Ministry Wants Bank Rakyat Indonesia to Seal Deal for Bank Agro

Jakarta Globe, Yessar Rosendar, March 28, 2010

The State Enterprises Ministry has given its blessing to state-owned PT Bank Rakyat Indonesia’s bid to acquire PT Bank Agroniaga, and called for the deal to be completed quickly to spur lending to the agricultural sector.

“The study for the acquisition has been completed and I hope the process can be accelerated,” Agus Pakpahan, the deputy for agriculture, forestry, paper and printing at the ministry told reporters on Friday. “Bank Agro could be a medium for BRI to increase its lending to the agriculture and plantation sector.”

Micro lending is one of BRI’s core businesses and by buying Bank Agro it would acquire a large number of micro credit customers in the agro-business sector.

BRI expects its micro credit ledning to grow 33 percent this year to Rp 71 trillion ($7.8 billion) compared with Rp 53 trillion in 2009.

Agus said there were some foreign investors interested in acquiring Bank Agro but that the government would prefer BRI to buy the bank, which focuses on lending to the agricultural sector. However, he refused to disclose how big a stake BRI was looking to buy.

Agus is confident that the acquisition will also benefit Bank Agro.

“Their performance is not bad, but it will be optimized if it is under BRI,” he said.

Bank Agro is currently 96.87 percent owned by Dana Pensiun Perkebunan, the state plantation companies’ pension fund.

Roswita Nilakumia, chief commissioner of Bank Agro, said in December that the lender had been negotiating with four potential investors, two of which were domestic, with one from China and one from the Middle East.

This year Bank Agro has forecast a profit of Rp 20 billion, an 124.7 percent increase from Rp 8.9 billion in 2009.

“If approved, the acquisition will likely happen after Bank Agroniaga completes its rights issue scheduled in the second quarter this year,” Rahmi Marina, an analyst from PT Kim Eng Securities, said in a research note released this month.

According to an Antara report, Aviliani, an independent commissioner for BRI, is also supporting the proposed acquisition.

“The acquisition is important because the competition against foreign banks will be tighter in 2011 and therefore state-owned banks have to strengthen their assets,” Aviliani said, adding that the plan will be discussed by BRI shareholders at a meeting in May.

BRI, which has allocated Rp 2 trillion for acquisitions this year, has also been negotiating to acquire a stake in medium-sized lender PT Bank Bukopin.

However, BRI said this month that it would pull out of the race to buy Bank Bukopin if the government prefers state pension fund PT Jaminan Sosial Tenaga Kerja to acquire the bank.

Apindo disagrees with Facebookers over tax boycott

The Jakarta Post, Jakarta | Sun, 03/28/2010 6:17 PM

Indonesian Employers Association (Apindo) chairman Sofjan Wanandi said Sunday he did not support a Facebook group that was pushing for a boycott of tax payments in a protest against recent corruption by tax officials.

Sofjan said he could understand the community’s disillusion at recent corruption among tax officials, but called on taxpayers to abide by the law and continue to pay taxes.

“All over the world people need to pay taxes because all countries need money to finance development,” Sofjan said as quoted by Antara during a fun walk on Sunday.

The group decided to promote its boycott online using the Facebook social networking site as a platform, following the revelation of a tax official's involvement in a Rp 25 billion ($2.75 million) corruption case.

The Finance Ministry official in question, Gayus Tambunan, was fired following the revelation of his fraud.

Sofjan also suggested the Finance Ministry continue with its tax reforms, to restore taxpayers’ confidence in it.

“We have actually built trust in the tax office, but because of the acts of one or two people we now have a feeling that that some of the tax money we paid is not used for development, but for personal use,” he said.

Sofjan urged the tax office to restore its image that had been tarnished by the recent corruption case.

“The image of tax officials, which has been not so good for a long time, has to be improved. Strict punishments are the only way to improve their image,” he said.

Former Indonesian Energy Bosses Named in Bribery Case

Jakarta Globe, Reva Sasistiya, March 26, 2010

Pertamina's former director of refining and former vice president are among those accused.

Highlighting corruption in Indonesia’s oil and gas sector, former senior executives at state-owned oil and gas company PT Pertamina and the former director of oil and gas at the Energy Ministry have been implicated in a bribery case, according to documents from a British court.

On Thursday, Innospec Ltd., the British arm of international chemicals company Innospec Inc., pleaded guilty to bribing Indonesian executives and officials in Britain’s Southwark Crown Court.

