SBY: We’ll Spend To Prop Up Economy

The Jakarta Globe, Ardian Wibisono, 21 December 2008

 

Susilo Bambang Yudhoyono (JG Photo)

 

The national government will continue to provide fiscal incentives and speed up infrastructure development in the next two years to maintain domestic real sector momentum amid the global economic crisis, President Susilo Bambang Yudhoyono said on Sunday. 

The policies are aimed at maintaining consumer buying power through job creation, which will also help the private business sector survive the ongoing turmoil, he said. 

“Our homework is first to maintain real sector movement through whatever fiscal incentives are needed,” Yudhoyono said during an address to the fifth annual meeting of the Indonesian Chamber of Commerce and Industry, or Kadin. 

“We also have decided to intensify and expand infrastructure development .?.?.?. I have checked each project one by one, where it will be located and how many workers it will employ.” 

The government has set aside Rp 100 trillion ($9.2 billion) for capital spending in 2009, mostly for infrastructure development, said Finance Minister Sri Mulyani Indrawati. 

Yudhoyono also said the government is considering slashing fuel prices again as well as continuing to work with public and private companies to prevent mass layoffs. It may also lower prices on staple food items including cooking oil. 

The president called for further cooperation between his government and the private sector, which he asked to continue giving supporting and advice on riding out the crisis. 

His comments appeared to represent a shift in government attitudes toward the private sector, given that previous administrations did not fully engage with Kadin. 

“I would like to state that in such difficult times and with the full challenges right now, the government and the business world represented by Kadin need to continue to cooperate in building a partnership to seek solutions and manage the problems we are facing right now.” 

Mohammad S Hidayat, the chairman of Kadin, said he supports the government’s plan to maintain consumer buying power, which could bolster the domestic market given that exports are slowing. 

“The only thing to resolve decreasing export performance is to strengthen the domestic market. This is because seeking new markets for exports takes longer than a year,” he said. “It takes quite a bit of time and support from our national banking network abroad.” 

Hidayat also called on the government to take protectionist measures by banning imports of some goods that are already produced domestically. 

“There should be a regulation for that, but it should exclude imports of production goods and raw materials for domestic industries,” he said. 

Sofyan Wanandi, chairman of the Indonesian Employers Association, said the government should only give incentives to sectors that create jobs and use locally produced raw materials, including the domestic housing industry. 

Winang Budoyo, an economist at PT Bank CIMB Niaga Tbk, said the strategy to focus on infrastructure projects and fiscal incentives would be welcomed as the country cannot rely on exports to support growth next year. 

“The government must be all out to strengthen the domestic market and consumer demand so that growth will not fall sharply,” Winang said. He expects economic growth to slow to 5 percent in 2009, down from about 6 percent this year.

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Want funding? Get competent: World Bank

Mariani Dewi, The Jakarta Post, Jakarta | Mon, 12/22/2008 11:04 AM  

State-owned water companies (PDAMs) need to improve their overall competency if they wish to meet a government target of one million new pipeline connections by 2011 or want any external funding for projects, the World Bank said Thursday in Jakarta. 

During the second day of the Nusantara Water national assembly of water companies Aldo Baietti, senior water management specialist from the World Bank Institute, said local water companies should be striving to finance their projects autonomously. 

Companies would have to prove they were financially capable in order to receive external funding, he said. 

When companies cannot cover their project costs and taxes, the government is forced to back them financially. Due to a limited government budget this year, the water sector is suffering from cutbacks. 

The World Bank said investment in water and sanitation had declined from US$400 million in 1999 to around US$45 million in 2005. More than 200 PDAMs allegedly owe the Finance Ministry Rp 4 trillion ($3.4 million) in debt, which the government will clear if companies show they can meet tax requirements. 

PDAMs, now operating debt free, are being urged to revamp their infrastructure projects and invest in the extension of the pipeline system to meet government targets. 

"How do we fund investments in the new pipeline connections? Most PDAMs do not have the capability to financially organize these massive projects, so we must work with the private sector. Also, we are finding the regulations very limiting," a seminar participant said. 

A representative from Surabaya PDAM said the company, which has won five awards for their performance from Business Review magazine, had only managed to extend the network by 18,000 connections a year, compared to the target of 20,000. This same target also requires the company to connect an additional 60,000 households to the water system every year. 

"This target is extremely high and we are struggling to come even close to meeting it," she said. 

An expert in water provision in East Java, Hariwiko Indarjanto, said historically the target was high considering only 7.3 million connections had been made in the last 30 years. Through better technical knowledge, he said, massive savings could be achieved and the extra funding channeled into the pipeline expansion project. 

"My team found many technical errors, such as the overuse of chemicals and electricity, but since the corrections were made, the companies have enjoyed greater savings," he said. 

Atem Ramsundersingh, a senior water management and institution specialist at the World Bank, said the target was attainable if water companies, local governments and local councils improved their competency and supported each other. He said the Bank was ready to assist companies that required support. 

The World Bank last loaned money to Indonesian water company PAM Jaya in 1991.

Life insurance to continue to flourish

The Jakarta Post, Jakarta | Mon, 12/22/2008 11:06 AM  

The country's life insurance industry will ride the waves of global economic downturn largely unscathed, with growth in premium income likely to hit 33 percent next year, say business players. 

