Jakarta Civil Servants Set to Lose Official Cars

Jakarta Globe, Lenny Tristia Tambun, Nov 26, 2014

This handout photo taken and released by
the Presidential Palace on Nov. 19, 2014
 shows President Joko widodo, right, leading the
 swearing-in ceremony for Basuki Tjahaja
Purnama, left, as Jakarta’s governor at the
 Palace in Jakarta. (AFP Photo/Presidential
Palace/Cahyo Sasmito)

Jakarta. The Jakarta City Council is forging ahead with an edict by former governor Joko Widodo to auction off 300 cars used by city officials and provide them with transportation stipends instead.

Civil servants in echelon II, III and IV will soon have to return their keys and take up transportation allowances as part of cost-cutting measures passed by the administration of Joko, who left office to become Indonesia’s president in October.

Reza Pahlevi, from the assets division of the Jakarta Financial Management Body (BPKD), said that the State Assets and Auction Service Office (KPKNL) was currently calculating the cars’ prices.

“We involved the KPKNL so that the car pricing will be fair,” Reza said on Wednesday in Jakarta. “We could ask the Transportation Agency to do it, but we think the result wouldn’t be fair and right. Therefore, we decided to ask the KPKNL.”

Reza said the BPKD would request Jakarta Governor Basuki Tjahaja Purnama — who took office last week — to issue a removal of asset letter once pricing had been recommended.

“We will commence the auction once we have obtained approval from the governor which is why we haven’t asked the officials to turn in their cars yet,” Reza said.

The KPKNL, which will auction the cars, has promised the process would be transparent as the public was allowed to bid, but civil servants were not.

In July, City Hall announced that officials would be provided with transportation fees taken from the city’s regional budget because it was considered more efficient that buying new cars, which devalued.

“The decree was signed by Joko Widodo back in July and we have started implementing it since October,” Reza said.

The transportation fees vary: echelon II officials get Rp 9 million ($592) per month, echelon III officials receive Rp 6 million ($395) and echelon IV officials get Rp 4 million ($263). The transportation fees will be subjected to 15 percent tax.

No Dissent to Fuel Price Hike by Markets

Conditional Love: Markets broadly supportive of subsidized fuel price hike — as long as infrastructure follows

Jakarta Globe, Muhamad Al Azhari & Vanesha Manuturi, Nov 18, 2014

Financial markets responded to the fuel price increase positively. The benchmark
 stock index rose 0.96 percent to close at 5,102.47 on Nov. 18, a day after the
president Joko Widodo announced the fuel price increase. (Reuters Photo/Beawiharta)

Jakarta. Economists and local executives praised President Joko Widodo’s decision to raise the price of subsidized fuel, a move considered a bold first step toward further fiscal reform.

Joko raised the subsidized fuel price by an average 33.6 percent as he eyes plans to shift subsidy government spending toward productive sectors, such as infrastructure and education investments.

“This gutsy policy will allow him to unburden himself from the heavy shackles which held back previous administrations, because of one simple rule: You need money to do stuff in life,” said Wellian Wiranto, a Singapore-based economist with OCBC Bank.

“It will not escape the market’s attention, too, that this is a man who manages to do this within less than a month in office, and, crucially, in an environment where tyglobal oil prices are dropping,” Wellian said.

“Previous administrations have largely chosen the more convenient path of discussing and deliberating until their backs are shoved against the wall of incessant global oil price upticks before they did the inevitable,” he said, referring obliquely to  former President Susilo Bambang Yudhoyono.

Joko’s move is slated to save around Rp 120 trillion ($9.8 billion) in the 2015 budget, which can now be re-allocated to other sectors rather than being burned in people’s vehicles while they are stuck in traffic jams.

Barclays Research sent a note to clients on Tuesday that said the fuel price hike could help Indonesia to help curb the oil deficit and support portfolio inflows.

Singapore-based economists, including Wai Ho Leong, Barclays’ senior regional economist for Asia excluding China, contributed to the note.

“We deem the fuel price hike to be supportive of the rupiah, and in the near-term we think the rupiah is likely to strengthen,” the note said, adding that their analysts believe the fuel hike is positive on two fronts.

The note highlighted that Indonesia’s oil trade deficit has gradually widened in recent years due to rising domestic fuel consumption.

