FRANCHISE BUSINESS GROWING RAPIDLY

Franchise business has recently become a trendsetter in Indonesian economic dynamics. Public interest in franchise business opportunity is very significant. This is reflected from two things, namely number of franchise buyers and number of businesses opportunities converted to franchise businesses. In the future, franchise business will be growing continually. Quoting data of Indonesian Franchise Association (AFI), total value of franchise business in 2011 reaches Rp 130 trillions, and it is predicted to reach Rp 160 trillions in 2012.

According to Chairman of AFI, Anang Sukandar, in Jakarta (Monday, 7/9/12), number of franchise business in Indonesia currently reaches 2,000 businesses. But, this number is dominated by prospective franchise businesses. To this day, around 40,000 franchise outlets have been spreading and have absorbed around one million workers. He said that franchise business will continue to grow rapidly reaching 2% - 3% a year, and franchise business opportunities could grow by 8% a year. Total investment for opening franchise business commonly starts from Rp 10-15 millions. “Regardless of the investment value, perseverance is an important factor”, he said.

Anang estimated that up to the end of the year, total sales turnover of national franchise business could at least reach Rp 220 trillions. Concerning franchise business development in the future, Anang mentioned some important factors, namely: firstly, franchise business is still growing; secondly, from the aspect of sales turnover, contribution of foreign franchisors is bigger; thirdly, foreign portion will be higher considering plan of new franchises from the United States and South Korea which will enter Indonesia. He reminded that Indonesia should not only become a fat market for foreign franchisors, but all local stakeholders must improve themselves as competition level is increasingly high.

Amir Karamoy, Chairman of Standing Committee for Franchise and Licensing of Indonesian Chamber of Commerce and Industry (Kadin Indonesia), said that a quite strong economic fundamental in the first 6 months of 2012 has supported franchise growth. He said that the most significant franchise growth is experienced by food and other culinary businesses. During school holiday, sales of food and beverage products increase quite significantly. According to him, growth in sales turnover is occurring proportionally, whether for foreign or local franchises. Based on Kadin Indonesia’s survey, local franchises show a positive development, and it can be seen from many reports regarding growth of franchise business.

Amir said that growth momentum of sales turnover will occur during the Ramadhan fasting month and Lebaran. During that time, consumption always increases if compared to normal days. And, expansion of foreign franchises will probably be slowing down awaiting amendment of Regulation of Trade Minister concerning franchises. Yet, however, foreign franchisors’ interest expanding their businesses in Indonesia is still high.

According to Amir, franchise growth is also supported by political and economic stability. Both are the key to national franchise growth. During 1^st semester of 2012, franchise business is going on very well, as seen from network expansion and appearance of new players. Four franchise businesses which are growing quite significantly are culinary, education, automotive, and travel businesses. While, by area Jakarta, Bogor, Depok, Tangerang and Bekasi are the largest contributors to franchise growth. “There are also franchise businesses which are growing in the region, and after they are developing, they expand their businesses to Jakarta” he said.

Business News - July 11, 2012 

INCREASE EXPORT WITH BIGGER ADDED VALUE

Looking at the structure or composition of Indonesia’s mom oil & gas export, the challenge that must become the attention of the government and the stakeholders is haw to increase added-value export. In the presentation of analysis on Indonesia’s trade performance in June 2012, Vice Minister of Trade, Bayu Krisnamurthi, in Jakarta on Tuesday (7/3) explained that based on UN Statistic Classification, Indonesia’s export structure is dominated by primary commodities and primary industry products (65%), while import is dominated by secondary industry and advanced industry products which reaches 62.9%.

Primary commodities that have a big contribution to export value are, amongst others: mineral fuels (35.4%); animal or vegetable fats and oils (10.8%), rubber (4.5%), ores, slag, and ash (3%); fish and prawns (1.4); and copper (1.3%). Export of primary commodities in May 2012 reaches USD 10.5 billions or down 16.3% from the previous year, while export of manufacturing products reaches 32.2% or increases 8.4%. In January – May 2012, export of primary commodities increases 33.2% to USD 52.7 billions from the previous year, while export of manufacturing products declines by 29.4% or USD 28.7 billions.

Accompanied by some echelon I officials, Bayu explained that primary commodities whose export value experience sharp decline in May 2012 if compared to the previous year are, amongst other, mineral fuels (7.11%); animal or vegetable fats and oil (46.82%); rubber (22.24%); tin (23.48%); and copper (63.79%). Decline in export value of the above commodities are due to decline of commodity prices in international market.

While, products that have influence over significant increase of import and contribute to non-oil and gas trade deficit in May 2012 are, amongst other: aeroplanea (increases by 182.6%), cell phones (increases 66.6%) electronic circuits (increases 54.9%); and loaders (increases 50.2%).

