THE CREATIVE SUBSECTOR OF TOURISM INDUSTRY NEED DEVELOPMENT

Indonesia’s tourism stood a good chance to grow in the future in line with the growing interest of Indonesian people to explore their own country and increasing appeal of Indonesia as tourist destination to foreigners. Naturally this opportunity must be grabbed by operators of the tourism industry  and one of the strategies was to promote marketing of the creative subsector. “Players of the tourism industry in Indonesia must be able to grab this opportunity whereby to strategically develop tourism” this was a statement made by Deputy Minister of Tourism and Creative Economy Sapta Nirwandar on Tuesday [17/9].

Sapta disclosed that the Creative Economy Subsector of the Ministry of Tourism was jacking up creative tourism to strengthen competitiveness of national tourism. He stressed that Creative Tourism was a new perspective which could be developed to support Indonesia’s tourism as the potential was great. Therefore promotion campaign of creative industry must be integral part of Indonesia’s promotion campaign.

Indonesia is a country rich in cultural heritage and full of cultural values to support regional tourism. The diversed culture and customs and colorful art and culinary experience was extraordinary attraction which were already marketed and there was yet more to explore.

The Indonesian tourism community was demanded to expose something that was marketable of their respective regions. Awareness of the people in the regions was a valuable moral asset whereby to develop tourism while the infra-structure must be built, including roads, art market and other facilities. No matter how heavy promotion campaign were launched, they would be fruitless if infra structure were poor. All parties expected to develop new perspectives on how to market Indonesian tourism which was rich in colorful culture.

Players of the tourism industry in Indonesia must be able to master digital based communication technology in marketing. Tourism operators must be active in branding products based on sound positioning and build on line information system globally depending on their target market. There would be three main topics to be highlighted, i.e., site strategy, social media strategy, and crisis management in tourism. “Creative tourism would be glorious with support of IT based marketing” he said.

Meanwhile BPS noted the number of foreign tourists coming to Indonesia by July 2013 was 717.800 visits or down by 9.09% compared to previous month. However, the trend of incoming tourist in July 2013 rose by 2.37% against same month last year at 701.200 visits. Accumulatively since January-July 2013 the number of inbound tourists was posted at 4.87 million or increasing by 6,44% compared to visiting tourist of the same period the previous year numbering 4.58 million visits.

The Ngurah Rai Airport in Bali posted most tourist visit, i.e. 1.77 million people over the first seven month of 2013. In the second place was Sukarno Hatta airport in Jakarta. Last July down turn of the number or arriving passengers in Ngurah Rai airport Bali remained high, when in July the number of arriving tourists was posted to increase by 9.71% compared to July 2012 from 241,400 visits. Compared to June 2013, the number of foreign tourist arriving in Bali also increased by 8.09.

Business News - September 20, 2013

TO SIGNIFY THE POWER OF COMPETITIVENESS

In times when Rupiah value was down and Indonesia’s economy was on the slowdown, World’s Economic Forum [WEF] in their annual report of 2013-2014 had positioned Indonesia in 38^th grade in terms of competitiveness; a significant promotion against the 50^th position of last year.

Although still way below Singapore at 2^nd place, Malaysia 24^th and Brunei Darussalam 26^th and almost the same as Thailand at 37^th, at least Indonesia’s position excelled over some ASEAN countries.

Take for example the Philippines in 59^th position, Vietnam 70^th, and Laos, Cambodia and Myanmar at 80^th, 88^th and 139 respectively. Compared to China and India, two rising Asian giants, Indonesia was in between. China was in 29^th position and India 60^th.

Improvement of Indonesia’s competitiveness brought high expectations as the international world would see Indonesia as more competitive nation. The promotion also uplifted optimism and brought brighter prospect. On thing was certain Indonesia’s elevated position means stronger supporting pillars to rest on.

WEF was using three catalyst to measure competitiveness. Firstly, the fundamental factor encompassing institution, infra structure, macro-economic environment, basic health and basic education. In terms fundamental factor Indonesia moved up to 45 from the previous 58.

