Update News January 04, 2017

In The News

Financial Authority Issues Regulation On Fintech Lending
The Jakarta Post, 04/01/2017

The Financial Services Authority (OJK) has finally issued a regulation on financial technology (Fintech) firms that run peer-to-peer (P2P) lending businesses.

The regulation, POJK No. 77/2016, requires a fintech company to have Rp 1 billion (US$74,239) capital when it registers its business with the OJK and for this to rise to Rp 2.5 billion when it applies for a business license.

The figures are lower than the respective Rp 2 billion and Rp 5 billion stated in the draft regulation.The regulation also does not strictly regulate maximum interest rates on loans. It only states that a fintech firm can advise its investors and customers of an interest rate by "taking into account fairness and national economic development".

OJK chair Muliaman D. Hadad admitted that the regulation was still an initial step made by the authority to regulate and supervise the business.

"What's important is they get onto our radar because we don't want to regulate the prudential aspects hastily," he said at the OJK's annual press briefing recently.

"We want to provide [business] transparency guidelines first."

The OJK also implements a regulatory sandbox, in which fintech firms can test any service they want to offer to consumers under the supervision of the authority before it issues further regulations.

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2016 Economic Growth Projected At 5 Pct: Finance Minister
Antara News, 04/01/2017

Indonesias economy grew at an estimated five percent in 2016, higher than 4.8 percent growth in 2015, Finance Minister Sri Mulyani Indrawati said here on Tuesday.

"The economic growth in 2016 is projected at five percent, below the assumption of the revised state budget, but relatively better than growth in 2015 at 4.8 percent," Sri Mulyani said.

The countrys economic performance was better than that of other G20 nations and developing countries, which were affected by global economic slowdown, she claimed. Economic growth during the fourth quarter of 2016 is projected at 4.7 percent, supported by improvement in household consumption and investment.

"Household consumption and investment has encouraged national economic growth. But, government expenditure will be affected due to lower expenditure in central administration due to budget adjustment," the minister stated.

In addition, she said, the national inflation rate was relatively under control during 2016, at 3.02 percent, lower than the assumption in the revised state budget of four percent.

"Inflation rate in 2016 was under control, supported by lower commodity prices and the governments move to maintain production, improving distribution, despite the risk of supply disturbance due to the climate," she said.

Economic stability was also reflected in the stronger rupiah, which was recorded at Rp13,307 against the US dollar, higher than the assumption of Rp13,500 in the revised budget.

"Strong economic fundamentals with various policies including recovery of state budget credibility and implementation of the law on tax amnesty have been factors behind the rupiah strengthening," Sri Mulyani said.

In facing the macroeconomic condition in 2016, the state budget deficit remained under control, at a safe level of 2.46 percent of GDP, she noted.

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Vice President Kalla Urges SOEs to Conduct IPO
Tempo, 04/01/2017

Vice President Jusuf Kalla urged State-Owned Enterprises (SOEs) to acquire more capital and be more transparent in managing it finances. One of the measures that can be taken by SOEs to achieve this goal, according to Kalla, is by entering the stock market.

"Because if [SOEs] are listed in the stock exchange, it means that they are being transparent, the public can evaluate the company's performance," Kalla said at the Indonesian Stock Exchange on Tuesday, January 3, 2017.

Kalla expressed his statement while opening the first trading session in 2017. During the event, Kalla also served as one of the panellists in a discussion moderated by the Chairman of the Financial Services Authority’s Board of Commissioner Muliaman D. Hadad.

During the discussion, Franky Welirang, Chief of the Indonesian Issuers Association asked about the possibilities of SOEs to offer their shares to the public through an Initial Public Offering (IPO). Back in 2016, only 16 out of the planned 35 SOEs had listed their shares in the Indonesian Stock Exchange.

In response to the question, Kalla said that the success of an IPO will depend on the State-Owned Enterprise Ministry to decide which SOEs are ready to offer their shares to the public. Currently, there are 20 out 150 SOEs have managed to be included in the stock market.

