ECONOMIC GROWTH IN 2014 AT 5.02%

The Indonesian economy in 2014 grew by 5.02% growth occurred in all business fields/ information and Communication is a business fields which experienced the highest growth at 10,02%, followed by Corporate Services at 9.81%, and Other Services at 8.92%. The Indonesian economic structure according to business field in 2014 was dominated by three main business field, namely Manufacturing (13.02%), Agriculture, Forestry and Fisheries (13.38%), Wholesale-Retail Trade; and Automobile-Motorcycle Repair (1.38%).

Data from the Central Bureau of Statistics (BPS), obtained on Thursday (February 5), stated that in term of the creation of sources of economic growth in Indonesia in 2014, Manufacturing sector has the highest source of growth at 1.01%, followed by Wholesale-Retail Trade, Automobile-Motorcycle Repair, and construction by 0.66%, respectively.

In terms of expenditure, economic growth in 2014 of 5.02% occurred in all components. Consumption Expenditure of Non Profit Institutions Serving Households (LNPRT) is a component that experienced the highest growth of 12.43%, followed by Household Consumption Expenditure by 5.14%, and Gross Fixed Capital Formation (GFCF) at 4.12%.

The structure of the Indonesian economy in 2014 according to expenditure, was dominated by Household Consumption Expenditure (56.07%), followed by Gross Fixed Capital Formation (32.57%), and export of Goods and Services (23.72%).

Viewed from the creation of sources of national economic growth in 2014, Household Consumption Expenditure Components (PKRT) has the highest source of growth at 2.79%, followed by Gross Fixed Capital Formation at 1.34%.

Spatially, Indonesia’s economic growth in 2014 occurred in all provinces. The highest growth occurred in West Sulawesi province at 8.73%, followed by Jambi Province at 7.93%, and South Sulawesi Province at South Sumatra, Bangka-Belitung Islands, Papua, Riau, East Kalimantan, and Aceh.

Indonesian economic structure in 2014 is dominated by java at 57.39%, followed by Sumatra at 23.16%, and other islands at less than 10% (E)

Business News - February 11, 2015

EXPORT VALUE OF INDONESIAN ESSENTIAL OILS AROUND USD 120 MILLION/YEAR

The world essential oil trade value is more than USD 4 billion, with an average growth rate of about 5% per year. In the world, there are more than 300 types of essential oils that are traded in the international market. While the Indonesian essential oils that have been, are being, and have the potential to be developed are more than 40 types, with value of Indonesian essential oil exports at approaximately USD 120 million/year. It was stated by Chairman of the Essential Oil Council of Indonesia (DAI), Dr. Mieka S. Rusli, in essential oil seminar, on Thursday (February 5), in Bogor.

Around 80% of total production of Indonesian essential oils is exported. Demand for Indonesian essential oil is more than 1,000 tons/year, including clove leaf/steam oil, lemongrass oil, patchouli oil, and eucalyptus oil. While, demand for turpentine oil is more than 10,000 tons/year.

World’s clove oil demand is around 5,000-6,000 tons/year. Biggest consumer of clove oil is the aromatic clove oil derivatives chemical industry that has developed in the country. Therefore, the challenge to be faced is to maintain and increase demand.

World’s lemongrass oil demand is cover 2,000 tons/year. China as a market leader of world’s citronella oil took over the role of Indonesia in the world’s supply of lemongrass oil. However, currently, China’s lemongrass oil production tends to go down, but domestic consumption increased to more than 800 tons/year. While, Indonesian lemongrass oil production lately slumped around 300 tons/year. The use of lemongrass oil is very diverse, among others, for flavor-fragrance, detergents, insect repellents, aromatic chemicals, and fuel additives. Insect repellents, aromatic chemicals, and fuel additives. The challenge faced by Indonesia is to be able to restore the glory of lemongrass oil production in Indonesia, which in the international market is known as Java Citronella Oil.

