READING BALANCE OF TRADE

         The balance of trade of the Republic of Indonesia has been alarming because surplus in the balance of trade has continued to reduce. The export does not increase significantly, while the import soars (www.mediaindonesia.com, 9/4/2012). Is it true? The following description would answer the question.

        Data at the Central Board of surplus of US$ 692.8 million in the balance of trade in February 2012, compared to US$ 923.4 million in January. The decreasing surplus is attributable to the imbalanced growth of the export and import in February. Indonesia recorded the largest deficit in bilateral trade with Thailand, China, Japan and France.    

            The export of non-oil and gas commodities was indeed lower in February 2012, compared January 2012. The decrease is visible in most of the main export destination countries, namely India, Japan, Malaysia, South Korea, Britain, Germany, Taiwan and Australia. Amid the decrease, the export to China, Singapore, Thailand, France and the United States increased. However, data at BPS show that the total export to 13 main destination countries decreased by 1.88%. Briefly, the export value was lower, compared to the same period last year. The share of the industrial sector in the export reduced from 62.73% to 60.27% and the contribution of the agricultural sector decreased from 2.74% to 2.62%.

            In the meantime, the import value rose by 2.74% month and 27.26% year to year. Compared to January – February 2011, the import from 13 main import destination countries rose by 21.25%, mainly driven by the rising import from China and Japan, from which the import rose by US$ 1,088 million (32.73%) and US$ 798.1 million (28.70%) respectively, Indeed, the main importer of non-oil and gas commodities in January – February 2012 was China, with the import value US$ 4.41 billion, accounting for 19.9% of the total import.

            Surely the above mentioned data are uneasy for us. Slowly but sure, Indonesia started to be dragged to the loser side in free trade era. In relations thereto, we welcome positively the action of Trade Minister Gita Wirjawan to seek inputs from former trade minister. Even though the recent meeting was called as courtesy call and intended to discuss issues, the government needs to seek inputs from figures once leading the trade ministry in the past. The discussion is important to find the weaknesses of Indonesia in the current free trade era. Far before the trade liberation was applied, parties actually reminded the government of two possibilities in free trade, namely gain or loss. Since free trade is not identical with freedom of trade, the role of diplomacy becomes more important. Surely, the diplomacy constitutes domain of the government. The recent visit of British Prime Minister David Cameron to Jakarta was a diplomatic visit in the framework of seeking market for British products when economy of the country melts down.

            We must concede that we are not in the benefited position in free trade and the main cause is rather internal. In relation thereto, the government must work harder and smarter to drive up export, as well as facilitate domestic business communities so as to be able to expand export market.

 Business News - April 18, 2012

REDUCTION OF OIL PALM CARBON EMISSION ABOVE 20%

           Data used by Environmental Protection Agency (EPA) of the United States concerning oil palm which did not meet biodiesel specifications because it only reduces carbon emission by 17%. EPA requires emission reduction of up to 20%. According to calculation of Indonesian Palm Oil Board (DMSI) it is because the data used is the wrong one. We have brought our data there and they are studying it. On April 28 they will give a response, Derom Bangun, Chairman of DMSI, total Business News.

            The most fatal calculation is about peatland. EPA uses result of research stating that carbon emission of peatland is 95 Mg CO2 equivalent/hectare/year. From tens of researches on peatland emission, only tow persons who stated such a large amount of emission.

        Based on research of Palm Oil Research Center, researches of various national and international universities, DMSI concluded that carbon emission of peatland only reaches 38 MG CO2 equivalent/hectare/year. With DMSI’s data, reduction of oil palm biodiesel in the United States.

             Peatland which is converted to oil palm estate, according to EPA’s data, by 2020 will reach 13% of size of peatland area. While, based on DMSI’s calculation, the maximum conversion allowed is only 9.5%. Opening oil palm estate on peatland is very expensive. In addition to that, production is not as high as on mineral land.

            With only 9.5% of peatland converted to oil palm estate, reduction of oil palm carbon emission reaches 22%, or above EPA standards.