David Beynon, vice chairman of the Indonesian Life Insurance Association (AAJI), told an industry seminar last week that the growth anticipated for 2009 was due to the under-penetrated insurance market, and the nature of the business. 

Whilst temporary cuts in profits may inevitable during a downturn, life insurance is a long term business, and profitability should be judged over many years, he said. 

Peter Heidinger, managing director and regional industry head of financial institutions for Citi Asia Pacific region, said although the insurance industry declined worldwide in the past year, the Indonesian market is of significant potential, in particular, the life insurance sector. 

In 2007, total insurance premiums in Indonesia grew by more than 30 percent. Most of this, 60 percent, came from the life sector. The general sector only rose by 2 percent, Heidinger explained. 

The Indonesian insurance market is supported by more than 100 providers, although overall, the insurance market in the country remains significantly under-penetrated, he said. 

In terms of life insurance penetration, the Indonesian market in terms of premiums was equivalent to 1.1 percent of GDP in 2007. This was far lower than Singapore's premium penetration of 6.2 percent of GDP, or Malaysia with 3.1 percent. 

Indonesian premiums per capita were only $20.4 in 2007, while Singaporeans spent $2,244.7 per capita on premiums and Malaysians $221.5. 

A study jointly undertaken by Allianz and the United Nations Development Program in 2006 projected there could be as many as 2 million microinsurance policies in Indonesia by 2010, and that this could double to 4 million by 2012. 

Isa Rachmatarwata, head of the insurance division of the Indonesian Capital Market and Non-Bank Financial Institutions Supervisory Agency (Bapepam-LK) said the insurance industry had a huge market still to explore. 

He said there was no reason to be pessimistic although a prudent attitude towards investment was required. "The agency will monitor the investment practices of insurance companies, specifically those under investment managers." 

Isa said Indonesia's premium income in 2007 was Rp 48.5 trillion (US$4.3 billion) from life insurance and Rp 20.2 trillion from non-life premiums. In the first three quarters of 2008, income from life insurance had reached Rp 40.8 trillion alongside Rp 17.9 trillion for non-life premiums. 

For example, insurance company PT Asuransi Jiwa Manulife Indonesia had received Rp 889.7 billion in premiums as of September 2008. 

Its new business premiums had grown 108 percent by the third quarter of 2008 compared year on year to the previous period, said Beynon, who is also the president director of the company. 

Beynon said insurance products which would be in favor with the customers next year included the traditional premium and the regular unit-linked premium. "These will take over the single premium unit link market and continue to grow." 

Single premium unit link is an insurance product that required the policy holder to pay once in advance. The product was then invested into other financial products. 

Regular premium unit link is also invested into other products in another financial body, but the customers pay the premiums in installments. (iwp)

Mulyani calls on companies to help root out smuggling 'mafia'

The Jakarta Post, Jakarta | Mon, 12/22/2008 11:06 AM  

Acting Coordinating Minister for the Economy Sri Mulyani Indrawati has urged businesses to help the government root out smuggling, which is supported by a "mafia" teaming up with officials. 

Businesses must also take part in combating illegal practices at ports that have smoothed the way for smuggling, she said. 

Although numerous attempts have been made to reform the excise and customs office, she said business lobby group Kadin should help out. 

"I know that some of my law enforcers are still dodgy because they get paid by businesses despite the reforms I've made," Mulyani told Kadin members Sunday. 

"If you are a whistle-blower and really sincere, please help me combat the mafia (at ports) as our common enemy. If not, you too are my common enemy." 

Mulyani said smuggling was one of the government's main concerns, particularly since export-oriented countries had lost their markets in the United States and the European Union because of the global economic downturn. 

As a consequence, those manufacturing countries were looking to benefit from emerging markets, including Indonesia, by any means, including smuggling, to keep their production capacity intact, she added. 

"Threats are coming from China and Vietnam because they see Indonesia, with its 5 percent economic growth, as the right place to throw their products after losing their export markets," she said. 

Kadin chairman Mohamad Suleman Hidayat said he acknowledged some businesspeople acted illegally and would "entirely support" the battle against smugglers. 

"There must be one or two illegal firms among thousands, and there must also be customs and excise officials that play dirty," he said on the sidelines of the national meeting. 

Indonesian Employers Association (Apindo) chairman Sofjan Wanandi has said that some of the 800 to 1,000 electronics-importing firms that had applied for import licenses from the Trade Ministry were allegedly smuggling in their products. 

Kadin's recommendations

1. Keep the economy stable by ensuring the stability of the rupiah exchange rate, improving interbank transactions and providing sufficient liquidity to the financial sector.
   
   
2. Provide clear measures for preventing systemic threats to the financial sector, with mechanisms in place that can be implemented promptly if there is a liquidity problem in the banking sector.
   
   
3. Accelerate and expand the availability of stimulus packages, including for labor-intensive sectors and small and medium businesses. This includes speeding up tax refunds.
   
   
4. Speed up fiscal expansion, particularly for health, education and infrastructure.
   
   
5. Implement policies on the agribusiness, food and energy sectors with concerted efforts between central government agencies and those of local administrations.
   
   
6. Review the tax structure, including tax cuts and exemptions for certain products to help boost local demand.
   
   
7. Resolve problems in the construction of infrastructure and develop the creative industries.
   
   
8. Resolve problems of inefficiency in logistics chains, particularly in ports, and illegal fees and other costs imposed by local administrations.
   