“While rapid income growth is probably the main driver [for higher fuel consumption], artificially depressed prices [in fuel products] have also contributed to higher consumption.”

“A decisive move by Joko to raise prices, accompanied by a roadmap for longer-term fuel subsidy reforms, will be critical in limiting oil consumption and import growth over the longer-run,” the note said.

Indonesia’s government has perennially found that demand for subsidized fuel exceeded the quota set aside.

This year state oil company Pertamina estimated that the country will be short 1.9 million kiloliters of subsidized fuel, as demand exceeds the annual quota of 46 million kiloliters.

The Barclays note also said that the price hike helps narrow of Indonesia’s trade deficit, which traditionally has been driven by broad-based import compression rather than stronger exports.

Such a trend — which means that fewer capital goods have been imported, supporting the local manufacturing sector — has contributed to the slowdown in economic growth.

“Should infrastructure spending increase in coming years, as promised by Joko, growth and capital goods imports could rebound,” the Barclays note said.

Indonesia’s trade deficit shrank in September after imports slowed.

The Central Statistics Agency reported a smaller trade deficit of $270 million in September versus a revised $311 million in August.

In September, exports grew 3.87 percent, while imports rose 0.23 percent.

That compares with a 10.6 percent growth in exports and a 13.7 percent expansion of imports in August.

“Policies to curb the oil deficit, along with broader measures to encourage exports and domestic manufacturing, are thus essential in preventing a renewed widening of the overall trade deficit,” the Barclays note said.

The Barclays note also said that “the ability of Joko to push through a fuel price hike shortly after taking office should strengthen investor confidence in his administration’s resolve to implement crucial but unpopular economic reforms.”

“This should help sustain foreign portfolio flows into Indonesian markets, providing support for the rupiah at a time when concerns over current account funding could rise due to the end of the third round of  quantitative easing and Fed policy normalization,” the Barclays note said.

Indonesia’s economy slowed in the third quarter of 2014 to the lowest level in five years, as weaker exports dragged down economic expansion even as private consumption remained strong.

Indonesia’s economy expanded by 5.01 percent in the three months ending September compared with the same period last year.

That compares with a 5.12 percent year-on-year expansion in the second quarter.

Financial markets responded to the Joko’s move positively. The benchmark stock index rose 0.96 percent to close at 5,102.47 on Tuesday.

As many as 6.3 billion shares worth more than Rp 5.3 trillion changed hands on the day.

Foreign investors, which contributed to 34 percent of the day’s trading, bought Rp 243.7 billion more shares than they sold. Gainers beat losers 192 by 111.

Meanwhile, the rupiah strengthened to 12,146 per dollar on Tuesday from 12,193 on Monday, according to data from the central bank. The yields for benchmark 10-year government bonds declined to 8.0319 percent from 8.0457 percent.

A lower yield, suggesting that investors take lower risks premiums over the securities, reflected their confidence over the overall economy.

Sara Loebis, corporate secretary of United Tractors, the heavy equipment distributor arm of Astra International, said that the fuel price hike would affect much of its operations since the company uses industrial fuel. Industrial fuel is priced more expensively than the subsidized fuel.

“If state funds from fuel subsidy can be diverted to more productive sectors such as infrastructure, this would indirectly open up the heavy machinery market.”

Irwanto, corporate secretary at BW Plantation did not rule out that the expected higher inflation may trigger the company’s operational costs to soar.

“But that may only have effects for about for 42 days to 2 months, I think,” he said.

“As long as the budget is used towards infrastructure development, we support the decision because it will eventually bring down costs.”

“In Indonesia, everything is expensive because our infrastructure is lacking,” Irwanto said.

Further coverage

• Indonesia Mostly Nonplussed Over Fuel Price Hike
• Govt Moots Floating Subsidized Fuel Price Next Year
• Editorial: Test Taken, Passing With Flying Colors

Jokowi Eyes Infrastructure Focus With Fuel Subsidy Cut

Bitter Medicine: The president says savings will go toward more productive sectors

Jakarta Globe, Dion Bisara & Muhamad Al Azhari, Nov 18, 2014

 (JG Graphics/Nadia Tammu)

Jakarta. Indonesia raised subsidized fuel prices by an average 33.6 percent as it seeks to shift subsidy spending to productive sectors.

“The government decided to divert the subsidy spending,” President Joko Widodo said during a live television broadcast at the State Palace on Monday night.