Currently, world patchouli oil demand in normal situation is around 1200-1500 tons/year. Meanwhile, Indonesian patchouli oil production is about 1,500 tons/year. The biggest consumer of patchouli oil is the fragrance industry (as fixative), but lately the fragrance industry tends to reduce the use dosage due to sharp price fluctuations over the last 4 years. The challenge in Indonesia is that it should be able to succeed the cultiva program (a program intended in a sustainability of supply and transparent and fair price for all stakeholders). Therefore, efforts to balance supply and demand are needed.

World’s turpentine oil demand is only around tens of thousands of tons per year. The major user of turpentine oil is aromatic chemical industry. Indonesia exports turpentine oil of around 10,000 tons/year in the form of crude turpentine oil. Though alpha pinene and beta pinene can be isolated by a chemical derivatives can be made by reaction. The challenge is the policy on sale of crude turpentine by PT Perhutani, and production efficiency should be done in order to compete with China.

Demand for essential oils is around 100-1000 tons/year consisting of nutmeg oil, vetiver oil, and ginger oil. World nutmeg oil demand is about 400 tons/year, but Indonesia is only able to produce about 350 tons/year, but Indonesia is only able to produce about 350 tons/year of nutmeg oil. Currently, it experienced scarcity of nutmeg oil production, as nutmeg plants in Sumatra were attacked by pests. World’s vetiver oil demand is about 100 tons/year, but Indonesia was only able to produce about 30 tons/year. China’s ginger oil is made from ginger pulp, so the price is cheap and can dominate the international market. Indonesia is familiar with Fresh Ginger Oil which price is more expensive, but world demand is limited.

World’s essential oil demand which is less than 100 tons/year includes sandalwood oil, cananga oil, massoia oil, cubeb oil, and lime leaf oil. Indonesia is a world major producer of sandalwood oil, but lately Australia started to do massive planting of Saltum album (sandalwood tree species), and in 2023 it is estimated to be able to produce sandalwood oil at more than 100 tons/year. While, Indonesia’s massoia oil production is estimated at around12-15 tons/year. Cubeb oil production is only several tons, due to raw material problem because cubeb plant has not been cultivated, and cubeb oil consumption is still limited. While, lime leaf oil not yet has a significant market share, because this type of oil is not yet popular for use as flavor. (Dm) (E)

Business News - February 11, 2015

TO REVIEW INDONESIA-JAPAN ECONOMIC PARTNERSHIP AGREEMENT

Since 2013 Indonesia had taken the initiative to implement IJEPA as agreed in the IJEPA itself, i.e. “after 5 years (2008 - 2013) the two countries could make general overview in regard to the implementation of the agreement. discussion of TOR of IJEPA Review had been exercised by the two countries since 2014. However in view of different opinion of Japan’s proposal, the definite timing of IJEPA Review would be done by Indonesian Trade Minister and Japan’s METI on January 21 in Tokyo.

As set forth by the Dir. Gen. of International Trading Bachrul Chairi, the overview of IJEPA would focus on implementation of chapters and revision of articles. To Indonesia the IJEPA Review was focused on increase of export of Indonesian goods and services to Japan and the world and stepping up of competitiveness and investment. The IJEPA negotiation would mainly demand to reduce tariff as promised by Japan, i.e. to open more access for agricultural, forestry and marine products and some industrial products.

IJEPA’S main issue was not only related to trade balance. Basically Indonesia’s trade balance had always been surplus for Indonesia. In 2004 surplus for Indonesia was posted USD 4.7 billion in January-October 2013 Indonesia also posted surplus of USD 6.2 billion. For a period of 5 years (2009 - 2013) Indonesia’s surplus tend to shrink by 3.9%. by oil gas and non oil-gas categorization, Indonesia’s surplus tend to post deficit, the biggest being in 2012 amounting to USD 5.49 billion but by 2013 dropped to USD 2.97 billion.

Compared to Trade Balance of the industrial sector, Indonesia’s deficit was higher; by 1212 the deficit was USD 10.85 billion and down again to USD 7,88 billion in 2013. Collaboration was not only in the economic sector as a whole but particularly also focused on Trading.