The Indonesians implicated in the case, according to the British court documents, are: Rahmat Sudibyo, director general of oil and gas at the Energy Ministry in 2001-02 and head of upstream oil and gas regulator BPMigas from 2002-04; Suroso Atmomartoyo, Pertamina’s director of refining from 2004-08; and Mistiko Saleh, Pertamina’s vice president from 2004-06.

Transparency International Indonesia brought the case to the attention of local media on Friday, calling a press conference and circulating copies of the British court documents.

TII secretary general Teten Masduki said he had sent a letter to Pertamina president director Karen Agustiawan urging her to report the case to the Corruption Eradication Commission (KPK). Teten said he had also urged BPMigas to do the same to help eliminate corruption in the oil and gas sector.

The British court ruled that between February 2002 and December 2006, Innospec Ltd. paid bribes to ensure that its lead-based fuel additive, tetraethyl lead (TEL), was chosen for purchase over other unleaded alternatives. An Indonesia government regulation banning the use of TEL was issued in 1999 but did not take effect until 2006.

According to court documents, the bribes were paid from $17.48 million in commissions that Innospec paid its local agent, PT Soegih Interjaya.

Rahmat rejected the allegation when contacted by the Jakarta Globe on Friday, saying he had never been involved in the purchase of TEL from Innospec.

Suroso also denied any involvement in bribery.

“I was the one who ordered that we stop purchasing TEL from Innospec in 2006, so clearly I was not involved in the case,” he said.

Firdaus Ilyas, of Indonesia Corruption Watch, said the case was only the tip of the iceberg in terms of corruption in the country’s oil and gas sector.

“That is why it needs to be further investigated quickly by the KPK,” Firdaus said.

Teten said that if Pertamina failed to report the case to the KPK, TII planned to launch cases against the implicated executives and officials in domestic courts.

Pertamina spokesman Basuki Trikora Putra said on Friday that the company still needed time to study the case before deciding what action it might take.

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Sri Mulyani Unveils Indonesia's New Tax, Customs Watchdog

Jakarta Globe, Dion Bisara, March 26, 2010

Finance Minister Sri Mulyani Indrawati stepped up her drive to reform the tax and customs directorates on Friday by inaugurating a new regulatory body called the Taxation Supervisory Committee.

“This committee should be the voice of taxpayers but also can help ensure the important role of taxation in contributing revenue to the state,” Sri Mulyani said in a speech after the inauguration ceremony.

“The committee needs to carry out a healthy supervisory function as well as checks and balances in anticipating emerging corruption in taxation.”

The TSC is independent of the Directorate General of Taxation and the Directorate General of Customs and will report directly to Sri Mulyani. Overseeing both bodies, the TSC will be responsible for confirming tax revenues and dealing with public complaints about tax officials. The establishment of the supervisory committee was mandated by the 2009 tax law.

The committee will be run by five officials, including Anwar Suprijadi, a reform-minded senior bureaucrat and former director general of customs who has been named the TSC’s first chairman.

Abdul Ansari Ritonga, the former director general of the state budget at the Ministry of Finance, has been named deputy chairman of the committee. The three other members are Hekinus Manao, the inspector general of the Finance Ministry, and two professors from the University of Indonesia, Sidharta Utama and Hikmahanto Juwana, both of whom are experts in tax issues.

Anwar told the Jakarta Globe that the committee would work to improve communication with the public, perhaps by setting up a telephone hotline to receive complaints about corrupt tax and customs officials. “Give our team some time to decide the exact mechanism,” he said.

Since taking over as finance minister, Sri Mulyani has made it one of her top priorities to reform the tax and customs directorates, which are widely considered to be hampered by corruption and red tape.

At a meeting with foreign investors on Thursday, Sri Mulyani said the government was serious about pushing for further reforms in the bureaucracy, particularly in the area of tax and customs, to help the country become more competitive internationally.

She explained that for the reform drive to succeed, the government must implement a system of punishments and rewards, develop the necessary technology and improve the welfare of civil servants to prevent them from being tempted into corruption.

Around 70 percent of the state’s revenue comes from taxation. In the proposed revision of the 2010 state budget, the government set a revenue target of Rp 733.38 trillion ($80.7 billion) for the tax directorate and customs directorate. The total state budget revenue target this year is Rp 973.16 trillion.

Innospec chemicals firm fined $12.7m in bribery case

BBC News

Indonesian officials were bribed with more than $8.5m

The UK arm of a US chemicals firm has been fined $12.7m (£8.5m) after admitting bribing Indonesian officials.

