ANTIGRAFT MODE IN INDONESIA NOT LIKE IN OTHER COUNTRIES

United Nations on Drugs and Crime (UNODE) saw that there was not a single country in the world which could serve as model of corruption eradication system in Indonesia. Improved performance of the Police Force as initial step of corruption eradication effort in Hong Kong some decades ago was not necessarily right to be adopted by Indonesia. Duty of the Police Force as an institution in Indonesia was different from that of nearly all countries in the world. “So there is not a single system of any country in the world which is even close to the condition in Indonesia. The reformation process of the Police in Hong Kong and Indonesia could not be generalized. This is still only one aspect of the police function, not as yet to mention the judiciary institution, the Ministry of State Apparatus Reformation and Bureaucracy etc” Monica Tabuhandaru, Project Coordinator UNODO disclosed to Business News (3/8).

Hong Kong was a country which had successfully reformed their Police Force to fight corruption in Hong Kong some decades ago. Meanwhile Singapore succeeded but it was thanks to the role of ex-Prime Minister Lee Kuan Yew who always appeared simple in his daily Life. “Japan, Korea and America also succeeded but the method are different than that in Hong Kong and Singapore. Japan saw that corruption caused high cost to their export products. Corruption could also cause poverty so it should be fought. In America corruption is even regarded as equal to violation of Human Rights. Indonesia could not simply adopt foreign ways, but in any country there are lessons learned for the respective countries” Monica remarked.

The role of Police in Europe was way different from that in Indonesia. The Police as security apparatus faced heavier challenges of different aspects. Policemen were stations in certain regions where there was not even a Court of Justice. So far judicial institutions were only existent up to the level of residence and towns. “Meanwhile a policeman’s salary was only around Rp 2 million and social complexity was mounting up. There were labor conflicts, land disputes and other which were now spreading far into the rural areas. But in big cities like Jakarta, police’s task was even more different. UNODC once conducted intensive survey on police performance. It was unveiled that there were sectoral police stations (station A) manned by 120 policemen, but there were also other stations manned by 20 persons. “But UNODC survey unveiled that Police Station B of 20 men performed better than police station A of 120 men. The survey was not loosely run. We cannot mention the address of the said station. Survey outcome underscores that reformation but also leadership quality of the commanders”.    

Meanwhile the Ministry of Maritime and Fishery (KKP) was getting more serious about national strategy implementation on the prevention of abuse and blackmarketing of narcotics (P4GN) such was in accordance with the message of Presidential Instruction No. 12/2012. The National Board of Narcotics (BNN) signed Memorandum of Understanding with the Minister of Maritime and Fishery Sharif C. Sutardjo. “Drug abuse must be fought against in tandem with post rehabilitation plan. Rehabilitation plan includes Logistics provision, accompaniment and development of maritime and fishery techniques and making of anti-drug cadres” Minister Sharif disclosed to Business News (13/8).

The Ministry of M & F and BNN planned to conduct training sessions in maritime and fishery techniques for drug-abuse victims. Those were the foundation and basic asset for both institutions to constantly foster collaboration. The new modus of operandi of drug smuggling very often used fishermen’s traditional boats. Quite frequently traditional fishermen were used as couriers. A modus as such was using fishermen and ships crew who never know the dangers of such of crime.

Indonesia being the world’s greatest archipelago had numerous harbors, wharfs and quays used as gate of entry to accommodate traffic of goods from other islands or countries. This Indonesian waters being identified, there were at least 200 points of entry that could be used as smuggling channels. Stringent control over small harbors would strengthen control over international drugs traffic movement.

Business News - August 8, 2012

TO EVALUATE CREDIT IN FOREIGN CURRENCY

In a restful global economic climate, credit pipelining in foreign currency especially USD was never any serious problem. However, when economic crisis swept over the world which stagnated flow of USD, traffic flow of foreign currency was just as jammed.

