INDONESIAN CHAMBER OF COMMERCE & INDUSTRY : IT REMAINS SAFE TO DO BUSINESS IN THE POLICTICAL YEAR

The Indonesian Chamber of Commerce and Industry (KADIN) requested the business community not to delay investment in 2014. Despite entering the political year, many opportunities were open and entrepreneurs should take advantaged of these opportunities. Economic stability in the year of general election will remain intact. Because the Indonesian people were already mature in following the festival of democracy as has been done in the 2004 and 2009 general elections. Although the risk of global economic turmoil still exists, the policy that the has been issued by the government is expected to address this risk.

Therefore, KADIN asked local and foreign investors to not be afraid to face business and political conditions which is feared to trigger instability this year. Chairman of KADIN, Suryo Bambang Sulisto, in Jakarta (Friday, February 7), hoped that in the political year there would be no significant interference that could hamper the achievement of government targets of manufacturing growth at 6.4% - 6.8%, labor absorption at 400,000 people, industry product export at USD 14 billion, and domestic investment at Rp50 trillion can be achieved.

According to Suryo, every political year, must entrepreneurs take a wait and see attitude. This is because they feared that their businesses will be threatened, so they then to guess what policies will be taken by the next administration. He believed that Indonesia still benefits from having high attractiveness as an investment destination in comparison with other countries in ASEAN. Therefore, Indonesia should be able to use it. The businesses are expected to take advantage of this situation by realizing expansion and investment plans. “Do not be afraid to open a business, the political year is a stable year for investment,” he said.

Data of the Investment Coordinating Board (BKPM) stated that investment growth in Indonesia is increasing every year. In 2004, investment value of Rp56.63 trillion consists of Domestic Investment (PMDN) Rp30.66 trillion and Foreign Investment (PMA) USD 9 billion. In 2013, investment is targeted at Rp390 trillion. BKPM released realization of investment project in 2013 at Rp398.6 trillion consisting of Domestic investment at Rp128.2 billion and Foreign Investment at Rp270.4 trillion. The mining sector is still a magnet for investors followed by motor vehicles and transportation equipment. While investors who enter Indonesia are dominated by Japan, Singapore, South Korea, and the United Kingdom.

Meanwhile, Chairman of the Indonesian Young Entrepreneurs Association (HIPMI), Raja Sapta Oktohari, hoped that security and stability ahead of 2014 general election is maintained. Therefore, if social & political stability and security are disturbed, it can be a major challenge in the face of the ASEAN Economic Community (AEC) by 2015.

Socio-political dynamics recently tend to be dynamic, especially before the 2014 general election. AEC is one of the free trade that needs to be addressed with readiness of all elements of the nation. “This is so that Indonesia’s commitment to the AEC does not become a boomerang for ourselves,” Okto said.

It is important for Indonesia to prepare itself to face the AEC because it concerns  the dignity of the nation. In turn, it also will be associated with the survival of the nation. AEC is indirectly an arena of trade competition among ASEAN countries. HIPMI reminded that currently Indonesia’s economic scale has been ranked the 16^th economy in the world. Indonesia accounted for more than 40% of GDP with a population of nearly half of the population of ASEAN. (E)

Business News - February 12, 2014

FAO OPTIMISTIC ABOUT TECHNOPRENEURSHIP IN INDONESIA

FAO (Food and Agriculture Organization) or world food organization is optimistic about the realization of technopreneurship (entrepreneurship) in Indonesia. One of the ways is that Indonesia should more intensively do collaboration, including research with international institutions. Fisheries is one of the potential sectors for the development of research activities in Indonesia. “We have no money, we cannot products. But, the international agencies have. We have fertilizers, fish seeds for research in 100 locations in various villages. From the result of the research, it can be directed at technopreneurship, to build the local economy, “Director of FAO’s Fisheries Resources and Aquaculture, Indroyono Susilo, told Business News some time ago.

However, Indroyono needs to remind Indonesian researchers to be cautious. This is related to national interest. So far, foreign researchers also have interests in their own countries. In addition, there are many foreign researchers who do not comply with regulations. Genetic resources of Indonesia are the result of the joint research which were eventually taken abroad. It is very disturbing to the authority of the government and sovereignty of the country. “Intellectual Property Rights and Patents should be ours. If they do research in our country, Intellectual Property Rights and Patents belong to us. Patent-protected results of research should not be done alone, but must be done by two persons (with other Indonesian researcher). Because research is a collaboration. And, if it is done by two persons, it can reduce the risk of transfer of research results.”

