GOVERNMENTS GUARANTEE ENCOURAGES BANKS TO EXTEND CREDIT TO REGIONAL DRINKING WATER COMPANIES

Although track record of the Regional Drinking Water Companies (PDAM) had been unimpressive, as indicate by the high degree of stagnation in debt settlement, Bank BNI took the courage of extending credit to those PDAM companies.

Apart from Government’s guarantee, BNI willingness to extend credit was because some PDAM had shown good performance, the company being well managed, the management had shown effective managerial competence and run effective business operations, that the infrastructure building of a nation. Krisna Suparto, Director of Business Banking BNI disclosed to BusinessNews on the occasion of signing of credit for drinking water at the office of Director General Cipta Karya, Ministry of Public Works, Friday (11/6).

Credit for PDAM had been extended by BNI before, but the credit was not directly pipelined to the company, but through the Government instead. The credit, worth Rp 33 billion was used by the Government to finance 45 PDAM. With the present credit BNI directly channeled the loan to PDAM with interest borne by the Government. “So PDAM returns the loan to bank based on 6 month SBI bond by the time of credit agreement, while the Government pays the margin” Krisna remarked.

Beside PDAM, BNI also extended credit for toll road projects. The amount of credit extended to free way building projects had now reached Rp 1.5 trillion, of the targeted Rp 6 trillion. However, the extention of credit for toll road projects was felt as slow moving due to problems in land clearing, in spite of the land capping and Board of General Service (BUU).

This year the credit targeted for toll road projects amounted to Rp 3 trillion, including the sections of Semarang-Solo, Solo-Kertosono, Surabaya-Mojokerto, whilst the target of Rp 6 trillion would be extended to finance toll road sections of Trans Java Highway.

Director General of Cipta Karya : Change the Thinking Attitude of PDAM

Boedi Yuwono, Director General of Cipta Karya stated that the involvement of banks in PDAM financing might as well changed the thinking platform of PDAM, who had always been helped by way of mouth-feeding by the Government whether through State Budget or overseas loan. With direct loan from the bank, PDAM was expected to be more independent.

In this connection, through the Joint Financing Agreement of three banks, respectively Bank BNI, Bank BRI and Bank Jabar Banten credit of Rp 3.7 trillion had been extended as initial realization of the Acceleration Plan of drinking water procurement for urban areas. The credit scheme for drinking water Procurement Plan was being supported by guarantee and interest subsidy at the maximum amount of 5% from the Government.

The vast amount of fund was allocated for credible and qualified PDAM. Furthermore if the fund was felt as insufficient, the Government would add more credit. Today, of the 392 PDAM operating in Indonesia, 96 units were undergoing the process of application for credit restructurization at the Ministry of Finance. Of 15 PDAM whose status was healthy, 5 of them were ready to receive financing, i.e. PDAM of Malang, the Regencies of Tasikmalaya, Bogor, Tangerang, and Bandung.

FOOD SMALL – INDUSTRY PREPARED IN FACING THE AEC FORMATION 2015

The small and medium Industry (IKM) especially that of the food sector were prepared for the ASEAN Economic Community (AEC) of 2015. According to Adhi Siswaya Lukman, Chairman of the Association of Food and Beverage Traders (GAPMMI) disclosed to Business News Thursday (10/6) that he was aware of the fact that the Ministry of Industry had offered aid to the Small Industry (IKM) particularly in terms of standard, safety, and sanitation.

A part from the above, the aid extended was also related to identification of efforts to identity products to be exported. It was expected that by 2015 AEC would have been running, so if small business (UKM) were not reformed, it would be left behind. The present objective was that by that the time AEC runs, the UKM would be ready to sell their products. This means that the standard should be the same whether it was from Indonesia, Thailand, Singapore or other countries.

For that matter it was necessary to have MRA, since the case was not simple. Supposedly from now on the working group would have begun their actions, especially in Food & Beverages trading. They were now working on how to standardize products which were not the same, for example that between Singapore and Indonesia.

If Indonesia did not strive hard, Indonesia would not be ready for it. However, businesspeople were optimistic that by rigorous effort, in the next 5 years small business would not die – especially with the support of various ectors like the industrial sector.
The Directorate General of Food Safety and Packaging.

Eddy Siswanto, the Director of Food Industry, Director General of Small-and Medium Industry (IKM) stated to BusinessNews Wednesday (9/6) that the classical problem of IKM was low safety level or quality guarantee of IKM food products and matters related to packaging.

All food equipments and utensils must meet sanitation standard, so the end result would be more hygienic. This was the pre condition that must be understood from the very beginning. So far, in order to strengthen guarantee of food safety, the sanitary aspect of food processing needed supervision thereby the hygienic aspect of processing could be under control-because the traditional ways of food processing which was inherited from generation to generation was not too reassuring.