The effect of global crisis was starting to be visible in the performance of Quarter II – 2012 in the banking sector at home. Flow of foreign currency was not as smooth as it used to be. This was the impact of bank’s policy who were being more selective about applicant debtors; banks were also reserving more foreign currency to safeguard their liquidity.

To illustrate: Bank Mandiri, who by June of 2012 last booked increasing forex credit by 8% to become Rp 43 trillion. Over the same period the previous year forex credit grew by 10%. The management of Bank Mandiri deliberately put brakes on giving forex credit due to restricted liquidity of forex. Until June 2012, demand for third party fund of forex only grew by 8.1% to become Rp 59 trillion.

Downturn of foreign currency credit was in parallel with pipelining of corporate credit. Over the same period, this type of credit only grew by 23.9%. Predictably the reduced foreign exchange credit was only applied on credit which were not export oriented. Meanwhile credit for export remained to be given as long as the export commodity was exported and debtor received their income in USD.

It was reported that having pocketed loan from the Standard Chartered Bank Singapore amounting to USD 250 million, Bank Mandiri was again ready to pump out forex credit above 10% till end of 2012. Moreover if obtained loan could reached USD 450 million, the forex credit could grow even higher.

Bank Mandiri’s sister company, Bank BNI, also posted downturn in forex credit. While it grew by 15% in quarter II, now it only posted 13% growth. Downturn of forex credit was mainly happening in the oil-gas sector. This was related to price of oil-gas which dropped due to crisis effect in Europe.

Up to July 2012 last, forex credit provided by Bank BNI was posted at Rp 179 billion, up by 17% against previous period of Rp 152 billion. The bank that bore the logo of 46 predicted that pipelining of forex credit would be more stable provided that the crisis turbulence in America and Europe had subsided.

What was done by the two BUMN was the right strategy. For the sake of managing cases of non performing loans, companies must be selective in channeling forex credit. For example, only companies whose income was in USD like vendors and oil-gas producers. Hence the loss potential from forex loss could be avoided.

Banks were not supposed to force themselves to pipeline forex credit to debtors who sold their products in domestic market, Considering the possibility of forex loss. If debitor’s products were marketed at home, it was advisable for them to be giveb credit Facilities in Rupiah.

Under certain circumstances, banks could give recommendation or input to debitors who had forex credit to convert them into Rupiah credit. This was done to protect debirors from loss and also to safe banks from the risk of non performing loan.

Previously, to compensate release of new forex credit, Bank BNI jacked up pipelining of credit in Rupiah denomination, BNI planned to increase credit flow to eight industrial sectors, among others: agribusiness, construction, communication, electricity, mining, oil-gas, consumer goods and retail.

Although upper strata banks were putting brakes on forex credit, it did not mean forex liquidity was ignored just like that. To banks, liquidity was the lifeblood of a bank that enlivened bank’s operations which made them ready to face any circumstance.

To strengthen forex liquidity, in Semester I – 2012 Bank BNI had released global bonds worth USD 500 million for a period of 5 year. Furthermore Third Party Fund (DPK) of forex also rose by 21%. This foreign currency liquidity was readied to meet customers need and debitors who might at anytime needed foreign currency for overseas payments.

Either customers or private debitors of State Owned Companies (BUMN) who were partners of BUMN must fulfil their forex obligation, like Pertamina. This company who was being active in oil industry could at anytime have the obligation to pay for their import need of oil to the Singaporean oil market.

Hence the banks which were Pertamina’s partners must be able to fulfill. In order to fulfill, banks must know the payment schedule of Pertamina’s forex payment obligation. If banks had no possession of forex reserves in sufficient quantity, they should obtain forex of the public or other financial institutions, especially who had prepared credit line or market line in USD.

Today as export activities tend to weaken, demand for credit in foreign currency tend to lessen as well. So banks did not have to be persistent in channeling forex credit. It would be better if the available forex liquidity be managed well to anticipate possible future sudden soaring demand.

Banks were advised to avoid seeking for forex fund when forex stock was running out, because it was almost certain that fund owners would demand higher interest. So in times when forex abounds banks should aggressively collect to prepare just in case.       

