GOVERNMENT FOCUS EFFORT ON ROAD INFRASTRUCTURE BUILDING

The Government admitted that infra-struc­ture in Indonesia was still far from perfection, and such was felt as one of the handicaps in the process of social and economic development in Indonesia. To overcome the problem, a number of large scale infra­structure projects were now underway in many re­gions. Two ministries were responsible in infra struc­ture building, i.e. the Ministry of Public Works and the Ministry of Transportation/Communication. In 2014, budget allocation of the Ministry of Public Works was prioritized for national connectivity through road building.

Meanwhile in 2015 the Ministry of Public Works would need at least Rp.123.29 trillions for infra­structure building in Indonesia an increase of 46.5% compared to 2014 at Rp.84.14 trillion. The fund would be used for building infra-structure in water resources system, road management, development of infra-structure four housing settlements and space planning by the Ministry of Public Works. Djoko Kir­manto, the Minister of Public Works stated in Jakarta on Friday [11/4] stated that of the total Rp.123.29 trillion budget, Rp.60.03 trillion was allocated for road construction. The breakdown: for road infra structure 2,423 km long, for restoration of bridges 9.5 km, construction of new roads 402 km, and widening of road in strategic location, border regions and remote regions 790 km.

Meanwhile in 2014 the Government was striving to increase road capacity in Sumatra, Java, Bali, Kalimantan, Sulawesi, West Nusa Tenggara, East Nusa Tenggara Timur and Papua totaling 3,854.3 km long, including maintenance of 329.9 km long bidges, The allocation for ministries was in synergy with in­vestment plan for related BUMN, whereby to step up capacity for transportation services in each sector re­spectively.

Today transportation of goods in Indonesia was still reliant on roads, and yet transportation by railway was supposed to be more efficient. The ex­isting data showed the total length of railway in In­donesia was around 6,000 km of which more than 2,000 km were no longer functional, most of them were branch rails regarded as not advantageous when put in operation.

Beside the Ministry of Public Works, the Min­istry of Transportation would also reduce land trans­portation burden on roads in Indonesia by integrat­ing various transportation mode. Deputy Minister of Transportation Bambang Susantono mentioned that 93% of goods flow were today transported on roads, making the roads to be over-burdened.

The over-burdened roads were clearly visible among others in Java Northern Coastline Highway [Pantura] which showed how overloaded the roads were. Therefore, in the next 5 years the Government planned to decentralize traffic flow by activating rail­way transportation service.

The deputy Transportation Minister admit­ted that today railway was only at best in Java and Sumatra, but in the next 5 years they would build railway also in Kalimantan, Sulawesi of even Papua especially if Indonesia had strong fiscal ca­pacity to realize the development. The Government would also activate inter-insular sailing communica­tion in some cities like Jakarta, Cirebon, Semarang and Surabaya.

Previously the Ministry of Transportation was reported to scheme up the National Transportation Strategic Plan 2015 - 201 9 to realize the integrated multi-mode transportation concept. The inter-mode transport system was to inter-connect various transportation mode to accelerate traffic of goods and people actively and efficiently, such as in the marine sector which must be strengthened as most of Indo­nesia consists of the sea. (SS)

Business New - April 16, 2014

GOVERNMENT DETERMINED TO REDUCE NUMBER OF SLUM HOUSES

Shelter was Man's basic need, and everyone dreams of a decent home to live in. However, not all people could realize their dream, especially those of the low-income group. To solve the problem, the Min­istry of People's Housing [Kemenpera] was striving hard to spur on building of houses in all of Indonesia through the Self Help House Renovation Stimulation Plan [BPPS] for the low income group through Social Aid Plan [Bansos] and Rolling Fund.

Deputy Head of the Self Help Housing Program Dept. Ministry of People's Housing. Ministry of People's Housing Jamil Ansari stated in Jakarta on Friday [11/4] that the action was to make total overhaul of degrad­ed houses to reduce the number of inadequate homes which now had come to 7.9 million units.

Through 2006 - 2011 he had managed build­ing of 108,500 houses. Since 2012 he said, the ac­tivities had been increasing significantly. Hence by end of 2014 renovation of inadequate houses was posted at 858,000 units or by end of 2014 the re­maining unattended houses was 7.1 million.

The House Renovation Aid process in BSPS Program was exercised through transfer of money to recipient’s account, not through related institutions. The amount of aid was not the same, i.e. around Rp.2.5 million to Rp.3.5 million of the supposedly Rp.7.5 million. If the aided house's floor was earth and the roof was made of dry leaves, and the walls were of woven bamboo, the subject would receive aid of Rp7.5 million through bank transfer, not through any official. The renovation process itself was done by way of traditional villagers' joint - community effort.

The Ministry of People's Housing had asked provincial heads all over Indonesia to support this PSPS Total House Renovation Plan for the marginal people in the respective regions. The point was that one of the pro-people programs which was premium project of the Ministry was beneficial for the people in upgrading their quality of dwelling place to be live worthy. According to Jamil, the role of Governors in guiding and supervising the project was indispensable.

