Update News December 05, 2016

In The News

Bank Indonesia To Gradually Implement New Rule On Banks’ Minimum Reserve
The Jakarta Post, 05 December 2016

Bank Indonesia (BI) plans to partially implement a new policy on the minimum funds that banks need to hold in reserve at the central bank, as it seeks to give banks more space for liquid assets that could eventually boost lending.

BI recently announced it would change the way it required banks to store their primary reserve requirement (GWM) — the minimum funds banks store as a reserve at the central bank — from currently setting aside 6.5 percent of third party funds by the end of each day.

From the second half of 2017, the central bank will relax the GWM requirement as long as banks meet a certain average percentage within two weeks. BI has yet to disclose the policy in great detail, although senior deputy governor Mirza Adityaswara said it would give banks time to adapt.

“For instance, only 1.5 percent will follow the new averaging policy, while the remaining 5 percent will still follow the conventional GWM policy,” BI senior deputy governor Mirza Adityaswara said on Thursday.

Therefore, banks should maintain 5 percent of their third party funds by the end of each day, while the other 1.5 percent could be recorded by the end of a determined period of two weeks, he added.

“Later on, if those banks get used to it, we will gradually increase the percentage in years to come, maybe to 3 percent first, before it eventually reaches 6.5 percent,” Mirza added.

BI economic and monetary policy director Juda Agung confirmed that the period to average GWM would be two weeks and that only 20 percent of GWM would be subject to the new “averaging GWM” policy.

By implementing the averaging GWM policy, BI hopes banks can be more flexible in terms of managing their liquidity in a bid to boost loan growth, while the central bank can still control the flow of money.

“With this excess liquidity, banks need to have the skills and expertise to manage and place the money,” Juda said, adding that the policy also aimed to activate banks’ liquidity management and deepen the money market.

As of September, lending only grew 6.5 percent year-on-year, the weakest level since 2009, as banks were frazzled by weak demand for credit and high bad loans after the country’s economic growth slowed to a six-year low in 2015, which was mainly triggered by a drop in global commodity prices.

However, as commodity prices have recently stabilized, BI expects banks can start focusing on expanding next year, as most of their debt-restructuring programs have brought positive results in 2016.

“We hope that loan growth can reach 10 to 12 percent next year,” Mirza said. “By that time, banks will be more ready to expand. That’s why BI’s forecast of 5 to 5.4 percent economic growth next year is very reasonable.”

State-owned lender Bank Negara Indonesia (BNI) corporate secretary Ryan Kiryanto said banks would need to take different approaches to adapt to the policy and meet different needs for lending in different parts of the country.

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RI Allots Rp2t Budget To Lure Investment In Border Areas
The Jakarta Post, 05 December 2016

The government has allocated more than Rp 2.4 trillion (US$177.4 million) for six regencies in the country’s border areas in the 2017 state budget, to boost its overlooked economy.

The investment potential spans from agriculture, tourism and fisheries, among others, with a different championed sector for each regency. The six regencies — Natuna, Nunukan, Belu, Talaud Islands, Morotai and Merauke — were the exemplary projects among the 41 regencies in the border areas prioritized to be developed.

Villages, Disadvantaged Regions and Transmigration Minister Eko Putro Sandjojo stated that those regencies must create their own business model to build up economic competitiveness in each region.

“We also can’t deny the importance of the private sector’s role with their experience in respective fields. For tourism, we need hotels and restaurants, and the government can’t do all of that without the support of the private sector,” he said recently.

Investment in those six areas has also been limited to Rp 57.5 trillion since 2011 until the third quarter of this year, according to Investment Coordinating Board (BKPM) data. The realized investment last year was slightly down to Rp 8.8 trillion from Rp 9 trillion in 2014, with most of the allocations centered on plantation and mining.

“[Investment] is still very centered in Java and still focused on capital-heavy projects instead of the labor intensive ones,” BKPM head Thomas Lembong said, highlighting that the measure to channel village funds to push businesses in the remote areas was a “radical change”.

Eko Saputro acknowledged that the new allocation aligned with the ministry’s measure to empower villages through village funds, which were expected to climb from Rp 46.98 trillion this year to Rp 60 trillion next year.

