Update News December 07, 2016

In The News

Widodo says Financial Inclusion of 75% `Realistic`
Tempo, 07 December 2016

President Joko Widodo said that the target to have financial penetration level at 75% by 2019 is realistic, provided the target is supported by sufficient efforts of promotion and dissemination.

Speaking at the Forum Saresehan 100 Ekonom on November 12, the president said that it is not an easy target.

"I've told the Coordinating Minister for Economic Affairs for our bank savings to reach at least 75% in 2019, up from this year's 40 percent," he said as reported by Bisnis Indonesia.

The president said financial inclusion will strengthen the national economy and encourage investments through small and middle-scale development projects.

"It is not impossible to encourage people to save their money in banks—whether they are students, farmers, or fishermen. We must start by introducing them to the banking system," Widodo said.

The president also said that national savings will support investment. On the contrary, if financial inclusion rate stagnates, investment will run slowly.

On November 18, the government launched the National Strategy for Financial Inclusion (SKNI) in a bid to push financial penetration and expand access to the public.

The Coordinating Minister for Economic Affairs Darmin Nasution said that the SNKI is a follow-up on the collaboration between the government, Bank Indonesia (BI), the Financial Services Authority (OJK), and the banking sector in addressing lack of financial access in many parts of Indonesia.

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Minister Darmin: Economy to Grow by 5.2-5.4 Percent in 2017
Tempo, 07 December 2016

Coordinating Economic Minister Darmin Nasution expressed optimism that the economy would grow by at least 5.2 percent next year. In the 2017 State Budget, the government has set a target to achieve a 5.1 percent growth.

"[The target] in the State budget was set based on logical calculation. My prediction is based on the plan that we will execute," Darmin said after attending an economist forum in Jakarta on Tuesday, December 6, 2016.

According to Darmin, the figure can be achieved since the household consumption has been relatively stable at above five percent.

"Since Indonesia is a populous country, a decline in certain groups due to plummeting commodity prices will be balanced by a rise in other groups," Darmin explained.

However, Darmin pointed out that the declining trend in commodity prices has started to cease.

"Some commodity prices are going up, such as coal and palm oil prices. Other prices haven’t showed an increasing trend. However, the declining trend is slowing down," Darmin added.

Based on the improving commodity prices, Darmin was convinced that exports and imports in 2017 would improve, which in turn would boost the economy.

"We hope that our trading sector will start improving next year," Darmin said.

Indonesia’s economic growth in the third quarter of 2016 reached 5.02 percent, decreasing from 5.19 percent when compared to the previous quarter. The inflation rate in October 3.31 percent stood at 3.31 percent, and the average inflation rate in the period of January-October stood at 3.58 percent.

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Sri Mulyani Involves Stakeholders to Form Tax Reform Team
Tempo, 07 December 2016

Finance Minister Sri Mulyani Indrawati will involve stakeholders in an effort to establish a tax reform team, following a recent arrest of Tax Directorate General official Handang Soekarno by the Corruption Eradication Commission (KPK).

"The tax reform team that will be established must be fully supported by tax authorities. If the support only comes from external institutions, it won't last long. Therefore, we need to involve stakeholders, such as researchers or counterparts," Sri Mulyani said at an economist forum in Jakarta on Tuesday, December 6, 2016.

Sri Mulyani explained that the aim of tax reform is to formulate regulations that can provide assurance for tax institutions.
"The problem is how to design the sequence, since people will be concerned if an institution, whose credibility is doubted, is given autonomy," Sri Mulyani said.

According to Sri Mulyani, the quality of human resource plays is important.

"Recruitment, promotion, and rotation are important. I receive a disturbing report, saying that some promotions did not go through a proper process. This organizational structure issue is homework for us," the Minister added.

Tax reform, Sri Mulyani pointed out, is also related to database enhancement. According to Sri Mulyani, the tax amnesty program is important in expanding the database, as well as improving public’s trust in the Tax DG.

