China to suspend VAT for small businesses

Want China Times, Xinhua 2013-07-25

China will suspend the value-added tax and turnover tax for small businesses with monthly sales of less than 20,000 yuan (US$3,220) starting from Aug. 1.

The announcement was made in a statement released Wednesday after an executive meeting of the State Council presided over by Premier Li Keqiang.

The move will benefit more than six million small companies and boost the employment and income for tens of millions of people, the statement said.

VAT refers to a tax levied on the difference between a commodity's price before taxes and its cost of production. Turnover tax refers to a levy on a business's gross revenues.

The State Council also discussed measures to facilitate foreign trade and stabilize exports, such as simplifying customs clearance procedures, cutting operational fees, increasing financial support for profitable companies, facilitating the exports of small and mid-sized private enterprises, increasing imports and maintaining a stable yuan exchange rate.

China's economic growth slowed to 7.5% in the second quarter of 2013, down from 7.7% during the first quarter. Officials attending Wednesday's executive meeting, however, said the economy is still running within a suitable range.

They agreed that more efforts should be made to create a fair, open and convenient market environment, motivate market players and enhance construction in weak areas of the economy, so as to ensure that the economy can develop in a sustainable and healthy way, the statement said.

The statement also said the government will fully open up its railway construction market through reforms and give priority to railway construction in central and west China, as well as poor regions.

KPK Wins 2013 Magsaysay Award

Jakarta Globe, Rizky Amelia, July 24, 2013

Indonesia’s anti-corruption commission has been named one of the recipients of this year’s Ramon Magsaysay Award in recognition of its relentless drive to weed out graft in the government.

The Manila-based Ramon Magsaysay Award Foundation, which confers the annual honor dubbed the “Asian Nobel Prize,” announced on Wednesday that the Corruption Eradication Commission (KPK) was one of five recipients of this year’s prize, given in honor of “greatness of spirit and transformative leadership in Asia.”

It cited the KPK’s “fiercely independent and successful campaign against corruption in Indonesia, combining the uncompromising prosecution of erring powerful officials with farsighted reforms in governance systems and the educative promotion of vigilance, honesty and active citizenship among all Indonesians.”

Carmencita Abella, the RMAF president, said this year’s award recipients were “three remarkable individuals and two amazing organizations, all deeply involved in creating sustainable solutions to seemingly intransigent social problems in their respective societies, problems which are most damaging to the lives of those trapped in poverty or ignorance.”

“They all refuse to give up, despite daunting adversity and opposition,” she said in a press release. “They are all deeply rooted in hope. We have much to learn from them, and much to celebrate about their greatness of spirit.”

Johan Budi, a spokesman for the KPK, told the Jakarta Globe that winning the award would not have been possible without the hard work of the public, independent antigraft watchdogs and the media in bringing corruption to light.

“We will treat this award as motivation to work even harder and never give up in the effort to eradicate corruption, no matter how difficult it is or how long it takes,” he said in Jakarta.

He added that the award also came as a timely reminder to the KPK, amid political pressure to curtail its powers, that it was on the right track in carrying out its publicly mandated duties.

The other winners of the 2013 Magsaysay Award are Ernesto Domingo, a health care pioneer from the Philippines; Lahpai Seng Raw, a Myanmar aid worker; Habiba Sarabi, Afghanistan’s only female provincial governor; and Shakti Samuha, an anti-human-trafficking group from Nepal.

The KPK, which will receive its award at a ceremony in Manila on Aug. 31, becomes the latest Indonesian recipient of the prize named in honor of the former Philippine president who died in 1957.

Last year, Ambrosius Ruwindrijarto, who pioneered reporting on illegal logging in Indonesia’s national parks, was one of the recipients, while in 2011, Tri Mumpuni, a social worker, was honored for her foundation’s work to bring electricity to half a million rural residents by building micro-hydroelectric plants.