   
9. Protect local industries and local markets from smuggling based on the rules of the World Trade Organization. Aggressively promote Indonesia as an attractive place for investment.
   

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Govt may increase stake in Semen Gresik

Ika Krismantari, The Jakarta Post, Jakarta | Mon, 12/22/2008 11:06 AM  

The government is thinking to increase its share ownership in the country's largest cement maker PT Semen Gresik after the establishment of a holding company to group the shares of several local state-run cement producers, an official says. 

Secretary to the State Minister for State Owned Enterprises Said Didu said the government would be able to raise its stake in the company should minority shareholders agree to swap their shares for an equivalent in (waived) tax obligations. 

"For state-owned firms, the government options will either be to pay (the taxes) or swap (the taxes) for the stakes. So I believe there will be a jump in the government's share ownership in Semen Gresik," he said. 

The forming of a holding company will result in an additional tax for shareholders because there will be a revaluation of the assets of Semen Gresik. 

Said, however, refused to specify the amount of shares the government may take as a result. 

Currently, the government has a 51 percent stake in Semen Gresik, while 24.9 percent is held by the public and 24.1 percent is held by Blue Valley Holdings -- a subsidiary of the Rajawali Group conglomerate. 

Said explained that although the setting up of the holding company was related to state companies, this would not make the participants free from tax obligations that might be accrued as a result (through taxes applied to acquisitions and mergers). 

The directorate general of taxation has recently said it will not exempt state owned enterprises from such taxes, except for companies 100 percent owned by the government. 

Said suggested minority shareholders could swap their shares with tax obligations because it was likely their shares would be somehow diluted during the incorporation of Semen Gresik into the new holding. 

"However, this would still be decided in a shareholders' meeting," he said. 

The holding plan requires Semen Gresik, which currently parents Semen Tonasa and Semen Padang, to change its status and becomes a subsidiary on the same level as Tonasa and Padang under the new holding company. 

Semen Gresik president director Dwi Soetjipto has estimated the plan would cost the company about Rp 3 trillion (US$276 million) in taxes as a result of asset revaluation. 

The government will also form a holding company for state-owned companies engaged in mining, plantations and banking. The holding company for banking is scheduled to be completed in 2010. 

At present, there are 139 state companies with assets worth in excess of Rp 1,300 trillion (US$142.8 billion). 

State companies, which have become the country's economic backbone, are expected to pay the government Rp 31.5 trillion and Rp 35.0 trillion in dividends for this year and next year, respectively.

Indonesia to host World Islamic Economic Conference

Jakarta  (ANTARA News) - Indonesia will host the World Islamic Economic Conference (WIEF) here on March 1-4, 2009, the chief organizer said here on Thursday. 

Deputy Chairman of the Regional Representatives Council (DPD), who is also chairman of the WIEF Steering Committee,Irman Gusman, said the WIEF will focus on food security, energy and bottom line business handling of financial crisis. 

"This forum is of vitally importance because Islamic countries, particularly those in the Middle East, are no longer backward," Irman Gusman said. 

He said that countries in the Middle East had surplus funds amounting to US$1.5 trillion which were deposited in a funding facility called Sovereign Wealth Funds (SWF), or Sovereign Welfare Funds (SWF). 

"SWF was set up as a state-owned financial institution to serve as an investment instrument overseas," he said adding that other countries like Singapore, Malaysia and China had also set up similar funding facilities," Gusman said. 

Indonesia is expected to take advantage of the SWF to face the world economic crisis by asking owners of the surplus funds to invest in Indonesia. 

"We can take the advantage of the Beijing-Dubai-New Delhi axis. Here lies our future," he said. 

He said that at present China, India and the Middle East were now leading the front line in settling the global economic problem.

President launches his latest book

Jakarta,  (ANTARA News) - President Susilo Bambang Yudhoyono launched his latest book entitled Indonesia Unggul (Superior Indonesia) here Friday afternoon. 

Unlike his two previous book entitled Transforming Indonesia and Indonesia on the Move, the third was written in Bahasa Indonesia. 

The book which exposed the president`s ways of thinking because of his knowledge gained from reading was an answer to many requests from various people asking him to produce books in the Bahasa Indonesia. 

The book reflected the nation`s new chapter through direct presidential election in 2004 and also noted a tragic history of a tsunami and other natural disasters in the middle of going through democracy transition. 

The President also wrote about government efforts under his leadership and his unpaid debts as head of state to the Indonesian people. 

The book launch took place in Grand Indonesia Mall here on the occasion of the dedication of the Gramedia book store by the president. 

Several ministers and first lady Any Yudhoyono were also present besides public figures namely artist Titiek Puspa, Chairman of Indonesian Chamber of Commerce and Industry (Kadin) MS Hidayat, and CEO of Kompas Gramedia Jacob Oetama.

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Finance Ministry Sanction Over 500 Staffs This Year

Friday, 19 December, 2008 | 19:29 WIB 

TEMPO Interactive, Jakarta: Finance Ministry reported on Friday that over 500 officials in the ministry have been sanctioned since the begining of the year in a programme launched early last year to to create good and clean governance in the institution. 

In a release published by the ministry on Friday 510 officials at the ministry have been sanctioned since January up to December this year, 39 of whom were dismissed for disciplinary violations. 

The ministry did not provide details on the violations. 

The move was launched by Minister Sri Mulyani late in 2006 to ward off criticism on her policy of raising pay for the ministry's officials claimed as a strategy to reduce corruption. 