The Villages, Disadvantaged Regions and Transmigration Ministry would directly head the effort by publishing the list of potential projects in a book, as well as holding an investment forum to facilitate a gathering between the regency heads and businesspeople. President Joko “Jokowi” Widodo has pledged to prioritize the outer and remote areas in the country for development.

Along with the Villages, Disadvantaged Regions and Transmigration Ministry, the Public Works and Public Housing Ministry has also vowed to focus state budget spending next year on road development in Kalimantan, Papua and East Nusa Tenggara.

The total budget allocated for roads in border areas doubled to Rp 2.76 trillion next year from Rp 1.34 trillion this year, ministry data shows. Meanwhile, Tourism Minister Arief Yahya stated the ministry had acknowledged the importance of border tourism, which was estimated to see an increase in visitors, from around 2.2 million last year to 3 million visitors in 2017.

Morotai, named among the top 10 emerging tourist destinations, flaunted Rp 250.3 billion in potential investment to build a resort in the area famous for its scenic marine landscape. The land for the resort is expected to span 100 hectares. As for Merauke, the government invited businesspeople to invest in approximately 1 million ha of rice fields amounting to Rp 866 billion, among others.

“We have started managing it, while it was pretty much neglected in the past. Malaysia itself saw 65 percent of its total visits from border tourism,” he said, adding that he also had rolled out tourism events in border areas.

However, a tourism consultant working with Papua administration Jackeline Galatang stated that the area was still struggling with the availability of human resources. “Who will run these programs?” she said.

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RI Invites Norwegian Investors Into Shrimp Business
The Jakarta Post, 05 December 2016

Indonesia has invited investors from Norway to develop the country’s shrimp industry, which is estimated to require Rp 30 trillion (US$2.2 billion) to unlock its multi-million dollar a year business potential.

Maritime Affairs and Fisheries Ministry’s director general for aquaculture Slamet Soebjakto said that amount was needed to develop the nation’s entire shrimp sector, including offshore cages.

“We invite more Norwegian investors to invest in the shrimp industry, considering that Indonesia will revitalize its 300 hectares of shrimp ponds in 2017,” he said on Friday at a sustainable aquaculture seminar in Jakarta.

The shrimp farm revitalization program has been conducted in several regions including Lampung, West Sulawesi and North Kalimantan. Revitalization of the 300 hectares of shrimp farms is expected to yield 2,400 tons of shrimp, each harvest worth $18.9 million.

“Indonesia has set a shrimp production target of up to 1.25 million tons in 2019, which is a great opportunity for feed industries where shrimp feed demand is predicted to reach 1.48 million tons,” he said.

The major challenges in developing aquaculture in Indonesia, Slamet further explained, was limited investment, shortages in highly skilled human resources, as well as a lack of infrastructure where, for example, offshore-cage development required advanced technology.

Therefore, the government has asked Norway, given its superiority in offshore-cage technology, to invest in the sector starting next year as part of efforts to advance Indonesia’s aquaculture capabilities. “We’re hoping that technology transfer can make Indonesia’s aquaculture more sustainable,” he said.

Norwegian Ambassador to Indonesia Stig Traavik said Indonesia and Norway had already cooperated in research in aquaculture and fighting illegal fishing under a government-to-government scheme.

“What we want to do [right now] is really to enhance [our] business-to-business relationship and bring [our] expertise together, because we believe Indonesian aquaculture has a very bright future. It is going to grow fast, to become a big industry,” he said.

The cooperation, he further said, would create jobs in Indonesia. Aquaculture, feed industries, fish hatcheries and processing factories are among the sectors that have been opened up to foreign investors, while the catch fishery sector has been strictly reserved for foreign entities.

To attract investors to Indonesia’s aquaculture, the government will build exclusive zones to ensure business continuity, simplify investment procedures, and grant tax incentives on several imported raw materials.

Currently, Indonesia’s best shrimp broodstock farm is located in Karang Asem, Bali, which produces high-quality shrimp seeds called Vaname Nusantara. “The Vaname Nusantara has the ideal characteristics of fast growth, good size and is virus free,” he said.

Slamet said aquaculture played an important role in supplying animal protein to the world. “Indonesia is the second largest aquaculture producer in the world after China,” he said, adding that total production of Indonesian fisheries reached 14.3 million tons in 2014.

