GOVERNMENT CHANGE FORMAT OF CACAO DEVELOPMENT

The Government in this case the Ministry of Agriculture was changing the platform of cacao development. Previously since 2009 - 2012 the Government had proclaimed the National Cacao Quality and Production Promotion Movement (Gernas Cacao) which had the objective to improve the condition of domestic cacao plantation which were pest infected or aging.

Gamal Nasir, the Director General of Plantation, Ministry of Agriculture on the occasion of the 55^th Plantation Anniversary in Kendari on Monday (10/12) stated that in fact the Gernas Kakao Program which stated in 2009 had ended in 2011 with target of improving cacao plantation of 450 thousand ha. As regional demand were considerably high the movement was continued in 2009.

At the initial stage the movement included only four provinces, i.e. South Sulawesi, Southwest Sulawesi, and Central Sulawesi in the second year (2010) it developed into 14 provinces and in 2011 it included 25 provinces.

In that movement the Government was rejuvenating cacao plants with target of 80,180 ha, rehabilitation 185,935 ha and intensification of cacao plantation covering 157,033 ha. The total area of Cacao plantation included in the Gernas Cacao was only 27% of total cacao plantation expanse in Indonesia which reached 1.6 million ha.

For this program, the Government allocated total fund of Rp 3.5 trillion. In the execution, in spite of the increasing number of provinces that joined the Gernas Cacao Program, the needed budget could not be fulfilled in 3 years.

Furthermore the Government continued Gernas Cacao 2012, but up to this year, realization of budget was only Rp 3.3 trillion. The program was continued to 2013 but the Government only continued the unaccomplished part with fund of Rp 200 billion.

“So by next year we are only finishing the uncompleted task. The program only included plantation rehabilitation in cacao center provinces in Sulawesi, except North Sulawesi” Gamal Nasir remarked.

Broadly speaking the Gernas Kakao program had been effective in improving the condition of farmer-owned cacao plantations and their positive impact on production increase. Businessplayers of cacao, from the cacao industry and the regional Government were wishing that the Gernas Cacao movement be continued.

In the future, development of cocoa must be continued, although funding no longer originated from the APBN State Budget. More over the potential and opportunities in cocoa business was reasonably sizeable. “We had prepared a new program to continue the Gernas Cacao, but perhaps by other pattern with different scale and name. It was expected that in the future the Provincial Government would play greater role in supporting Gernas Cacao” Gamal was quoted as saying.

The Government admitters that from the evaluation in was unveiled that there were some challenges in the Gernas Cacao. For example, of the total rejuvenation plan only 79% were successful, whilst in the rehabilitation and intensification plan 20% were detected as being problematic.

Teguh Wahyudi, Head of the Cacao and Coffee Research Center (Puslitkoka) admitted from the evaluation of Gernas Cacao in was unveiled that there were Cacao seeds produced by Puslitloka by Somatic Embryogenesis (SE) did not grow well when rice was planted. This was because the condition of soil was not ideal while earth water was too shallow.

Therefore next year, he would produce seeds originating from farmers plantation. Hence the approach was that the seed must be in accordance with the condition of the environment. Besides, stipulation of land where the SE cacao seed was to be planted should be more selective.

“So the perception that SE cacao seed did not grow at all was not true. The World Bank even recommended cacao producing countries to adopt the Gernas Kako including the SE technology.” Gamal remarked.

Meanwhile Saleh Lasata, Deputy Govener of Southeast Sulawesi disclosed that the total area of cacao plantation in his area was 242 thousand ha. However, so far the volume improved through Gernas Cacao was only 83,133 ha or 34%. Meaning there were still 158.876 ha (66%) which were still untouched by Gernas Kakao.

The total area Cacao plantation in Southeast Sulawesi came to around 246,502 ha, plant production output posted at 162,816 tons. The total number of Cacao growers was posted at 159,074 people. “We are aware there are great challengers in cacao development, not just in terms of production but also problems in downstream industry. Therefore we are striving to improve and to strengthen economic business institutions in Indonesia” Saleh Lasta was quoted as saying.