Kalla admitted that SOEs that plan to conduct and IPO will have to gain an approval from the House of Representatives (DPR). "If an SOE wants to go public, it will not be as easy as a private company, because it requires an approval from the DPR," Kalla said.

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Sri Mulyani: National Economy Is Run by Professionals
Tempo, 04/01/2017

Finance Minister Sri Mulyani Indrawati has ensured that the national economy is managed professionally, accountably, and transparently in a bid to address challenges posed by the current global economic situation.

"It doesn't mean that everything is perfect. But we will continue to improve [the national economy] in professional, accountable and transparent manners and will build relationships based on mutual respect," Sri Mulyani said in relation to a termination of cooperation with JP Morgan Chase Bank in Jakarta on Tuesday, January 3, 2017.

Sri Mulyani added that all partnerships with financial institutions would be built based on good and mutual relationship.

"We are open to criticism and assessment because they are important for improvement. However, a reputable financial institution has a responsibility to create positive morale instead of misleading [assessment]," Sri Mulyani clarified.

Sri hoped that all partners would work with the government to manage and maintain the national economic fundamentals through positive and sustainable cooperation.

Sri Mulyani confirmed that the government has considered inputs from public and institutions and conduct internal improvements, such as tax reform.

"If there's an issue with the State Budget, we will correct it. We won't hesitate to do this, because we believe that professional, credible and accountable relationship is important," Sri said.

Earlier, the Finance Ministry decided to terminate cooperation contract with US-based JP Morgan Chase Bank following its research that could disrupt the national economic stability. Finance Ministry's director general of financing and risk management Robert Pakpahan said that the termination was conducted in relation to the research that doubted the quality of assets owned by Indonesian companies.

"The research is questionable since it was not based on accurate and credible assessment. Therefore, we terminated the cooperation because it wasn't professional," Robert explained.

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Govt To Retain Focus On Infrastructure Development In 2017
Antara News, 04/01/2017

Infrastructure is one of the backbones of economic growth so the government will retain its focus on infrastructure development this year.

Last year, infrastructure did not function optimally in supporting economic growth.  Moreover, many damaged infrastructural facilities have not yet been repaired. This has hampered industrial progress and efforts to improve the competitive edge of products.

Therefore, according to Prof Werry Darta Taifur, economic analyst of West Sumatras Andalas University, the government will still focus on building infrastructure this year.

"I am convinced that infrastructure is the backbone of Indonesia in reinforcing its economic growth," Werry said in Padang on Tuesday.

Werry argued that, up to last year, infrastructure in the regions was not maximally utilized and many facilities needed improvement. As a result, economic activity, notably industrial development, was hindered and failed to increase product competitiveness vis-a-vis overseas goods.

"Developing infrastructure will also drive the development of industries. Thus, weaknesses in the infrastructural sector should soon be improved," the Andalas University professor said.

In this context, the National Development Planning Board (Bappenas) has included infrastructure in the governments three focus areas of national development in 2017 to drive forward the economy. Outlining the governments programs, Bappenas said infrastructure, services and manufacturing are the three main sectors that will be accorded priority this year.

The three sectors are prerequisites for a country to progress, Bappenas chief and National Development Planning Minister Bambang Permadi Soemantri Brodjonegoro said in Jakarta last Saturday. Infrastructure, which is instrumental in pushing economic growth, is still inadequate. The sector can provide a lot of employment, both in projects under construction and those already operational.

The government has projected investments of Rp4,000 trillion until 2019 on infrastructure projects. Of this, the private sector is expected to invest about two-thirds or Rp2,667 trillion while the government will invest the remaining Rp1,333 trillion. Infrastructure projects, especially ones related directly to the public interest such as toll roads, airports and seaports, are highly attractive for the private sector. Toll road projects in Java are almost certain to be profitable.

When private investors build a power plant and state-owned power firm PLN buys the power at a take or pay price prospective investors would be interested. As long as the investment and the selling price to the national power utility are reasonable, they will be interested.

The second sector is services, which includes tourism, communications and information services, financial services and other services. "Service sector also has to be expanded. The manufacturing sector is not enough as we need sectors that provide many jobs. Tourism has potential," Minister Bambang said.