Indonesia’s Microfinance Industry Faces Overwhelming Demand

JakartaGlobe, Janice Winata, July 23, 2013

Many roadside stall operators in Indonesia have to resort to loans from mobile
 banks (bank keliling) as they are unable to obtain formal banking services.
(JG Photo/Fajrin Raharjo)

A tattooed man briefly interrupted Wastiri as he ducked into her roadside stall, taking a seat alongside the slow-moving traffic that crawled down the narrow Tanjung Priok street. She flashed him a smile as he greeted her, beaming wide and toothless from her perch atop a worn wooden bench.

Colorful bags of instant noodles and potato chips lined the walls of Wastiri’s stall — a tiny plastic-covered shop sandwiched between a ramshackle noodle stand and a large commercial bank in North Jakarta’s roughhewn portside neighborhood.

For some 40 years this stall has been the source of Wastiri’s livelihood, she explained. In that time the woman, now more than 80, has become something of an institution. Customers call her “Emak” (Mother) as they stop by to ask what she has in stock, peering into her small store as they walk down the street.

The bank next door hasn’t been as reliable, she said.

“I would like to borrow from banks, as it is cheaper to do so, but their requirements are complicated,” she complained. “They ask me for an identification card [which I have], but I do not have a family card or the deed to my home for collateral. I don’t own the place.”

For Wastiri, and millions of other low-income Indonesians, the nation’s commercial banking system is a closed door. While lenders like Bank Rakyat Indonesia offer low-cost microloans, lending regulations — which require customers to have proof of a permanent job, income and collateral — shut out the majority of Indonesia’s laborers.

It’s a large segment of the domestic market. Despite Indonesia’s rising middle class, nearly half of the country’s households live at, or close to, the government’s $22-a-month poverty line, according to World Bank statistics. Some 92 percent of Indonesia’s workforce is employed in the informal sector. Most hold semi-permanent jobs but lack an employment contract.

Commercial lenders and microfinance cooperatives have tried to meet the demand, but a combination of strict regulations and too-high thresholds have hampered efforts and given rise to a murky black-market of motorcycle-riding lenders and unscrupulous loan sharks.

The lenders offer loans at high interest rates — nearly 20 percent higher than bank rates — and often collect daily payments from customers. The requirements are loose and the lenders are eager to approach customers, said Wastiri.

“Bank keliling [mobile banks] are more suitable for us,” she said. “Thought they ask for daily or weekly payments, it is easier for us to borrow money from them — I personally don’t even have to give them my identification card.”

Experts have struggled to estimate the real size of the informal market, but from their best estimates it appears to be growing.

“We can expect to see an increase in the number of non-bank microfinance institutions because the non-bankable segment is huge and it is very difficult for the poor to access banks,” said Dewi Meisari, an expert in micro-, small- and medium- sized enterprises at the University of Indonesia (UI).

The Ministry of Micro, Small and Middle Enterprises recorded 55 million MSMEs in 2011 and reported a loan-to-GDP ratio of 33.1 percent in a survey a year later. Some two-thirds of the MSMEs in Indonesia have no access to formal banking services, the ministry found, warning that the lack of access was a threat to Indonesia’s economic growth.

“The lower income population has little or no options when they borrow money,” Dewi said.

Growth potential

Indonesia’s microfinance market can be lucrative if properly tapped, experts believe. MSMEs account for  57 percent of the nation’s gross domestic product, Bank Indonesia (BI) Deputy Governor Halim Alamsyah said during a seminar last June. While MSMEs have historically borrowed outside the formal market, the number of micro business owners receiving commercial loans has grown in the last year, Firman Moeis, head of commercial linkage at CIMB Niaga, added.

“The micro finance market in Indonesia has great potential for growth,” he said. Out of the 56 million MSME owners in Indonesia, only 37 percent of them receive micro banking services. [But] as of February 2013, the MSME industry had an outstanding loan value of Rp. 514.5 trillion — a 14.6 percent jump from last year’s numbers.”

Firman believes the nation’s economic growth is anchored by micro businesses like Wastiri’s food stall. During the Asian economic crisis, the owners of small and mirco businesses emerged unscathed, he said.

“The 1998 crisis negatively impacted big companies, but small-medium businesses thrived,” Firman explained. Today, the economic downturn isn’t as drastic; furthermore, the small-medium businesses are fundamentally sound, so I am certain this situation will leave little or no impact on the microfinance industry.”