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Pulogebang Terminal Operational on Dec. 20
Tempo, 05 December 2016

Transportation Minister Budi Karya Sumadi inspected Pulogebang Integrated Terminal in East Jakarta on Sunday, December  4, 2016. Budi wanted to ensure that Pulogebang Terminal will be ready for operation on December 20, 2016.

He said that bus operations will be transferred gradually from Pulogadung to Pulogebang. “[Buses] of Central Java and East Java routes will be transferred to Pulogebang. Others will follow suit,” he said.

According to Budi, the Government will first need to address four issues in order to open Pulogebang Terminal in the near future. First, he said, it needs to shut down the temporary terminal.

“It will be closed within the next three days.”

The second is amenities in the terminal, particularly food court. Budi expects to see outlets and stores in Pulogebang Terminal to soon be opened.

The third, according to Budi, is feeder bus issue from and to Pulogebang, particularly from Bekasi.

“I have asked Director General of Land Transport to coordinate with Bekasi Transportation Office for the feeder [buses],” he said.

The fourth, he said, is technology and information development, which is currently being addressed by Jakarta administration and the Communication and Informatics Ministry

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Minister Susi to Regulate Island Ownership
Tempo, 05 December 2016

Maritime Affairs and Fisheries Minister Susi Pudjiastuti confirmed to immediately manage islands in Indonesia, including the aspect of ownership.

"We need to establish a program to manage islands in Indonesia. The government has to know the assets of this country in terms of how many islands there are. That is our future program," she said in Semarang to receive honorary doctorate degree bestowed by Diponegoro University on Saturday (3/12).

She added that there has not been any inventory of the potentials of Indonesian islands. She went on by saying that the islands will be regulated in terms of their ownership in accordance with the new program from the ministry.

"Every island cannot be owned 100 percent by the people. The state owns 30 percent of the land. The program will be launched as soon as possible," Susi asserted.

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Govt to Shift Electricity Subsidies to Infrastructure Projects
Tempo,05 December 2016

Energy and Mineral Resources Ministry will shift subsidies for 18.8 million customers of 900 VA electricity next year to power infrastructure projects. The scrapping of subsidies of the group of customers will save the ministry Rp20 trillion.

“For infrastructure projects, including construction of new transmission lines,” Director General of Electricity M Jarman said yesterday, December 4, in a discussion on electricity subsidies in Jakarta.

Jarman confirmed that the Government will base its policies on the law. Including to utilize savings from scrapping subsidy for 2017 to support electricity sector. The Government is aiming to achieve 97 percent of electrification ratio by 2019. As of September, the Energy Ministry recorded 89.3 percent of electrification ratio.

“So, nearly 11 percent [regions] are not yet electrified.”

The Government has decided to scrap subsidies for 18.8 million out of 22.9 million customers of 900 VA electricity. The rest, some 4.1 million of the group of customers, are deemed still deserving to receive continued subsidies. The decision will come into effect on January 1, 2017.

Whereas 450 VA customers will continue to receive subsidies next year, Jarman said. “As many as 23 million customers of 450 VA electricity will still get subsidies,” he said.

Small and medium-sized enterprises (SMEs) business 900 VA electricity consumers, according to Jarman, will continue to receive subsidies. The Government will also continue to provide subsidies for SMEs business 6,600 VA and below electricity consumers, citing domestic business sustainability.

“Small-scale businesses consuming 6,600 VA electricity and below will continue to get subsidies. We won’t touch those who are productive like SMEs.” Other beneficiaries of the electricity subsidies are socially-oriented customers, such as houses of prayer, school, and public service buildings.

State-owned electricity company PT Perusahaan Listrik Negara (Persero) is aiming to electrify 1,000-2,500 villages that have no access to power next year. PLN president director Sofyan Basir earlier said that the company could yet meet the target of electrification ratio as some outermost regions and islands are still not yet electrified, such as East Nusa Tenggara, Ambon, and Papua.

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Indonesia`s Aviation Industry Growth Second Biggest After China
Tempo, 05 December 2016

The growth of Indonesia’s aviation industry is the second biggest in the world after China, according to Chairman of the Indonesia Aircraft Maintenance Services Association (IAMSA) Richard Budihadianto.

