TOWARD AEC 2015 PELINDO III MUST SECURE SMOOTH TRAFFIC FLOW OF GOODS

Chairman of Commission VI of House Airlangga Hartarto on this technical visit to Indonesia Harbor III [Pelindo III] stated that as BUMN, Pelindo II was demanded to assure smooth traffic of goods at Tanjung Perak Harbor Surabaya; moreover AEC would start to begin by next year. In the future to anticipate free trading and application of Law no 17/2008 on Sailing, it became a challenge for Pelindo II whose core business was to manage harbors with important mission to speed up cargo traffic. House Public Relations disclosed on Monday [8/9].

He further stated that his technical visit to Pelindo III was to check how ready BUMN was to ensure smooth traffic of goods through Tanjung Perak harbor Surabaya and surrounding. The point was that harbors were the gateway for cargo moving in and out of Indonesia to keep the process rolling. Besides the technical visit was meant to control management process of BUMN. The visit was continued to Multi Purpose Terminal at Teluk Lamong [TMTL] and PT PAL.

Data of BPS obtained on Monday [8/9] disclosed that through January-July 2014 the volume of sea cargo at home was posted at 132.7 million tons, an increase of 6.76% against same period of 2013. Increase of cargo was posted in Makassar harbor 13.40%. on the contrary the volume of goods shipped at Tanjung Priok harbor dropped by 16.33#, Balikpapan down by 16.19%, Tanjung Perak down by 13.56% and Panjang down by 12.67%.

In July 2014 the volume of cargo shipped was posted at 19.6 million tons or down by 0.82% against previous months. Downturn of goods shipped was posted at Panjang harbor [53.66%], Tanjung Perak [23.32%], Tanjung Priok [21.15%] and Balikpapan [1.26%] On the contrary at Makassar harbor the volume of cargo shipped bu 4.54%.

Meanwhile through January-July 2014 the number of sea passengers was posted at 7.3 million passengers, an increase by 72.14% against same period the year before. Increasing number of passengers was posted in Makassar harbor posted at 39.80%, Tanjung Perak 29.32% and Belawan 3.98%. On the contrary the number of passengers in Balikpapan harbor dropped by 33.93%, and Tanjung Priok harbor dropped by 12.04%.

In July 2014 the number of passengers for sea transportation was posted at 1.2 million people – an increase of 14.12% against the month before. Increasing number of passengers was posted in Makassar harbor up by 102.07%, Tanjung Priok 84.21%, Belawan 20,00 %. Tanjung Perak 9,95% and Balikpapan 5.29%. increased number of sea transportation passengers was on account of “home for Lebaran rush” in 2014. (SS)

Business News - September 12, 2014

INDONESIA’S IMPORT OF TEA POSTING STEADY GROWTH

Although Indonesia was one of the biggest producers of tea in Asia, it was undeniable that Indonesia was also dependent on import of tea. Import of tea by Indonesia was necessary to cover up need for tea in Indonesia. Low quality of Indonesia’s tea reason for the Government to import tea. By importing tea, the local tea industry had to struggle to compete. Under such circumstances many tea farmers choosed not to grow tea anymore and changed profession.

Report of the Indonesia Council of Tea [DTI] stated that less certification made volume of imported tea to storm in. Every year tea producers supplied need for the domestic market and export to the amount of 20,000 tons. Domestic tea had been under preassure by imported tea from world’s tea producers in Asia, USA Europe. Around 10.000 tons of imported tea entered the domestic tea each year.

Chairman of DTI Rahmat Badrudin stated in Jakarta on Tuesday [9/9] that one way to wall out import was to urge the Government to enhance certification system. He said that certification must be applied on imported and local product alike. Certification must include product testing, plantation management and factority operations. As with imported products, certification was not too far different but focus was more on importers. Today he and the Government and the Indonesia Tea Indonesia [ATI] were scheming up non tariff barrier like Halal certification.