While large companies saw their balance sheets reverse into the red, the nation’s informal sector — cigarette sellers, stall owners and street food cart operators — continued to earn a living, said Leonardus Kamilius, founder of Koperasi Kasih Indonesia, a microfinance institution operating in Cilincing, North Jakarta.

“In the 1998 crisis, the companies that were battered by the crisis were the big companies who owed US dollars. For small enterprises, their economies are not as related to the global economy and hence, they are more resilient,” he told the Jakarta Globe.

Financial literacy still a problem

For Said Hendro, access to microloans has been both a blessing and a curse. It’s tempting to borrow too much, he said, adding that many of his friends found themselves neck-deep in debt after taking money from both microfinance cooperatives and mobile banks.

“Many of my friends around here have gone back to their villages as their businesses have gone bankrupt,” Said shared. “They borrow from all these mobile banks and they can’t repay their debt.

“I understand their predicament completely because these people come by everyday offering loans and it is hard to say no. Even though I have loans from both official cooperatives and the mobile banks, I am still tempted to borrow more.”

Experts warn that the lack of financial literacy among low-income residents could undermine out any gains made by offering poor people access to financial services. Borrowers need access to both commercial loans and education for Indonesia’s microcredit industry to make a positive impact, experts said.

“Most people in the low-income population cannot comprehend the whole notion of interest rates — the way the process of borrowing is explained to them is by telling them how much they need to pay in installments per week,” Dewi explained.

Leonardus echoed Dewi’s sentiment.

“People who can afford loans of 5 million rupiah and above, they generally already know how to manage their money and do not require further financial education,” he said. “However, for smaller loans like 500,000 rupiah loans for a banana fritter [pisang goreng] seller, he does not know how to manage his money and will benefit greatly from financial education.”

RI, Dutch academics jointly publish CSR book

The Jakarta Post, Jakarta,  July 15 2013

Eighteen academics, scholars and post-graduate students from Indonesia and the Netherlands have jointly published a book titled Corporate Social Responsibilities (CSR) in Indonesia: Legislative Developments and Case Studies.

“The internationally reviewed publication provides an overview on recent developments on legislation related to CSR in Indonesia. This also provides suggestions for a further introduction of CSR in a wider legal context,” the Netherlands Education Support Office (Nuffic Neso Indonesia) said in a statement made available to The Jakarta Post on Monday.

It said the case studies in the book revealed the need for developing new CSR mechanisms in Indonesian companies.

The book is the result of a joint research project between Brawijaya University, Indonesia and Utrecht University, the Netherlands.

“Both the project and book aim to enhance the interaction between research and teaching as well as between research and society overall,” said Afifah Kusumadara, one of the project initiators from Brawijaya University.

“These will provide interesting learning materials for CSR courses in both countries while at the same time contributing to wider CSR debates, with many companies in both countries being involved,” she went on.

Nuffic Neso Indonesia, which facilitates cooperation between Indonesian and Dutch higher education institutions, has seen a growing interest from both sides to cooperate.

“Indonesian universities are increasingly focused on internationalization and Dutch universities have a strong interest in Indonesia,” said Nuffic Neso Indonesia director Mervin Bakker.

“This leads to stronger collaboration in, for example, staff and student exchange, double/joint degrees and research.” (ebf)

Central Bank to Let Rupiah Weaken Against US Dollar

Jakarta Globe, Agustiyanti & Grace Dwitiya Amianti,  July 9, 2013

The government is set to boost public spending on buildings and
infrastructure projects in the second half of this year. (JG Photo/Afriadi Hikmal)

Bank Indonesia has indicated that it will allow the rupiah to further weaken against the US dollar this year, in line with the country’s slowing economic growth.

The rupiah almost touched 10,000 against the dollar in Monday trading, bringing its depreciation to 3 percent so far this year. The weak rupiah makes it costlier for companies to import machinery and raw materials, but also boosts exporters’ earnings.

“We should give it room. We will maintain that the rupiah is stable and reflects its fundamental value,” central bank governor Agus Martowardojo said on Monday.