"Growth of China’s aviation industry is the fastest, followed by Indonesia and India,” Richard said in Jakarta on Friday.

According to Richard, the growth is measured by the order of aircrafts from the three countries every year and the increase in the business value of their aviation businesses.

In terms of business value, Richard said that Indonesia’s aviation industry is now worth US$ 1 billion and is expected to grow by around 10 percent in the next five years.

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Airlines To Boost Capacity At Year-End
The Jakarta Post, 05 December 2016

Major airlines will expand their flight capacities to meet demand as passenger numbers rise during the year-end holiday season.

National flag carrier Garuda Indonesia will increase its flight frequencies and deploy larger aircraft in anticipation of surging demand for its services at the end of the year. The measures will add more than 13,000 extra seats for both domestic and international peak season service starting from Dec. 12, up 15 percent from the same season last year.

Out of the figure, around 8,300 seats will be allocated for domestic tracks, including busy routes such as Jakarta-Denpasar and Jakarta-Medan, and also intra-island itineraries, such as Biak-Nabire in Papua.

Certain routes, for instance Jakarta-Medan and Jakarta-Singapore, will be served by larger aircraft, such as the Airbus A330, which can carry 360 people.

“Historically, our passenger numbers in December are always the highest compared to other months. Even [when the tickets are sold] at normal price, they will still contribute the most [to revenue],” Garuda chief financial officer and risk management director Helmi Imam Satriyono recently said over the phone.

Indonesia’s top airline aims to fly 40 million passengers this year, including those carried by its low-cost subsidiary, Citilink, up by 11 percent from last year. From January to October, the state-owned carrier served 28.8 million passengers, a 6 percent rise from last year, according to the company’s data.

Similar to Garuda’s move, private carrier Sriwijaya Air Group also plans to offer more seats through additional flights and by expanding its fleet with the addition of two new Boeing 737-800 aircraft.

The group, which operates under Sriwijaya Air and NAM Air brands, plans to roll out around 190,000 seats during the year-end holiday season. The move will help enhance both its domestic routes, such as Jakarta-Denpasar and Jakarta-Silangit, as well as international tracks, including Kualanamu to Malaysia’s Penang.

“We plan to serve at least 1 million passengers in December, up 15 percent from December last year,” Sriwijaya Air operations director Toto Nursatyo said.

He added that 60 percent of the targeted figure would be generated from flights around Christmas and New Year’s.

The airline normally sees a higher number of passengers in December compared to other months, which on average books around 850,000 passengers.

Sriwiaya expects to fly 11 million passengers this year, up 10 percent from the past year. Similar to Garuda and Sriwijaya, the country’s largest low-cost carrier, Lion Air, also plans to provide extra seats during the peak season.

The firm’s president director, Edward Sirait, said it might add 10,000 extra seats during the season, nearly similar to last year, although it had yet to propose the plan to the Transportation Ministry.

The extra flights may serve routes heading to Manado, Medan and Makassar, he added. Apart from these cities, the airline would consider demand for t government’s newly promoted tourist destinations, such as Wakatobi in Southeast Sulawesi and Morotai in North Maluku.

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Govt, Apple Sign Cooperation Agreement
Tempo, 05 December 2016

The Communications and Informatics Ministry on Friday, December 2, 2016, announced cooperation with giant tech company Apple Inc.

“We have signed a cooperation agreement with Apple. They agreed to build a research and development center here [in Indonesia], and they are ready to recruit Indonesians to work with them,” Communications and Information Minister Rudiantara said at the Presidential Palace Complex in Jakarta on Friday, December 2, 2016.

Rudiantara revealed that the cooperation agreement encompasses research and technology and industry development.

“So, in the research and development sector, I will be directly involved. Meanwhile, the industry development sector is Industry Ministry’s jurisdiction,” he said.

According to the Ministry, the cooperation will provide an opportunity for Indonesia to be a part of Apple’s investment plan.

“Apple will announce [the investment value]. I can say that it’s above Rp100 billion (US$7.6 million),” he revealed, adding that he would invite Apple Inc. to visit Indonesia in late December.