To draw investor’s interest, particularly in cacao industry, the Provincial Government of Southeast Sulawesi built four cacao clusters, i.e. Lambidia Cluster including the Kolaka Regency with total area of 92,441 ha, the Pakue Cluster (the Regency of North Kolaka, 82,848 ha) the Lelembu Cluster (the Regency of South Konawe and Bombana, 28,585 ha) and the Besulutu Cluster (the Regency of Konawe, North Konawe, Buton Ultra and Muna 33,482 ha). “To support investors, we build facilities like were houses and infrastructure building” Saleh Lasta concluded. 

TO CAPTURE BANK INDONESIA'S MESSAGE

Indonesia's economic development been re­markably fast in the past decade, which was among others supported by advancement of the banking sec­tor. The banking sector had been able to flourish well, nearly all financial indicators of the nations banking sector were showing impressive performance.

However, the banking authorities and players of the industrial sector must not be off-guard. As neg­ative impact of the debt crisis in Europe mounted, and economic recovery in the USA was slow, all dangers called out for extra attention. As known, the chain ef­fect of overseas crisis were beginning to be strongly felt as indicated by declining national export due to lowered global demand.

In this case Bank Indonesia had prepared nine new regulations for the domestic banking sector. The regulation would anticipate dangers to Indonesia's fi­nancial sectors in the future. The Central Bank had prepared three points of main policy including: (1) to maintain stability of the financial system (2) strength­ening of resilience and competitiveness of the bank­ing sector and (3) strengthening of the intermediary role of banks.

The three policy package accommodated nine rules to be applied by the national banking sector as per January 2013. The nine rules for the Indonesian banking sector were as follows:

The first corridor was Maintenance of the Fi­nancial System stability, which included a series of policies.

Firstly to apply risk management on banks which extended credit or mortgage or automotive credit. This rule was related to Loan to Value ratio on Mortgage (KPR) and Automotive Credit.

Secondly to manage the application of trustee system. This was in response to BI's wish to per­suade exporters to keep their export yields (DHE) in national banks instead of foreign banks abroad. By compiling DHE in domestic banks, the need for forex at home could be fully assured whereby not to bring negative impact on Rupiah.

Thirdly to improve the rules on Minimum Capital Provision Obligation (KPPM) and to oblige main­tenance of Capital Equivalence Maintenance Assets (CEMA). KPPM was related to bank's effort arid ca­pability in taking each kind of risk. Meanwhile CEMA was related to the commitment of foreign banks and Foreign Bank's branch office (KCBA) operating in In­donesia to strengthen productive assets of high value as bumper or resistance to crisis threat.

Fourthly, improvement on stipulations for short term funding facilities for banks. This was relat­ed to the effort and strategy of Bl to extend bail out fund to banks which were having liquidity problems for the short term. To learn a lesson from the case of Bank Century which now had become a big case, it seemed that BI planned to prepare safety belt so the short term funding facility could be actually run in ac­cordance with the set corridors.

The Second Corridor was Strengthening of Bank's Resiliency and Competitiveness consisting of the following policies. Firstly, to regulate ownership of banks in accordance with PBI no. 14/8/PBI/2012. This point needed to be underscored in a separate regulation because this case had for long been an ob­stacle to many parties due to the growing share of foreign banks.

It was about time that foreign ownership in national banks be reviewed so national interest could be well protected. This did not mean that Indonesia was anti-foreign or anti-globalization. The spirit was that foreign banks were welcome to join the national banking sector provided they complied to the rules set by the banking authorities.

Secondly regulation on business and expan­sion of bank's networking based on capital. The spirit of this rule was to prevent brutal cannibalism where banks of strong capital ruled over the banking sector at national level or down to the regions and prov­inces.

Banks of lesser capital were still given enough room to maneuver their operations. The same ap­plied to middle and higher level banks. Naturally small banks would be motivated to strengthen their capital whereby to operate in broader market region. For that purpose bank owners might have to increase their capital from internal resources or involve new inves­tors. It was also possible for banks to be engaged with other banks in the process of merger.