Innospec paid bribes of more than $8.5m to prolong the use of harmful, lead-based fuel in petrol engine cars.

Judge Lord Justice Thomas at Southwark Crown Court said Innospec's corruption was "systematic and large-scale".

The company called it a "deeply regrettable" chapter in its history and said it had changed procedures to try and ensure it didn't happen again.

Tetraethyl lead fuel additives were phased out in the US and Europe from the 1970s to the 1990s, because of health and environmental concerns, but are still used in piston engine aircraft.

The court's decision followed a controversial transatlantic plea bargain, which the judge criticised as beyond the remit of the UK's Serious Fraud Office (SFO).

The plea agreement followed more than two years of negotiations with the company by the SFO, the US Department of Justice and the US Securities and Exchange Commission.

The deal earmarked $40.2m (£26.3m) as being available for fines and confiscation, about two-thirds of which is expected to go to US authorities.

Judge Lord Justice Thomas said that in the future, prosecuting authorities should not make such deals and that the fine was "wholly inadequate", but he did not want to make the company insolvent.

"I have concluded that the director of the SFO had no power to enter into the arrangements made, and no such arrangements should be made again," he said.

Innospec employs 365 people at its Merseyside plant.

China urged to back joint ventures in RI

Mustaqim Adamrah, The Jakarta Post, Jakarta | Fri, 03/26/2010 10:58 AM

Indonesia is urging China to invest here instead of mainly being a trader, and to back a “win-win solution” in the implementation of the free trade agreement between ASEAN and China (ACFTA).

Industry Minister Mohamad Suleman Hidayat said Thursday that during the visit of Chinese Prime Minister Wen Jianbao to Jakarta on April 23, there would be “some important programs” to discuss, including future Chinese investment in Indonesia.

His visit is part of the celebration of the 60th year of Sino-Indonesia relations.

“I’ve asked the Chinese [industry] minister to [help create more] concrete cooperation — [by having] his manufacturers come here and join with our manufacturers in joint investments,” Hidayat told reporters at the ministry.

“Don’t just export all the time. This is also part of a win-win solution in the ACFTA.”

With the full implementation of the ACFTA early this year, the government effectively has scrapped 6,682 tariff lines in 17 sectors, including 12 in the manufacturing sector and five others in the agriculture, mining, maritime sectors.

An influx of manufactured products from China is expected following these changes.

Similarly Indonesia will enjoy zero duties in China on its exports, most of which are raw materials, unlike Chinese exports which are mostly manufactured products.

Indonesia exports to China liquefied natural gas and mining commodities including coal and bauxite as well as agricultural commodities such as crude palm oil and cacao.

Indonesia also exports some manufactured goods like fabrics and jamu (herbal medicine) to China.

On the other hand, Indonesia imports a large number of manufactured goods from China, such

as steel products, footwear, garments, food and beverages, ceramics, plastic-made products, toys, chemicals, furniture, electronics, machines, electronic devices, electrical components, IT products, tools and herbal medicines.

During the visit of Prime Minister Wen, Indonesia and China are also expected to discuss other issues, including defense.

Foreign Minister Marty Natalegawa said earlier a strategic partnership with Beijing would be all-encompassing and comprehensive, including defense cooperation.

The strategic partnership has translated into a number of cooperation deals, including joint military production which started in 2008 and an extradition agreement signed in 2009.

Indonesia has also conducted joint military training with China, whose military budget is the world’s second-largest after that of the United States.

Indonesia Minister Says Nestle Has ‘Right’ to Cut Off Sinar Mas

BusinessWeek, by Achmad Sukarsono ,March 25, 2010, 9:48 PM EDT

March 26 (Bloomberg) -- Nestle SA’s decision to stop buying from Indonesian palm-oil producer Sinar Mas Group over deforestation concerns is “perfectly normal,” the country’s environment minister said, suggesting the government doesn’t plan to protest.

“That’s their right as a consumer,” Gusti M. Hatta said in an interview in Jakarta yesterday, speaking of Nestle’s decision. “If there’s a clear violation, then I would cut them off without mercy,” he said, adding an investigation into the country’s biggest maker of palm oil is ongoing.

Nestle’s dropping of Sinar Mas sparked calls for the government to speak out on behalf of the palm-oil industry, which produces the country’s biggest agricultural export by sales. The Indonesian Palm Oil Association last week said the Vevey, Switzerland-based company’s decision was “unfair.”