Business News - August 8, 2012 

RUPIAH AND IHSG NEED POSITIVE SENTIMENT

The Moneymarket

During closing session last Thursday (2/8) Rupiah was seen to strengthen considerably against USD by four points thanks to growing optimism triggered by meeting of the Europe Central Bank (ECB) which was expected to stimulate the market positively.

Rupiah exchange rate value in inter-bank transaction inched up to Rp 9,435 against the previous position of Rp 9,439 per USD. Rupiah was still stable although the Fed had not glen any extra stimulus, which economists predicted to be given by next September.

The market’s attention was now focused on the ECB meeting which was being awaited for the market was expecting that the policy would bring positive impact in the market. However the German manufactures in the Euro region who reduced their activities could be one of Rupiah catalyst to retun to the bearish zone. Strengthening of Rupiah was still at limited range because market players were still waiting for outcome of ECB meeting which might lower their interest rate.

Meanwhile the Central Board of Statistics (BPS) announced annual inflation this year was happening through July 2011 – July 2012 at 4.5% with highest inflation happening in the food sector. Price increase in the food sector was noted at 7.02% which was the strongest stimulus to inflation over the period of July 2011 – July 2012.

Significant price increase was also happening in ready food category, beverages, cigarettes and tobacco at 5,88% and garments which increased by 5,06% followed by increased price in education, recreation and sport at 4.2%, housing, water, electricity and fuel at 3.29%, health 2.96% and transportation, communication and financial services at 1.87%.

Compared to national annual inflation rate of the same period two years before, inflation rate this year was relatively lower compared to inflation rate of July 2009 – July 2010 at 6.22% and inflation of July 2009 – July 2011 at 4.61%.

Meanwhile BPS ado released inflation rate of calendar year (January-July 2012 at 2.5% which was relatively higher than inflation in calendar year 2011 at 1.74%. Inflation rate of July itself was posted at 0.7% which was also an increase compared to inflation of July 2011 at 0.67% and inflation of May at 0.65%.

Government Optimistic about Controlling Inflation of 2012.   

Meanwhile the Government remained optimistic about maintaining inflation of 2012 at 5.2% which was lower than the target of State Budget (APBN-P) 2012 of 6.8% due to cancelled price increase of subsidized oil. Bank Indonesia and the Ministry of Finance had agreed to set inflation target for 2013, 2014 and 2015 at 4.5%. 4.5% and 4% respectively with deviation of 1%.

The Central Board of Statistics (BPS) announced Indonesia’s accumulated import through first Semester of 2012 (January-June) posted surplus of USD 470.1 million. With accumulated total export of USD 96.69 billion while import was USD 96,41 billion the accumulated trade balance through January-June was posting surplus.

Sector wise, export through First Semester of 2012 was dominated by the industrial sector at the value of USD 57.76 billion or 59.62% of total export. Furthermore export value also supported by the oil-gas sector at the value of USD 20.06 billion supported by export of mining commodity worth USD 16,53 billion (17.07%).

Meanwhile export of commodities of the agricultural sector was considerably low at the value of USD 2,53 billion or 2,53% of total export. By sector, only export of minery products which recorded  increase of 4.9%, meanwhile export of industrial products of semester 1, 2012 surprisingly dropped by 4.85% against same period of last year. The same was with export of agricultural products which slumped by 1.35%.

Regretfully import-export balance of July still recorded deficit of USD 1.32 billion. This was because export value of June dropped by 16.44% while import value rose by 10.71% against previous year.

Total export of June 2012 which reached USD 15.36 billion dropped by 8.7% against May which was posted at USD 16.72 billion. Total import was posted at USD 16.72 billion. Total import of June 2012 rose by 10.71% to become USD 165.69 billion against June of last year at Rp 15.07 billion. The deficit of Trade Balance gave negative sentiment to Rupiah this week which was estimated to move in the range of Rp 9,435 – Rp 9,465 perUSD.