Thirdly to improve stipulations on single pres­ence policy (SPP) or gradual permit stages for banks. This policy was meant to rearrange Indonesia's bank­ing configuration in accordance with bank's internal strength. Owner or shareholder dominating in one or more banks were obliged to establish a holding com­pany. This rule applied to all categories or bank own­ership.

The third corridor was the corridor for Bank's Intermediary Function Strengthening consisting of several policies. Policy one enhancing access to fi­nancing for micro, small and medium (UMKM) busi­ness by general banks. This stipulation led to serious consequences to banks because there was a tone of “forcing” by the authorities that banks pipeline their credit to UMK whether directly (as executing bank) or by engaging other banks as channeling banks like the Regional Development Bank (BPD) group and/or People's Credit Bank (BPR).

Secondly expanding other financial service access through branchless banking. The fact that operational reach of banks in the remote regions trig­gered the emergence of telecommunication operators rendering banking services like money transfer was inevitable due to objective need.

However, the growing transaction value created need for rules which regulated branchless banking considering the risk of transaction failure which necessitated consumer's protection to be well observed. In this case it was advisable for Bank Indonesia to be engaged with telecommunication authorities to regulate and control brancless banking operations involving several national telecommunication operators. 

Business News - December 14, 2012

ECONOMIC GROWTH NOT YET ACCELERATES THE REAL SECTOR

Some observers consider that Indonesia’s economic growth at 6% - 6.5% not yet has an effect on real sector development. Consequently, economic growth could not yet accelerate labor-intensive industry sector. It means that high economic growth is not ideal in promoting labor absorption. With a quite high growth in 2011 at 6.5%, number of additional workers absorbed is only 1.5 million workers. While, in fact, government’s target for last year is 1% economic growth to absorb 450,000 workers. And, with 6.5% growth, it could have absorbed 2.92 million workers. It shows that economic growth quality is not yet optimal.

General Chairman of Indonesian Entrepreneurs Association (Apindo), Sofjan Wanandi, on Thursday (12/6), stated that in the past 10 years, Indonesia’s economic growth has been mainly accelerated by non-labor-intensive industries. Consequently, the gap between the rich and the poor and unemployment increase. While, many entrepreneurs did not want to enter labor-intensive industries, maybe because of the law, or the profit is too small. And, problem of legal certainly and labor regulation are complained by labor-intensive industry operators in Indonesia. Besides unemployment, alleviation of property and gap between the rich and the poor still become a problem that must be fought by the government from economic growth realization. Therefore, quality aspect of growth must be improved, Sofjan said.

Sofjan believed that the government should improve growth quality. Therefore, there should be a stronger policy because the Medium-Term Development Plan (RPJM) target is reduction of open unemployment by 5% - 6% by 2014. According to him, growth of labor-intensive sectors, like agriculture and manufacturing, must be accelerated. He sees that growth of these sectors is not yet optimal.

Government’s role is very important in promoting growth of agriculture and manufacturing industry sectors. There must be more policy and budget support to improve agricultural infrastructures so that irrigation system will improve and farmers could work more optimally. And, agro-industry sector must also be seriously improved. Conducive industrial policy, adequate electricity and infrastructure for proper distribution are very important to prevent de-industrialization which is becoming more evident.

Sofjan reminded the government to evaluate economic growth quality, particularly its influence on creation of work opportunities and alleviation of poverty. The government should also be more progressive in directing fiscal policy to solve problem in the upstream sector which is the cause of poverty originating from rural and agricultural areas. He stated firmly that these are important points for improvement of direction of development policy and fiscal policy now and in the future. Economic growth having a rising trend should be maintained in the midst of global economic uncertainly.

Sofjan explained that in the current national public policy, poverty elimination is no longer considered as a residual target, but it has become an explicit target of a development process. This change of paradigm has caused achievement of economic growth at 6%, but the condition is not always better than the one where economic growth rate is only at 4% or 5%; as poverty alleviation and creation of work opportunities accompanying economic growth will also become important aspects in quality assessment of economic growth. The important thing is how the growth could co-relate with increase of work opportunities and acceleration of real sector, he said. 

Business News - December 12, 2012