Jamil stated that the Ministry was striving hard to increase the amount of fund in housing proj­ect, so the aid extended by the Central Government to Provincial Government could be promoted. The same was with house procurement for Civil Servants in the regions by the local Government was needed as not all civil servants, especially those of lower rank had the capacity to build houses. The local govern­ments could benefit from the Aid Program facilities at the Ministry to accelerate house building for civil ser­vants. Through mortgage [KPR] facilities and liquid­ity facilities on soft loan basis [KPR FLPP] and infra structure building like road, water supply, electricity supply and drainage system, it was expected that the houses to be owned by civil servants would be up to the standard and be affordable.

He disclosed that through 2005 - 2013 the Government had built 24,789 Rusunawa flats or 203 twin blocks spread out in 33 provinces and 130 re­gencies/cities with total budget of Rp.3.43 trillion. Besides, through the Ministry of Public Works over the same period the Government had built 39,966 units of Rusunawa flats, so the total number of Ru­sunawa built by the Government was 64,755 units which were allocated for employees, university stu­dents, religious school students , the army and the police personnel. (SS)

Business New - April 14, 2014

THE IMPLICATIONS OF MINERBA LAW ON INDUSTRIAL DOWNSTREAMING

The prohibition to export raw mineral prod­ucts to be effective per 2014 was hard to realize as processing industry at home was still at minimum. The Ministry of Industry M.S. Hidayat it was estimated that mineral smelters at home were not ready to oper­ate by 2014. The Government sets target that 70% of smelters could be built in 2 years. Today 50% of smelters were running and some investors were in­vesting their capital.

Moratorium of export of raw mineral prod­ucts, according to the Minerba law was not easy to exercise as exporters had been doing it for decades. So it needs a long process to make the Law fully ef­fective as targeted by the Government.

The Minerba Law had its positive impact and added value on the domestic industry. Building of smelters needed enormous capital and the Govern­ment was calling out all stakeholders to invest their capital in this sector. The main hindrance to smelter building was power supply. So the Government was considering the proposal that investors built their own power plants for smelters,

Previously it was disclosed that there were al­ready 153 investors who were interested to invest in smelter building in Indonesia. They came from China, Hong Kong, Singapore and South Korea. It was re­ported that the Government of Japan expressed their grievances over prohibition of raw mining materials by the Indonesian Government as their processing in­dustry was running short of raw materials.

The Government wished that Japanese min­eral processing industry relocated their smelters to Indonesia whereby to put added value to the minery products. But it was presumable that Japan would not dare to bring .this case to WTO. So it was time to, relocate their investment to Indonesia. For example Singapore would collaborate with the Provincial Government of South Sumatra to build smelters in South Sumatra at the value of USD 400 million. The point was that na­tional companies must stop importing raw materials in large scale whereby it was regulated by Presiden­tial Decree that downstreaming of mineral industry be managed by the Ministry of industry.

However the Ministry of industry would still collaborate with the Ministry of Energy and Mineral Resources who had command over the raw materi­als. As reported, applications to build smelters kept increasing, including by join venture companies. Ap­plication for permit to build smelters was one or the pre requirements for holders of mining permits [IUP] to obtain export permit [SPE] from the Ministry of Trade to export raw ore materials.

Today there were already 36 IUP permit holders being given SPE export permit by the Ministry of Trade. Previously the companies already had rec­ommendation of the Ministry of ESDM as they had already passed clear and clean test which included many aspects such as research procedure, explora­tion and exploitation, having exercised technical fea­sibility test and had fulfilled economic and environ­mental requirements and administrative obligations i.e. paying financial obligations to the Government.

Meanwhile to fulfill electricity need for smelt­ers PT PLN and KADIN Indonesia had signed MoU to build powerhouses of 1,500 megawatt. The collabo­ration was on business to business basis. The 1,500 MW electricity would be sufficient to support 30 - 40 smelters in all of Indonesia.

So far the survey outcome of the Indone­sia Resources Mineral [IRESSJ mentioned that the downstreaming of mineral industry would promote investment growth to the amount of Rp 400 trillion. According to IRESS the downstreaming policy made investors set forth 185 proposal at the value of USD 25.5 billion or Rp300 trillion. Therefore the Govern­ment, House and the public must support this down-streaming concept and the Minerba law to be consis­tently run.

The beginning of downstreaming caused less­ened tax and royalty in the next 3 years at the value of Rp60 trillion - Rp100 trillion, but the shortage was small compared to the benefit of downstreaming. State's income would soar high in the next 3 years. If this downstreaming process was postponed, Indone­sia would be losing added value to the amount of Rp 268 billion from 2017 to 2023.

Export of raw ore materials carried out so far made national industry support to be clumsy. Besides Indonesia would be losing added value in vast amount and become a dependent nation. Export of raw mining materials had happened in 2008 - 2011. Export of bauxite ores came to 40 million tons, iron ores 13 million tons, nickel 33 million tons and copper 14 million tons.