Apparently is was not easy to change old ways, which had been adopted for too long, including security of product quality. For example in Magelang there was an accompaniment plan for IKM specializing in tofu-cream business apparently they were accustomed to using dry wood as fuel for the warming process.

Among the many aspects to be highlighted were promoting efficiency and strengthening competitive edge of traders, changing traditional habit of using dry wood as fuel into gas as fuel. Warming system was changed into boiler system. Advisors were approaching the people to teach them how to work more efficiently.

After highlighting on production efficiency, the next focus was on proper packaging, which was the basic competence in business. Just as books were judged by their cover, food were judged by their packaging.

EQUAL RIGHTS AND RESPONSIBILITIES BETWEEN USER AND PROVIDER IN PROPERTY BUSINESS NECESSARY

It was most important to maintain equal rights between user and provider of services in the construction sector that the sector might develop and be profitable to all parties. This was the message of the Head of the Board of Construction and Human Resources Development (BPKSDM) Bambang Guritno upon opening Meeting of National Executives of Indonesia Concrete Asthpalt (AABI) in Yogyakarta recently.

The general perception today was that provider of services in construction business was losing business against users. For that matter, the effort toward maintaining equality was by insuring contract of project which was profitable and not disadvantageous to both parties.

In the same opportunity, the Director General of Bina Marga, Djoko Murjanto stated his opinion that target his opinion that target of development might be attained provided that rights and responsibilities between provider and user were well balanced. For that matter, to accomplish building of road infrastructures worth Rp 148 trillion for over the next five years, the Government needed good collaboration with the Association. As for asthplat production, the need to be fulfilled was among others highly competent and responsible workers to work on the field.

Meanwhile Mohammad Subagjo, Chairman of AABI, admitted that up till now there had been no equal rights between provider and user in terms of risk performance control. According to Subagjo there had been to much responsibility burdened on service providers.

This was not to mention taxation which were imposed, regulation problems, and other legal matters related to contract. Therefore, he expected that there would be the best solution to all the problems.

LEVEL OF DOMESTIC CONTENT MUST REACH 40%

Presently the level of local content (TKDN) of products used domestically, especially by the Government, was still low. The low usage level of domestic products by the Government and State Owned companies was due to lack of illumination. This was disclosed by Secretary of the Director General of Textile Metal Industry and Variety (ILMTA) Suprijanto during the Illumination session of Application of Domestic Products (P3DN) at the Ministry of Industry Jakarta (4/6/2010).

Suprijanto explained that there had been a good number of socialization, so the Ministry of Industry needed to continue informing Government institutions about using domestic products. Apart from illumination, Suprijanto elaborated that the low usage of domestic products was because the products were not produced at home or they were produced but the specifications were not suitable “Somehow we plead all institutions to increase use of local content in producing goods” he stressed.

Meanwhile Chairman of the Program for Utilization of Domestic Products (P3DN) KADIN Indonesia Natsir Mansur set forth that with the implementation of AC-FTA there was business diversification new industries were emerging, utilization was uplifted, while orders for industrial products soared up. For that matter, according to Natsir, we needed a policy which strengthened the domestic market. The Government should do more than just extend tax incentives but also ensure certainty for the management of manufactured goods.

“The Indonesian currency must be spent on Indonesian made goods. Let their be no local businessman who feels it hard to be the master in his own threshold” Natsir disclosed it to Business News. To illustrate, businesspeople in China or in any ASEAN state were giving special privileges to local players in a tender of procurement of goods and services for the Government. Therefore, supposedly the Government sets up certain criteria for foreign companies who participated in any tender of goods and services in Indonesia.

In the effort to secure the domestic market, the Presidential Decree Keppres no. 80/2003 on the Guidelines for Procurement of Government Goods and Services should be seriously implemented. Let there be no Ministry or Institution who bought imported goods. For that matter, local content standard for Government Institution and State Owned companies were set at minimum of 40%. “Never let it happen that just because some foreign product was slightly cheaper, the local product with 40% local content was cast aside.”

To quote information of Bank Indonesia, allocation of State Budget for Government shopping must increase year after year. In 2009, for example, Government institutions Rp 503 trillions, an increase against 2008 which was Rp 417 trillion. “This is a great opportunity which must be grabbed by local players to supply products to Government institutions.”

In monitoring implementation of local content rules (TLDN), the Indonesian Chamber of Commerce collaborated with the Board of Government Financial Supervision for Development (BPKB) who would become part of the Task force of the National Team (P3DN). “The BPKP will also monitor the local content factor. So don’t be surprised if suddenly the BPKP comes to one of the Government’s office to inquire about local content.”

USE OF SUBSIDIZED FUEL EXCEEDS QUOTA

In accordance with Law no. 22/2010 on oil and natural gas, the Government is obliged to ensure procurement and distribution of oil fuel, which are vital commodities for the people in all of Indonesia.