Therefore, the government will also focus on manufacturing to make economic growth sustainable and competitive.

"We have to revive and push development of the manufacturing sector with products that are competitive both in domestic and global markets," Bambang said.

The government will avoid dependence on natural resources in carrying forward its development agenda in 2017. It will seek to create a sustainable economic development program in the future. Growth is no longer dependent on commodities and natural resources, which are very vulnerable to fluctuation.

Bambang said the economy improved in 2016 from 2015 when commodity prices, which had hit rock bottom, rebounded in 2016.

Basically, the government wants to avoid relying on resources that are highly vulnerable to sharp fluctuations. It no longer wants to see the economy beset by extreme ups and downs such as high dependence on exports of less competitive commodities. When prices fall, exports lose their sheen in economic growth.

The countrys economy has been badly hit by its dependence on a number of commodities, therefore, the government is set to reduce dependence on one commodity for growth. The time has come for the government to seek to create sustainable economic growth, to minimize the impact of commodity price falls in future. For this, services sectors such as tourism will be boosted to drive economic growth while infrastructure will be developed to support services and manufacturing.

"In essence, investment in infrastructure, services and manufacturing will boost growth, " said Prof Werry Darta Taifur.

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Indonesia To Build Infrastructure Projects Worth Rp4,000 Trillion In 2019
Antara News, 04/01/2017

The Indonesian government said the country is expected to build infrastructure projects with a total investment of Rp4,000 trillion until 2019.

Minister of National Development Planning Agency (Bappenas) Bambang Permadi Soemantri Brodjonegoro said the private sector would account for to third or Rp2,667 trillion of the investment.
Bambang said the government would put up Rp1,333 trillion or one third of the total investment.

The private sector including state companies are expected to provide two third of the total investment, he said at a discussion on Evaluation of Year-end 2016 and Hope 2017 here on Saturday (31/12/2016).

He said infrastructure projects are high attractive for the private sector especially ones related directly to the public interest such as toll roads, airports and seaports.

When private investors build a power plant and PLN would buy the power at a take or pay price the prospective investors would be interested, he cited.

He said as long as the investment and the selling price to the national power utility are reasonable, there would be purchasing power agreement.

Toll road projects in Java are almost certain to be profitable, he said.

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Surabaya to Develop Tram System to Improve Public Transport
The Jakarta Globe, 04/01/2017

Transportation Minister Budi Karya Sumadi said the development of a tram system in Surabaya, East Java, will commence early in 2017 to improve public transportation and attract more tourists.

The minister made the statement after a meeting with Surabaya Mayor Tri "Risma" Rismaharini on Friday (30/12).

"Our discussion concluded with a plan to start the development of a 4-kilometer-long tram route from Joyoboyo to Tunjungan. We expect to finish it in two years," Budi said.

The minister said he hoped the tram system would also become a tourist attraction to attract both domestic and foreign tourists to the city.

In response, Risma said the Surabaya administration will build a park-and-ride facility, which will serve as a hub where commuters and tourists can park their vehicles and board the trams.

Prasetyo Boeditjahjono, director for general for rail in the Transportation Ministry, said the tram system, which will eventually stretch over 17 kilometers, will cost around Rp 3 trillion ($220 million).

The detailed engineering design is available and the ministry is still considering loan options for the project from several parties, including the World Bank. Also discussed during the meeting is a plan to develop a 30-kilometer-long commuter rail system that will connect the East Java districts of Wonokromo, Sidoarjo and Tarik.

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Surakarta's Adi Sumarmo Airport Rail Link to Open in 2018: Minister
The Jakarta Post, 04/01/2017

Surakarta's Adi Sumarmo International Airport in Central Java will be connected to the city by an electric train to provide better transportation for the residents and tourists, a minister said on Wednesday (28/12).

"KAI [state-owned railway operator Kereta Api Indonesia] has prepared a detailed engineering design and we hope the construction will start in three months," Transportation Minister Budi Karya Sumadi said in a statement.

The electric train will link Solo Balapan railway station to the airport. The 56-kilometer distance is a one-hour journey by car. According to Budi, state-controlled construction firm PP, KAI and airport operator Angkasa Pura I will finance the Rp 1 trillion ($74 million) project.