"People are still concerned with exploitations when they submit their data to the Tax DG," Sri Mulyani revealed.

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RCEP Negotiations to Conclude by 2017: Trade Minister
The Jakarta Globe, 07 December 2016

Trade Minister Enggartiasto Lukita expects the 16 nations participating in the Regional Comprehensive Economic Partnership, or RCEP, to reach an agreement next year, allowing Indonesia to start reaping benefits from the free-trade deal immediately.

"We cannot afford to prolong negotiations at a time when the global trade outlook continues to be bleak," Enggartiasto said in his speech at the opening of the 16th RCEP negotiating committee meeting in Tangerang, Banten, on Tuesday (06/12).

Enggartiasto cited rising protectionism in both advanced and developing countries following the United States' decision to back away from the Trans-Pacific Partnership (TPP) agreement as a reason not to postpone the discussion any further.

The meeting, which will last until Friday, is a follow-up from the so-called intersessional meeting in Cebu, the Philippines, on Nov. 3-4, where delegates from China and India finally met to discuss the issue.

"We hope to reach an agreement so a decision can be made at the high-level meeting," he told reporters.

The China-backed RCEP is one of a few mega-regional economic pacts that rose to prominence following frustrating deadlocks in multilateral trade negotiations at the World Trade Organization in the past few years. The pacts are supposed to bring together bilateral agreements and offer trade and investment benefits through regional liberalization.

Progress in the RCEP negotiations has been sluggish since it began four years ago between the 10 member states of the Association of Southeast Asian Nations (Asean) and six trade partners – Australia, China, India, Japan, South Korea and New Zealand.

The RCEP would integrate regional markets with a combined gross domestic product of about $22.4 trillion, or 30 percent of global trade, and a combined population of 3 billion people, or about 45 percent of the world population, providing a potential market for Indonesia, Enggartiasto said in his speech.

The numbers may seem promising, but Indonesia has so far only had positive trade balances with half of the states participating in the RCEP.  According to data from the Ministry of Trade, Indonesia's trade balance was still in a deficit with Malaysia, Singapore, Thailand, China, Australia and New Zealand as of September.

"Look, we can't hide from globalization. The main point is that we should take the things that bring benefits to us," Enggartiasto told reporters.

He did not elaborate on Indonesia's terms in the agreement, except for stating that the country's demands on tax has yet to be discussed and that it needs to keep its trade balance positive amid regional liberalization.

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President Asks Investors To Focus On Import Substitution
Antara News, 07 December 2016

President Joko Widodo (Jokowi) has asked that investment flowing into the country be focused on industries that produce import-substitution commodities.

"We are going to focus our investment on import-substitution commodities," President Jokowi said when delivering a keynote speech at a "100 Indonesian Economists Workshop" in Jakarta on Tuesday.

He noted that he has ordered his economic team, particularly the Capital Investment Coordinating Board (BKPM), to target foreign investment in Indonesia worth Rp760 trillion in 2017.

"We should also make every effort to reach the 2018 investment target of Rp840 trillion. We want the investment to account for 45 percent of the gross domestic product to trigger economic development," President Jokowi remarked.

He cited the International Monetary Funds report, which suggested Indonesias economy is in good condition. "This is good news, but we should not become too happy too fast," he warned the audience.

The president said some of the countrys economic risks were linked to external factors, such as uncertainty over US economic policies, including its interest rates, and the weakening of Chinas economy.

According to Jokowi, it is important to attract as much investment as possible into the country.

"I have given the economic team a clear order to pursue investment targets in 2017 and 2018," he stated.

To attract investors, the government has adopted various policy reforms, according to the head of state.

"I am confident that investments will enter Indonesia in the petrochemical, steel, oil and gas, and electricity generator spaces, for example," he noted.

Jokowi, who is also a former Jakarta governor, said many investors would make financial closures in 2017, so a lot of money would flow into Indonesia. Apart from investments, the government is also paying great attention to the tourism sector, which is expected to absorb a large number of workers.