“We need intervention from the government because the impact could reach other palm oil companies,” Libria Sefita Dewi, a palm oil analyst at PT Mega Capital Indonesia, said in a phone interview. “The image of Indonesian palm oil producers could become so bad that a defense is necessary.”

Nestle’s action came after a Greenpeace report said Sinar Mas illegally destroyed rainforest areas that are a key habitat for orangutans.

Unilever NA suspended deliveries from Sinar Mas in December and U.S. food provider Cargill Inc. may stop doing business with Sinar Mas if a global trade body validates the Greenpeace report, the company said yesterday on its Web site.

‘Responsible Land Clearing’

PT Sinar Mas Agro Resources and Technology, Sinar Mas’s palm-oil unit, is “committed to applying responsible land clearing and the best practice of farming management in all of our plantations,” President Director Jo Daud Dharsono said by phone on March 17.

“It’s not fair if major companies such as Nestle and Unilever dropped supplies from Indonesian producers just based on one report,” Fadhil Hasan, executive director at the Indonesian Palm Oil Association told reporters in Jakarta on March 18.

The country’s palm-oil exports may rise to 18 million tons this year from 15.5 million tons in 2009, the Indonesian Palm Oil Association said Jan. 26. Sales reached $10 billion last year, the association said.

Coal Mines

Legislation that takes effect next month will give Indonesia’s Environment Ministry power to revoke business licenses and permits without having to go through police. The ministry will first use the new law to crack down on coal producers in Borneo “because there are companies that have built mines in forested areas without approval,” Hatta said, without naming them.

“Almost half” of more than 1,500 mines appearing in Indonesian Borneo in the past decade are illegal, he said.

Larger producers such as PT Bumi Resources and PT Adaro Energy “tend to be good” in managing the environment, Hatta said. Some businesses have “misinterpreted” the government’s intent to enforce the new law, Hatta said.

“We’ll give time” to the companies to deal with their environmental issues “although we’ll strictly monitor the progress,” he said.

Rules governing the oil industry will be clarified within a year, he said, and “tolerance” will be given to mature oil fields.

The energy ministry is seeking a three-year delay on enforcing existing environmental rules. Applying them immediately could lead to a 40 percent drop in oil and gas output, energy ministry official Evita Legowo said Feb. 24.

Southeast Asia’s biggest economy expects to produce 965,000 barrels of oil per day this year, compared with 949,000 barrels a day last year, according to energy-ministry data.

--Editors: Patrick Harrington, Greg Ahlstrand.

To contact the reporter on this story: Achmad Sukarsono in Jakarta asukarsono@bloomberg.net

To contact the editor responsible for this story: Greg Ahlstrand gahlstrand@bloomberg.net

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Editorial: Not-so-clean government

The Jakarta Post | Fri, 03/26/2010 9:57 AM | Opinion

The whopping Rp 36 billion (US$3.9 million) in donations that have gone into the coffers of Supreme Audit Agency (BPK) chief Hadi Poernomo during his career as a tax officer has raised many eyebrows.

Not only Indonesia Corruption Watch (ICW), but ordinary people with any common sense will be tempted to question his claim that he raised such a huge fortune from his extremely generous parents, siblings and relatives. Hadi, a former tax office chief, amassed Rp 12 billion in the last four years, which he said was mostly from donations.

Donations have become a regular explanation, if not excuse, for a steep increase in public officials’ assets since wealth declaration was made mandatory for the country’s state officials in 1999. The mandatory wealth report was introduced as the country embarked on a fight against corruption, with a hope the Corruption Eradication Commission (KPK) and the public alike could verify the assets of state officials from the executive, legislative and judiciary branches of power.

That the public control mechanism hardly works may explain that awareness of corruption eradication has been limited to the educated community, but the bulk of the population has remained silent. Or perhaps Indonesian people are culturally so permissive to corrupt practice that it may take the nation one or two generations to uproot graft.

Public participation is key to the nationwide drive against corruption through a simple action called a reality check, which has worked well in the neighboring Philippines, where corruption is as deeply rooted as in Indonesia. Through a reality check, the public may question how a new young tax officer could buy a luxury apartment or middle-ranking police and military officers possess luxury cars and send their children to study overseas.

There are so many blatant facts of the glamorous lifestyle of our state officials and their families around us that should provoke the basic question needed to kick-start a probe into alleged corruption: where has the money come from?

Public announcements of the wealth of state officials are a good start. But little has been heard about the KPK’s efforts to verify the wealth reports. Wealth reports have been reduced to a ceremony to show public officials’ compliance with the law, regardless of their questionable assets.