            EPA also calculates that the economic period of use of peatland for oil palm estate is 30 years, while in fact, with many existing weaknesses, including durability of peatland to support oil palm tress, the maximum economic age of oil palm is only 25 years at the maximum.

            EPA also assumes that conversion of forest to oil palm estate will reach 43%. This happens because EPA uses landsat satellite data which only reported that the area is covered by plants and defined as forests. While, in fact, such areas could be rubber plantation or dormant land.

          EPA did not consider that the Indonesian government through moratorium policy has prohibited the opening of primary and peatland forest for oil palm plantation. Therefore, DMSI calculates that land conversion only reaches 26%. With 26% conversion rate, emission reduction reaches 20%.

            Concerning methane which is captured and not released into the air, according to EPA calculation, will only reach 5.5% up to 2020. While, in fact, the data used by EPA is last year’s data. The data used by EPA is data on oil palm factories that do not participate in carbon trade mechanism, while in fact, there are many who captured merhane but are not participating in carbon trade as the revenue is low, but the spending is high.

            According to DMSI, around 60% of oil palm factories will capture methane in 2020. The stimulating factor is Resources which allows the State Electricity Company (PLN) to buy electricity from biomass generator at a price of Rp 975/kwh.

            It is electricity buying that stimulates the businesses to use wastes for power generation so they did not release methane into the air, he said.

            If 60% capture methane, oil palm carbon emission reaches 26%. In general, oil palm does not meet the requirements to be used as biodiesel raw material in the United States in 2020. The problem is whether or not they could accept our argument. Various kinds of attempts have been made to protect their products from competition with palm oil, he said. 

Business News - April 9, 2012

BP MIGAS TO ENHANCE COST RECOVERY EFFICIENCY TO MAXIMIZE STATE REVENUE

            Upstream Oil and Gas Regulator (BPMIGAS) successfully enhanced cost of operation and investment (cost recovery) efficiency in 2012 or only USD 15.1 billions to be claimed from the State by Co-operation Contractor (KKS Contractor) from the proposed USD 17.4 billion for the production of oil and gas at 2.25 million barrels of oil equivalent.

            The cost recovery figure this year is lower than realization of cost recovery in 2011 at USD 15.5 billions. This indicates BPMIGAS? Success in making management of upstream oil and gas industry more efficient to maximize state revenue.

          Once KKS Contractor proposed a budget of USD 17.4 billions for producing total gross revenues from upstream oil and gas activity at USD 53.7 billions with the share of the state at USD 28 billions and the share of KKS contractor at USD 8.3 billions.

            But, after going through negotiation, BPMIGAS successfully maximized total gross revenue to USD 56.3 billions from the proposed USD 53.7 billions.

          With the increase in gross revenue, the share of the state increases to USD 32.2 billions from USD 28 billions.

           The share of KKS Contractor also slightly increases to USD 8.9 billions from the proposed USD 8.3 billions. While, cost recovery proposed by KKS Contractor becomes USD 15.1 billions by increasing efficiency in some budget items proposed by KKS Contractor which are considered not to affect achievement in oil and gas production.

        Basically, we consider cost recovery as an investment to maximize state revenue, said Head of Public Relations, Security, and Formalities Division, Gde He added that the investment must also be enhanced to be more efficient by providing gain to contractor and the government. Cost recovery must optimally be spent domestically in the from of local content.

       Last year, from capital spending of USD 11 billions in upstream oil and gas industry, BPMIGAS has successfully accelerated rate of local content more than USD 6 billions.

        Such investment must continuously be made by Contractor in various forms of upstream oil and gas operations to reduce decline of oil production from 14 percent to 3-4 percent per year.

           With the investment and attempt to reduce decline in oil production, such as Enhanced Oil Recovery (EOR) attempt, Indonesia’s production is currently at around 90,000 barrels a day.

          But, cost recovery spending not only produces oil, but also produces gas. Therefore, cost recovery of USD 15.1 billions is to produce 2.25 million barrels of oil equivalent. 

 Business News - April 9, 2012