GUNANTO E. S.

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RI holds financial 'crisis simulation'

Aditya Suharmoko, The Jakarta Post, Jakarta | Sat, 12/20/2008 12:11 PM  

The government Friday held what it called a "crisis simulation" exercise to improve coordination between relevant parties when facing a financial crisis, despite the refusal by lawmakers to endorse the government proposal to set up a financial safety net.

On Thursday, the House plenary session rejected the proposed regulation-in-lieu-of-law on a financial safety net (JPSK) as according to lawmakers this might give to government a "superior" power, leading to a "moral hazard". 

But this did not prevent government from carrying out the simulation. 

The exercise -- with the participation of the Finance Ministry, the central bank and the Deposit Insurance Corporation (LPS) -- was part of a crisis management scenario, to test their readiness to safeguard the financial sector, Finance Minister Sri Mulyani Indrawati said in a press conference. 

"Today's simulation will be a lesson to fix some flaws, while perfecting the (in-lieu-of-law on the financial system safety net) JPSK regulation. Information sharing is what needs to be improved the most," she said. 

"Between Bank Indonesia (BI), LPS and the government, there is a gap that can lead to lack of coordination. BI, LPS and the government should be in unity when facing a crisis," she said. 

She added that Indonesia was the first country in Asia to conduct such a simulation. 

Mulyani said Indonesia's biggest threats that could cause possible crises in the financial sector were external factors, such as a decline in commodity prices and exports demand, both of which might reduce the debt repayment capacity of firms, or could trigger a rise in bad loans that could damage the banking sector. 

The minister was responding to the House of Representatives' recent rejection, which means that the government will have to draft and submit new proposals on the JPSK. 

Mulyani said the government would not make significant changes to the new JPSK bill, which should be submitted to the House at the latest by Jan. 19, but "will include lawmakers' opinions". 

"The regulation-in-lieu-of-law (on JPSK) will be a basis (for the bill). But we will include some relevant opinions from lawmakers, which we did not think of when drafting the proposed law," she said. 

Lawmakers said they wanted the government to change several articles in the proposed law so that the government's authority would not be "too excessive". 

The articles referred to included the government's immunity if it makes a wrong decision, the finance minister's leadership position in the Financial System Stability Committee (KSSK) and role in determining when a crisis might be deemed to exist. 

Danareksa Research Institute chief researcher Purbaya Yudhi Sadewa said the existing regulations should be adequate to protect the financial sector. "The government has been able to safeguard banks all this time. What is the urgency to make the JPSK law?" 

The BI law, he said, stipulated the government could inject funds to BI if its balance plunged to negative. "It means that BI can inject funds to ailing banks, with the government's (liquidity) support, even without the JPSK law."

New RI Exim agency may 'save the day'

Mustaqim Adamrah, The Jakarta Post, Jakarta | Sat, 12/20/2008 12:11 PM  

Businesses have placed high hopes on the new export financing agency (LPEI) to be set up shortly, following the recent endorsement of the LPEI bill, saying now is the right time for the country to have this new institution to help cope with the global credit and financing crisis. 

Benny Soetrisno, chairman of the Indonesia Textile Association (API), said Friday textile producers welcomed the endorsement of the bill which paved the way for the setting up of the agency. 

"It's very good to have LPEI, which will provide a financing scheme different to that of (most) banks because banks don't disburse loans to new business players," he said in a conference. 

"Unlike LPEI, banks require a business asking for loans to have earned profits for two years in a row," he added. 

Likewise, Indonesian Employers Association (Apindo) chairman Sofjan Wanandi, also at the conference, said he believed the new law would support exports. 

"LPEI's requirements for loan proposals should not be as tough as commercial banks lay down, including collateral requirements, etc.," he said. 

Trade Minister Mari Elka Pangestu said LPEI would emerge as a new institution replacing Indonesia Export Bank (BEI). 

"BEI will have a six month transition period to transform itself into LPEI, which we have all been awaiting for so long," she told reporters at the Trade Ministry. 

"LPEI will be useful for exporters to penetrate, particularly, new non-traditional export markets, (complementing) the financing schemes provided by commercial banks," she said. 

Earlier this week, a House of Representatives plenary session endorsed the bill, providing the legal basis for the establishment of the agency, which will be named the Indonesian Eximbank. 

The agency is expected to start operating by June next year. 

The law mandates the agency to help exporters facing the global economic turbulence by providing a new alternative financing, underwriting and insurance scheme, despite the drying up of liquidity in many financial institutions. 

Finance Minister Sri Mulyani Indrawati earlier said the government would inject Rp 4 trillion (US$358.74 million) of initial capital into the agency, with it expected to "have total assets of Rp 14 trillion" before starting operations. 

The agency will be allowed to secure funds from government bonds and foreign borrowings, while putting its reserve funds in government bonds, central bank certificates and foreign currencies.

City sets Marunda as industrial zone, port

Tifa Asrianti, The Jakarta Post, Jakarta | Sat, 12/20/2008 9:38 AM  

The city administration is preparing the Marunda industrial zone in North Jakarta to become a special economic zone with an international port. 

City assistant secretary for economy affairs, Mara Oloan Siregar, said the administration wanted to develop Marunda into a special economic zone (SEZ), in which it would have high-tech, high-knowledge and high-value-added industries. 