The train will be operated by the companies' subsidiary, he said.

Besides the airport rail link, there are also other plans to improve transportation infrastructure and attract more tourists to the heart of Java, including construction of a new airport in Yogyakarta.

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Jakarta`s Giant Sea Wall To Prevent City From Sinking: Bappenas
Antara News, 04/01/2017

The giant sea wall to be built along the coast of Jakarta is designed to prevent the city from sinking, head of the National Development Planning Board (Bappenas) Bambang Permadi Soemantri Brodjonegoro has said.

"The giant sea wall is planned on necessity not on some sort of image projection. Therefore no one should make a controversy of it," Bambang, who is minister for national development planning, said in a year-end discussion here on Saturday.

The national Capital Integrated Coastal Development (NCICD) has been in the center of controversy following corruption case involving the city councilor and a developer.

Bambang said he has submitted to President Joko Widodo a report about calculation and comprehensive analysis of the project.

He said the project become urgent as the city is sinking faster than previously expected.

"We are confronted with a situation of the city sinking faster than originally estimated. Not only Jakarta but all coastal areas of Java tend to sink," he said.

Semarang of Central Java has even flooded with sea water, he added.

"Jakarta sinks much faster than previously estimated because of much use of ground water, therefore, we have to address this problem immediately," he said.

The capital city, one of the worlds most densely populated cities, sits on a swampy plain and is sinking at a faster rate than any other city in the world.

The first phase of building the giant sea wall that will cost around Rp10 trillion is to keep Jakarta from caving in until 2025, he said.

In addition the city administration has to control the use of ground water by improving the drinking water supply system, he said.

"For that purpose in the next phase we need to build sea wall not on-shore but off-shore that the cost would be much high at Rp70 trillion up to Rp80 trillion. That might save Jakarta until 2040 or longer," he said.

The plan, therefore, has to be carefully drawn and the technology is not easily available, he said.

He said the sea wall on shore has to be built soon in places where the ground sinks faster, adding by 2020 or 2021, the government has to start planning construction of the off shore wall.

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Pelindo II to Open East Asia Route in Q1 2017
Tempo, 04/01/2017

Having been named as a super hub in a bid to compete with Singapore, Tanjung Priok Port is confident that mother vessels of Jakarta-Japan route will start operations in the first quarter of this year.

State-owned port operator PT Pelabuhan Indonesia II (Persero) president director Elvyn G. Masassya expects that East Asia-bound mother vessels will be launched at least in the first quarter. “The first phase is Japan [East Asia], thereafter we will carry out simulations to other countries,” he told Bisnis.

East Asia route, particularly Japan, has been chosen on the basis of the high volume of exports to the region. At present, PT Pelabuhan Indonesia (Pelindo) II is holding negotiation with three major sailing companies to open other routes to Europe and the Americas.

After naming Tanjung Priok port as a super hub, she is confident that both exporters and importers at the port will be able to cut shipping cost by 10% to 15% compared to the cost of ship to ship transfer in Singapore or Malaysia.

Elvyn said that the super hub concept will not undermine export volume in other regions in Indonesia. Moreover, she said that Pelindo I, III and IV have principally agreed with the concept.

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Indonesian Govt To Build 10 MW Gas Power Plant In Morotai
Antara News, 04/01/2017

The central government will build a 10-megawatt (MW) capacity gas power plant in the Morotai Island Regency, North Maluku, to meet the electricity demand in the area.

"Construction of the power plant will be started this year after we meet some related requirements, such as the principal permit from the local government and the determined location in South Morotai," North Malukus Head of the Energy and Mineral Resources Department Safruddin stated here on Tuesday.

The process to build a 10 MW gas power plant in Morotai is part of the implementation of providing basic infrastructure in order to develop Morotai as one of the 10 major tourist destinations in Indonesia and a Special Economic Zone.

Electric power is viewed as a basic infrastructure that is significantly needed in the region, since it currently only has 3 MW mainly generated by a diesel power plant, which is prone to breakdowns owing to issues, such as engine damage.