Tougher regulations are needed to make sure accountable wealth reports, including penalties for public officials who falsify their wealth reports. In the long run, the nation may need to consider shifting the burden of proof to the state officials. It may spark a lengthy debate, as the country’s legal system does not recognize the mechanism, but for the sake of a clean government and good governance such a revolutionary legal reform is worth exploring.

Trade ministry to speed up licensing procedures

Antara News, Friday, March 26, 2010 04:18 WIB

Jakarta (ANTARA News) - Trade Minister Mari Elka Pangestu said her ministry had set itself the target of creating an online registration and license-issuing system over the next five years.

"At present, we are already using a national single window system whereby trade licenses are processed in only a few days` time. Five years from now, we must be able to issue licenses or permits in an even shorter time, in just one day`s time, if possible," Pangestu said on Thursday during a panel discussion at the Indonesia Summit 2010 held by the Economists Conferences at the Shangrila Hotel here.

She said the government was now focusing on overcoming infrastructure problems and reforming the bureaucracy. The two tasks were the government`s present priorities that needed to be tackled soon in order to boost trade with other countries.

Indonesia with its rich natural resources had benefited from trade with other countries over the years, she said.

"The question now is how to maintain and obtain more benefit from our resources. Therefore, the government is now focusing on ways to increase the value and quality of our products," she said.

The Economist Conferences is a leading provider of highly interactive meetings including industry conferences, management events and government roundtables. Also attending the Thursday discussion session were several foreign envoys , namely Japan`s Ambassador Kojiro Shiojiri, China`s Ambassador Zhang Qiyue and US Ambassador Cameron R Hume.

Earlier, the Economist Intelligence Unit had forecast that Indonesia`s Gross Domestic Bruto would expand by 5.6 percent in 2010 and by 5.9 percent in 2011 as Indonesia . like much of the rest of Asia, was undergoing a relatively robust recovery.

While Indonesia`s relative (by export-oriented Asian standards) insulation to the global economy was cited as having cushioned it from the worst of the crisis, it would in large part be an increasing openness to global markets that would help create new opportunities.

"Yet while Indonesia is hitting its stride, there are many aspects to its development that need committed reform and restructuring if the country is to meet `stretch` goals that is, to exceed the consensus view that Indonesia should be growing at 7 percent or more per year. These include bolstering institutions and legal environments to promote and encourage investment in public infrastructure," the Economist Corporate Network director said.

Indonesian Tax Official Tied to Police Bribe Case to Be Questioned

Jakarta Globe, Farouk Arnaz & Camelia Pasandaran, March 25, 2010

The luxury residence of tax official Gayus Tambunan in Kelapa Gading, North Jakarta. The National Police say they will summon him for questioning over Rp 25 billion in a case of suspected police corruption. Gayus has already been acquitted embezzlement, but police have reopened the case after Susno Duadji said the funds were for bribes. (JG Photo/Safir Makki)

The young mid-ranking tax official who was found to have about Rp 25 billion ($2.75 million) in accounts in his name and was at the center of a scandal over suspected police graft will finally be questioned by the National Police.

Insp. Gen. Dikdik Mulyana Arief, the deputy chief detective, said police would summon Gayus Tambunan, 30, for questioning.

“We will investigate where more than Rp 24.5 billion went to,” Dikdik said, referring to the money that had since disappeared from Gayus’ accounts.

The move followed a statement by National Police Chief Gen. Bambang Hendarso Danuri that something “strange” had occurred in earlier police investigations into the tax official.

Police also have been under heavy criticism for quickly tagging the whistle-blower in the case, former National Police chief of detectives Comr. Gen. Susno Duadji, as a suspect rather than probing allegations that police officials had taken bribes to halt the investigation into Gayus.

Susno, who claimed that three police officials he had identified by rank and initials had taken bribes, was on Wednesday declared a suspect in a defamation case filed by two officers who said he had implicated them.

An earlier police probe into Gayus’s accounts found that only Rp 395 million of the funds in his accounts were illegal. In October, police charged him with money-laundering, corruption and embezzlement. Prosecutors, however, only indicted him for embezzlement, for which the Tangerang District Court acquitted him on March 12.

The police then unfroze the account, which they said still contained Rp 24.5 billion. Susno claims the sum was a bribe for the police officials, but according to Gayus, the money was not his but belonged to a businessman from Batam named Andi Kosasih who wanted to buy land in Jakarta.

After having accepted Gayus’s explanation, the National Police later changed their position, saying they had evidence that he transferred more than Rp 1 billion to Kosasih’s account.