Secondly, the efficiency elevator factor encompassed six pillars, i.e. high education and training, market efficiency of goods, labor efficiency, development of the money market, technological readiness and market scale. By this factor Indonesia’s position moved up from 58^th in 2012-2013 to 52^nd in 2013-2014.

Thirdly, the innovation factor which rest on two pillars i.e. sophistication in business and innovation. In this respect also having betterment from 40^th to 33^rd position. Elevated competitiveness level was thanks to betterment in the above factors. Of the 12 pillars the brighter side for Indonesia was market scale and macro-economic environment.

The only thing was, the greatest contributor to appraisal was the infra-structure pillar which elevated from 78^th position to 61. It seemed that the Government’s effort through the MP3EI plan to spur on economic development through infra-structure was beginning to show results.

Infra structure development must be accelerated to step up national efficiency in regard to logistics and connectivity about which investors complained. The characteristics of an advanced nation was adequate infra structure. The effective way to spur on development of physical facilities and infra-structure was to increase allocation for infra-structure building which now constituted 2% of GDP-to 5% of GDP.

Betterment of Indonesia’s competitiveness from WEF must not make the Government to be off guard as there were still some points to be corrected. This was related to the fundamental institutional factor. The information was unveiled from the main problems in the business world.

There were five main problems faced by business players, namely corruption [19.3%] inefficient Government’s bureaucracy [15%], poor infra structure [9.1%]; access to capital [6.9%]; restrictive labor regulations [6.3%]. Four of the five problems, except infra-structure, was institutional problem.

Poor institutional quality, particularly inefficient bureaucracy and corruption was the worst obstacle in increasing competitiveness significantly. Small wonder that WEF placed Indonesia in 106^th position in terms of corruption factor in competitiveness.

Business people and investors placed corruption as their main grievances. This was in line with the report in Transparency International 2013 which positioned Indonesia as one of the most corrupted country. Indonesia was in 118^th position among 175 countries with score 32 out of 100.

WEF also put bad mark on distrust in politicians, mis use of state’s fund, extravagance in state’s expenditure all boiling down to Inefficient bureaucracy.

The institutional factor was more than just a matter of institutions, but also regulations. In other words, legal uncertainty might generate serious problem. The problem was not lawlessness but disobedience to Law. Uncertainty in law abiding appeared in the form of illegal collections and bribery. To establish a clean and responsible Government must be the determination of the bureaucracy.

Permit application procedures for business called for serious attention. Take for example, as reported by the World Bank in 2013, it took 47 days to accomplish, but businesspeople claimed they needed longer time. The policy of One-Stop-Service [OSS] was still a subject to grievances by applicants as the road was still long and winding.

The fact confirmed assumptions that the institutional factor was in a strategic position in the process of strengthening of competitiveness. The conclusion was that good performance must be maintained while low performance must have its pitfall detected and solution be found for it.

The principle was that competitiveness must be reviewed each year. So next year WEF would re evaluate the determinant factors of Indonesia’s competitive edge. It must be remembered that other countries were also striving to improve their ranking to drum up investors.

Business News - September 20, 2013

STATED OWNED COMPANIES PROSPECT AMIDST ECONOMIC SLOWDOWN

The impact of global crisis, which touched national economy had generated anxiety among BUMN managers. To anticipate problems, the Ministry of BUMN had taken the right step to ask target of dividend distribution amounting to Rp 37 trillion proposed in APBN State Budget 2014 be revised to Rp 32.4 trillion.

Depreciation of Rupiah value against USD and falling prices of some primary export commodities at the international market greatly affected performance of state owned companies do the dividends due for the state must be re evaluated.

So far the recommendations made by the Minister of BUMN Dahlan Iskan at the technical meeting of Commission VI of House and Master plan and budgeting of the Ministry of BUMN had serious response. In next year’s state budget dividend of 141 BUMN targeted at Rp 37 trillion was projected Rp 5.9 trillion from banks and Rp 31.1 trillion from other BUMN.