For information, price of local tea was around USD 1.7/kg while price of imported tea, especially from Vietnam, was only USD 0.9/kg. Therefore Rahmat demanded that tea imported to Indonesia should be high quality tea. Most tea imported from Vietnam, Sri lanka and Kenya were low quality tea. For that matter local farmers were reluctant to plant tea. While they were also trouble by high production cost, fertilizers cost etc. certification was also designed to run fair trading. So far Indonesia’s tea product was exported, while paying high import tax also had to face non tariff barrier in buyer countries.

For the mater, Indonesia would be applying non tariff barrier in the form of Certification for imported tea commodity. This was meant to wall out storming import of especially from Vietnam. He disclosed that today the Government with DTI and ATI was scheming up non tariff barrier in the form Halal Certificate. “The certification was to check whether the products meet Indonesia’s quality standard or not” he said.

Certification was also to implement fair trading. So far Indonesia’s tea products exported, while having to pay high import tax also had to face non tariff barrier in buyer countries. He claimed that today all big plantations already applied the certification.

To quote data of BPS, total import of tea through January-July 2014 was 9,249 tons or USD 14.8 million. Vietnam’s portion was 3,539 tons or USD 3.9 million. imported tea amounted to 500 – 600 tons per month. Besides tea was also imported from Kenya amounting to 1,254 tons or USD 3.9 million, India 984 million tons, Iran 2,255 tons or Rp. 1.7 million, Sri Lanka 208 tons or USD 1.5 million and other countries 1,007 tons or USD 2.9 million. (SS)

Business News - September 12, 2014

The Ministry of Industry: TAX HOLIDAY, A FORM OF SYMBIOSIS MUTUALISM BETWEEN GOVERNMENT AND INVESTORS

Facilitation of tax holiday was designed to drum up long term investment to Indonesia to drum up long term investment to Indonesia, especially new investment in pioneer industries in Indonesia which would accelerate growth of pioneer industry in Indonesia. Within the context of tax holiday, the pioneer industry was an industry of broad linkages, giving added value and high externality, introducing new technology and having strategic value to national economy,

Considering the importance of the policy in sustaining investment in Indonesia, the Government was today revising the regulation related to tax holiday. In revising this policy, the Government planned to prolong the period for tax exemption to become more than 10 years. But the Government underscored that facilitation of tax incentive for more than 10 years was only applicable to strategic industry.

As footnote, in the Regulation effective today, i.e. the Regulation of the Ministry of Finance [PMK] No. 130/PMK.011/2011 on facilitating exemption of Income Tax it was stated that exemption of income tax [Pph] given to recipient industry was 5 years and maximum 10 fiscal years, effective as per beginning of commercial production.

Arryanto Sagala, Head of the industry Climate and Quality Analyzing Board [BPKIMI], Ministry of Industry in Jakarta on Tuesday [9/9] expected that tax holiday could be a form of symbiosis mutualism between Government and investors. On the one hand Indonesia needed additional capital but businesspeople wished to have fiscal facilitating so they could make profit. The Government finally decided to extend facilitation of tax holiday for another year. The reason was that such facilities were still needed. “The Government and needed each other” Arryanto stated.

Arrayanto made sure that extention of tax holiday did not change the content of PMK 130/2011. One of the articles of the Regulation stated that corporations having of Income Tax Free incentives for 5 to 10 years. He elaborated that through the period of tax holiday, companies were still entitled to 50% reduction of PPh due for 2 years. One thing was sure that to obtain this fiscal incentives, producers must be ready to undergo complicated burreucratic procedure. Tax holiday was tax incentive. All countries in need of investment growth would offer fiscal easing as such.

He further disclosed that the Ministry of Industry had recommended that capital good industry and non-auxillary goods be given lenience in tax paying. While extending period of tax incentives, he said, the Government would also lessen prerequirements for strategic industries.

Arrianto explained that in the present policy it was mentioned that taxpayers who were entitled to tax holiday were those who planned to invet fresh capital at leat Rp1 trillion. The revision was expected to drum up foreign investors needed by Indonesia to reduce dependency on import.