In 2015, the government established 10 "new Bali" spots, which are being developed as tourist destinations. Bali, so far, is Indonesias most popular tourist resort province.

"The 10 tourist destinations have been prepared. What needs to be developed further are their infrastructure, supporting products, positioning, packaging, and large-scale promotions," he declared.

He said the government has been launching large-scale promotions internationally, such as in Europe and the United States.

"Of the 10 new Bali spots, 3-4 are ready to be visited by foreign tourists, while the remaining spots still need infrastructure support. We must achieve this target, no matter what kind of development methods are needed to make it a success," he stressed.

Indonesia should also focus on Chinese tourists as every year, some 150 million of them travel the world. Currently, Europe and the United States receive the most Chinese tourists.

"Why dont we attract them? We already have a cooperation agreement in place with China to attract them. What remains to be done is to open flight routes to that country to fly them to Indonesia," he added.

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S. Korea, Indonesia Develop Environmentally Friendly Businesses
Tempo, 07 December 2016

Indonesia and South Korea are developing environmentally friendly small-medium enterprises (SMEs) or green businesses that emphasize efforts to reduce emissions in product processing.

SMEs should participate in cutting industrial emissions by implementing environmentally friendly technologies, Deputy for Organization at the Cooperatives and SME Ministry Meliadi Sembiring said on Tuesday.

"The SME sector is expected to be more creative and innovative to be able to survive competition and run their businesses in environmentally friendly ways," Meliadi said at the opening of the first Indonesia-Korea Green Business Forum.

The Indonesia-Korea Business Forum is the first event held by the Green Business Center (GBC) with the support of the ASEM SMEs Eco Innovation Center (ASEIC) of South Korea and the Ministry of Cooperatives and SMEs.

"Green Business Center is an institutional form of cooperation between Indonesia and South Korea and it serves as a business incubator for SMEs both in Indonesia and Korea. GBC is dedicated to incubating, consulting, and assisting SMEs in developing business and industry so as to accelerate the pace of business potential through green business innovation," Meliadi explained.

As of now, there are 11 tenants under the GBC, three of them Indonesian companies and eight Korean, according to Meliadi.

The three Indonesian companies are PT Sumber Makmur Petra (coal and concrete mix), KOSPERMINDO - ASPERLI (seaweed processing enterprises), and PT Multi Coco Indonesia (coconut processing business).

"The purpose of this forum is to increase the commitment and participation of SMEs and increase their knowledge, concept and application of environmentally friendly industries," Meliadi said.

Meanwhile, a Korean representative for the Indonesia-Korea Joint Secretariat for Economic Development Jang-jean Kang said the forum is very important as a platform to exchange information related to environmentally friendly industries between the two countries.

"The governments policy for the development of environmentally friendly industries is very important. Korea has for a long time been applying it, and finally has turned from being a poor country to become one of the major industrial countries in the world," Kang said.

Indonesia is the fourth largest carbon dioxide emission-generating country in the world, Jang-jean said, and hoped that it would, therefore, make its industries more environmentally friendly.

"We managed to overcome environmental problems by always emphasizing to companies to produce environmentally friendly products and reduce pollution," Kang said.

The Korean government has a budget of US$5.3 trillion Won for implementing its green business program, while Indonesias budget is much smaller. Therefore, cooperation to reduce industrial emissions, according to him, should continue to be expanded and developed.

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Jakarta MRT Project 60 Percent Complete
The Jakarta Post, 07 December 2016

PT MRT Jakarta has reported that, as of Nov. 30, the Mass Rapid Transit (MRT) project was 60.22 percent complete.

"The elevated section of the MRT Jakarta is now 42.7 percent complete while the underground section is 77.8 percent complete," MRT Jakarta corporate secretary, Hikmat, told the Jakarta Post on Tuesday.

The MRT elevated section will run from Lebak Bulus to Sisingamangaraja with seven elevated stations, namely Lebak Bulus, Fatmawati, Cipete Raya, Haji Nawi, Blok A, Blok M and Sisingamangaraja.