Proposal the Ministry of BUMN to revise dividend to Rp 32.4 trillion was in accordance with the range of Rp 30 trillion to Rp 33.5 trillion dividend once proposed at the internal coordinative meeting between the Ministry of BUMN and Ministry of Finance.

So far BUMN banks were know as the highest dividend payer to the state. To illustrate, BRI paid dividend to shareholders amounting to Rp 5.55 trillion or around 30% of total net profit of RP 18.5 trillion in 2012.

The BRI dividend posted increase of around 84.2% to become Ro 225.232 per share compared to previous year. The highest contributor of dividend next to banks was Pertamina.

Last year Pertamina who pocketed profit of Rp25.89 trillion set aside dividend for the State amounting to Rp 7.7 trillion, or an increase of around 6.5% against previous year.

Beside request for revision of BUMN dividend to the state, the meeting of BUMN Minister with the Parliament also discussed request for inclusion of state’s capital [PMN] to 5 BUMN. Unfortunately the request for PMN worth Rp 5.75 trillion was rejected by Commission VI of House. The reason was that House was afraid they would be called by the Corruption Eradication Commission [KPK] as the PMN was beyond proper procedure.

The Ministry of BUMN admitted that the proposal was set forth after the APBN-P Budget 2013 was discussed. Five BUMN which was enlisted as candidate receiver of PMN was PT Hutama Karya Rp 2 trillion, PT Bahana PUI around Rp250 billion, PT Krakatau Steel Rp956 billion, PT Geo Dipa Energy Rp 500 billion and State Assets Manager Company Rp 2 trillion.

BUMN’s measly capital was always the one problem that surfaced when discussion was on to question why state owned companies tend to be stationary. An example was Pertamina which took pride as the greatest contributor of dividend in this country was small in terms of capital investment compared to similar companies of other countries.

For comparison, an oil-gas company in Thailand possessed invested capital of not less than USD 100 billion, while Pertamina had only around USD 10 billion. So forget about Pertamina making huge expansions like acquiring an oil well abroad.

It was know that Pertamina’s ambition to buy assets abroad was high, but being handicapped by finance. To overcome capital shortage instantly was to hold back for a while payment of dividend to the state. So if company’s profit was concentrated to expand capital investment, company’s opportunity would be greater.

The problem was, would the Government be willing to receive less dividend? It was but a matter of agreement; would they wish to see the state company grow big, or just be content wih the existing capacity?

Not less important was to question capital need fir BUMN banks. The Government, in this case the Ministry of Finance and Ministry of BUMN must understand that the growing need for capital was needed by corporate banks where by to be able to compete at the regional forum.

In the banking industry, the higher the capital the better was bank’s capability in taking risk. As foreign banks were operating in Indonesia with strong capital support from their principal abroad if local banks did not do anything to increase their capital, soon or late they might have to accept defeat.

One of the pragmatic way to increase capital of corporate banks was by increasing profit portion held for capital strengthening which would result in reduced amount of dividend paid to the Government. This way was feasible depending on the collective decision made at the Annual Shareholders Meeting [RUPST].

It must be realized that the threat and challenges of BUMN banking was getting heavier; while having to compete against national banks they had to compete against foreign banks as well. Beside human competence, capital was not less important. Now competition was not in fighting for third party fund, but in rendering premium service to customers.

The growing tendency to increase BI rate in the past 3 months also increased bank’s funding and operational expenses. Naturally a condition as such increased burden of banks. The rational choice was that banks must give up Net Interest Margin [NIM] due to increase deposit interest and to hold on credit interest to minimize NPL potentials.

As footnote, credit guarantee for deposits in Rupiah currency in banks increased to 7%, Rupiah deposit in People’s Credit Banking [BPR] became 9.50% and forex deposits in banks became 1.50%. The percentage level of interest in banks was effective as per September 15, 2013 until January14, 2014.

The application of deposit guarantee interest was among others based on: Rupiah fixed deposit interest of one to three months tenure in some banks being surveyed by Deposit Insurance Body [LPS] which increased significantly [between 50-100 bps] in 2013 to September 2013.