Morotais limited electricity generation capacity has led several investors, both from within and outside the country, to put off their investment plans since they need a large amount of electricity to operate their businesses.

"Last week, the representative from the Embassy of Poland had visited Morotai to explore the possibility of investing in a tourism area, but one of the requirements they had put forth to realize their investment plans was sufficient electrical energy," Safruddin remarked.

To address this issue, Indonesias central government has expressed its commitment to providing electrical energy largely needed by several investors by starting work to build a 10 MW gas power plant in 2017 that would be followed by other power plants, mostly using sources of renewable energy.

According to Safruddin, several countries, such as Japan, were already showing interest to build power plants by harnessing the energy of ocean waves in the region, which in the era of World War II had become the base of the Allied forces.

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Gov't Accelerates Establishment of National Cyber Agency  
Tempo, 04/01/2017

Coordinating Minister for Political, Legal, and Security Affairs Wiranto, said that the government will speed up the establishment of the National Cyber Agency, which will serve as a monitoring agency for the country's national cyber activities.

Currently, the Defense Ministry has its own Cyber Defense division, while the State Intelligence Agency and the National Police each have their Cyber Intelligence and Cyber Crime division, respectively.

"These institutions will resume their tasks, but [the National Cyber Agency] will cover and coordinate the three institutions," Wiranto said on Tuesday, January 3, 2017.

Wiranto added that the government also plans to apply an electronic voting system, which is expected to minimize the occurrences of election disputes. "If [e-voting] has been applied, there will be no need for manual count," Wiranto said.

Communication and Informatics Minister Rudiantara added that the increasing number of false news (hoax) being spread through social media is one of the main reason of the establishment of the National Cyber Agency. "The decision was to establish a team led by the Coordinating Minister for Politics, Legal and Security Affairs," Rudiantara said.

The team will focus on handling social media and public websites, excluding private information. "We will not deal with private issues unless it has something to do with legal cases," Rudiantara said.

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Indonesia Information Center To Be Built In Hebron
The Jakarta Post, 04/01/2017

An Indonesia Information Center will be built in Hebron, Palestines busiest city, to disseminate information on the potential economic, social, cultural and educational scholarship opportunities in Indonesia.

This will be coordinated by the Honorary Consul of Indonesia in Ramallah, Palestine, jointly with the Indonesian Embassy in Amman, Jordan.

A statement from the Indonesian Embassy in Amman received by ANTARA here on Tuesday mentioned the information center is one of the programs of the Palestinian Indonesian Friendship Association (PIFA), which was launched in late December 2016 in Amman, Jordan.

At the launch of PIFA, Indonesias Ambassador to Jordan and Palestine Teguh Wardoyo stated that the establishment of PIFA will strengthen and enhance the relationship between Palestinians and Indonesians.

On the occasion, the ambassador explained the history of Indonesias support for Palestine, which has helped build strong bilateral relations that will strengthen over time. The relation between the two countries is growing among Palestinians and Indonesians based on mutual concern and respect for each other, he added.

Ambassador Teguh Wardoyo also quoted Indonesian Foreign Minister Retno L P Marsudis statement at the 60th anniversary of Asia-Africa Conference in 2015, "Maybe there is no international issue more important for Indonesia, and is very close to the hearts of the people of Indonesia, except the Palestinian issue".

According to Nico Adam, head of political, economic, social and cultural affairs at the Indonesian Embassy in Amman, in the long term PIFA will also build the House of Indonesia in Palestine, which will provide information on Indonesia to the local people.

The house will have an exhibition room containing Indonesian products and will serve as a training center for Indonesian arts, cultures, language and culinary, he added. The Palestinians have provided land for this purpose, Nico added.
Ambassador Teguh delivered aid of US$10,000, given by Indonesias Tahir Foundation, to PIFA Chairman Abdel Moneim Zahdeh. While receiving the funds, Zahdeh gave an inscription that will be put up at the House of Indonesia.

He appreciated the Indonesian government and its people for the sustained support that they have given to the Palestinians in all areas, including in achieving independence and sovereignty.

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