The Advantages and Disadvantages of IJEPA

IJEPA offered advantages for Indonesia in many sectors including export of goods and investment. Indonesia’s trade deficit was more than 96% from auxiliary goods (62.82%) and capital goods (33.52%) while consumer goods was only 3.66%. Japan was the second biggest investor country in Indonesia; in 2010 up to Q III 2014 Japan’s total investment was posted at USD 11.4 billion including 2.314 projects or 10.34% of total foreign investment in Indonesia.

           

Most of Japan’s investment was in the automotive industry and heavy equipments plus metal industry, machinery, and electronics. By sector, Japan’s investment in the automotive sector was USD 5.99 billion or 71,84% of total foreign investment. In mental industry, machineries and electronics Japan investment was worth USD 1.9 billion or 19.49% of total foreign investment. Through IJEPA implementation 2013, total trade deficit of non oil gas sector was USD 9.7 billion.

Japan’ total investment effect on Indonesia through 2010 – 2013 was USD 65.5 billion or 8.9% of Indonesia’s total export. Basically Indonesia was advantaged by the non oil gas sector amounting to USD 55.8 billion.

Basically the role of Japan’s investment against Indonesia’s export alone was already that high, i.e. on Indonesia’s export of automotive USD 4,5 billion and printer-computer USD 1.2 billion. Income from Trading Sector was not only from increased forex reserves but also on employment in Indonesia. The automotive industry was the sector with biggest labor accommodation, i.e. 19.849 workers in Indonesia in 2010 – 2014. That number was equal to 30,31% of total labor accommodation by all Japanese investment in Indonesia over the same period. (SS)

Business News - February 11, 2015

THE MINISTER OF INDUSTRY AND INDUSTRIAL ESTATE ASSPCIATION SUPPORT CILAMAYA HARBOR DEVELOPMENT PLAN

The Ministry of Industry and HKI Industrial Estate Association fully supported masterplan of Cilamaya harbor development in the effort to make it an alternative harbor to the existing harbors. As disclosed by the Ministry of Industry Saleh Husin in Jakarta on Thursday (6.2), a number of business people who factories were located along the industrial estates by in Karawang and Cikampek, West Java expressed their grievances about difficulty in using logistic in that zone due to fast growing industry which increased the need for sound infra Structure especially access to harbors.

“With the increasing number of industry in West Java, the only way out to solve traffic density problem was to build an alternative harbor which was indispensable. Now cargo transportation from factory to harbor could only be done once a day instead of three. The Cilamaya harbor to Tanjung Priok harbor, and the Anyer harbor in Banten.”

“We leave the master design of the harbor to the Minister of Transportation. Soon when the harbor was completed and be part of logistics line nation wide. The Ministry of Industry would be involved in it and traffic congestion would be reduced” Saleh remarked.

Separately after making audience with the Ministry sometime ago, chairman of HKI Sanny Iskandar expressed his hope and expectation. “We are most concerned about the role of Cilamaya harbor. We don’t have the authority to build Cilamaya harbor like the Ministry of Transportation, but the Cilamaya harbor would be most beneficial for industrial estates in West Java” he said.

Soon when the Cilamaya harbor was ready Subang would also be benefited because the location was potential for industrial estate location. We believe that Subang had the potential for building 5 industrial estates of various dimensions from 200ha, 1000ha or even 2,000ha. At least Subang would developed like Bekasi and Kerawang as it had become part of a toll road corridor.

Against Special Tariff Increase

Today space in Karawang was getting limited, so with the development of Subang, connectivity would be closer. The type of industry might vary depending on the investors; it could be textile industry, or garment of automotive and supporting as well as electronics the way it was now developing in the corridor of Bekasi up to Purwakarta. Consumer goods were potential commodities to be developed in Subang.”

In another opportunity Chairman I not GINSI Capt. Subandi stated that GINSI objected to Anguspel tariff increase by 20% as result of oil price increase of 30%. They could only approve increase of 15% although anguspel continued to increase price by 20%.

“By signing the consensus, GINSI do not acknowledge the tariff declared by Organda Anguspel. Therefore the Tarif is categorized as illegal. We from GINSI ask there shall be no tariff increase as before, or there must be no tariff increase considering that oil price have been lowered by the Government. The Government even plan to lower price of Solar oil,” Subandi explained. (SS)

Business News - February 11, 2015