Update News December 22, 2016

In The News

Four Big Banks Support Bank Indonesia's National Payment Gateway
The Jakarta Post, 22 December 2016

In order to support Bank Indonesia’s (BI) plan for an integrated payment system called National Payment Gateway (NPG), four banks inked an agreement on interoperability and interconnectivity of debit cards and electronic money on Wednesday.

The agreement was signed by state-owned lender Bank Rakyat Indonesia (BRI), Bank Mandiri, Bank Negara Indonesia (BNI) and the country’s largest private lender Bank Central Asia (BCA) that act as acquirers and represent 75 percent of debit transactions in the country.

Besides the four banks, three switching companies, namely Artajasa Pembayaran Elektronis, Rintis Sejahtera and Alto Network also support BI’s plan to implement NPG.

“NPG is expected to solve problems and increase efficiency of Indonesia’s payment system nowadays. Currently, the payment system infrastructure is deemed inefficient due to limitation of interoperability and interconnectivity between principals,” BI executive director of communications Tirta Segara said in a press statement.

NPG is a system that processes payment transactions electronically through a variety of instruments, such as ATM cards, electronic money and credit cards. With NPG, people are able to carry out non-cash transactions from any bank in the country, using any kind of instrument or channel.

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President Jokowi To Launch National Apprenticeship Movement
Antara News, 22 December 2016

President Joko Widodo (Jokowi) is set to launch a national apprenticeship movement at the Karawang International Industrial Estate in West Java on Friday as part of the effort to increase the number of skilled workers more quickly.

"On Friday, we, along with Mr. President will launch a national apprenticeship movement to make Indonesia competent," Manpower Minister Hanif Dhakiri said at a press conference here Wednesday.

Indonesia is still facing three major challenges of poverty, social disparities and unemployment, the minister noted.

Although the Central Statistics Agency (BPS) has recorded a decline in poverty, social disparity and unemployment rates, there must be synergy among the government, the business world and civil society, he said.

Skill or competency disparities were the biggest contributors to the three elements as graduates of senior high schools and below make up the vast majority of the Indonesian work force, he said.

Therefore, steps are needed to give them more access to on-the-job training including apprenticeship, he said.

Indonesia is predicted to become the worlds seventh largest economy in 2030 if it can create 113 million skilled workers in the next 14 years, he reminded. The national apprenticeship movement will be implemented in an integrated, systematic, measurable, post-and incentive-based manner, he said.

The policy should not be misconstrued as an effort to recruit low-paid workers, he said.

"Through strong and continuous synergy, I believe that we can increase the competence of our workers more quickly," he said.

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Gov't Expects Tax Reform Completion in 2020
Tempo, 22 December 2016

The Finance Ministry has set a target to complete its tax reform initiative by 2020. Finance Ministry's expert staff for tax compliance Suryo Utomo hopes that the tax reform would boost public’s tax compliance.

"Currently, our tax ratio is only 11 percent. It is expected that in the next four years, the tax compliance will improve. Therefore, tax revenue will be higher," Suryo, who also serves as the leader of the Finance Ministry’s Tax Reform Team, said during a press conference in Jakarta on Wednesday, December 21, 2016.

Based on a work schedule prepared by the Ministry, the Tax Reform Team will evaluate the tax administration system in the first quarter of 2017. In the second quarter of 2017, the team will draft strategic initiatives and set milestones to be achieved. Then, the team will realize short-term milestones that support tax revenue in 2017.

In the third and fourth quarters of 2017, the team will continue to hone the strategic initiatives and evaluate the tax reform along with related stakeholders, prior to evaluating the initiatives from 2018 to 2020. The team will also add new strategic initiatives during the implementation of the tax reform. It is expected that the tax reform will be fully realized by January 1, 2020.

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Tax Amnesty Collects Rp101tn Revenue
Tempo, 22 December 2016

Finance Ministry’s tax director general Ken Dwijugiasteadi revealed that the government had collected a total revenue of Rp101 trillion (US$7.7 billion) by December 20, 2016. The revenue came from retribution fee, tax arrears and inspection termination for preliminary evidence.

“Most of the revenue in the second period came from micro, small, and medium business,” Ken said during a press conference at the Finance Ministry in Jakarta on Wednesday, December 21, 2016.

To this date, the total assets declared by 512,315 taxpayers participating in the tax amnesty program stand at Rp4,043.66 trillion (US$311 billion). In the first period, the declared assets reached Rp3,667.69 trillion (US$282 billion). Meanwhile, the total assets declared in the second period are recorded at Rp375.97 trillion (US$28.9 million).

According to Ken, the assets declared in the second period consist of domestic assets at 302.43 trillion (US$23.2 billion) and overseas assets at Rp 62.83 trillion (US$4.8 billion). The repatriated assets in the second period stand at Rp10.71 trillion (US$823.8 million).