While 80% of the iron and steel scrap imports Indonesia is still in control, import 500 thousand tons per year of raw materials alumina, and copper prod­uct imports 1.28 billion dollars in the same period. Through downstream mineral policy, the domestic in­dustry had a chance to catch up. Because the policy will complement the downstream supply chain hus­bandry national industry has a strong structure of the metal industry. The completeness of accelerating the process of industrialization.

With calculation as above, then the down­stream and coal policy is appropriate because it has both the intent and purpose to sustain the national economy in the long run. Thus the debate about the construction of the smelter from any viewpoint be­comes no longer valid and it is time to end. Better business operators for the sake of long-term thinking rather than short term. (SS)

Business New - April 14, 2014

ELECTION IN INDONESIA’S ECONOMY

The World Bank projected Indonesia's eco­nomic growth in 2014 at 5.3%, lower than 2013 at 5.3%. Vice President of the World Bank for East Asia and the Pacific reg

ion Van Trotsenburg stated that countries of the Asia Pacific region like Indonesia and Thailand were facing hard economic problem and higher overseas debt this year.

Trotsenburg disclosed that economic growth of the Philippines also slowed down to 6.5%, while developing countries in East Asia were growing by 7.1%. East Asia would be a region with fastest eco­nomic growth in the world in spite of having slow­down of 8% on the average from 2009 to 2013. In China, growth would show downturn to 7.6% against 7.7% in 2013.

Beside China, other developing countries in Asia would grow by 5.0% against 5.2% in 2013. Global growth which strengthened this year could help developing zones to steadily grow while adjust­ing to tight global economic condition.

Generally speaking the World Bank in the East Pacific region would have stable economic growth. This region had been the growth propeller machine of the world since global financial crisis. The growth was supported by economic recovery and market response to Tappering Off policy by the Fed in the USA.

Malaysia's economy would also grow by 4.9% in 2014. Export from Malaysia would predict­ably grow. However, the cost for paying debt and fiscal consolidation would be burdened on domestic demand.

From the above picture, the present or next Indonesian Government were demanded to respond to World Bank's view through relevant economic pol­icy including fiscal policy which was right and mea­surable. Noteworthy was the statement of Finance Minister Chatib Basri that economic policy aimed at fiscal tightening was rated as not suitable for 2014. The point was that tightening policy run by the Gov­ernment today was restoration plan to solve prob­lems of 2013. In short, Indonesia could not go on making fiscal tightening.

According to Minister Chatib, in the medium and long term and onward supposedly the Govern­ment concentrated on the national supply side which would soon improve national fundamental economy. So it was about time to relax tight money policy.

Therefore one of the key solutions in uplifting national supply was evenly spread and fast development in infra-structure, hence adequate infra structure and upgrading of Human Resources in the next few years was vital and indispensable.

In regard to General Election, either for Leg­islative [April 9 2014] or Presidential [July 9 2014] were expected to make legislative members and Pres­ident/Vice President who meet people's expectation including businesspeople. This signal was seen: when some names of Presidential candidate surfaced, the market responded positively.

Toward Legislative Election, the market was zealous. Investors kept accumulating shares. Similar­ly positive expectation of marketplayers of Election outcome made Rupiah to strengthen against USD. History had it that in 3 elections of the past index of IHSG always moved positively upward.

Meanwhile strengthening of Rupiah would still continue, but only very thin because of the Fed's factor who planned to tighten their money policy. So surplus of current transaction and controlled inflation contributed to Rupiah strengthening. For that matter, BI who maintained benchmark rate at 7.5% on April 8, 2014 last was rated as right.

So the Government must benefit from the dy­namic economic pulsation triggered by the Election event. The General Election was rated as a good mo­mentum to energize domestic trading. Transactions were high during election and so was activities of businessplayers, particularly in the sectors of mi­cro and small-and-medium business [UMKM] which jacked up economy by around 2% -3%. The UMKM sector would produce in abundance various attri­butes and symbols of political parties to be used in political campaigns.

The textile and garment industry were energized to jack up national economy because the need for dress and costumes as well as party's banners, flags, T-shirts, hats, jackets and other campaign at­tributes would be in high demand. Unemployment would be minimized and this would reduce poverty. Money circulation would mount to fantastic amount, probably around Rp100 trillion trough various financ­ing resources, Government of private. The Govern­ment must make the best of this momentum.

General Election had its multiplier effect and opened economic opportunities. Small home indus­tries would supply campaign necessities and small restaurants would mushroom, the people would ben­efit from high money circulation.

Still the Government had to make the best of the momentum, i.e. to accelerate the infra structure building sector in all of Indonesia and to ensure peace and order during election, by involving the people to be active in maintaining security in the environment.

For the time being the Government had the asset to continue economic development during the legislative election than ran peacefully; this was a good start to run the Presidential election on July 9, 2014 next. If the election ran peacefully, it would be followed by a period of power transition which was also orderly and it would mean a good starting point for the next Government to continue the momentum of economic growth.

It seemed that inter-party coalition in the next Government was inevitable in view of the quick count outcome where no single party appeared as single majority to score above 20% of vote at the past Leg­islative Election, but the public expected coalition of not more than 3 or 4 parties only to ensure effective state administration. (SS)

Business New - April 14, 2014