To defend the rupiah, Bank Indonesia has sold dollars, bringing the country’s foreign exchange reserves down to $98 billion in June. It was the first time reserves dropped below $100 billion since 2011.

Finance Minister M. Chatib Basri said the currency’s weakness was not too worrying because its decline was in line with other currencies across the region, indicating that the country’s competitiveness would not be affected too much.

“That issue is not unique to Indonesia,” Chatib said.

The Finance Ministry estimated that the economy expanded 6.1 percent in the first half, down from last year’s 6.2 percent expansion, as investment slowed due to higher costs of importing capital goods and raw materials. First-half gross domestic product data are due next month.

“We can observe an economic slowdown in the first half this year from the decline in capital goods imports,” Chatib told the House of Representatives in a meeting on Monday.

Imports of capital goods, a leading indicator for investment, contracted by 17 percent in the January-May period to $13.2 billion from a year earlier, according to the Central Statistics Agency (BPS).

Investment accounts for a quarter of the country’s gross domestic product, making it the second-biggest contributor after domestic spending, which accounts for more than half.

But Chatib said he forecast the country could still grow 6.3 percent this year, as targeted by the government, on expectations of large state spending during the second half.

Data from the Finance Ministry showed that government ministries and institutions in the January-June period have only spent 39 percent of the 2013 budget of Rp 1,726 trillion ($173 billion). In those six months, spending on infrastructure projects totaled Rp 34 trillion, or just 18 percent of an expected Rp 188.3 trillion.

Chatib told the House that the budget deficit was at 0.58 percent of GDP in the first half of 2013 and would increase in the second half to 1.8 percent, which is lower than government’s target of 2.3 percent of GDP for this year.

To boost investment in the second half, the government will simplify rules on investment, said Chatib, who also heads the Investment Coordinating Board (BKPM).

“We will simplify investment rules, such as by relaxing the negative list and the rules of the tax holiday,” he said, referring to the list that exclude certain sectors from foreign investment and the rules that grant exemptions to some investments.

SBY Ready to Launch Official Facebook Page

Jakarta Globe, Ezra Sihite,  July 4, 2013

In this handout photograph released by the presidential palace President
 Susilo Bambang Yudhoyono (L) inspects an Indonesian air force plane during
 a sendoff ceremony at the Halim Perdanakusuma airport in Jakarta on
June 25, 2013. (AFP Photo/PresidentSBY.info/Abror Rizki)

Indonesian President Susilo Bambang Yudhoyono will follow his successful foray into Twitter with an official Facebook page later this week, presidential spokesman Julian Aldrin Pasha said on Thursday.

The president announced plans to join Facebook in early June, saying “Insya Allah, I will join Facebook,” after the launch of his official Twitter account, the first official social media account created for the president and his staff. The palace has not set a firm date for the Facebook page’s official launch, Julian said, but it will likely go online in “the next three days.”

Yudhoyono said his recent push into social media was part of an effort to reach out to average Indonesians. He has become an avid Twitter user since opening the account in mid-April, signing off as *SBY* on more than 580 tweets and garnering some 2.67 million followers.

Indonesia may have one of the lowest internet penetration rates in the region — 22.1 percent in 2012 according to the Indonesian Service Providers Association — but it has an active presence on social media.

The nation’s users rank sixth in the world on Twitter and second on Facebook. Jakarta has the world’s most active Twitter users. Bandung has the sixth.

But the president’s entry into social media hasn’t been without controversy. The central government has pushed to reinstate criminal charges for insulting the head of state, a move that could potentially turn Yudhoyono’s presence on Twitter and Facebook into a legal battleground.

Yudhoyono seems prepared for the criticism. His staff said the president was fully “aware that he will have to respond to both the babble and the critiques.”

“SBY wants to become a true netizen. He wants to be part of the pulse of ordinary citizens and immerse himself in a dialogue that is free and equal,” presidential adviser Daniel Sparingga said.

Related Articles:

Yudhoyono Turns to Facebook to Connect With Indonesians

SBY Launches Twitter Account