The total repatriated assets currently stand at Rp130.01 trillion (US$7.9 billion). However, Tax DG spokesperson Hestu Yoga Saksama said that the realization of the asset repatriation is currently at Rp67 trillion (US$5.1 billion).

“Only a small portion [of the repatriated assets] goes to stocks and others. The majority of the assets are still parked in banks,” he explained.

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Industry Ministry Plans to Export Local Lubricants to Asia,Europe
Tempo, 22 December 2016

Industry Ministry plans to export local lubricants to Asia and Europe by the end of next year in a bid to improve competitiveness against imported products.

Achmad Sigit Dwi Wahjono, Director General of Chemical, Textile and Various Industries, the Industry Ministry, said that the 80% local lubricant products have secured the Indonesian National Standard (SNI) certification to ensure their quality and competitiveness.

“The implementation of the SNI is imperative to maintain quality. So that we can also export local lubricants,” he saidWednesday in a written statement in Jakarta, as quoted by Bisnis.com

He explained that 33 lubricant manufacturers, both national and international, operate in Banten, Jakarta, West Java and East Java with a total capacity of lube oil blending plants (LOBP) of 1.8 million KL/annum. Whereas, domestic consumption of lubricants will only reach 850,000 KL/annum, leaving a 47% excess in lubricants supply.

“The potential of lubricant products is expected to boost lubricant exports to ASEAN member countries, Japan, China, South Korea, the Middle East and the European Union,” he added.

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Gov't to Finish Regulation on Land Bank on March 2017  
Tempo, 22 December 2016

The National Land Agency (BPN) is currently drafting a regulation draft the establishment of the Land Bank together with respective stakeholders. The regulation is expected to be completed around February or March 2017.

"After that, [we] will implement plans to establish the Land Bank," said Budi Situmorang, Director General of Spatial Planning to Tempo on Tuesday, December 20, 2016.

The regulation will be the main guideline for all state institutions in fulfilling their need of land for infrastructure development. Budi said currently, all respective stakeholders are discussing ways to finance land acquisition, including mapping land ownership and land needs.

Himawan Arief Sugoto, an expert staff of the Land and Spatial Planning Ministry said that the Land Bank may be funded by the 2017 State Budget. In the regulation draft bill, the Land Bank will have three methods to acquire lands, including exercising its judicial authorities, using funds from the State budget and converting land use, or by involving the public "in the form of land trade, and consolidation of flats," according to Himawan.

However, Himawan stated that traded lands must have proper economic value. "If the land does not have anything on it, then there has to be road [access]," Himawan explained.

Himawan said that land acquisition will refer to the synchronization of strategic national projects and the national spatial planning. Himawan expected that there will be 4 million hectares of neglected land that can be acquired by the Land Bank. "If [the lands] are not being used, it will be made available for development purposes," Himawan said.

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Govt Now Allows SOEs, Private Sectors to Finance Land Acquisitions
The Jakarta Globe, 22 December 2016

President Joko "Jokowi" Widodo has signed a new presidential regulation on Wednesday (22/12) that will allow state-owned enterprises and private companies to pay for land acquisition in some priority projects, in a move to accelerate infrastructure development in Indonesia.

Land acquisition for government projects is supposed to be the responsibility of central and regional governments but they are often constrained by the existing state and regional budgets, delaying the completion of the projects.

For example, the government only allocated Rp 2.8 trillion ($207 million) for land acquisition on toll road projects in the state budget this year when a total of Rp 17 trillion is actually needed.

With the new regulation in place, the president hopes SOEs and private companies can bear the upfront cost until the government comes up with sufficient funds to pay them back.

"The government will give a guarantee against risk that may arise from the delayed budgeting process," Bastari Panji Indra, the deputy assistant for housing, land and infrastructure financing at the Coordinating Ministry for Economic Affairs, said on Wednesday.

The financing scheme, however, will only apply to 225 strategic projects that the government identified in January this year as well as all power plant constructions under its so-called 35,000-megawatt electricity grid program.

The strategic projects include the Jakarta-Bandung high speed train, sections of the Trans Java toll road, Labuan Bajo airport expansion in East Nusa Tenggara, Iran and Pertamina's Bontang refinery project and a new sewage system in Jakarta.

Next year, the government has set aside a land acquisition fund of around Rp 20 trillion through the Asset Management Agency in the 2017 state budget.

Private companies are expected to invest up to Rp 1,700 trillion in infrastructure projects between 2014 to 2019, but they have only put in about Rp 110 trillion so far, Bambang Brodjonegoro, the head of Bappenas, the National Development Planning Agency, said.

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Govt to Review Feed-in Tariff for Renewable Energy
Tempo, 22 December 2016

Energy and Mineral Resources Minister Ignasius Jonan said that the Ministry will review the feed-in tariff scheme for the renewable energy sector and the geothermal energy sector.