Meanwhile Euro’s exchange rate value against USD and Japanese Yen weakened after President of Europe’s Central Bank (ECB) Mario Dragh failed to announce a definite plan to troubleshoot debt crisis in the Euro zone. Euro slumped by 0.6% to the level of 95.30 Yen on Thursday (2/8) after previously strengthening by 1.1%. This common currency of 17 states then inched down by 0.4% against USD to become USD 1,2180 after previously strengthening by 1,5%, i.e. in the position of USD 1.2405 which was the highest level since July 5, 2012. However USD weakened by 0,3% against yen to become 78,24 Yen.

The Capital Market

Index of IHSG during transaction last weekend (3/8) tend to slump in line with weakening of global shares. It seemed that negative sentiment spattered from the statement of ECB leader which disappointed the market.

The global factor again suppressed through disappointment of investors and market players as there was no purchase of Spanish and Italian bonds. Moreover index of Dow Jones Industrial Average fell by 92.18 points (0.71%) to the level of 12,878.88 Index of S&P 500 also dropped by 10.14 points (0.74%) to the level of 1,365.00 while index of Nasdaq Composite lost 10.44 points to (0.36%) to the level of 2,909.77.

            

Meanwhile IHSG last Thursday (2/8) was closed lower by 37 points (0.90%) to the level of 4,093.11 with total transaction amounting to 5.44 million shares worth Rp 3.87 trillion. Index of all sectors of shares dropped. Foreign investors were still recorded as net buyers at the regular market with buys amounting to Rp 63.1 billion. The best selling shares were: ASII, BBRI, BBCA, ADRO, and KLF.

Technically downturn of IHSG had been maximized to the support level of 4,090 which was tested. Chances were IHSG would have ascended during closing session last Friday (3/8) in the range of 4,060 – 4,130 with varied sentiments and tendency to rise.   

Beware of Possible IHSG Downturn Toward Weekend

Some stock players still rated IHSG movement last Friday (3/8) would be signified by negative sentiment. Therefore analysts reminded the market to be on the alert of possible downturn of IHSG to ward weekend. There were some global sentiments which would influence index, such as: outcome of the Europe Central Bank (ECB) meeting which was disappointing and release of data of factory orders in June which dropped by 0,5%.

In addition to that, weekly data of unemployment claim in the USA also rose to 365,000 against the previous 357,000. In view of the grim economic data, index of Dow Jones Industrial Average (DIJA) slumped by 192 points.

Previously Edwin analysts already predicted index would enter the correction phase this August with potential downturn as much as 100 to 200 points, although over the month surely IHSG might rise or fall in line with completed financial release of Semester 1 financial Report after dividend were distributed toward long Lebaran holiday.

Some stockmarket players predicted that movement of index which was very volatile would continue till next week, to be exact August 2012. The rated that under the circumstances the chances for loss or fail was considerably big.

Weakening of IHSG last Thursday (2/8) was a continued trigger for correction per July 23 last where top form had perfectly shaped up but today again weakening and showing reverse motion. Therefore there were two possibilities: IHSG would crash to the level of 3,800 or this correction was an instrument for catapult that would shoot IHSG up to as high as 4,200.

Spectral shares still had the potential jack up index even higher. It was recorded that the average performance of net profit of emitents of the property sector through Semester 1 (year on year) was predictably highest compared to nine other sectors recorded at the Indonesia Security Exchange (BEI). Significant sales growth served as main propeller of net profit growth of property emitents. The projection emitent’s net profit was higher, possibly around 20% - 15%.

Meanwhile a number of analyst rated that six shares entering the LQ45 list had considerably high liquidity with the potential to be actively marketed at the secondary market. The fundamental performance of the six emitents was also perceived as good so they had the potential for transaction with better liquidity by investors.