He added that his administration planned to allocate more money on infrastructure, education and health.

Joko said the new price of subsidized fuel would be effective from 00:00 on Tuesday. The prices of the widely used low-octane gasoline, or Premium and subsidized diesel were increased by Rp 2,000 (16 cents) per liter.

Indonesians will now pay Rp 8,500 per liter for Premium and Rp 7,500 per liter for subsidized diesel. Previously, Premium was sold at Rp 6,500 per liter and subsidized diesel at Rp 5,500 per liter.

News reports previously stated that the government planned to increase subsidized fuel prices by Rp 3,000 per liter on average.

Part of President Joko Widodo’s
infrastructuire plan includes building more
 roads with money saved from the fuel
subsidy. (Antara Photo/Wahyu Putro A)

“The increase is moderate compared to recent increases because we currently see a declining trend in global oil prices,” Energy and Mineral Resources Minister Sudirman Said said.

On Monday, Brent crude fell by 73 cents to $78.68 a barrel after Japan, the world’s fourth-largest crude oil importer, slipped into recession and as Saudi Arabia officials reiterated that the oil price should only be subject to supply and demand.

Finance Minister Bambang Brodjonegoro said that by raising the subsidized fuel prices and slashing fuel subsidy spending, the government would now have more than Rp 100 trillion in additional budget funding in its war chest that can be spent on infrastructure, welfare and development of the nation’s maritime sector.

The minister said the fuel price increase would save Rp 120 trillion in the 2015 budget.

Fuel subsidy spending in next year’s budget is set at Rp 276 trillion, up from 246.5 trillion in the 2014 revised budget.

Bambang said the state budget deficit can fall to below 2.2 percent of the estimated gross domestic product next year.

Indonesia’s inflation rate rose to 4.5 percent in October from 4.3 percent a month earlier, as people already anticipated the subsidized fuel increase and traders jacked up the prices of goods, including food, before the fuel price increase was announced.

Minister Bambang believes inflation may soar to 7.3 percent by the end of this year from an estimated 5.3 percent in the revised state budget.

Development targets

Sofyan Djalil, the coordinating minister for economic affairs, said in a press briefing on Monday that the government needs to build so much infrastructure, that “we must save some of our budget for productive spending.”

National Development Planning Minister Andrinof Chaniago said between 2015 and 2019, the government plans to build 2,600 kilometers of new roads; 1,000 kilometers of new toll roads; 15 airports; 24 sea ports; and expand the railway network by 3,258 kilometers.

The government also plans to procure 50 ferries to deploy in remote areas and to improve public transportation in 29 cities.

In the energy sector, the government plans to build two new refineries with a total capacity of up to 600,000 barrels of oil per day. It also plans to upgrade the existing refineries of state energy firm Pertamina in Cilacap, Central Java, and Balongan, West Java.

The government further plans to add up to 35,000 megawatts to state utility PLN’s installed electricity capacity of nearly 52,000 megawatts.

Andrinof said the development would prioritize infrastructure “for the public good.”

By doing that, the electrification ratio is expected to be boosted to 96.6 percent of the nation’s population by 2019 from the current 81.4 percent.

A gasoline station attendant fills fuel
 into her customer’s car in Jakarta.
(Reuters Photo/Supri)

Shielding the poor

The government has registered about 15.6 million poor households that will require financial protection from the knock-on effects of higher fuel prices.

Rini Soewandi, the state enterprises minister, said the government would issue one million chip-based cards this year, starting today, which the government will use to transfer cash directly to the poor to help pay for education, health care and welfare.

The remaining 14.6 million poor will get the cards next year, but in the mean time they will receive cash transfers under the old system where local administrations register poor households and distribute cash to them directly.

Efforts to reduce fuel subsidy spending were also made in the energy sector.

Indonesia spends massively on oil imports, while oil exports have dwindled due to falling production.

Government data show that Indonesia recorded a $27.7 billion crude-oil output deficit  last year, more than seven times the 2004 levels due to a lack of investment in exploration activities.

Energy Minister Sudirman said on Sunday that his ministry had established a special committee to fight what he described as a secretive cabal, or “mafia,” which illegally benefits by acting as brokers in the oil and gas sector.

The committee has been tasked with initiating reforms that include reviewing policies and the bureaucratic systems within the energy sector.

