BUSINESS PLAYERS ASKED TO PREPARE FOR AEC 2015

Time files. Before you knew it, 2015 was approaching. Meaning, just one year ahaead before the ASEAN Economic Community was in effect. How ready was the national industry in anticipating AEC? Was the national industry ready for it? There were pro and contra opinions in regard to the economic integration concept. Some claimed to be ready, some were far from being ready due to various factors.

AEC 2015, like it or not, was already signed and would pose as great challenge to national industry. In AEC, Asean products would storm Indonesia’s market, not just goods but also services, i.e. foreign workers would grab job opportunities in the local labor market. Don’t be surprised if soon housemaid positions were filled by Filipino workers. Goods and services used by Government institutions should be watched on. A high degree of nationalism was called for to face the condition, or else Indonesia would be spectators in their own territory in labor, trading and industry.

In view of the above, the Ministry of Industry again reminded industry circles to prepare themselves to face AEC 2005 as the market would be invaded by imported products. Secretary General of the Ministry of Industry, Anshary Bukhari stated on Friday [6/12] that AEC 2015 would pose as challenge to Indonesia. “We expect businessplayers to be ready for the competition, because if we were not ready we would be nothing but a market for them.” Ansari remarked.

However, Ansari admitted that AEC 2015 offered opportunities to Indonesia to expand market for national products to the international market. AEC would also draw foreign investors to invest in Indonesia whereby they could set up joint venture companies to ease inflow of imported raw materials for the local industry. In anticipating the AEC 2015, the Government had prioritized some industrial sectors to be developed, among others: agro based industry [CPO, cacao, rubber] abd processed fish products, textile and textile products, footwear, and leather goods. He underscored the need to strengthen regulations, tariff, road infra structure and harbor management.

In tandem with the above, Ansari said that a number of effort to strengthen competitiveness must be exercised toward AEC 2015, including: minimizing of capital expenses, energy cost, and logistics expenses. Besides also assurance of raw materials supply, control on illegal imported products and maximizing consumption of domestic products. In the long run, it was also necessary to promote industry’s supporting factors, develop human resources, R&D development and development of industry.

Meanwhile, Deputy Secretary General of the Indonesian Businessman Association [Apindo] Franky Sibarani disclosed that the Government must focus effort on reforming and strengthening national competitiveness of the national industry toward AEC 2015. According to Franky, the national industry was rated as ready to face AEC 2015 which was unlimited by tariff. Besides the said sectors, the textile industry, especially garments, fishery, wood, rubber, electronics, agro-based products including CPO, and IT, Indonesia was not ready to compete. 

Business News - December 11, 2013

CONSUMERS’ CONFIDENCE STILL ON THE UPTURN

Survey of Danareksa Research Institute in November 2013 unveiled that consumers’ confidence re-strengthened in November for the fourth time. After increasing by 1.8% according to survey in October, Consumers Confidence index inched up again by 1.2% to become 92.3 in November, the highest level in 7 months.

The improving consumers’ confidence in November was mostly due to negative public perception of Indonesia’s economic prospect. Besides, people’s anxiety of increased food was also reduced. Latest survey unveiled that around 71.8% of consumers were afraid of increasing food price had dropped from the previous 76.5% in October.

Meanwhile the portion of consumers who were worried about high oil fiel price also dropped to 18.7% in November against 26.9% the month before. Apparently the people were getting accustomed to the formed new prices after increase of oil price last June.

According to the latest survey outcome, consumers felt sure that inflation pressures would cool down in the next six months. The index which measured consumers’ sentiment on inflation dropped by 0.1% to become 190.7 in November. However, the index was still higher than the index of the same month last year. Broadly speaking inflation expectation for the next 6 months was among others due to price increase of goods and services toward year end due to low season and increasing need for food and clothes toward Christmas and New Year.

The main two components which formed IKK index increased in November. The first component, i.e. the component which showed the present condition [ISS[ rose by 2.4% to become 74.2 as consumers gave better rating to economic condition and employment opportunity. Meanwhile other IKK component which showed condition of the future [Expectation Index] was showing increase of 0.6% to become 105.9 in November, the highest level in the last 10 years. The IE increase indicated that people were getting more optimistic about economic prospect in the next six months.