“It is strange, and we believe the money was a ‘success fee’ for Kosasih from Gayus because [Kosasih] had admitted that the money was his,” National Police spokesman Insp. Gen. Edward Aritonang said. Police on Wed nesday named Kosasih a suspect for having given false testimony and put him on their wanted list.

Meanwhile, the head of the National Police Commission (Kompolnas), Djoko Suyanto, on Thursday sent three recommendations to the president regarding alleged judicial mafia operating at the National Police.

“First, we think that case brokers should be eradicated, as it goes along with the government’s commitment,” Djoko said at the president’s office. Second, he said there were indications that Susno had violated the police code of ethics and honor.

The commission’s last recommendation, he said, was for an evaluation of the police after a string of scandals over the past year. “It should be comprehensive for the sake of the institution, nothing personal.”

Meanwhile, the Attorney General’s Office dismissed an option to reopen the Gayus case, citing the legal principle of double jeopardy that prevents a person from being tried twice for the same crime. Besides, prosecutors are appealing the acquittal, so a separate legal measure could overlap the appeal, AGO spokesman Didiek Darmanto said.

But prosecutors would not inter vene in the police’s plan to relaunch an investigation into the Gayus case, he said.

Four prosecutors who handled the case — Cirus Sinaga, Fadil Regan, Eka Kurnia Sari, and Eka Savitri — were being examined by an internal inquiry team, he said.

Additional reporting by Heru Andriyanto.

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Editorial: Indonesia Must Invest to Stay in the Game

Jakarta Globe, Editorial, March 25, 2010

Indonesia cannot rely on commodities alone for prosperity. (Reuters Photo)

It is now a well-known fact that Indonesia is riding above the curve in terms of macroeconomic performance when compared to other Asian economies. In fact, a recent seminar organized by the Economist magazine notes that the nation is hitting its stride but will most likely not be able to stretch itself to fully realize its goals.

There are reasons to be optimistic, the participants of the conference said. Annual household consumption currently stands at $1,500 per person but is expected to grow by an average of 6 percent a year over the next five years — twice the global average.

Indonesia is also one of the fastest urbanizing countries in Asia, with an estimated 60 million people expected to become city dwellers over the next five years. With 60 percent of its population under 29 years of age, the demographic dividend is in its favor.

But to a large extent, the country’s economy has basically been a “rocks and crops” story. Economic growth has been fueled by relatively high commodity prices and a fast-growing middle class. Investments, especially foreign direct ones, have lagged behind most other fast-growing Asian economies.

For this to change, Vice President Boediono noted at the conference, the government will focus on improving connectivity over the next five years. This will involve upgrading the country’s logistics network and improving telecommunications. As the vice president rightly pointed out, the country’s economic potential can only be unleashed if the right kinds of infrastructure, both hard and soft, are in place.

Without connectivity, not only will domestic consumption plateau, the country will find it difficult to plug itself into the global economic grid. Better and more efficient logistics — the ability to move people and goods around the country faster and more efficiently, will have an enormous multiplier effect on the economy and in reducing poverty.

Building better and more efficient infrastructure cannot be overemphasized. But given our nation’s size and geography, connecting the major islands is a huge challenge that will require planning, financing and the most careful execution.

The government has already committed to building 20,000 kilometers of new roads and significantly expanding the power grid, but it needs to take ownership of the infrastructure program by also committing the necessary funding.

According to current projections, Indonesia’s economy in 2030 will be the same size as China’s today — about $4 trillion. But China’s economy over the next 20 years is projected to grow to $52 trillion and India’s economy to $14 trillion. So even though Indonesia’s growth trajectory may seem optimistic, it must ensure that it keeps up with the scorching pace being set by India and China if it intends to be a player on the Asian stage.

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Investment board admits difficulty to lure foreign investors

The Jakarta Post, Jakarta, Thu, 03/25/2010 6:06 PM

The Investment Coordinating Board (BKPM) admitted Thursday that it was difficult to lure investors from the U.S. and European countries to invest in Indonesia.

BKPM head Gita Wirjawan said the declining number of Indonesian workers and students in the U.S. and Europe had made it hard to promote Indonesia.

"Maybe we need to open more Indonesian restaurants and send more workers to [the US and Europe]," he said as quoted by kompas.com. "They could promote Indonesia and show that the Indonesian economy has changed."

However, Gita was upbeat that Indonesia could attract more investors from the US and Europe.