In addition, foreign researches are also sorting out research materials in Indonesia. They sort out while adjusting their research material to the interests of their country. “It should not be like that. The research should also fit with our national interests. “All research collaboration activities with international institutions must produce increase of capacity of researchers in the country. Research material should also be adjusted to research and development activities in the country. Foreign researchers want to do research in Indonesia, and would transfer knowledge and technology from Indonesian researchers. “Those who come here are S3 (strata three) candidates. We do not need to teach them. If we teach them, it means that they succeeded in increasing their capacity.”

The competence of each research activity must also comply with the research materials. Suppose that the corresponding cooperation projects, including the development of Indonesia-China Center for Ocean and Climate Change. All results of research collaboration are recorded. That is, the research results are not vain, but can be used at any time because it is stored. “We build ocean observation and climate change stations with China, there is capacity building. Especially matters with regard to marine potential, they can be recorded in the station. This is an example of our cooperation with China  which is mutually reinforcing capacity.”

Indroyono admitted that during work, it is highly possible to increase cooperation between FAO and Indonesia. He travelled a lot to different countries in the world, especially Asia Pacific. In this region, there are still a lot of problems of availability of food or famine. Cooperation with Indonesia could be in the form of science and technology development in agriculture, fisheries, and marine. For example, cooperation for strengthening of food security system with nuclear technology for rice is very potential for Indonesia. As a result, hunger rate in the world, especially in Indonesia, could continue to decline. “During the administration of the late Soeharto, the second president of Indonesia, it has provided assistance of 100 thousand tons of rice to Africa. The assistance is to reduce hanger rate in some African countries. Indonesia has shown an active role in world food development. “So it could push Indonesia to more quickly achieve MDGs (Millennium Development Goals) target by 2015. Because the time is just around the corner. We were able to reduce the hunger rate in Africa in 1985.”

Meanwhile, Business News observation in the village of Gumiwang, Banjarnegara, Central Java, is that there was doubt about the continuity of the production of rice and vegetables. Rice supply from each family is processed by farmers in Gumiwang village. But some claimed that their daily needs are lacking. Although almost all kinds of vegetables are produced by farmers, some families still buy from outside the village. Farmers in the Gumiwang village are planting vegetables, maize, cassava, rice and so forth. Types of vegetables include beans, green eggplant, peppers, onions and others. “But the people here have not been able to rely on rice supply from the paddy fields,” a farmer in Gumiwang village, Ali told the Business News some time ago.

Food in security in that village relies on family traditions. So when there is one family member who experienced a shortage, he could still rely on other families who are in surplus. Food security network can be based on the smallest unit, which is the village. In addition to corps, livestock, catfish, carp and gouramies can still be relied on. Most people buy catfish seeds. They raise the fish in the ponds in the backyard. There are also farmers who must find catfish feed, i.e. worms. “They are looking for worms in the ditches in Purbalingga (about two hours drive from Gumiwang). Then the worms are used for feeding catfish. After harvest, they sell them the collectors.” (E)

Business News - February 12, 2014     

TO TEST INDONESIA’S HUMAN RESOURCE READINESS TOWARD MEA 2015

In a new free market era called the ASEAN Economic Community to be effective on January 1, 2016 traffic of people, goods, services and investment would be free in Southeast Asia. The question is: is MEA blessing or disaster ? This was related to readiness of Indonesia’s human resources to compete against workers of other ASEAN states.

Indonesia with 240 million people is a huge  market, constituting 40% of Asean population. To Indonesian business people, chances to grab market opportunities from the 60% market outside Indonesia was great. But again the question was: how strong was the local industry to compete against industries of the neighboring countries ? Would Indonesia have the strengthen to grab southeast Asian market, or would things turn otherwise?

It must not happen that the vast Indonesian market would serve as sitting ducks for marketers of other countries. Over the past 10 years, the condition had been far from being impressive. Over that period, de-industrialization had been prevalent. Many factories were closed due to heavy import. The textile industry was heavily invaded, thousands of textile producers collapsed. For example, the Tanah Abang Market in Jakarta, which was the largest textile market in Southeast Asia, 80% of the products were imported products.