‘Feed-in tariff’ is a payment mechanism in the renewable energy based on the cost of generation of the technology. The renegotiation is done to create a more efficient electricity cost.

Jonan hopes that the discussion for feed-in tariff can be held soon as he is setting up a team to discuss the matter. “As soon as possible, [in] January if the team is ready,” he said on Wednesday, December 21, 2016.

According to him, it is necessary to be done so that the renewable energy can compete with traditional fossil fuels. Jonan said a country that has adopted it is United Arab Emirate.

They can build a solar power plant that can produce 150-megawatt with a pretty low tariff of 2.99 cents per kWh. Moreover, the country is currently developing a solar power plant that can produce 200-megawatt with the even lower tariff of around 2.42 cents per kWh.

Jonan said that renewable energy sources must be able to compete with fossil energy. This must be implemented if Indonesia wants to have a good energy mix.

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Indonesia, Japan Establish Maritime Forum
Tempo, 22 December 2016

Indonesia and Japan have agreed to create an Indonesia-Japan Maritime Forum in order to discuss strategic cooperation in the maritime sector.

"Indonesia-Japan Maritime Forum (IJMF) has been created through the Memorandum of Cooperation to Establish Indonesia-Japan Maritime Forum, signed by Coordinating Maritime Minister Luhut Panjaitan and Japans Foreign Minister Fumio Kishida today," a press release from the Coordinating Ministry of Maritime Affairs received on Wednesday stated.

Minister Luhut, accompanied by National Development Planning Minister Bambang Brodjonegoro and
a number of high-level officials went on an official visit to Japan from December 20 to 21.

The main agenda of the visit included the formation of the maritime forum and discussion around cooperation in infrastructure, centering around Patimban harbour, and Jakarta-Surabaya Rapid Train, and sea security.

The IJMF cooperation includes partnerships in maritime security and sea safety, development of the maritime economy, construction of maritime infrastructure, and maritime education and training.

The coordinating minister also talked about strategic partnerships with Japan in the Sabang, Natuna, Morotai and Maluku regions.

IJMF will be an important forum for both countries to build concrete maritime partnerships, both bilaterally, and also to maintain regional stability, peace and security.

During the visit, the coordinating ministry met a number of high level Japan officials including Foreign Minister Fumio Kishida, Land, Infrastructure, Transport and Tourism Minister Keiichi Ishii, Economy, Trade and Industry Minister Hiroshige Seko, senior politician Toshihiro Nikai as the Secretary General of the LDP Party and Head of Indonesia-Japan Parliamentary Friendship, and former Prime Minister Yasuo Fukuda, representing the Japan-Indonesia Friendship Society.

The Indonesian entourage also had the opportunity to meet Japans industry players, including representatives from Ports and Harbors Association of Japan, Sumitomo Corp., Taisei Corp., Chiyoda Corp., Teijin Limited, Marubeni Corp., Sumitomo Mitsui Banking Corp., and INPEX.

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Tourism Investment Grow 23 Percent
Tempo, 22 December 2016

Tourism Minister Arief Yahya said that investment realization in tourism sector during January to September 2016 reached US$1,094 billion (Rp14.7 trillion), a 23 percent increase year-on-year. “The highest [percentage of] investment was made in star hotel development,” Arief said yesterday as quoted from the Tourism Ministry website.

Tourism investment realization comprised of foreign investment (PMA) of US$594.59 million and domestic investment (PMDN) of US$139.06 million. Foreign investment in star hotel development made up 56 percent of total investment. The rest consisted of management consulting (27 percent) and restaurant (7 percent). Domestic investment comprised star hotel development (65 percent), water tourism (21 percent) and amusement parks (4 percent). Some 51 percent were Singapore-based investors.

On tourist arrivals, Arief said that the number of foreign tourist arrivals from January to October 2016 was 9,403,641 or grew 9.54 percent year-on-year. He expects that until late December, the target of 12 million foreign tourist arrivals will be exceeded, with an estimated 1.3 million arrivals in November and 1.5 million arrivals in December. “I’m optimistic that it will be surpassed as the said months are the peak periods,” he said.

To attract tourists in 2017, Arief will roll out three priority programs: digital tourism, homestay and air connectivity. According to him, digital tourism is a strategy to win global markets, particularly that of 26 countries. Digital tourism program will kick off with the launch of ITX (Indonesia Tourism Exchange), which will bring together travel agencies, accommodation operators and attractions to facilitate transactions.

Earlier, President Joko Widodo had instructed his subordinates to bring in up to Rp670 trillion worth of investment. According to Jokowi, investment proposals in tourism sector can help the government to achieve the target. “We must simply establish the product support, positioning, packaging and promotion.”

The Investment Coordinating Board (BKPM) chairman Thomas Lembong said that several Chinese investors are interested to develop national tourism industry. He named Fosun International and HNA Group as prospective investors. Fosun International is a company actively investing in tourism and fashion industries. The HNA Group is China’s first airline company.

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