"Mercedes, Nokia, Siemens Network and many other large companies operate here. They already know the scene here," he said.

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VP says RI needs infrastructure development without delay

Aditya Suharmoko, The Jakarta Post, Jakarta | Thu, 03/25/2010 12:58 PM

Looking forward: Vice President Boedion delivers a speech at the Indonesia Summit, an economic discussion hosted by Economist Conferences, in Jakarta on Thursday. Antara/Puspa Perwitasari

Vice President Boediono stressed Thursday the need to add and upgrade infrastructure "without delay" to accelerate growth to 7 percent annually, from the around 6 percent experienced in recent years.

"To accelerate growth from the 6 percent range in recent years to 7 plus percent per year is going to require adding and upgrading infrastructure, from roads, railways, ports, power plants, to IT without delay," he told the Indonesia Summit held by Economist Conferences.

"We know that such a plan will require the private sector to a play a major role. Our capacity to finance a large amount to infrastructure falls quite short of what is required. We have worked hard to reduce hurdles to private investment in general and infrastructure in particular."

According to the Investment Coordinating Board, Indonesia needs Rp 2,000 trillion (US$220 billion) per year to develop infrastructure that will help it achieve a 7 percent growth by 2014.

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RI’s jump to investment grade rests on fiscal reforms: Fitch

The Jakarta Post, Jakarta | Thu, 03/25/2010 8:56 AM

Indonesia needs to demonstrate monetary and price stability and to continue with its reform program to raise tax revenues as well as to improve overall economic fundamentals in order to achieve an investment grade debt rating, according to Fitch Ratings.

“Making the jump to investment grade will depend on continued strengthening of the policy framework, including demonstrating monetary and price stability,” Andrew Colquhoun, Fitch’s director of Asia Sovereign Ratings said at a credit briefing to investors in Jakarta on Wednesday.

Reforms to raise fiscal revenues and improve economic fundamentals would also support Indonesia’s credit profile, he added.

Fitch upgraded the country to ‘BB+’, a notch below investment grade, in January 2010 primarily in recognition of the improvements to sovereign credit-worthiness arising from fiscal policy discipline and falling debt ratios.

Colquhoun said that prevailing low government tax revenues, however, remained a rating weakness. “But the ratings remain on stable outlook,” he added.

Indonesia’s sovereign creditworthiness is backed by its strong public finance track record relative to its peers in the region.

Indonesia was one of only 15 Fitch-rated sovereigns which registered a year-on-year decline in the general government (GG) debt position as a share of GDP in 2009.

With the current macroeconomic path and fiscal policy framework, Indonesia’s public debt looks set to continue on its downward trend during Fitch’s forecast period.

In general, Colquhoun saw limited potential for ‘contagion’ spreading to Asia in spite of investors’ concerns on some high-debt sovereigns.

“Emerging Asia weathered the global recession well, compared to other regions, partly reflecting improvements in credit fundamentals before the crisis, supporting regional sovereign credit outlooks in general,” he said.

The outlook for Asian companies and financial institutions appears to be brighter too compared to their peers in Western Europe and the US, according to a statement published by the rating agency in Jakarta on Wednesday.

The impact of the global economic downturn was relatively contained in most South East Asian economies, and the performance of most banks in these countries was quite resilient, the agency said.

“Even as asset quality slightly deteriorated and credit costs rose modestly, these were fully absorbed by the banks’ pre-provision earnings leaving their capital positions intact,’ it said.

The statement highlighted that “indeed, several Indonesian banks’ ratings were raised after a similar upgrade to the sovereign rating in January 2010.” But raising fresh equity to fund loan growth and to meet more demanding capital requirements in future will remain challenging, said the agency statement.

The majority of Asia Pacific structured finance ratings are expected to remain stable.

Indonesia ‘has become a good place for investment’

Aditya Suharmoko, The Jakarta Post, Jakarta | Thu, 03/25/2010 10:35 AM

Foreign direct investment is flowing into Indonesia, now considered an attractive investment destination, says a senior economist.

The Economic Intelligence Unit (EIU) Corporate Network Director Ross O’Brien said in Jakarta on Wednesday that a lot of investment that was held back during the recent global financial crisis, which peaked in October 2008, would start flowing to the country this year.

“A lot of firms put investment plans on hold. A lot of these projects will come out of storage,” O’Brien said after a media briefing on the Indonesia Summit, to be held Thursday in Jakarta at the Shangri-La Hotel.

The summit, hosted by Economist Conferences, a division of the Economist Intelligence Unit (EIU),, will see over 100 business leaders and government officials from Asia taking part in an interactive discussion.