With increased people’s optimism of economic prospect as a whole in the next 6 months, consumers’ plan to buy durable goods increased in November. Latest survey unveiled that around 31.6% consumers being surveyed planned to buy durable goods in the next 6 months, increasing by 30.4% in October. However, the level in November 2013 was still low compared to the level last year.

Meanwhile, consumers trust in the Government’s capability to manage all the great task also increased in November. After dropping 2 times consecutively IKK index on the Government [IKKP] rose by 1.2% to become 78.6% in November. In the last survey, 3 components which formed IKKP increased while 2 other components dropped. The component which showed highest increase was the one which showed Government’s capability to step up economic growth [related index rose by 4.6% to become 82.6% in November.] 

Business News - December 6, 2013

THE IMPLICATION OF ECONOMIC SLOWDOWN

The monetary and fiscal policy which tend to be tight to improve the Indonesia Balance of Payment [NPI] particularly in terms of current transaction had negative effect on various sectors which were directly affected. Take for example the property sector.

Chairan of the Indonesia Real Estate [REI] Setyo Maharso stated that they objected BI’s policy who lately made regulations which were not supportive to property growth.

And yet the real sector in Indonesia, according to research exercised by the University of Indonesia played positive role and contributed significantly in propelling Indonesia’s economic growth, i.e. by 26%-28%.

Setyo stated that if the contribution of housing sector to economic growth in Indonesia was high, then support of the Government and the monetary authority’s would be needed so the housing sector could keep growing and be the locomotive of growth, considering that backlog had come to 15 millions units.

Recently BI decided to increase BI rate by 25 bps to become 7.5%. According to property circles the policy must be watched on because it would have negative effect on the business sector including real estate. Previously BI had issued a circular letter effective as per October 1, 2013 to restrict LTV and KPR indent.

As known, many parties understood well that the monetary policy adopted by BI signaled BI’s cautious stance against Deficit in Current Transaction and global adverse condition. However the business circles underlined that BI’s action must be balanced with monetary control over the real sector as it might trigger chain effect which threaten economic growth.

Real estate developer circles rated that increase of BI rate was a fearful thing especially for people who had not owned homes. The dream to be able to buy a house with banks credit would be a far cry. To the people who could afford to buy a house by mortgage, were haunted by heavy life’s burden due to high credit interest.

It was expected that the Government would adopt a policy which was more accommodative to the businessworld particularly small and medium developers. The Government’s policy and monetary authority should be synchronous and non contra-productive to bank’s partners. To the banking sector, they also pled not to be hasty in increasing bank interest.

The Government was urged to make a regulation which was against domination of mortgage by brokers for investment so fulfillment of public need for houses was below expectation. The Government had their objective to promote the property sector whereby to enable people own decent homes. But what happened was people having difficulty in having homes due to monetary policy.

On the other hand, property business was much dominated by certain people, even foreigners as investment. The property sector was growing, but did not meet people’s need for homes, especially the lower-middle class group.

Indeed there is problem in the property sector in Indonesia, where need was high, but supply was limited. In other words, there is backlog. Naturally people buy houses for sale or for rent. This sector also needed change in regulations in regard to foreign ownership as foreign ownership in the property sector for investment or business was alarmingly growing.

This condition needed to be observed more closely by the Government as Indonesia had to join the AEC free market community 2015. In that era, automatically developers from Asean would enter Indonesia. They would need homes; unless there was the right regulation, the might pose as danger. For example if there was any foreign developer entering Indonesia and offer low interest rate from their country of origin, local developers would be in trouble because they would lose competition.

The Indonesian Real Estate Association [REI] also asked for the stakeholders in the real estate sector to support small and medium developers. Again developers were urging the Government and monetary authorities not to issue counter productive policy packages wwich would harm that very sector.

In this case two economic propeller sectors: property and automotives, had to face serious pressures in the post monetary and fiscal policy era. Therefore the Ministry Industry Moh. Saleh Hidayat said that growth in the two economic sector must not be hindranced as it was feared they would hindrance national economic growth as a whole.

About the property sector, the Government believed that the sector had tremendous potential and high multiplier effect. Moreover, the property sector was labor intensive and capital intensive so close collaboration among all parties would be necessary.