It will table a possible revision of the 2001 Oil and Gas Law and create a healthy investment climate, although details are not yet forthcoming.

Additional reporting by Reuters

Further Coverage:

Editorial: Jokowi Proves Himself as a Man of Action

Indonesia Raises Subsidized Fuel Prices by Rp 2,000 a Liter

Indonesia Raises Subsidized Fuel Prices by Rp 2,000 a Liter

Jakarta Globe, Dion Bisara, Nov 17, 2014

(Antara Photo/Fanny Octavianus)

Jakarta. Indonesia raised subsidized fuel prices by an average Rp 2,000 per liter, in an attempt to curb fuel usage and narrow the gaps in the current account and the state budget.

The price for low-octane gasoline, or Premium, will rise to Rp 8,500 per liter, from Rp 6,500. Subsidized diesel was raised to Rp 7,500 per liter from Rp 5,500. The prices would go into effect at midnight on Monday.

The move would also help to reduce state expenses on the subsidy and that money could be used for other programs such as education and health care.

President Joko Widodo announced the prices increases at around 9:10 p.m. on Monday in an address that was broadcast via television.

“The increase is moderate even by recent latest increases standard because we see a decline in global oil price trend,” said Energy and Mineral Resources Minister Sudirman Said before the announcement.

Sofyan Djalil, the coordinating minister for economic affairs, said in a press briefing on Monday that the government has so much infrastructure that needs to be built that “we need to save some of our budget for productive spending.”

Bambang Brodjonegoro, the finance minister, said that the increase will save Rp 120 trillion ($9.8 billion) in the 2015 state budget.

Indonesia’s current account deficit has narrowed to 3 percent of gross domestic product in the third quarter from 4.3 percent of GDP in the previous three-month period.

The government last raised subsidized fuel prices in June 2013 by an average Rp 3,000 a liter.

KPK Seizes 17 Cars From Ratu Atut’s Brother

Jakarta Globe, Rizky Amelia, January 28, 2014

Wawan’s mansion on Jalan Denpasar IV in Kuningan, Central Jakarta was
 deserted on Tuesday afternoon, the day after the KPK confiscated 17 cars
from the money-laundering suspect. (JG Photo/Benjamin Soloway)

Money-laundering suspect Tubagus “Wawan” Chaeri Wardana — the brother of detained corruption suspect Banten governor Ratu Atut Chosiyah — had his fleet of 17 cars confiscated by anti-corruption investigators on Monday and Tuesday morning.

“At the moment, there have been 17 cars confiscated including some luxury cars such as a Lamborghini [Aventador], a Ferrari, a Bentley and a Rolls-Royce,” Bambang Widjojanto, deputy chairman of the commission, said on Tuesday.

Investigators began their search on Monday afternoon at Wawan’s two houses on lanes off Jalan Denpasar, a Kuningan, South Jakarta thoroughfare known for its hellish traffic bottleneck and exorbitant property prices; the street counts the Singapore embassy among its tenants.

Both properties, one large, the other mammoth, were deserted by Tuesday afternoon. Curtains were drawn, no lights were on, guard posts were left unmanned and there were no cars in sight. The larger of the two properties had a four-car garage — a rarity in Jakarta.

The KPK also searched at least five other addresses, including the office of Wawan’s wife, South Tangerang Mayor Airin Rachmi Diany; his employee Yayan Rodiah’s houses in Grand Serang Asri and Griya Serang Asri; and two houses in Taman Graha Asri, Serang, owned by another employee, Dadang Prijatna.

The commission confiscated a Harley Davidson motorcycle and three cars from the Kuningan addresses: a Toyota Land Cruiser, a Nissan GTR and a Lexus Sedan. A Honda motorbike remained in front of the smaller of the houses on Tuesday.

KPK spokesman Johan Budi said the other ten cars confiscated included two Mitsubishi Pajeros, a BMW, a Honda Freed, three Toyota Kijang Innovas, a Toyota Avanza, a Ford Fiesta and a Toyota Fortuner.

Four luxury cars were confiscated from a warehouse in Tanah Abang, Central Jakarta, Budi said.

“They were found in various places, even in a warehouse, but the most important thing is they have been found,” Bambang said. He would not comment on the commission’s view of the possibility that Wawan kept vehicles in a warehouse to conceal the extent of his assets.