“It won’t be labor intensive, but it will be technology and capital intensive. It will be a high-ranking project,” he said. 

The Marunda SEZ project, he said, needs to wait for the completion of the law on SEZ, which was expected to be completed by July next year. 

He said the administration submitted the proposal to the central government. 

“As soon as the law is completed, we will discuss the proposal with the SEZ national board, chaired by the coordinating minister for people’s welfare,” he said. 

“We will consider special incentives to be given to the investors, such as customs, immigration, a cut in revenue tax, easy land permits, and all that will be in accordance with the law.” 

Economic expert Dorodjatun Kuncoro Jakti said the new SEZ concept would not be similar to the existing one because Jakarta, as a tertiary education center, could develop a technology-based SEZ that could be a national pilot project. 

“Jakarta is a center of tertiary education, a service city and a financial center. If we combine these potentials with high-value-added industries, it will shift us from labor-intensive to resource-intensive industries,” he said. 

Therefore, he added, not only would the SEZ have manufacturing industries, but it would have microscopes, medical equipment, computer and software factories. 

He said Jakarta should establish the SEZ quickly because Singapore, Malaysia and Vietnam had already started similar projects. 

To support SEZ activity at the 1,500-hectare Marunda, Mara said, the city administration would build a port called Ali Sadikin International Seaport, which would compete with Tanjung Priok Port. 

He said the administration chose Marunda as an SEZ, because it had good access through the future international port, tollroad network and East Flood Canal — which can function as a waterway.

“We also want to integrate the tollroad with the railway network,” he said. 

The city administration will start the Marunda development project by investing in PT Kawasan Berikat Nusantara (PT KBN). 

In the 2009 budget, the city administration has allocated Rp 100 billion to raise ownership from 11.3 percent to 51 percent. 

Of the City Council’s seven factions, four have questioned the SEV development plan — the Democratic Party, the United Development Party (PPP), the National Mandate Party (PAN) and the Golkar Party. 

Most of the factions demand that the city administration postpone the project because it has not yet held a feasibility study.

Rp2.000 Bank Notes to be Issued Next Year

Friday, 19 December, 2008 | 19:33 WIB 

TEMPO Interactive, Bandung:The State-owned bank notes printing company (Perum Peruri) executive-director Junino Jahja said his office will print Rp2.000 bank notes next year, in line with Bank Indonesia plans to issue the bank notes in 2009. 

According to Junino, Bank Indonesia initially planned to issue the Rp2.000 bank notes in September 2008. However, the plan was cancelled and delayed until next year. "We are still waiting for Bank Indonesia's decision on when to print the bank notes, including the design and everything," he said in Bandung yesterday. Bank Indonesia will not mint Rp1.000 coins. "Rp1.000 notes will only be printed on paper," he said. 

Junino said bank notes printed by Peruri are impossible to be forged perfectly as they are equipped with 22 security elements. This is more than that of the dollar or euro, which have 13 security elements. 

ALWAN RIDHA RAMDAN

Govt eyes $25b of investment in energy and mining

Alfian, The Jakarta Post, Jakarta | Fri, 12/19/2008 11:42 AM  

In a bold move, the government forecasts investment in the oil, gas, power and mining sectors next year will grow by 16.7 percent compared to this year, despite the global financial crisis and economic downturn constraining some financial flows. 

An official statement from the Energy and Mineral Resources Ministry issued late Wednesday showed that oil, gas, mining, and electricity projects are expected to attract US$25.39 billion investment in 2009, up from this year's target of $21.74 billion. 

Energy and Mineral Resources Ministry Purnomo Yusgiantoro said earlier in the day the global financial crisis would have only a minor impact on these sectors which all represent long-term projects. 

"Business in oil, gas, mining, and electricity is not short-term. The projects can last between 20 and 30 years. Thus, despite the crisis, these sectors will still be able to attract investment next year," Purnomo said. 

Purnomo added he had received information there were three mining companies, including the U.S.-based copper and gold mining company Freeport, which were in the process of laying off part of their workforce, but he was convinced that the dismissals reported now were far less than the workers these sectors would hire in 2009. 

"We have information that about 200 workers have been laid off, but the projects in these sectors could provide jobs for 150,000 workers next year," Purnomo said. 

Of the $25.39 billion of targeted investment for oil, gas, energy and mining in 2009, the oil and gas sector is expected to contribute the lion's share, at about $16.64 billion, or 66 percent of the total. 

The ministry said the investment would go into existing and new oil and gas blocks, as well as into coal bed methane development. 

Kardaya Warnika, the ministry's advisor for information and communication and former chairman of upstream oil and gas regulator BPMigas, said Indonesia's oil and gas sector was attractive for investors as production costs here were still reasonably lower than oil prices, even at the current levels. 

"Although the oil prices have now declined to below $50 per barrel, investors could still gain as the production cost for oil in Indonesia is only about $10 per barrel," he said. 

The ministry said investment in the oil and gas sector would also come from downstream projects, including two small oil refinery projects and three small LPG compression terminals. 

The oil and gas sector is expected to provide 56,650 new job opportunities in 2009. 

Electricity projects, including the state power firm PT PLN 10,000 megawatts accelerated program and a further 15,629 megawatts of power projects planned with private power producers (IPPs), are expected to bring in contributions in the coming year of $6.61 billion of inward investment. 

These new power projects are expected to generate about 92,250 jobs. 