The implementation of such commitment is by properly maintaining quota for subsidized fuel. Realization of the average volume of subsidized fuel in 2010 already exceeded the agreed quota.

Realization of the average distribution of subsidized fuel in 2010 have so far exceeded the stipulated quota, i.e. around 9% to 10%, the Minister of Energy and Mineral Resources stated during a technical meeting with Commission VII of House, Monday (7/6).

Due to limited state’s budget foe allocating the plan of fuel subsidizing, it is necessary to gradually reduce and control distribution of subsidized fuel in tandem with on target subsidizing.

In the State Budget, the volume of subsidized fuel is set at 36,504,775 kiloliters. Unless properly controlled, the volume will swell to 40,100 kiloliters. In 2009 the quota for subsidized fuel was stipulated at 36,854,448 kiloliters of which 37,837,611 kiloliters was realized.

To minimize use of subsidized fuel, the Government plans to take the following measures scheming up regulations in relation to reduction of subsidy according to the present condition, among others through revision of Regulation Perpres no 55/2005 and Perpres 2006 on selling price of domestic fuel, informing the public on enhancing fuel efficiency through print and electronic media, obligation to use fuel according to mandatory rules.

Further steps would be to allocate certain types of fuel certain consumers by closed distribution and maintain coordination with related institutions.

Other measures taken would be to reduce subsidy for certain types of fuel by transforming price subsidy to social aid like enhancing efforts of reducing poverty, the execution of which will be coordinated with the National Planning Board (BAPENAS). To reduce total volume of fuel, the Government would I minimize use of certain types of fuel, diversify energy, and apply closed distribution system for certain category of users.

PRODUCT LABELING IN INDONESIA LANGUAGE TAKES TIME

The Government through the Ministry of Trade confirmed that the implementation of mandatory labeling in Indonesia language on domestic products would be effective as per Regulation of the Ministry of Trade No: 22/M-DAG/PER/5/2010 on mandatory labeling in Indonesian language on products.

In that Regulation, it was compulsory to label certain products. With the mandatory labeling in Indonesian language being put in effect, there would be on reason for producers and traders to argue. The Ministry of Trade was known as preparing stern sanctions for importers and domestic producers who ignore the regulation.

Marga Singgih, Chairman of the Domestic Business Development of the Indonesian Footwear Association (Aprisindo) disclosed to Business News Monday (7/6) that he welcomed the policy. Labeling in Indonesian language on all products circulating in the market was believed to halt the flow of imported products especially from China to the local market.

However, he was pessimistic about the effectiveness of such policy afield. With a remaining time of just four months, it would be hard for business players to label their products especially to think that some products were already distributed in the market. “If it is said that the labeling strategy is meant to slowdown the flow of illegal products to Indonesia, such policy is regarded as just right, but it’s a pity that the tikme frame is too short, which is hard for players to comply to the rule.”

Therefore, the Government was expected to ease rules for the business world in regard to implementation of the policy, i.e. businesspeople were given one year time to label their products, especially products which were already in the market. “As fashionable products, foorwears have a fast trade cycle there are thousands of types of them. How can they withdraw thousands of items of footwear in just four months?”

Such a policy would only be effective if accompanied by strict supervision afield. The Custom Dept was regarded as playing an important role in safeguarding the policy. “In the future the Custom Dept is expected to be more professional, let there be no collusion between the Custom Dept and importers in allowing inflow of illegal products.”

LOCAL CATTLE REARERS SUPPLY 40% OF RAW MATERIALS FOR RAWHIDE INDUSTRY

The rawhide-based manufacturing industry try was developing quite impressively. Regretfully the supply of domestic leather raw materials at the domestic market was unable the keep up with the growth of rawhide and leather-based industries like: footwear, bags, waistbelts, leather jackets etc. Scarcity of procurement of local leather was indicated by the composition of imported leather raw materials which reached 80% of total demand.

Agit Punto Yuwono, Secretary General of the Association of Indonesian Leather Processor (APKI) disclosed that a good number of leather processing companies had to close their business due to shortage of raw materials supply from local suppliers. APKI reported that that the total leather processing industry today numbered 167 companies, of which 67 were medium-large companies, while the remaining 100 were small, home industry processors.

“The 167 rawhide processing companies are only able to procure around 20% of total need of leather and leather-product industries” Agit disclose to Business News in Jakarta Tuesday (3/6). With total procurement of only 20%, Agit remarked, import of leather raw materials had to be imported to maintain continuity of supply to the leather industry.

Today the Leather based industry needed around 5 million sheets of leather plus 25 million sheets of lamb leather per year. However the local cattle could only procure 40% of demand while the local lamb procured 25% of total need per annum. “By relying on imported raw materials, the price of Indonesian leather products becomes less competitive in the export market due to currency conversion before comparing against imported leather products” Agir remarked.