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The Benefits of Social Forestry Program
Tempo, 05 December 2016

The social forestry program launched by President Joko Widodo (Jokowi) is expected to help develop agroforestry, decrease the inequality of land tenure, and reduce social conflicts as a result of encroachment.

The program, launched in September this year, is also likely to increase the welfare of people and reduce their dependence on "middle-man" in economic activity.

It is aimed at preserving forests, and supporting people who live near the forest and rely on its natural resources, people with small or no land, and those who live below the poverty line.nAn important benefit from the program will be reduction in CO2 emissions arising from deforestation, and peatland degradation.

Importantly, the new program is centered around the people, which is a paradigm shift from before. This means that the people are not only entitled to the programs benefits but are also obliged to help guarantee its success.

This principle is at the core of the UNDP REDD+ Indonesia Social Forestry program under the Ministry of Environment and Forestry.

The social forestry program also aims to help increase the productivity of people in remote villages and boost economic activity, Environment and Forestry Minister Siti Nurbaya stated in Jakarta on Thursday.

The ministry has set a target of 12.7 million hectares of forest area to be managed by the local people through many programs, such as Social Forestry Scheme, Forest Village, Peoples Forest Plant, Customary Forest, and Forest Partnership.

The 12.7-million-hectare target is a manifestation of President Joko Widodos (Jokowi) Nawacita program, an agenda to achieve greater economic self-reliance by focusing on strategic sectors. The program, as conceived by the ministry, is meant to support the Nawacita program of President Jokowi and Vice President M. Jusuf Kalla (JK), Nurbaya noted.

People must be given an opportunity to manage the forests and the land through social forestry schemes, for this is in line with the constitutional mandate related to the Recognition and Protection of Indigenous People (MHA), she added.

A target area of 13.5 million hectares has been identified for the program and will be managed by the community, the minister revealed. The minister said she had made working visits to many provinces in Indonesia, and met many people to obtain first-hand information about forest management for public welfare.

In the meantime, President Jokowi has also mandated that access to the market for outcomes of social forestry projects should increase, and the public should be given the knowledge and technical ability to strengthen their business and livelihood.

At present, a total of 1,737 social forestry business groups have been already formed, and their production results have been marketed regionally, nationally and even internationally, through online media. President Jokowi has urged Siti Nurbaya to simplify social forestry regulations and procedures to make it easier for people to access the benefits of forests.

Many social forestry initiatives had missed their targets during implementation and people were still facing difficulties in getting the necessary permits, Jokowi said. The president further highlighted the importance of paying attention to indigenous people, calling on the Ministry of Environment and Forestry to immediately settle issues related to customary forests.

Social forestry initiatives should not only relate to legal matters, such as giving people access to social forestry permits, but should be followed by advanced programs to enhance the welfare of people living in and around forests, Jokowi stated.

The advanced programs should start from preparation of production infrastructure, training and counseling, to expanding peoples access to market and technology information, financing, and post-harvest preparations.

During the commemoration event of National Tree Planting Day and National Planting Month on Monday in Tuban, East Java, President Jokowi said tree planting for social forests, managed by both private parties and cooperatives, needs to be explored more.

"Let us not give large concessions entirely to corporations, if it could be beneficial for the people, then
by any means, go for it," President Jokowi said.

When corporations fail to pass on the benefits to the public, then social forest management concessions will be given to cooperatives or private entities, according to the president.

"I believe that this model can be followed and I will be sure to check it. We hope that it could be a good model to be explored in other provinces and regions," he stated.

The government will support programs that incorporate farmers, fishermen, and cooperatives in managing large economic schemes.

He also advised other ministries to support the program so that they receive tangible economic benefits and improve the economy.

"I have warned the cooperatives minister to involve the cooperatives, and I have also said to the maritime and fisheries minister to incorporate fishermen. The same goes for the agriculture minister whom I have advised to incorporate farmers," Jokowi reiterated.

The president assured the people that he would keep an eye on the program and evaluate it in the next 3 to 4 months to a year. The social forestry program will also help Indonesia reduce gas emissions, as it is one of the keys to understanding how to effect a change in the way forests and land are managed as these have become the biggest gas-emitting sources in the country.

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