Update News January 18, 2017

In The News

World Bank Projects Higher Growth For Indonesia, Calls For Better Spending
The Jakarta Post, 18/01/2017

Effective spending along with reform in fiscal policy and the investment climate will help Indonesia grow its economy by 5.3 percent this year, according to a new World Bank report. The estimation is higher than the government's estimate of 5.1 percent.

In its January edition of Indonesia Economic Quarterly, World Bank stated that the 2017 state budget improved the country's quality of spending, including sustained higher allocations for infrastructure, health and social assistance, with better targeting for energy subsidies and social programs for the poor.

"It's very important for Indonesia to sustain this reform momentum so that the country can meet its development goals," said Rodrigo Chaves, the bank's country director for Indonesia, on Tuesday.

According to the report, improving the quality of public expenditure entails two actions with the first being reallocation toward priority sectors where public spending is low as additional spending can have the greatest impact on poverty and growth.
"These sectors include infrastructure, health and social assistance," the report said.

The second thing that the government should do is to maximize the effectiveness of spending in all sectors, particularly agriculture, education and social assistance, the bank wrote.

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World Bank: Quality Spending is Key to Achieving Development Goal
Tempo, 18/01/2017

Finance Minister Sri Mulyani endorsed a World Bank assessment that in order to achieve its development goals, Indonesia must significantly improve the quality of its public expenditure.

"Proper budget allocation is important but equally important is how it will be spent," said Sri Mulyani, at the launch of the World Bank's Indonesia Economic Quarterly-Sustaining Reform Momentum at the Center for Strategic International Studies (CSIS) on Thursday, January 17, 2017.

However, Mulyani recognized the big challenge faced by the local administrations, the budget end-users when they determine which programs will be the most effective.

Mulyani is concerned on how the funds transferred to Indonesia's more than 75,000 villages will be used.
"There are good and bad local governments," said Mulyani, acknowledging the different efficiency levels of administrations across the nation. "The question is not what, but how spending can be most effective."

According to the World Bank, education is one area where the effectiveness of spending can be improved.  The government is striving to improve the quality of education and to assist students to develop higher-order thinking skills.

The use of a student-centered learning approach is considered to be at the core of this change, which involves less teacher-centered lecturing and more interactive learning, drawing on practical teaching practices with a connection to real world contexts.

The report, however, fails to mention the urgent need for vocational training, which economic observers believe would be one option to solving the over five percent unemployment rate, involving about 7 million jobless people in the country.

The World Bank's economic quarterly report rated  Indonesia's economic performance and policy reforms  in 2016 well enough to have weathered the risks caused by the global uncertainty.

It reported that the current account deficit narrowed and direct investment was strong during the third quarter last year.  Additionally, fiscal policy credibility was enhanced through expenditure cuts in 2016 and more realistic revenue targets in the approved 2017 Budget. The World Bank projects GDP growth in 2017 at 5.3 percent, a slight increase over last year's projection of 5.1 percent.

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North Sumatra–Aceh Train To Operate By 2019
The Jakarta Post, 18/01/2017

State-owned railway company PT Kereta Api Indonesia (KAI) has set a target to reactivate the trans-Sumatra train connecting Medan in North Sumatra to Aceh by 2019.

The vice president of the company’s regional division I North Sumatra, Mateta Rijalulhaq, said that the project had been speeded up to meet the high public demand for a train to serve the route.

“I was told by the railway directorate general that the trans-Sumatra railway track will be ready for operation by 2019,” Mateta told The Jakarta Post at his office on Monday.

He said that the target was not too ambitious, considering that so far, three railway stations, ones that had been built during the Dutch colonial era and subsequently closed, had been reactivated in Aceh since November 2016.

The three stations are Krueng Geukeuh, Bungkaih and Krueng Mane. All are located in North Aceh. They are connected by tracks with a total length of 11.3 kilometers and are served by the Cut Meuthia train with 10 return trips a day.

In March 2016, President Joko “Jokowi” Widodo officially launched the reactivation of the trans-Sumatra railway’s 80-kilometer Binjai-to-Besitang section.

According to recent data, 299.85 km of the trans-Sumatra railway track are in operation. Of that distance, 288.5 km are located in North Sumatra.