Last week PT BEI released six new emitents included in LQ 45 shares. The six shares were: PT Media Nusantara Citra Tbk (MNCN) who had market capitalization of Rp 32.78 trillion, PT Bumi Serpong Damai Tbk (BSDE) Rp 20.47 trillion, PT Bhakti Investama Tbk (BHIT) Rp 13.73 trillion, PT Sentul City Tbk (BKSL) Rp 6.91 trillion, PT BW Plantation Tbk (BWPT) Rp 6.01 trillion and PT Indotraco Penta Tbk (INTA) Rp 2,51 trillion.

A little positive sentiment might be generated from the planned IPO release by some new candidate emitents. All in all IPO in Semester II remained highly prospective and were well responded by investors. There were 12 companies who were ready to release shares in BEI in Semester II. Some of them were predicted to be stormed by investors, like PT Citra Borneo Indah, PT Waskita Karya, PT Semen Baturaja, PT Aero Wisata Catering Services, PT Drilling Service Indonesia, (a Pertamina subsidiary company) and PT PLN Batam.

Prospect of Semester II IPO Remains to Stay Bright 

The stockmarket authorities and analyst were certain that IPO of shares in Semester II remained prospective and were well responded by investors. Price of IPO shares at the secondary market was predicted to increase thanks to sound fundamental economy and prospective market condition.

According to analysts, beside IPO value which was considerably high, performance of the six companies were also good. Six other companies who were ready to go public were PT Inti Bangun Sejahtera, which would offer 15% of shares worth Rp 192 billion, PT Provident Argo with 20% of shares worth Rp 500 billion and PT express Trasido Utama who released 20% of shares with targeted fund of Rp 800 – Rp 900 billion. Furthermore PT Pelayaran Nelly Dewi Putri (20% shares), PT Persib Bandung Bermartabat (targeted fund Rp 200 billion) and PT Cipaganti Citra Graha with targeted fund of Rp 750 billion.

Other factiors which might stimulate investors were stock split activities by emutents who were rated as positive phenomenon which would increase shares liquidity of the related emitent. Beside increasing liquidity of shares retail investors could also easily buy shares of bigger value at affordable price.

With emitents doing corporate acts, it was believed that the money market would be made merrier by retail investors. In the few months some emitents had made corporate acts breaking shares value, among other PT Astra International Tbk (ASTII) and PT Kalbe Farma Tbk (KLBF).

This corporate act could draw foreign investors to buy corporate shares. Usually after stock split, performance of emitent’s shares became more appealing. On the other hand, corporate acts made shares liquid enough to be traded. So it came as no surprise if there were emitents who were interested in doing this corporate act.

For that matter this week IHSG would be projected to movie in the range of 4,050 – 4,120 with tendency to thinly increase. Second layer and third layer shares, strengthened with IPO outcome were the reasons for IHSG increase.   

Business News - August 8, 2012

TO KEEP WATCH ON DEFICIT IN TRADE BALANCE

Amidst growing anxiety among many circles about Indonesia’s trade deficit over three consecutive months, the Government still breezed out optimism. Indonesia’s trade balance (NPI) was widening, reaching the level of USD 32 billion in September 1, 2012. However, the deficit was not going to affect employment figures.

Deputy Minister of Finance Mahendra Siregar admitted that the lowered export value had its impact on lowered industry income such as mining, manufacturing and other industries. Nevertheless the lowered export would not affect employment process at home. Hence employment targets would be met as targeted.

The Government was confident that employment was guaranteed not to shrink because industry kept running well. Downturn of export was due to lowered commodity prices, not because of lessened volume. Therefore industrial activities would keep running.

Previously the Central Board of Statistics (BPS) released export figures of June which was posted at USD 15.3 billion, down by 16.4% compared to June 2011 at USD 18.3 billion. On the other hand, export value of that period rose by 10.7% from USD 15.07 billion to become USD 16.69 billion.

Meaning there was deficit of USD 1.33 billion, way above April and May when deficit was posted at USD 485 and USD 641 million respectively. This deficit would expand if the condition in Europe changed for the worse and commodity prices were falling.