Meanwhile, the MRT underground section will have six underground stations, namely Senayan, Istora, Bendungan Hilir, Setiabudi, Dukuh Atas and Bundaran Hotel Indonesia stations.

Hikmat said the company aimed to open the MRT in February 2019.

Therefore, the company is trying to speed up the acquisition of 134 plots of land that will be used for the project, Hikmat said.

"We have made a lot of improvement in land acquisition. We will give an update about this matter in a press conference on Dec. 14," he said, refusing to reveal how many land owners had sold their land to MRT Jakarta.

Meanwhile, on Tuesday, the company also launched an electronic procurement (e-proc) application to simplify the procurement process.

"The e-proc will simplify the process for businesspeople who wish to submit a tender. Procurement will be faster and more efficient with this application," Hikmat said.

He added that MRT Jakarta was the second province-owned enterprise (BUMD) to use an e-proc system after PT Pembangunan Jaya Ancol Tbk.

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Garuda Indonesia Opens Jakarta-Mumbai Route on Dec. 12
Tempo, 07 December 2016

Flag carrier Garuda Indonesia will open scheduled flights to India starting December 12, 2016. Garuda Indonesia will operate three flights a week from Jakarta to Mumbai via China.

Garuda Indonesia president director Arif Wibowo said that the flights will make one transit stop in China in first phase of operation.

“We will see how it goes in two or three months; if the results are good, we will make it direct flights,” he told reporters at a tourism event in Jakarta on Tuesday, December 6, 2016.

Arif went on to say that India has a huge potential considering its 1.4 billion population. On the other hand, the number of tourists traveling from India to Indonesia is quite significant at 300,000 arrivals per year.

As such, he is confident that seat occupancy rate of Garuda’s Boeing 737 to operate in that route will reach 70-75%.

“More so because it will start to operate on the right time, i.e. before year-end holidays,” he added.
Aside from India, Garuda will also open direct flights from China’s Chengdu province to Bali. Regular flights will commence mid-January 2017.

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Govt Imposes Moratorium on Land Clearing of Peatland
Tempo, 07 December 2016

Indonesia, through its new government regulation (PP) No. 57/2016 on the revision of PP No. 71/2014 on Peat Ecosystem Management and Protection, has imposed a moratorium on land clearing in peatland areas.

The revision ruled that there should be no land clearing and no issuance of new licenses in peatland areas, especially for deep peatland, Secretary General of the Environmental Affairs and Forestry Ministry Bambang Hendroyono said, Tuesday.

PP 57/2016 also states that no drainage should be performed as it causes the peat to dry out, and no fires can be set in peatland areas.

Even traditional communities have been barred from setting fires in peatland areas. The new PP was signed by President Joko Widodo on Dec 2 and will go into effect in the very near future.

The new PP places a permanent moratorium on peatland exploitation, stating that everyone is prohibited from clearing new land until a zoning system for the protection and cultivation of the peatland ecosystem is in place.

"PP No. 57/2016 shows the solid commitment of President Joko Widodo to peatland ecosystem protection," stated San Afri Awang, who works with the Forestry Planology and Environmental Management section of the Environmental Affairs and Forestry Ministry.

Natural succession, rehabilitation, and restoration are ways of improving the peatland ecosystem.

"Natural succession means restoration without any human intervention," he explained.

In addition to the regulation, the government will also intensively monitor peatland restoration efforts.

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EARTH WIRE --Efforts Underway To Restore Lake Limboto In Gorontalo
Antara News, 07 December 2016

The central government is giving special attention to Gorontalo, currently the third conservation province in Indonesia after the provinces of West Papua and East Kalimantan.

Environment and Forestry Minister Siti Nurbaya explained in Gorontalo on Monday that the conservation effort is intended to preserve and protect the environment, biodiversity and rare flora and fauna and to restore Lake Limboto.