The mining sector may attract up to $2.15 billion in investment. It was not stated if the recently endorsed mining law -- which many consider as not being business-friendly -- would have an affect on this forecast. 

The government has targeted that investment in oil and gas should reach $14.79 billion this year. While the mining and electricity sectors are expected to bring in $1.55 billion and $5.40 billion of inward investment, respectively. 

The ministry will publish the figures for actually achieved 2008 inward investment in these sectors by the end of this month.

250,000 migrant workers sent home

The Jakarta Post, Thu, 12/18/2008 11:18 AM  

The global economic meltdown has slowly taken a toll on Indonesia as 250,000 of the country's migrant workers have returned home, exacerbating the already high jobless rate, a minister says. 

Manpower and Transmigration Minister Erman Suparno said Wednesday the workers, who are mostly semi-skilled, had to leave for home early before their contracts expired as their employers were hit by the financial crisis. 

"The cause is obviously the global economic downturn. Employers are facing financial problems due to sluggish demand," said Erman, adding the employing countries included Malaysia, South Korea, Hongkong and Middle Eastern countries. 

He believed the return of these workers to Indonesia would severely add to the country's unemployment. 

According to the Central Statistics Agency (BPS), 9.43 million people were unemployed as of February this year. As the country has no social security for the jobless, it is estimated there are actually 40 million unemployed people. 

These people are now working doing just about anything to make ends meet. 

According to the National Commission for Placement and Protection of Indonesian Migrant Workers (BNP2TKI), there are around 5.8 million Indonesian workers abroad, mostly in Malaysia and the Middle East. 

In 2006, remittances from migrant workers reached around Rp 60 trillion (US$5 billion), providing an impressive contribution to incoming financial flows alongside foreign direct investment, according to BPN2TKI chairman Jumhur Hidayat recently. 

Aside from overseas migrant workers, there are also indications of mass return of internal migrant workers into Java as a result of tumbling commodity prices forcing plantation companies in Kalimantan and Sumatra to scale down their workforce. 

Java is Indonesia's key economic island, the center for all labor-intensive industries. 

Erman said the government would try to limit the impact of unemployment by providing training for labor-intensive industries and by intensifying the internal transmigration program. 

-- JP/Suherdjoko

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Pertamina, Telkom book big profits

The Jakarta Post, Thu, 12/18/2008 10:55 AM  

JAKARTA: Secretary to the State Minister of State Enterprises Said Didu said Wednesday state companies were forecast to post a combined net profit of around Rp 81.2 trillion (US$7.18 billion) this year, up by 13 percent from Rp 71.6 trillion last year. 

"The jump in profits is attributable to the soaring prices of commodities, including in oil, mining, and plantations," said Said during a hearing with lawmakers. 

Oil and gas company PT Pertamina and telecommunication operator PT Telkom contributed to the largest increased profits with Rp 27 trillion and Rp 11 trillion respectively. 

Other large contributors included Bank Mandiri and Bank Rakyat Indonesia, which were likely to book Rp 5 trillion each. 

Dozens of state companies are also forecast to post losses, including power company PT PLN, airline operator PT Merpati Nusantara, railway operator PT Kereta Api, sea transportation operator PT Pelni, and paper company PT Kertas Kraft Aceh.

RI risks losing $435.6m in wood exports on new U.S. policy

Mustaqim Adamrah, The Jakarta Post, Jakarta | Wed, 12/17/2008 11:01 AM  

Indonesia could potentially lose at least US$435.6 million a year in exports of wood-based products to the United States if it fails to address planned certification requirements next year, a study has found. 

Vanda Mutia Dewi, Greenomics coordinator for forestry and mining, said Tuesday the losses would be inevitable if no effort was made to anticipate possible failures in policy implementation. 

The policy, dubbed the Lacey Act, requires exporters of wood-based products to have certification that their wood is not sourced from illegally felled trees. 

"The government should prepare (a set of policies) from now on as the Lacey Act will be effective in early April for wood products and in July for paper and its derivatives," she said. 

"The country could lose $435.6 million in exports every year if the industry fails to meet requirements stipulated in the Act." 

The Act is designed to combat illegal logging worldwide by banning any trade of products allegedly derived from illegal logging, which remains widespread in Indonesia. 

Under the regulation, according to Vanda, global traders selling wood-based products to the United States are required to have a certificate issued by the U.S. government via internationally recognized agencies. 

According to Greenomics, last year Indonesia shipped wood-based products worth $242.2 million, and paper and paper derivatives worth $193.4 million to the United States.

The amounts accounted for 6.94 percent of the country's total exports of wood-based products. 

According to the Central Statistics Agency (BPS), exports of wood and wood-based products amounted to US$2.48 billion in the first 10 months of this year, a 3.9 percent drop from the $2.58 billion booked in the same period last year. 

Vanda also said the government should compare standards stipulated in the Lacey Act to local standards issued by, for example, the Indonesian Ecolabel Institution. 

She recommended the government consult with the World Trade Organization to ensure the implementation of the Lacey Act referred to "fair trade". 

"That is necessary to avoid possible domination by foreign agencies in issuing certificates in the name of the Lacey Act," she said. 

The implementation of the Lacey Act should also be based on facts, "not documents", she added. 

Earlier this month, the government set up a team to address issues in relation to certification requirements. 

