Three Toll Road Sections To Be Put In Tender Through 2012-2013

The three toll road sections, namely Medan Kulanamu-Tebing Tinggi 60 km long, worth USD 475 million of investment ; Cileunyi – Sumedang – Dawuan (Cisumdawu) 58.5 km long worth  USD 252 million. According to Ghani, the three toll road projects already had definite support, hence ready for auction.

For the construction of Medan – Kualanamu – Tebing Tinggi toll road section and Cisumdawu the government would get loan from China. However, although financed by overseas, the government would exercise the land clearing using State Budget fund.

To drum up private investment, sometime ago the government already offered the project to china. During is visit to this bamboo curtain country, the BPPT executive explained about investment procedures of toll road building in Indonesia, and disclosed various problems faced as well as the measures taken by the government.

“However at the time there was still no investors stating their interest. Normally the interested investors would come over to Indonesia. They would carry out their own study and directly contact the related official” Ghani remarked.

Indonesian Shoes Competitive Against China

As one of reliable export commodity, footwear plays an important role as forex contributor to the state. Besides, because of the labor intensive nature of the industry, the footwear industry accommodates workers in great number. The two roles, as forex contributor and labor absorber are enhancer of growth year after year, and vitalizes investment including foreign investment.

Data of the Indonesian Footwear Association (Aprisindo) showed that export of national footwear this year was targeted to reach USD 2.4 billion. Meanwhile ini the domestic market Apsirindo reported increase of 30% this year against previous year at Rp 27 trillion.

Positive trade performance of national footwear, at domestic or export market, testifies that national footwear industry continues to exist in spite of import invasion from china. On the other hand, the ACFTA era should recharge spirit for Indonesian footwear producers whereby to sharpen their competitive edge through betterment of quality and design.

Head of the Small Business (UKM) Development Division Tongki Komaladi was optimistic that Indonesian products were competitive against China’s product at the domestic market. According to Yongki, invasion of china’s products to Indonesia was not a hindrance to the domestic shoes industry. Evidently sales of local shoes remained stable or even increasing. The most important thing was to create innovative products “the more unique our products the harder it would be for china to compete with us” Yongki remarked.

In fact the storm of china’s products caused by the ASEAN-China Free Trade needed not to be over responded by Indonesian business people with excessive fear. Every shoes producers, Yongki said has their own strategy to wall out invasions, so it was not necessary to worry that China would dominate our market. He was still optimistic that although around 60% of shoes raw materials were imported his products would not be edged aside by China.

Admittedly there were still obstacle faced by national footwear industry, among them great dependency on imported raw materials and high bank interest. He elaborated that bank interest at Bank Indonesia was still two digit. In addition to that the cost of logistic collecting during distribution was very expensive. All were regarded as hindrances to the development process of national footwear industry. Therefore, according to Yongki it was simply wrong to beg to the Government to give facilities and convenience.

BRI Extend Investment Credit and Capital to Perhutani

PT Bank Rakyat Indonesia (BRI) entended loan to Perum Perhutani in the form of credit investment of working capital worth Rp 1.964 trillion. The loan would be used by State Owned Companies (BUMN) who managed forest in Java for capital expenditure amounting to Rp 964 billion and for operational expenditures worth Rp 1 trillion.

The Director of institutional Affairs and BUMN Asnawi Syam stated that the funding extended top Perhutani was a form of inter BUMN act of synergy. Furthermore as a healthy BUMN with achievements of making hundreds of billion Rupiah of profit in the past 3 years, Perhutani was never touched by any credit facility.

“we feel sure that the financing facilities or offer would enable Perhutani to be more focused in their effort an be able to exercise business development and other investments” Annawi made this remark during signing pf credit agreement in Jakarta on Monday (30/5).

Besides financing operations, BRI would also undertake payroll for Perhutani employees, where BRI commands over effective payroll system most appropriate for institutions employing large number of workers.

In the same opportunity, Financial Director of Perhutani ANS Kosasih stated that the financing was badly needed by the Company was never given any credit it was because Perhutani was able to finance need from their own pocket. However as time goes by, such was no longer appropriate. Perhutani was too late in developing business, while competitors from Indonesia and over season were in  a better porition to develop business.

With this new sourch of financing, Perhutani capability to develop business was increased, and consequently jack up performance.

By end of 2010 Perhutani had made earnings of Rp 3 trillions and made profit befire tax of around Rp 325.45 billion. Kosasih was certain that he could make profit up to Rp 1 trillion in the next two or three years.