The largest lake in Gorontalo is now in critical condition from an environmental standpoint because of silting, so efforts are being made to restore the lake to its former glory and prevent it from running dry. Local wisdom in Gorontalo, according to the environment and forestry minister, must be revived as one of the necessary measures for restoring the condition of Lake Limboto.

Conservation efforts in the area, including restoring the condition of the lake, must consider other dimensions to the problem and solution, such as taking into account the values of the nobility in society.

The environment and forestry minister also highlighted the decline in the quality of water at Lake Limboto and promised to step up efforts to conserve and restore the lake. Lake Limboto is one of the most popular tourist spots in Gorontalo, but it is being threatened by pollution and environmental problems, so prompt measures for preservation are underway.

Without these efforts, the lake, also a habitat for the flora and fauna in the province, will eventually completely dry out. The locals have been called on to lend their complete support to the revitalization initiative, which is in their own interests and for their welfare.

The Regional Development Planning Board (Bappeda) has coordinated efforts to restore and revitalize Lake Limboto with the government of Gorontalo to synergize the various programs associated with the lakes preservation.

The coordination effort also involved the Department of Public Works of Gorontalo Province, the Lake Limboto Revitalization Team, and the Board of Watershed Management.

Gorontalo Regional Development and Natural Resources Head Sulastri Husain has said her party is currently familiarizing the locals with the revitalization process for Lake Limboto.

"Coordination with the Gorontalo city government is important because the revitalization and handling of Lake Limboto must be comprehensive and sustainable," she remarked in Gorontalo some time ago.

According to her, embankment construction work and the dredging of sediment in the lake will continue and needs the support of the local government, local people, and all relevant parties.

The local government should proactively provide clear information to the locals concerning the revitalization efforts, so that there is no confusion. The revitalization of Lake Limboto will include recovery efforts upstream, midstream, and downstream, because the largest contribution of sediment occurs upstream.

Gorontalo Governor Rusli Habibie has also encouraged the locals to support the project by not hindering the construction of an embankment around the lake and a sluice gate to manage the flow of water into and out of the lake.

He also pointed out that the embankment and sluice gate will help prevent the floods that frequently plague Gorontalo during the rainy season. The governor explained that continuous dredging was necessary as the depth of the lake had steadily decreased.

"The revitalization process is aimed at restoring the condition of the lake," he noted, adding that the central government, through the Public Works Ministry, had allocated funds worth Rp150 billion to restore the lake.

The funds were also used for sediment dredging and the construction of a sluice gate and dykes around Lake Limboto.

As part of the 15 inland water bodies in Indonesia that are in critical condition, Lake Limboto, the largest in Gorontalo province, should be returned to its original state. Thus, Gorontalo Deputy Governor Idris Rahim stated that the provincial administration was ready to implement a forest integration program to save the lake.

"Lake Limboto is currently in a very alarming condition because of silting. Therefore, the forest integration program, involving the military (TNI) and police, aims to save the lake," Rahim remarked in Gorontalo some time ago.

He noted that efforts such as reforestation programs around the lake and along the banks of the tributaries that empty into the lake have been started to prevent silting. According to him, the forest integration program to save Lake Limboto is a strategic effort as it is among the 15 lakes in critical condition in Indonesia that need to be preserved.

"Lake Limbotos preservation must involve the local communities that are concerned about the viability of the lake," he emphasized.

He pointed out that although the provincial administration has implemented several programs to save the lake, these had yet to yield optimal results.

"Therefore, involving the TNI and Polri in the forest integration program to save Lake Limboto is expected to prove effective," he added.

Even President Joko Widodo (Jokowi) is concerned about the current condition of Lake Limboto, as it was covered by water hyacinths, which make the lake shallower by the day. Moved by the critical condition of Lake Limboto, the head of state had promised to speed up the dredging of sediments from the lake bed, a process that he estimated could cost nearly Rp11 trillion.

He also urged the public works minister to speed up the dredging process and construction work. The local government is optimistic that the revitalization and preservation programs for the lake can be accelerated.

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