The same was with forwear industry. The shoe industry center in Cibaduyut Bandung had changed into a market of imported shoes. Although there were still some shoemakers who still persisted, the condition was most disheartening. Many other industries like cosmetics, jamu, infant food and electronics which were also losing steam.

The intra ASEAN free trade agreement put the local industry in a difficult position, they were losing their maneuverability. Indonesia would become a paradise of imported goods. The nation’s trading balance would be in deficit. The Government’s commitment to support local industry was under question.

Supposedly one of the national problems was to make competent personnel of high competitiveness those who were ready to work in industries. The matter would be complicated if MEA were effective in 2016. Even if it was said that Indonesian workers were not less competent than their competitors, they still lack of self confidence in competing.

Although by quality Indonesian workers were not inferior, their readiness to perform at regional level was still handicapped. The handicap was in terms of mental attitude and mindset, known as softskill. One of the thinkable solution was how stakeholders in education could develop softskill for Indonesian workers. Psychological instead of physical readiness was more needed by the industry, although many companies still set hard skill set hard skill as qualification at initial screening,

A sound example was that nearly all employment ads set certain Accumulative Achievement Index [IPK] as qualification requirement. Universities were racing to make competent personnel, among others high IPK qualification. The gap between schools and companies made Indonesia’s human resources less competitive internationally.

Deviation from the right principles must be stopped by conducting dialogue between the industrial and educational world. Some colleges were already doing that, still many schools pursuing to make skilled graduates. And yet workers of high integrity were those having high working ethos needed by the industry. Dialogue between schools and companies was just one of the alternative solutions.

Other thinkable solution was integrated curriculum from kindergarten to High School with more emphasis on soft skill. Development of soft skill was a long process of character building. Japan had been successful in building strong national economy thanks to the support of high quality human resources on account of their Government’s effort to make superior race of strong softskill since early age.

Education at tertiary schools which only took 4 to 5 years was felt as too short to make competent, soft-skilled personnel. The mission was in the domain of the Government, in this case the Ministry of Education and Culture.

To reform curriculum with emphasis on soft skill rather than hard skill was a hard challenge for the Government in view of the system applied at the elementary schools today. Today with reasoning to step up quality of education, many schools set high standard for their students.

Only trouble was there was too much focus on hard skill in the system instead of softskill. A clear example was education at kindergartens where children were stuffed with reading, writing and arithmetics lessons as prerequirement to enter elementary school. This was indeed not the right thing to do because children would miss their innocent and playful childhood whereby by playing they could acquire softskill the easier way.

Soft skill qualities such as discipline, honesty, and responsibility must be implemented instead of reading, writing and arithmetics. This was the area where the Government of Japan had been successful which was why softskills of their workers were above that of other nations.

Nation and character building in Indonesia must be enhanced. This nation had tremendous human potentials which would prove to be productive if they were armed with the right education. If this was realized, the myth that foreigners or overseas graduates were better would vanish. At least the best sons of the nation would have greater confidence to compete internationally.

Sin economic and trading liberalization, very frequently the Government of RI adopted policies which were paradoxical; so it came as no surprise that the execution afield were often discouraging in the effort to build competitiveness. Indonesia was aggressive in making market liberalization, only to be shocked to realize that the nation was not fully ready to compete.

In the banking industry, for example, it was easy to find foreign bank’s branch offices in the cities or even towns; but try to find a representative office of an Indonesian bank which could penetrate other countries: there was bound to be none. The Ministry of Industry MS Hidayat admitted he was anxious and worried about facing MEA. To be exact, he felt that Indonesia was not ready to join MEA. One of the causes was high logistics cost which was 16% of total production cost.

Yet in other countries logistics cost was normally not more than 4% - 10% of total cost. It was this high logistics cost that made Indonesian products lose competition internationally. High production cost in Indonesia was mainly on account of many factors like poor infra structure, mismanagement etc but the most incurable was corruption, illegal collection, collusion being tolerated or untouched.

Above all, human resources development was a crucial thing and of high urgency. There was still time for the Government and all stakeholders to prepare qualified and competence professionals to face MEA by January 1, 2016 next. This nation must not lose confidence, discouraged or feel inferior. To be determined was one of the main prerequisite in entering regional competition. It was better than being forlorn and be lost in self pity, regretting why this nation was not ready to enter MEA 2015. (SS)  

Business News - February 12, 2014 

INDONESIA’S ECONOMIC REVIEW 2013 AND OUTLOOK 2014

The Central Statistics Board [BPS] had exposed their latest data and analysis and from here projection could be made of Indonesia’s economic performance 2014. Indonesia’s GDP of 2013 grew by 5.78% against that of 2012. GDP is total value of goods and services produced by a nation over a certain period. Spending was made by the Government, private sector, and household.