As known, since founding, the Directorate of Business an institutions of BUMN in 2007 now there are around 56 BUMN who have had credit facilities, cash or loan, in the form of working capital and credit investment and non cash loan in the form of facilities like Bank guarantee, LC/SBLC etc.

The commitment or credit from BRI in the form of cash loan to BUMN up till now had reached Rp 54 trillion with outstanding account of around 29 trillion. Apart from the said assistancem Bank BRI would act to manage payroll to around 25,000 workers of Perum Perhutani in Java and Madura.

Payment of employees salaries through BRI was the right solution, because BRI was the right solution, becauses BRI network are close to Perhutani operational units. Mpreover BRI is experienced in paying salaries to institutions like the Ministry of Religion, the army, airforce, police, Public Workers, etc.

Parliament to Make Amendment on State’s Financial Law

Deputy Chairman of the Legislation Board of House, Dimyati Natakusumah said that House planned to make amendments on Law No. 17/2003 (BN no 6913 page 168-208) on state’s finance. The law amendment was included in the National Legislation Program of prioritized Bill 2011.

Law No. 17 year 2003 had not regulated independency in management of financial state for authorities in the government, the Legislation authorities and judicative authorities. For that matter amendment of this law would be necessary.

Bomer Pasaribu, ex Deputy Chairman of House of the past period stated that the effort to amend law no. 17/2003 had begun since 6 years ago. Chairman of House and Convention Board of 2004-2009 on March, 2005 assigned the Legislation Board of House and Commission XI of House to make through analys on law and regulations to enhance independence and effectiveness of House’s role.

According to Bomer, in line with the dynamic of life, the demand was not to maximize the role of House but also  other state’s institutions like DPD, the Yudicial Commission which were close to three summits of power i.e. executive, legislative and judicative.

The objective of law amendment was to strengthen the three summits of power including the Regional Representatives (DPD) and Yudicial Commission.

The Legislative Body needed to synchronize perception of the amendment, to decide what was needed total change or limited change. However it was recommended that the amendment was limited. If the change were overall it might take a long time to accomplish. House must focus attention on three executive summit i.e. executive, legislative, judicative and the corresponding body.

This law amendment must be carried out the limited way, in principle it should be active and fast and be finalized by 2011, so it could be implemented in State Budget 2012 an onward. The principle of limited revision should be understood as anticipation of amendment of other related laws such as Law no 1/2004 (BN no 7021 page w 13B-14B) on state’s treasures and law no 15/2001 (BN no 7120 page 1B-6B) on management Examination and Financial responsibility of State Budget and other Laws.

Meanwhile Pateniari Siahaan who was also Vice Chairman of the Legislative Body of House for the period 2004-2009 agreed on amendment of the Law of State Finance. However the Legislative body of house must take through analysis in the changes. The problem was that there were 18 other laws which needed synchronization, harmonization and round ups. (SS)

Ministry of Industry Absorb 14,9% of Definitive Ceiling of State Budget 2011

Until quarter I 2011, precisely May, absorption of budget by the ministry of industry reached 14.9% of definitive ceiling of State Budget 2011 at Rp. 2240 trillion. The minister of industry M.S. Hidayat, during technical meeting with commission VI of house on Monday (6/6) disclosed that the budget absorption level was on the right track, considering that tender process of government projects had just begun.

In part of his presentation to house it was stated that in 2012 the ministry of industry had recommended 11 tasks under the Director General of Basic Industry Manufacturing, the Directorate General of Industrial Zones Development the Directorate General of Climate Management and Industrial Quality; the Directorate General of International Industrial Collaboration, and the Secretariat General respectively.

Through a number of recommendation which supported development acceleration and expansion of six economic corridors the total fund reached Rp 472 billions, of which the greatest allocation was for the development of cheap public transportation amounting to Rp 144 billions and extra restructurization for textile-and textile products industrial machinery worth Rp 100 billions.

In the effort to increase added value to domestic agro industry, apart from enhancing investment in certain Industries in certain facilities and asked the ministry of finance to give incentives to industries who processed their raw material at home (such as for mining products) while on the other hand to impose disincentives on commodities brought out of Indonesia, such as by way of imposition of export tax.The regulations was intended to be put in effect on the mining and petro chemical industries, to shift domestic industries more to the downstream side.

Export Tax Down, Export Up

In May – June 2011, the government reduces export tax for cacao to 10% after it once decided to impose 15% export tax on cacao. High export tax had a consequence on the performance of cacao export in April 2011 which was sluggish. Based on data of the National Bureau of Statistics (BPS) in April 2011 volume of Indonesia’s cacao export only reaches 1,199 tons. This number falls by 83.6% from the month before which reaches 18,743 tons. Export tax reduction is expected to boost cacao export.