Arryanto believed that tax holiday needed be revised because many reports stated that the process to obtain tax holiday was not too tight. Arrianto added on that the Coordination Minister of Economy had asked for trimming of the bureaucracy structure. The task was mandated to the Ministry of Finance, aided by the Ministry of Industry, BKPM, and the Ministry of Trade. (SS)

Business News - September 12, 2014

AGRICULTURE NEEDS TECHNOLOGY

The Indonesian agriculture is still traditional, inefficient, and labor intensive so it resulted in high costs, and as a consequence, Indonesia is unable to compete with neighboring countries. Spudnik Sujono, Secretary of the Directorate General of Food Crops at the Ministry of Agriculture, stated this.

In rice cultivation, Indonesia lags far behind other countries. For example, planting in Indonesia 100% user manpower, while Thailand already uses transplanter. Indonesian farmers harvest crops manually, and the machineries used are only semi-manual thresher, while the developed countries use large harvesters.

Ironically, Indonesia as an agricultural country is not developing technology that supports in this direction. This can be seen in almost all agricultural machineries in Indonesia which are made in foreign countries with brands like Yanmar, Kubota, Donfeng, John Deer, Sengkyuand other brands. “There are also Indonesian brands, like Agrindo, but it has a foreign license. While, engineering machines of Indonesian origin are very limited. Brands, such as Pura, Gunung Biru, and unbranded products made by local craftsmen are very few compared to foreign brands,” he said.

With this condition, 30 million farm households live in traditional conditions so that productivity is not maximal, there is loss of income opportunity, and Indonesian agricultural products are unable to compete with other countries.

The problem of agricultural technology development in Indonesia is that the technology is not in demand by industrialists and technical experts in Indonesia. “Agricultural technology is considered unattractive compared to the one of other sectors. For example, research on robotics and aeronautics is considered more prestigious than tractor engineering, which is more suitable to the conditions in Indonesia.

Due to a lack of understanding of the needs of the community and business process of agricultural sector, agricultural technology is unreadable by technical experts. The problem in the development of agricultural technology is that the industries only develop accessories or implements, such as plows, and not the core, i.e. the engine, because the research and engineering of agricultural machinery is not encouraged by the government. “Currently, there is only one research institute specializing in agricultural machinery engineering, i.e. the Agricultural Mechanization Center under Agricultural Research Agency, but ideally, due to its highly technical nature, it should be under the institution that handles industry,” he said.

The focus of the development of agricultural technology today is the capability to solve labor shortage in the agricultural sector. “Today young people have left the agricultural sector. They prefer to go to the cities, and if they work in the village they prefer to work as motorcycle taxi (ojek) drivers than becoming farmers. Consequently, those who are still willing to work in the farm demand higher wages. Currently workers’ wage in the villages is relatively high, “he said.

There should be a technology that can replace manual labor and increase the prestige of labor in the agricultural sector. The use of transplanter in rice planting is to save planting time and labor up to 80%.

Other technology which is needed now is to reduce loss of yield. Manual harvesting process, which is still practiced, makes crop yields scattered. There has to be a technology to maintain the freshness and quality of crops until they reach consumers.

There should be an integrated harvesting-post harvesting machinery to reduce manual handling. For example, the use of combine harvester will reduce loss of up to 2%. The use of modern storage device is capable of maintaining the freshness of crops. “Corn from the United States and Brazil when arriving here still have good quality due to the use of modern combine harvester and silo,” he said.

Technology to increase the added value of food crops is also very necessary. The goal is to produce derivative products of high added value, such as raw materials for pharmaceutical industries.

Increase the added value of food crops is very important because Indonesia is currently exporting raw materials, but importing in the form of advanced products. For example, Indonesia exported cassava, but imported cassava in the form of starch, which is widely used by food and pharmaceutical industries. Indonesia exported cocoa beans and imported chocolate, whose price is expensive.

What should be done in the development of agricultural technology is that it must be followed by social engineering, considering the use of energy resources in the rural areas and solving problems from upstream to downstream in an industry-based technology package. (E)

Business News - September 10, 2014