Certification includes Sustainable Forest Management (SFM), Verification of Legal Origin (VLO) and Chain of Custody (CoC). The VLO and CoC confirm the legality of the wood, and the SFM certifies the wood was legally felled and comes from a sustainable forest. 

An exporter can choose any of the three certificates.

Related Article:

Govt team to work on U.S. rules for wood certification

Govt can now spend more on key projects, says WB

Aditya Suharmoko, The Jakarta Post, Jakarta | Tue, 12/16/2008 11:03 AM  

With falling crude oil prices sparing the government from spending more on the fuel subsidy, the money saved should be spent on more productive agenda such as building infrastructure to stimulate the economy, the World Bank says. 

The World Bank, a major donor to Indonesia, also welcomed the latest cut in domestic fuel prices as reflecting world oil prices. 

"This decision (to cut prices) is a reflection of what's happening on the world market... prices have collapsed in a very short period of time," Joachim von Amsberg, World Bank country director for Indonesia, said Monday. 

"So all of a sudden, a very large subsidy in fuels in Indonesia disappeared. "I think that shift is welcome and we will ensure that in the future, the resources spent on very large fuel subsidies can be used for investment. That should be good for Indonesia and good for economic prospects." 

His remarks underlined the government's vow to accelerate infrastructure development next year to stimulate the economy clouded by the global economic downturn. Such projects could also lead to more jobs at a time when the private sector is expected to cut output on slower demand, bringing about possible layoffs. 

Public Works Minister Djoko Kirmanto says the government is looking to create 3 million new jobs next year through state-funded infrastructure projects. Up to Rp 34.9 trillion has been allocated for projects under this ministry alone. 

Finance Minister Sri Mulyani Indrawati says the impact of the global slowdown on Indonesia's economy could likely peak in the first half of 2009. While the 2009 state budget projects growth of 6 percent, the government now expects the economy to grow between 4.5 and 5.5 percent -- still higher than most economists' predictions. 

Against this backdrop, visiting World Bank managing director Juan Jose Daboub said in Monday's forum the bank would provide both financial and non-financial support for the government in protecting the poor and maintaining longer-term investment in infrastructure. 

"We are contributing our resources and expertise to improving social protection, better budget execution, as well as sustained infrastructure and institutional reforms, including in the financial sector," Daboub said. 

He also confirmed the bank was currently in talks with the government for a contingency fund of US$2 billion to help plug the state budget deficit. 

"The finance minister will make an announcement early January," he said. 

Daboub added that should the government need more money to plug the deficit, the World Bank would consider lending a hand. 

"We will wait and see, should it take place," he said. 

The government says it will issue fewer bonds to finance the deficit amid an adverse sentiment worldwide, and will instead rely more instead on loans, both from neighboring nations and multilateral organizations.

President: Asean Charter to strengthen southeast Asian unity

EMERGING COMMUNITY - ASEAN Secretary-General Surin Pitsuwan (left) presents the ASEAN Charter to Thailand's Information and Communication Technology Minister Mun Patanotai as Singapore's Foreign Minister George Yeo (rear left) and Indonesia's President Susilo Bambang Yudhoyono (center) applaud during a special ASEAN foreign ministers meeting at the ASEAN secretariat in Jakarta on Monday. (AP/Dita Alangkara)

Jakarta,  (ANTARA News) - President Susilo Bambang Yudhoyono said the ASEAN Charter was a document that would enable South East Asia to face various global challenges in the future with greater unity. 

"With the ASEAN Charter, we are more bound than ever before to bridge differences among ourselves in more friendly ways," President Yudhoyono said in his address at a ceremony marking the promulgation of the ASEAN Charter at the ASEAN Secretariat here on Monday. 

He hoped that in the future, differences among ASEAN member countries should be regarded as an asset, and not as a potential for conflicts, for the sake of ASEAN unity. 

The ASEAN Charter, he said, would also strengthen regional integration and make ASEAN a law-based organization as well as a community-based organization in the political, economic and social fields. 

With the charter, ASEAN member countries would share a commitment and spirit to move toward the formation of an ASEAN Community in 2015, he said. 

Yudhoyono also said with the ASEAN Charter, ASEAN member countries would be more ready to deal with international problems and challenges, such as climate change, the energy crisis, the approaching deadlines of the Millennium Development Goals (MDGs), and competition in the globalization era. 

According to the president it was thanks to the existence of ASEAN, that the Southeast Asian region had enjoyed peace and stability over the past four decades. 

After suffering intervention by various countries during the colonial era, the Southeast Asian region was now in the lead of changes and movements in the region and its environs through various forums, including the ASEAN+3 and the ASEAN Regional Forum (ARF). 

Originally, the ceremony to officially put the ASEAN Charter into effect was scheduled to be held in Thailand during an ASEAN Summit but the Thai government decided to postpone the summit due its domestic political crisis. 

However, Indonesia proposed that the ceremony be held as scheduled (Dec. 15) but at the ASEAN Secretariat in Jakarta. 

Besides President Yudhoyono, the ceremony was also attended by ASEAN member countries` representatives, ASEAN foreign affairs ministers, ASEAN Secretary General Surin Pitsuwan, and several Indonesian ministers. 

During the ceremony, the audience also observed a few moments of silence in remembrance of the late Ali Alatas, a former Indonesian foreign affairs minister, who died last week.