Vice President Boediono, Finance Minister Sri Mulyani Indrawati, Trade Minister Mari Elka Pangestu and Industry Minister MS Hidayat are among those attending.

O’Brien estimated investment growth in Indonesia would reach 13 percent this year.Investment in Indonesia grew by 3.3 percent last year, according to the Central Statistics Agency (BPS). But Indonesia’s economy managed to grow by 4.5 percent in 2009 as household consumption remained strong. The government estimates the economy will expand at 5.5 percent this year on the back of stronger trade and investment.

The EIU forecasts Indonesia’s economy will expand 5.6 percent in 2010, and 5.9 percent in 2011, due to a resilient domestic market and good investment opportunities.

The head of the Investment Coordinating Board (BKPM), Gita Wirjawan, said he was upbeat that investment in the country would grow by 15 percent this year.

Indonesia still has some problems caused by factors affecting the investment climate, he admitted. But these will not lead to Indonesia losing momentum in attracting investment, he said.

“We still have issues with legal certainties and transparency.

But so does the US, the UK and other emerging countries. Every country has its own issues,” Gita said.

The BKPM has been involved in intensive communication with the International Finance Corporation to change the perspectives of foreign investors on Indonesia.

Gita said the future visits of Chinese Prime Minister Wen Jiabao and US President Barack Obama would add to the momentum leading to Indonesia becoming better positioned on the international map.

He said Indonesia could attract Rp 2,000 trillion (US$220 billion) in investment annually if the country could tap the momentum.

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President to launch Nat`l Strategy for Corruption Eradication

Antara News, Wednesday, March 24, 2010 19:49 WIB

Jakarta, March 24 (ANTARA) - President Susilo Bambang Yudhoyono will soon launch a National Strategy for Corruption Eradication 2010-2015 (STRANAS PK 2010-2015).

State Minister for National Development Planning Board/ chairperson for National Development Planning Board (Bappenas) Armida Alisjahbana said at her office here on Wednesday.

"Stranas PK laid down in a presidential decree will soon be launched by President Yudhoyono as the manifestation of the national top leader`s commitment to eradicating corruption in Indonesia," Armida Alisjahbana said.

She explained that the Stranas PK 2010-2015 which has been prepared for two years involved all stake holders.

"The Stranas PK is a strategic document that can synergize government efforts to combat corruption in accordance with the UN Convention against Corruption (UNAC)," she said.

According to her, the arrangement and implementation of Stranas PK was expected to reduce corruption practices by state officials and the people.

She said Stranas PK 2010-2025 was the continuation of the National Action Plan on corruption eradication which has yet to be completed.

It was adjusted with the 2003 UN Convention against Corruption that has been ratified by Indonesia.

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President does not believe in economic growth only

Antara News, Wednesday, March 24, 2010 19:17 WIB

Jakarta (ANTARA News) - President Susilo Bambang Yudhoyono said he did not believe in developmental theories that only prioritize economic growth but ignore even distribution of prosperity among all segments of the people.

"I do not believe in theories which extol economic growth but fail to make the people enjoy the benefits of development. I also do not approve of economic mechanisms in which the government is not permitted to interfere because they do not run well in developing countries," President Yudhoyono said.

The head of state made the remarks at the opening of a National Working Meeting on people`s empowerment in the framework of the government`s 2010 National Self-Reliant Community Empowerment Program (PNPM) at the Grand Sahid Hotel on Wednesday.

On the occasion the president said the government`s role in the development of various sectors including people`s economy and welfare was still needed to guarantee the provision of subsidies for the people.

"In the past when we had the idea to implement free education and free health care following the fuel price hikes, some people disagreed with it because according to them it would only spoil the people, " the president said.

Commenting on the PNPM program, the President said its implementation had even become better from year to year, although there were still technical shortcomings.

The three-day National Working Meeting from March 24-26, 2010 is participated in by 32 provincial governors, 394 district heads and mayors, and a number of regional officials responsible for the implementation of the PNPM program.

The meeting`s agenda included coordination of job opportunity expansion efforts and poverty reduction policies, the system of national development planning to reduce poverty , the management of state money and sources of cost at home and abroad, and the decentralization of regional government organizations.

The government`s National Self-Reliant Community Empowerment Program (PNPM) is a concrete effort to reduce poverty and unemployment in the country.

The concrete efforts to reduce poverty and unemployment are those carried out by the central and regional governments such as the extension of assistance under the PNPM scheme.