Maqdir Ismail, Wawan’s lawyer, denied that the cars were hidden — he said they had been repossessed by a leasing company because his client was unable to pay.

The cars were parked on Tuesday at the KPK headquarters in Jakarta. Aside from the vehicles, the KPK also confiscated documents detailing Wawan’s assets.

Wawan has been named a money laundering suspect in two cases: the rigging of medical equipment contracts and attempting to corrupt the country’s democratic system by exchanging billions of rupiah in bribes for a favorable ruling in a disputed election in Lebak district, Banten.

Benjamin Soloway contributed reporting

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Tax Break for Eco-Friendly Car Producers Now Official: Minister

Jakarta Globe, ID/Damiana Ningsih, June 5, 2013

A model poses next to a car displayed at the Indonesia International
Motor Show 2012 on Sept. 20, 2012. (JG Photo/Safir Makki)

The government has officially issued a decree to support the production of low-cost, environmentally-friendly cars in Indonesia, a minister confirmed on Wednesday.

Industry Minister MS Hidayat said on Wednesday that President Susilo Bambang Yudhoyono signed the 2013 decree number 41 on luxury items tax, which includes vehicles, on May 23. The decree was legalized on the same day by Legal and Human Rights Minister Amir Syamsuddin.

“This regulation will cover some programs related to eco-friendly cars, support conservation of energy use and [the use of] alternative energy, for example low-cost and green cars, hybrid, electric cars and cars using biofuel. It will curb taxes and boost demand for greener cars,” he said.

Hidayat said no luxury tax would be imposed on cars or station wagons with engine capacity of up to 1,200 cc and with a minimum fuel consumption of 20 kilometers per liter.

Tax exemption would also apply to diesel or semi-diesel vehicles of up to 1,500 cc, also with minimum fuel consumption of 20 kilometers per liter.

The current tax for new vehicles ranges from 10-75 percent depending on engine size. Only emergency vehicles, such as ambulances, are tax exempt.

Some analysts have forecast that the policy could eventually boost Indonesian vehicle consumption by a third.

Indonesian auto sales, buoyed by an expanding middle class, hit a record 1.1 million last year though the figure is expected to be slightly lower this year because of likely fuel price increases and higher downpayment requirements.

Hidayat said the automotive industry could now launch eco-friendly car production in line with the regulation. He added that the regulation was aimed at spurring a long-term movement toward sustainability, rather than immediate commercial interests.

“Relating to the price [of the vehicle], even though there was a pricing set by the Ministry of Finance, I wish for flexibility. The pricing should be as fair as possible when complying with the adopted technology. Don’t make it solely as a commercial purpose,” Hidayat said.

Previously, Astra International said the company would delay production of its eco-friendly vehicle, the Ayla, until government regulations on low-cost, green cars were finalized.

Astra Daihatsu Motor opened a new plant in Karawang, West Java, in April that has a production capacity of 120,000 units per year. Daihatsu had set a goal to produce 3,000 Ayla cars per month in the facility.

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SBY Signs Eco-Friendly Car Regulation

Jakarta Globe, May 28, 2013

KompasOtomotif

President Susilo Bambang Yudhoyono recently signed a government regulation aimed at supporting the development of environmentally-friendly vehicles in Indonesia.

Newsportal Kompas.com reported on Tuesday that Yudhoyono signed the Low Emission Car Project decree, which seeks to curb taxes and boost demand for greener cars.

“The president signed it yesterday [Monday],” Johnny Darmawan, the president director of Toyota Astra Motor, told Kompas.com on Monday.

An anonymous source at the Ministry of Industry also confirmed to Kompas that the decree had been signed.

The regulation stipulates special tax incentives for eco-friendly vehicles such as hybrids and electric cars. Furthermore, it notes that such cars must be assembled in Indonesia and fulfill the minimum standard for local parts to receive the tax break.

“It was proposed that luxury taxes would not apply to low-cost green cars ,” Budi Darmadi, the director general of advanced industry based on high technology at the Ministry of Industry, said.

Previously, Astra International said the company would delay production of its eco-friendly vehicle model, the Ayla.

Astra Daihatsu director Pongky Prabowo said the company is waiting for government regulations on low-cost green cars before it starts producing the Daihatsu Ayla and the Toyota Agya, the latter a collaboration with Toyota Motors.

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