Indonesia’s trade balance where deficit broke through USD 1.33 billion was by far more severe than the prediction of most economists. However, they still saw the positive side of Indonesia’s June performance. The first positive side was that two third of downturn was contributed by the oil sector. A condition as such was acceptable because the oil-gas sector was having downturn in commodity prices.

However, some factors were notable in this downturn, and price downturn was the prevalent factor. ICP dropped by 12.9% in June. In addition to that global demand for oil was declining which reduced export of gas. The Government’s policy to prioritize domestic consumption was contributing factor to export downturn. However, export performance might bounce back if demand for oil increased.

In the non oil-gas sector, export was downsized due to downturn of commodity price. For example, price of coal dropped by 10% in one month. However, no significant downturn was seen in volume or demand from main buyers like China. It was true that China’s economy was hit by the chain effect of the crisis in Euro zone, but the impact on Indonesia was small.

Domestic demand in China was not declining. Demand for coal and steel in China were even increasing. The stimulus policy and monetary violations were believed to prevent economic downturn.

But accumulatively, through January-June 2012, Indonesia’s trade balance still booked surplus of USD 476.2 million, with accumulated Export of USD 94.41 billion.

As with deficit of last June, the main cause of deficit in trade balance was trade balance of the oil-gas sector which posted minus USD 1.37 billion due to transaction in oil business which posted minus to transaction in oil business which posted minus value of USD 11.8 billion. Thankfully Indonesia’s trade balance in gas was still surplus.

Country wise, with ASEAN nations deficit was posted at USD 727.6 million, but with Malaysia Indonesia still posted surplus of USD 1.28 billion. The biggest deficit was against Thailand, i.e. USD 3.07 billion. Beyond ASEAN, the biggest deficit was against China, i.e. USD 4.045 billion.

Export of non oil gas in June 2012 was posted at USD 76.83 billion or falling by 2.79% year on year. Based on export market share: to China USD 10.45 million, Japan USD 8.72 billion, and USA USD 7,46 billion. Combined total export to the 3 countries came to 34.66% of total export. Export to ASEAN states reached USD 15.46 billion.

Import in June 2012 was posted at USD 16.69 billion or up by 10.71% against same period of last year amounting to USD 15.07 billion and against May 2012 dropping by 2.05%. Total import of January to June was 2012 USD 96.41 billion, an increase of 15.35% year on year. In terms of import China was the biggest at USD 14.49 billion, Japan USD 11.78 billion and Thailand USD 5.76 billion.

Because import through Semester 2012 almost equaled Indonesia’s export, it means trade balance was most likely to happen in this year 2012. Total export through January – June accumulatively came to USD 96.69 billion while total import was posted at USD 96.41 billion. Although Indonesia’s posted at USD 96.41 billion. Although Indonesia’s trade balance through January-June was still surplus, there was a growing tendency of import always exceeding export.

Indonesia’s import-export balance sheet in June 2012 was posting deficit of USD 1.32 billion. Total export slumped by 16.44%, while total import rose by 10.7% compared to June 2011. Downturn of export was estimated due to adverse market condition in crisis torn Europe. Moreover Europe was Indonesia’s export important destination for non oil-gas products which was posted at 11.73% of total export.

On the other hand, Indonesia’s non oil-gas trade balance with ASEAN countries through Semester I 2012 was also showing deficit of USD 727 million. Total of Indonesia’s non oil-gas export to ASEAN through Semester I 2012 was posted at USD 15.46 billion, while import came to USD 16.18 billion.

ASEAN as Indonesia’s export destination posted 20.12% market share of Indonesia’s total export of non oil-gas products, while in terms of import ASEAN countries controlled over 21.15% of Indonesia’s domestic market.

The biggest importer country to Indonesia was still Singapore with import totaling USD 5.45 billion followed by Thailand USD 5.76 billion and Malaysia USD 3.19 billion while other ASEAN states exported non oil-gas commodities to Indonesia at the value of USD 1.78 billion.