Ali Alatas had represented Indonesia on an Eminent Persons Group set up in 2006 to explore the future directions of ASEAN and advised ASEAN Leaders on what they should do, what should be put into the ASEAN Charter. 

ASEAN groups Brunei Darussalam, Cambodia, Indonesia, Malaysia, Myanmar, Thailand, Singapore, the Philippines, Laos, and Vietnam.

Related Article:

ASEAN charter comes into force

Asean closer to EU-style body

Alatas 'a statesman' for RI, world

Furniture makers gain $250m orders from China's loss

The Jakarta Post, Jakarta | Mon, 12/15/2008 10:34 AM  

Although many industries are suffering from a drop in orders, furniture producers are enjoying extra orders worth US$250 million until next year, with U.S. customers shifting their orders from China to Indonesia. 

The Indonesian Furniture Entrepreneurs Association (Asmindo) said at the weekend the United States -- one of the world's major furniture buyers -- had decided to relocate orders because of competitiveness. 

"The shift has already commenced this month," Asmindo chairman Ambar Tjahyono said on the sidelines of the association's annual conference in Jakarta. 

"The extra orders worth $250 million may create demand for up to 1 million workers." 

The country's furniture and handicraft industry currently provides around 7 million jobs. 

Many purchasing companies on the international market have lost faith in the quality of Chinese furniture, turning to higher-quality furniture from other countries, including Indonesia, despite higher prices, Ambar said. 

China's furniture price index -- an internationally recognized combination of measures to help gauge the competitiveness of a product -- dropped dramatically in 2007 to 56.6 from 140.1 in 2006, while Indonesia's index fell only slightly to 112 from 116.5. 

China has long been a tough competitor for Indonesia in the furniture exporting business, Ambar said, adding that China sends 80 percent of its furniture to the U.S. furniture market, and Indonesia only 27-30 percent. 

In 2007, Indonesia's share in the global furniture market was around 9 percent, compared with China's 32 percent. Another big exporter, India, was at 1.3 percent. 

Indonesia's furniture and handicraft exports in 2007 were valued at $2.35 billion, with the amount estimated to grow by 6.5 percent to $2.8 billion this year, Ambar added. 

This is roughly the same rate of growth experienced by the industry for the past four years. 

For next year, the extra orders from the United States will help Indonesia's exports grow, he said, but quickly added that the growth might be slower because of the ongoing global economic slowdown. 

"The current situation calls for more support from the government and banks in the form of rescheduling of loan payments," Ambar said in his opening speech. 

"We need to diversify our target market and that will take time." 

Vice President Jusuf Kalla, who also attended the meeting, said the government would do its best to support the labor-intensive sector although he remained upbeat about its prospects. 

"The nation's furniture market still has a lot to offer the world market," he said. 

"The crisis threatens more the high-end furniture producers such as Italy and the U.S. and less the mid-level producers such as Indonesia." 

Kalla said the global and domestic markets would be looking for more affordable products, and companies should seize the opportunity to produce low-priced furniture. (dis)

Garment exports doing well despite global crisis next year

The Jakarta Post, Jakarta | Mon, 12/15/2008 10:36 AM  

Thanks to investment worth around Rp 4 trillion (US$363 million), garment-making businesses are expected to grow by 11.4 percent by year-end, and another 10 percent next year. 

Garments account for 60 percent of Indonesia's textile and textile products (TTP). 

Garment exports are projected to reach $6.4 billion this year, from $5.82 billion in 2007, said Kurnia Saputra, a board member of Garment Partnership Indonesia, an initiative by the USAID-financed SENADA to help raise industry competitiveness. 

Growth in garments will be higher than the forecast 8 percent increase in the total exports of TTPs, which will grow from $10.3 billion in 2007 to an estimated $10.81 billion this year, Kurnia said on the sidelines of a link-and-match meeting between garment producers and buyers held by SENADA last week. 

Although several textile companies have had to lay off workers, garment makers have been doing well and have absorbed another 50,000 workers this year, according to Redma Gita Wirawasta, executive director of Indotextiles research center. 

There are already more than 1 million workers in the garment industry. 

"This (increase) was pushed by an increase in investment this year of Rp 4 trillion, which was the highest investment in the industry for the past five years," Redma said. 

"This gives us optimism about next year's projection of garment exports, which will likely grow by another 10 percent," he said, adding that "there have been no layoffs in garment companies this year". 

Major destinations of garment exports are the United States, contributing 26 percent, the European Union (12 percent), ASEAN (5 percent) and Japan (3 percent). 

Indonesia's garments account for only 3 to 4 percent of the world's total, Kurnia said. "But we can strengthen our global position as an important garment industry player by pushing for greater compliance with global manufacturing practices." 

Complying with good industrial practices such as meeting requirements for safety and working conditions will boost sales because international buyers will have no doubts about dealing with complying companies, he said. 

Total sales of TTPs in 2008 are estimated at $16.25 billion, a slight increase from last year's $15.09 billion, with the domestic market absorbing around 33 percent of the whole. 

Mukhtar Ahmed, vice president of OSG LiFung Indonesia, said that globally Indonesia was ranked ninth among TTP exporters and 11th among garment exporters. 

Ahmed said that despite the current global crisis, the United States and Europe would remain major destinations for Indonesian garment exports, while countries in the Middle East and the former Soviet Union would act as buffer markets. 

"The weaknesses of the Indonesian garment industry lie in communication and marketing and also in research and development," he said. (iwp)