Looking at the trend of increase of import of cell phone products, the government will promote investment in cell phone products considering that so far, those who are locally made are only cell phone cases. There are four factors that affect import, namely price, quality, specification, and diversity of imported products. For example, automotive industry as part of international manufacturing system, even though they are produced in Indonesia, import of Indonesian components originates from various countries.

Cumulatively, trade balance of January – May 2012 is USD 1.5 billions in surplus (down by 87%). Products whose import increases sharply in January – May 2012 that it reduces trade surplus are, amongst other: aeroplanes (increases by 112.6%); cell phone (increases 22.2%); and potassium chloride (16.5%). In the future, this should be anticipated considering that activity of import of these kinds of products will continue as domestic demand increases continuously.

“Actually, the activity of import of raw & auxiliary materials and intermediate goods will increase continuously, where at the same time, we are working to reduce import of consumptive goods. Commonly, import of intermediate goods as part of the industry is for the purpose of increasing productivity. That is the reason why Indonesia must not concentrate on producing finished products, but must also consider producing the raw material”, said Bayu who was accompanied by Chairman of KADIN (Indonesian Chamber of Commerce and Industry) Committee for Productivity Increase, Gunadi Sindhuwinata. Therefore, industry deepening structure is also required.   

 Business News - July 6, 2012

PERTAMINA REGRETTED CRUDE OIL LOOTING

Crude oil looting on Tempino-Plaju pipeline in Jambi and South Sumatera is increasingly concerning.  The losses in May 2012 reach 39,000 barrels of crude oil. And, in June, total losses increase to more than 59,000 barrels during that month. Pertamina EP regretted that there is no response yet on the report conveyed to law enforcers in the criminal act. One of the proofs is that the amount of losses as a result of the looting on the Tempino-Plaju pipeline increases each month, Pertamina EP’s Public Relations Manager, Agus Amperianto, told Business News (7/2).

The looting causes loss to the state due to loss of state revenue potency from the aspect of crude oil production as mandated by the government through BPMIGAS to Pertamina EP. Criminal act is rampantly occurring in Pertamina EP’s oil gas operations area, especially in South Sumatera and Jambi. The criminal act is committed on company personnel and assets that has caused tens of billions of Rupiah in losses. The criminal acts occurring include, amongst other, crude oil looting, asset thievery, sabotage, and violent crime. Many of the criminal acts occur in Pertamina EP’s operational area in Sunatera and Jambi. Losses have occurred two times in there two regions and total losses have reached more than 100,000 barrels. The irresponsible, but it also hamper operational activities because of lost and damaged assets, environmental pollution, and fire threat.

A photovoltaic company from Germany, Inutec Solar Center, once regretted the prohibition imposed by Customs and Excise officer from Soekarno-Hatta airport, Cengkareng, Jakarta. The solar panels for generating electricity are planned to be given as a gift to University of Indonesia (UI) Energy Center in Depok. But, when the solar panels have already been shipped from Germany through Soekarno-Hatta airport, it is prohibited by customs and excise officer. We have shown recommendation letter from UI that the solar panels are intended for education and development of renewable energy in Indonesia. Therefore, there is no reason why the solar panels have to be prohibited, Lismawati, Inutec Jakarta Representative, told Business News.

Inutec’s gift to UI is a right thing as the Energy Center needs equipment. Some students of the Technical Faculty, especially those who join the S-2 program need equipment at the laboratory. There was a foreign private company who gave assistance, but there was bureaucracy problem at the airport. We are concerned that the act of the customs and excise office could degrade Indonesia’s reputation. The German company did not get anything, but they have spent some cost for assisting UI. And, at the airport, the office offered an option on re-export to Germany. We refused it because the cost is very expensive.

The value of the gift from Inutec to UI Energy Center has reached hundreds of millions of Rupiah. Besides grant of solar panels, founder of Inutec and photovoltaic expert, Alexander Kaub, will provide capacity building to UI Students. Its potency is enormous considering that Indonesia has a tropical climate, with its sun rays hotter than in Germany. Sun ray as source of energy in Indonesia is three times of that in Germany. But, development of solar energy system in Indonesia is far behind Germany. So, there should be a development in the future. If not, our fossil fuel could only exist for nine more tears at the maximum.

PLN and Petronas Carigali (PC) have signed a gas sales agreement on Kepodang field. The agreement was signed by President of PLN, Nur Pamudji, and General Manager of Petronas Carigali Indonesia Operations, Zainal Anuar B. Abdullah, Gas supply from Kepodang field will be intended for PLTGU (gas abd steam-fired power generator) Tambah Lorong in Semarang. Supply is scheduled to start in 2014. The contract period is 12 years or up to the end of December 2026. Currently, PLTGU Tambah Lorong is rested temporarily because much of Central Java load is supplied from PLTU (steam-fired powe generator). But, in the next two years, the load will increase, and at that time, PTTGU Tambah Lorong can be operated by gas to support growth of load, President Director of PLN, nur Pamudji, told Business News.