Based on the above data the Government must scheme up a strategy to jack up trade surplus. By theory, the Government was obliged to jack up export by various means while trying to downsize import. But the policies in effect seemed to contribute more to slowing down export and stepping up import. This all had to be reviewed.

For example, Japan protested the Indonesian Government’s policy to restrict export of mining raw materials through imposition of 20% export tax. For that matter, the Ministry of Industry MS Hidayat planned to meet Japanese business associations and investors combined in the Jakarta Japanese Club on August 8 next.

In that meeting the Minster of Industry planned to explain the background of Indonesia’s policy to tighten export of raw mining materials. What was being done by Indonesia could have been done by any country who realized that for decades they had not done anything to put some added vale on the raw materials that they produced.

The Minister asked Japanese producers of mining products to relocate their industry to Indonesia whereby they could obtain low priced raw mining materials. The spirit of the message was that Indonesian Government invited them to move to Indonesia. The Government of RI would guarantee supply of raw materials and facilitate various incentives of taxes has fiscal including import tax etc. Other countries had moved to Indonesia, only Japan had not.

As told, the Government’s aim to tighten export of raw miming materials was to enhance industry downstreaming process at home. The way it had been, Indonesia’s mining materials were exported raw. The Ministry set forth that overseas investors had come to state their interest, among other from China, France and some other European states and Korea, while investors from Japan had not.

There was one regulation which needed to be reviewed, i.e. rule related to Government’s plan to include mineral products of metal category into category of products upon which export tax would be included in accordance with Regulation of the Ministry of Finance (PMK) no 75 year 2012. The export tax to be imposed was 20%.

Mineral products which were not included in the PMK Ministry of Finance no. 75 year 2012 law particularly of metal types, export tax of 20% would be imposed as on other mineral products. The stipulation of export tax imposition of metal minerals would be after limited meeting lead by the Coordinating Minister of Economy. The point was, were the players of domestic industry ready to process metal mineral products to meet local need?

Other points was that the Government was urged to make a breakthrough to anticipate competition in the pulp industry as well as to synchronize with the Regulation of Uni Europe of March 2013. The breakthrough was among other to apply forest management system in accordance with the forest of high conversion (HCFV) as done by Asia Pulp & Paper.

By that step the Government was expected to promote pulp and paper industry in Indonesia in order to meet international standard of trading and environment. Today only APP was applying HCFV system in developing business. Roadmap of APP could serve as paradigm to the Government in leading Indonesian companies in facing global chanllenges in the coming decades.

Previously to fight illegal logging, Uni Europe was making Forest Law Enforcement and Trade (FLEGT) Action Plan. FLEGT had the objective to help producer countries to step up management and build up capacity to eradicate illegal logging, to prevent or reduce consumption of illegal logging and UE investment which accounted for illegal logging and prevent entry of illegal wood to the Uni Europe market.

To meet FLEGT objectives, UE created Voluntary Partnership Agreement (VPA). VPA was a practical mechanism to detect and exclude illegal logging from the UE market. The final objective of this agreement was to abolish illegal from the domestic and international market. Countries who signed this agreement could export legal wood only to UE.

Not less important was that the Government must strive to reduce dependency on import, particularly agricultural commodity. Take for example import of sugar. The Government must try hard to minimize dependency on imported sugar so that domestic sugar products could sell better.

Essentially the spirit needed was not to import excessively which means that consequently sugar productivity at home must be stepped up. In addition to that, to jack up jack up productivity of sugar yields of sugar essence in sugarcane must be increased so domestic production of sugar could be increased.

For comparison, Thai Farmers were now able to produce sugar yield essence between 12% and 14% and none was below 10%. High sugar yield essence was also found in Brazil, minimum at least 12%. If other countries could attain high degree of sugar essence yields, surely Indonesian sugarcane growers could increase yields up to 12% or even 15% in order to promote sugar industry and growers’ welfare. Hence national sugar production output could be increased and self-sufficiency in sugar could be attained.    

Business News  - August 8, 2012