Beside that the inter-bank Rupiah interest in the JIBOR money market through the period of August 2013 was showing highest increase in one month JIBOR interest of 73 basic points to become 6.49%.

In regard to stipulation of deposit insurance interest level, the Deposit Insurance Agency [LPS] was constantly observing the development of liquidity and bank interest. In case of significant change in economic condition, LPS was going to evaluate interest level. In accordance with LPS rules, if the interest of deposit being agreed between bank and customers exceeded insurance interest level, the customers’ deposit would not be guaranteed.

In regard to the above, banks were obliged to inform to depositor customers about the interest level in effect by placing the information in places accessible to customers.

Bank’s sacrifice to reduce NIM would certainly reduce net income, which would automatically lessen dividend. So it seemed reasonable if target of dividend payment be lowered considering the uncondusive economic condition.

So some sort of deal was agrees upon, for the sake of securing profit, banks in Indonesia were striving to maintain net profit margin [NIM] in the range of 5%-6%. With NIM of that size, banks could still maintain profit bay maintaining NPL ratio and CAR at safe level. Banks were also constantly trying to suppress operational cost against operational income [BOPO].

Business News - September 20, 2013

ENTREPRENEURS ASK FOREIGN NGOS TO STOP BLACK CAMPAIGN

Entrepreneurs requested foreign Non-Government Organization (HGO) not to spread rumors that disturb Indonesia’s exports. The disturbance done by foreign NGOs is especially concerning natural resource-based industries such as paper and crude palm oil (CPO). Even, these foreign NGOs aimed at undermining the Indonesian economy rather than providing constructive feedback.

Sofjan Wanandi, General Chairman of the Indonesian Employers Association (Apindo), in Jakarta (Friday, September 13), called for the NGOs in the country not to ruin exports by giving statements that make Indonesia export commodities in the international market disrupted. He hoped that domestic NGOs not to disturb because Indonesia needs to boost exports. He also admitted that he frequently received complaints from the national entrepreneurs who experience decrease in exports, due to rumors spread by foreign NGOs. “We asked foreign NGOs to immediately stop doing this because black campaign is very disturbing to our exports”, he said.

Foreign NGOs negative campaign against Indonesian export products is very disturbing to the business community in the country. Moreover, they send a letter to overseas buyers not to buy Indonesian products, especially pulp & paper and palm oil, such as what is done by Greenpeace recently who sent a provocative letter to buyers.

What is fought and campaigned by foreign NGOs is not pure anymore because many of them have been exploited by international firms to attack Indonesia. Sofjan admitted that currently there are still matters that are related to the environment and forestry in Indonesia that must be addressed. There is no reason for Greenpeace or other foreign NGOs to constantly pressure the national forestry industry has been practicing environmental sustainability-based business.

Businessmen complained in the presence of the Minister of Industry, Minister of Trade, and the Minister of Finance about export activity. In the Forum for Improvement of Manufacturing Industry Exports, one of the obstacles to export is campaigns by NGOs. Black campaign must be fought. Entrepreneurs should unite under Indonesia Incorporated to fight against the black campaign. In addition to disturbances from NGOs, export activity is also constrained by illegal levies. “We are asking the help of the officers, including those in the regions, to facilitate, and not to collect illegal payment”, he said.

He invites the stakeholders, ranging from the business community, NGOs, society as well as the governments policy makers to jointly ward off foreign accusations. The reason is that foreigners are always accusing or launching black campaign against Indonesian industrial products exported to several countries which are considered not environmentally friendly.

As a result of the black campaign, Indonesian products, one of which is forestry products, are declined by export destination countries. The reason they do not want to accept Indonesian products is because they are not environmentally friendly. Related to that, Indonesia had to fix and maintain compactness so that such accusations can be resisted. The black campaign conducted by foreign parties has an impact on the declining value of national exports of industrial products. This is very detrimental to Indonesian industries, while other countries which do not have resources will benefit from this. 

Business News - September 18, 2013