PC will supply 116 MBBTU of gas per day and the maximum utility is 121 BBTU per day. The price of gas agreed is USD 4.61/MMBTU with 8.6% escalation a years. 

 Business News - July 6, 2012

THE IMPLICATIONS OF PRIVATELY MANAGED AIRPORTS

To step up services and anticipate growing number of users of air transportation, expansion of airports and infra structure was needed. Today, of the 25 commercial airport run by PT Angkasa Pura I, nearly all of them were having over capacity and needed expansion in order to serve well.

It seemed reasonable that the Government allowed opportunity for the third party to participate in airport development projects. Airports which were of commercial value were better be offered to private operators so the Government could concentrate more on managing airports of less commercial value to open access to isolated regions.

For that matter it was best for the Government to evaluate which airport should collaborate with private operators and which airport should be privatized. The Government’s policy was worthy of appreciation because it was a notable breakthrough.

As know, infra-structure building for example were the important factor supportive to economic development. Inter-regional, inter-provincial or inter insular connectivity would be cheaper with frequent airlinks and professionally managed airports by private operations or new airport run by the Government.

Very frequently word was out that the Soekarno Hatta airport in Cengkareng, Banten was overcrowded and might endanger air traffic. This was because the Soetta airport was the center of air traffic for arrivals as well as departures. If other airports in the regions were renovated and upgraded it would be supportive to air traffic and passengers handling at Soetta airport.

What’s more, if airport which served as points of destination for tourists or other potential airports in the regions were upgraded, it might lessen passengers’ flow to Soetta airport. Today many foreign and local tourists were concentrated in Jakarta because of the better airport and letter access to tourist objects.

Yogyakarta, Denpasar, Balikpapan, Banjarmasin, and Manado with all the panoramic tourist attractions had the potential to drum up more tourists if the airport were modernized. If necessary the Government could be engaged with the private sector in project investments based on build, operate and transfer (BOT) concept.

The private companies who modernized the airport might be given the concession to manage the airport over a certain period, for example 25 years. In the affirmative case the public would be happy with airport facilities and services. Broadly speaking airports run by the private sector tend to be better than being managed by the Government.

Today the number of airport in Indonesia was posted at 223, consisting 25 airports managed by BUMN, i.e. 13 airport run by PT Angkasa Pura 1 and 12 airport run by Angkasa II and one airport run by PT Freeport Indonesia; the rest were under the supervision of the Directorate General of Air Transportation of the Ministry of Transportation.

As whole the physical condition of airport in Indonesia were varied. Some were adequate and in accordance with international standard so they deserved to be called international airport but some airport were in poor condition as they were not properly maintained.

The disheartening thing was that some airports were too closely located to people’s settlements of office buildings which might endanger the people and airlines. A condition as such made it difficult for pilots to make maneuvers or smooth and safe landing.

It seemed reasonable that some cities like Medan and Yogyakarta planned to relocate their airports to some better spots; a proposal as such needed support whereby to create a safe and comfortable mode of transportation.

Again the government was engaged in collaboration with the private sector in managing airport for the future. To avoid future polemics, it would be better for the Government cq the Ministry of Transportation to communicate with the Parliament to appoint the private sector as developer and operator of commercial airports.

Beside better airport to be managed by private operators considering the vast development of airline business and the future application of ASEAN OPEN SKIES 2015 and ASEAN SINGLE FLIGHT 2020, Indonesia would need 4,000 pilots, 7,500 technicians and 1,000 air controllers.

To meet those challenges the Association of Indonesia Air Regulators (INACA) in collaboration with the Human Resources Development Agency, the Directorate General of Civil Aviation, Ministry of Communication and Transportation held the first international convention with focus on training of air personnel for Indonesia needs.

Today school of aviation were growing fast in Indonesia in tandem with operation of new aircrafts around 8% per year. Still schools of aviation in Indonesia were unable to keep up with the growing demand in this sector.

Indonesia with a population of 240 million only had 13 schools of aviation compared to other countries which were just as populous as Indonesia. for example the USA who had 1,076 aviation schools and Uni Europe having 369 schools.

To keep up with the exploding demand for pilots, if the national schools of aviation were not able to meet the need, collaboration could be run between local schools and foreign schools. Pilot candidates had been sent overseas to study flying techniques.

Other pragmatic way was to employ foreign pilots who were experienced to work with national airlines. Local airlines employing foreign pilots were commonplace, and other countries were doing the same, and in many cases Indonesian pilots worked for foreign airlines.

The conclusion was that development of airports undertaken by the third party and employment of qualified pilots became an urgent matter as homework for the Government so the national airline industry might grow sustainably.  

 Business News - July 6, 2012