It seemed right if the Government continued to analyze various incentives, fiscal and non fiscal to promote the property sector. Besides, the Government also encouraged REI to actively participate in the Domestic Products Use and Upgrading Program.

The Ministry of Industry’s policy was response to developers through REI that the housing sector could serve as locomotive of national economic growth which had been well underway.

In the past two or three decades, the housing sector contributed significantly to the growth of nations including Indonesia. Some world’s surveys also disclosed that the contribution of housing sector to GDP was great.

Broadly speaking businessplayers of all sectors must adjust their business expansion plan next year in accordance with BI’s plan to put brakes on economic growth by slowing down credit growth to the level of 15% - 17% for 2014.

By slowing down economic growth through adjustment of business growth percentage, demand for imported raw materials and auxiliary goods for industry could be reduced. This coulf help to minimize deficit ratio and ease pressures. Automatically inflation would cool down as well as imported inflation was reduced.

However the effort of monetary authority must be accompanied by Government’s serious effort to put brakes on import of oil fuel. Development of cheap transportation mode must begin soonest. Diversification of non fossil energy fuel like bethanol, bio fuel, and bio diesel must be enhanced. Restriction of oil fuel consumption must exercised immediately whereby to reduce oil importing.

Reduction of oil importing would improve deficit ratio, tame inflation and Rupiah strengthening as demand for USD by importers would lessen. Those were the sacrifice by all parties to make Indonesia’s economy healthy and sustainable. 

Business News - December 4, 2013

TOWARD AEC 2015, GOVERNMENT PREPARE PRODUCT STANDARDIZATION

The Government of RI through the Ministry of Industry was promoting the application of Indonesia National Standard [SNI] among businessplayers. In this campaign the Government offered incentives as well as training programs for standardizing competence of human resources through capacity building.

Today the process of SNI certification was based on mandatory quality upgrading of products and services under technical supervision of Ministries which was the main pre-requirement of standardization. This indicated that SNI application was more by obligation rather than businesspeople’s own awareness to upgrade quality.

Budi Darmadi, the Director General of High Tech based Premium Industry, Ministry of Industry stated in Jakarta on Tuesday [26/11] that toward AEC 2015 national industry should actively promote competence and enhance self-reliance so as not to be outsmarted by overseas traders.

One important aspect to be prioritized was to upgrade quality standard of Human Resources whereby to be acknowledge world wide. National standardization was hindranced by handicaps, i.e. limited infra-structure of the SNI system it self, wide gap between regulation and implementation, low awareness of the public about quality standardization, low participation of stakeholders in standardizing process.

According to Darmadi, standardization was absolutely necessary as it would serve as reference for other countries in the ASEAN region in buying Indonesian products. Budi disclosed that SNI needed to be developed with reference to the United Nations Economic Community [UNECE] or some other international standards like the International Organization for Standardization.

Today, Budi said, at the initial harmonization process toward AEC 2015, there were 19 aspects of UNECE-based standardization to be applied, while another 32 UNECE based regulations for the next stage of harmonization must be applied. To comply with the so many rules related to standardization, many points had to be observed, among others to aim at the domestic market as baseload, and to strengthen competitiveness against export invasion.

Besides, the Government was also preparing five SNI mandatory for six types of food and beverages. Previously the Government had applied SNI for the said six F & B products but not compulsory. Now the status was upgraded to compulsory SNI which were: instant powder milk, sweetened condensed milk, dew drinking water, instant noodles, biscuits and palm frying oil.

The Director General of Agro Industry, Ministry of Industry Panggah Susanto disclosed that high demand for F & B products at home means chance for growing import of products of low quality. Before the said six products, another 5 products had been subject to this regulation. According to Panggah this mandatory SNI was badly needed by the domestic industry which produced the six F & B products. The reason was the vast domestic market which would be sitting duck for foreign products in the coming 2015 AEC.

Therefore Panggah expected that the mandatory SNI for six F & B products be effective before  AEC 2015. In other words, at least next year the mandatory SNI for six F & B products should be in effect. He stressed that the fat market in Indonesia was most appealing to overseas sellers; so import must be watched on especially with the open market in 2015.

Business News - November 29, 2013