Growth was posted at all economic sectors, with highest growth in the Transportation and Communication sectors, i.e. 10.9 percent and the lowest in Mining and Excavation 1.34%.

Meanwhile GDP minus oil-gas in 2013 grew by 6.25%. Indonesia’s GDP in 2013 based effective price came to Rp9,-84.0 trillion, whilst GDP on the basis of constant price [year 2000] came to Rp2,770.3 trillion.

On quarterly basis, Indonesia’s GDP in quarter IV – 2013 compared to quarter III-2013 [q-to-q] inched down by 1.42 percent but compared to quarter IV-2012 [y o y] grew by 5.72%.

Indonesia’s economic growth in 2013 in terms of expenditure was in export of goods and services amounting to 5.30% followed by household expenditure 5.28%, Government’s Consumption Expenditure which grew by 4.87%, and Gross Fixed capital [PMTB] component 4.71%. Meanwhile, import as reduction factor posted growth of 1.21%.

In 2013, GDP was spent on Household Consumption Expenditure 55.82 percent, Government Consumption 9.12%, Gross Fixed Capital or Physical Investment 31.66%, export 23.74% and import 25.74%

Pprice-based per capita GDP effective per 2013 came Rp36.5 million, and increase compared to per capita GDP in 2012 posted at Rp33.5 million. As noted 57.78% of GDP of quarter IV-2013 was contributed by Java in the following order by province: Jakarta, East Java and West Java.

By quantity, activities in secondary and tertiary level was still concentrated in Java, while activities of the primary sector was concentrated in outside Java.

Meanwhile Indonesia’s economy in quarter IV-2013 described GDP wise on the basis of constant price 200 went down by 1.42% against previous quarter [q to q]. The downturn followed three monthly pattern, i.e. contraction in quarter IV after posting increase in quarter III.

Contraction in quarter IV-2013 was because the agro sector was posting significant downturn i.e. electricity, gas and clean water due to seasonal cycle. Meanwhile others sectors through quarter IV-2013 were posting positive growth, i.e. electricity, gas and clean water growing by 4.45%, transportation and communication growing by 2.36%. the processing industry sector grew by 1.72%, mining and excavation sector grew by 1.72%, general service sector grew by 1.62%; Trading, Hotel, Restaurant growing by 1.44% and the Finance, Real Estate and Company Services grew by 0.50%.

The conclusion Indonesia’s economy in 2013 posted growth of 5.78%, meaning below the target of 6.3%. Somehow this attainment was notably high considering the deficit factor in current transaction. Still, this growth lacked of quality as it was not sustained by the tradable sector. The result was low employment. The tradable sector consisted of agriculture, mining and manufacturing industry.

To Bank Indonesia, the policy to anticipate tight money policy and to manage Rupiah value had shown their result in export  which grew by 7.4%, while the import sector inched down by 0.6%. The result was visible increasing surplus in trade balance of quarter IV 2013.

I was true that economic growth of 5.78% was notably high, even above prediction of some circles who predicted growth at only 5.6%. However, economic growth should not be judged quantitatively but also qualitatively. The reason was that economic growth did not create job opportunities and reduce poverty and in the end social gap widened.

It happened because growth was supported by non tradeables which on the average grew above GDP itself, while average growth of tradable  was below GDP growth. Evidently the economic growth of 5.78% was not followed by reduced poverty.

Poverty even tend to grow. In March 2013, poverty was posted at 11.37%, but in September 2013 poverty jumped up to 11.47%.

So this year’s economic strategy should be more high-growth orientated through monetary fiscal mixed strategy which tend to be loose although in some certain area tightening was still necessary  to minimize deficit in current transaction and suppress inflation so economic growth potential could be uplifted to 5.8% - 6.2% and inflation controlled to around 5.5%% - 6.0%.

In tandem with the above, the tradable sector must be prioritized especially through fiscal policy based on APBN State Budget so a higher and better quality economic growth could be attained to generate wide multiplier effect. Economic growth achievement of 2013 should be a good asset to start with to embark on 2014 amidst stormy political atmosphere. (SS)

Business News - February 12, 2014