minister of Trade Rachmat Gobel remained optimistic about meeting target of 300% export increase. The Minister of Trade and the Minister of Foreign Affairs had agreed to step up the role of ITPC and Trade Attache. The ITPC must be able to unmarked intelligence in the country where they were located. BP2KP would simultaneously map out several points related to export penetration. “To be frank, today only export to America increased slightly. To meet the 300% increase target is not easy. We have to grab someone else’s market”

Export should be national target to be jointly pursued by all stake holders: the Government and businessplayers, at home and abroad. The Ministry saw that the effort to increase market share in the world needed favorable trading climate. Space planning, labor And wages system must be developed to promote national productivity. “In CPO export we are synchronizing effort target, but there must be synchronization of the upstream and downstream industry. Export should be national commitment, not just out home work at the Ministry of Trade.”

Indonesia had planned to set up trade attaché in 24 countries, ITPC officials operated in 19 cities of the world. With good approach to Principal Agent we could jack up export of products like automotive and electronics. “We made a visit to Japan to drum up Japanese buyers”.

In automotive sector, the objective was to make Indonesia a production center. “So the hub for automotive industry for Southeast Asia is Indonesia, not Thailand, Malaysia, or Vietnam. There would be fighting over market share”

Approach to principal agent begins with collaboration of ITPC and trade attaché. They would give information about who the Principal was to be approached. This was once done by BP2KP i.e., to conduct a meting with associations.

In the market opportunity there would always be a niche for Indonesia to export, as the market was not saturated yet. He upstream and downstream sectors must be synchronized. A clear example was application of SLVK. “We have certified our wood and we sell the”.

Indonesia’s export depended on demand from buyer countries. For example Indonesia’s export was most potential when China increased import. This was the general rule. Indonesia could learn a lesson from South Korea’s success. South Korea increased their exports by ten fold the period of 1960 – 1970. The strategy adopted by them was setting up trading companies in potential buyer countries. A concept as such was once proposed by KADIN i.e. the Indonesia Incorporated concept. “Support is sought after from all institutions including the Ministry of Industry, agriculture, maritime and fishery. (SS)

Business News - February 6, 2015