The Indonesia cacao farmers Association (APKAI) predicted that in 2011 national production of cacao beans could reach more than 700,000 tons. While, in fact, the Indonesian cacao Association (ASKINDO) is pessimistic that cacao beans production this year could only reach 500,000 tons. APKAI’s prediction is higher than ASKINDO’s as there are some regions which produce higher volume of cacao, they are, amongst other, central sulawesi and west sulawesi. In these regions, cacao bean harvest could reach 500 tons/hectare. Nationally, cacao beans harvest in January – May 2011 only reaches 300,000 – 400,000 tons.

The international Cacao Organization (ICCO), stated that world’s cacao supply will experience a 189,000 MT surplus. The oversupply is due to increase of cacao production in Africa. Cacao harvest I Ghana, world’s second largest cacao producer, will increase 52% to 960,000 tons in the harvest season this year. Meanwhile, cacao production in Ivory Coast will also increase 4.7% to 1.3 million tons. Cacao production in Nigeria will increase by 5000 tons to 240,000 tons. Cacao harvest in Cameroon is predicted to increase  100,000 tons to 215,000 tons.

On the contrary, according to ICCO, Indonesia’s cacao production will record the highest decline. Cacao harvest in Indonesia, as world’s third largest cacao producer, is predicted to decline to 510,000 tons from 550,000 tons.

Two factors that cause increase of cacao harvest are: firstly, improvement of climate condition. Secondly, high cacao price which encourages farmers to grow more cacao. Price of cacao once touched its highest level in the past 32 years, latest on March 4, 2011, at USD 3,775/ton.

Meanwhile, the Indonesia Cacao Industry Association (AIKI) predicted that number of fake cacao powder circulating in Indonesia reaches 5000 tons a year. This condition causes losses to industry as price of fake cacao powder is 50% cheaper than the original one. Fake cacao powder is processed cacao shell. Unsterile cacao is frequently spoiled, and the processing of cacao beans uses fumigation which involves the use of chemicals. WHO has declared that fake cacao powder is unfit for consumption.

Currently, total national production of cacao processing industry reaches 280,000 tons/year. From this amount, domestic consumption only reaches 40,000 tons, and the remaining is for export. Domestic consumption of cacao powder is low or only 0.06 kg/capita. This rate is much lower than in Europe which reaches 10 kg/capita.

Goverment Policy Encourages Producers To Change Role To Traders

The industries complain about government policies which do not favor them. Policy of import duty is considered to reduce competitiveness of domestic products and will finally encourage producers to shift role to importers or traders. Chairman of Indonesian Young Entrepreneurs Association (HIPMI), Erwin Aksa, regrets about government policy in industry which does not favor producers. Consequently, producers change role to traders which are considered more profitable. He gave an example of import duty policy where the government imposes import duty on raw materials not produced domestically, while finished products are exempted from import duty.

According to Erwin, the potential change of role to traders has been evident. Moreover, if it is not accompanied with incentive policy that could boost industrial growth. While, in fact, there is a rampant inflow of Chinese products. Erwin said that the application of ASEAN-china Free Trade Agreement (ACFTA) has forced domestic players to come face to face with industries from a country which is designed to supply global demand.

Survey the ministry of industry on national businesses and consumers shows that domestic products started to decrease. While, many domestic industries are supplying to meet demand of one country. While, Chinese industries receive and tax reduction. “in such a condition, it is understandable if many national business will change role to importers. By becoming importers, they will not bear any business risk”, he said.

Erwin regretted the attitude of the business or producers who recently changed role to importers of products from china and india. Local producers should be the host for domestic products. He predicted that import of Chinese and Indian products will probably become a trend in 2011. He explained that producers who changes role to  trades are mostly small and medium businesses. Many of the imported products sold are garment, handicraft, food and beverages, and furniture.

The above condition confirms that de-industrialization could happen in the future. Erwin explained that currently, Chinese industries experience overproduction as its main markets, namely United States, Europe, and Japan are in sluggish condition. In addition to boosting domestic consumption, China also seeks new potential markets, and one of them is Indonesia. So, flow of cheap products from china will increasingly flood the Indonesian market.

To curb the shift of role from producers to traders, according to Erwin, the government must determine the direction of the national industries. He also explained that raw material guarantee and capital access will significantly affect the success of domestic industries. Moreover, bank interest rates domestically are high if compared to China. Guarantee of market and commitment to use local products are also necessary.