Of the planned 1,574.5 km of track to be operated for the transSumatra railway train, 411.5 km will be located in North Sumatra, while 600 km will be built in Aceh and the remaining 563 km will be in Riau.

The construction of the whole length of track is expected to be completed by 2021. The total budget needed for this project is Rp 22.073 trillion (US$1.6 billion).

Mateta said the operation of the passenger and freight trains has received a warm welcome from locals, adding that in Aceh between 200 and 300 passengers had been using the service daily for a fare of Rp 1,000 per trip.

He said the three available stations would later be connected directly to the stations in Medan. “People do hope to have a train that connects North Sumatra to Aceh,” said Mateta.

He added that the reactivation of the North Sumatra–Aceh railway track was started from Binjai Station in North Sumatra. The operation would be gradually extended to the Medan-Besitang route, covering a distance of 80 km, and afterwards continued to Langsa and then North Aceh.

Mateta also said that most of the tracks used for the trans-Sumatra railway were a legacy from the Dutch colonial administration.

“Except in Bireun, we will build a new track there,” he said, adding that most parts of the route passed by local people’s plantations and residences.

Separately, spokesperson of PT KAI’s Divre I North Sumatra, Joni Martinus, said that people’s interest in using trains for transportation was high as shown by the increasing number of railway passengers every year. “This year, we have the target to serve 3,289,208 passengers, a 7 percent increase compared to last year’s figure of 2,998,994,” Joni said.

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Japan, Three Others Eyeing Jakarta-Surabaya Rail Project 
Tempo, 18/01/2017

Four countries have shown interest to finance Jakarta-Surabaya railway revitalization project. The project is expected to improve the speed of Jakarta-Surabaya train to around 150 kilometers per hour (semi-express).

“There are China, South Korea and Russia. It’s allowed to show some interest,” Transportation Ministry official Prasetyo Boeditjahjo said yesterday at the Parliamentary Complex in Jakarta.

According to Prasetyo, those countries had expressed their commitment to be engaged on the Jakarta-Surabaya railway project. Japan’s PM Shinzo Abe had expressed his commitment early last year to finance the megaproject through government debt.

Follow-up discussions at ministerial level had been held ever since. Japan’s interest in the project intensifies as Mr. Abe visited Indonesia last week. The agenda items discussed in the meeting was Jakarta-Surabaya railway project, among others.

Transportation Minister Budi Karya Sumadi said that President Jokowi had allowed Japan to submit the megaproject’s financing proposal. The government will soon prepare the feasibility study. “It’s clear, the President has presented Japan an opportunity to submit a preliminary proposal,” Budi said.

However, Prasetyo said that despite such interests, the government has yet to commence a feasibility study on the project. Moreover, the government has yet to include the feasibility study budget in the 2017 state budget (APBN). “We expect to include the budget this year,” Prasetyo said.

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Gov't Invites Investors to Develop Airports 
Tempo, 18/01/2017

The Indonesian government will provide an opportunity for investors from the United States to develop the Kualanamu international airport in North Sumatera and the Sultan Aji Muhammad Sulaiman airport in Balikpapan.

"We have Kualanamu airport and [the airport] in Balikpapan to develop by inviting foreign investors," said Transportation Minister Budi Karya Sumadi at the Transportation Ministry office on Tuesday, January 17, 2017.

Budi made his statement after the Indonesia-US Aviation Working Group Seminar event that was held to discuss cooperation opportunities in the field of aviation between the United States and the Indonesian government.

The event was also a follow up to both countries plan to increase connectivity by adding more Indonesia-US route using Indonesian flagship carrier Garuda Indonesia.

Budi said that the cooperation will allow Garuda Indonesia to fly to cities in the United States. "[Garuda Indonesia] can fly to New York, Los Angeles or the US Airlines can fly to Bali or Jakarta," Budi said.

US Ambassador to Indonesia Joseph R. Donovan said in his opening speech that the cooperation will be established to accelerate the development of both countries' partnership in the aviation industry.

"We came here to establish a strategic partnership, specifically in the aviation industry," Donovan stated. "The United States government and companies hoped to strengthen cooperation with Indonesia in the aviation sector."

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Countries Learn Oil Management in Bojonegoro
Tempo, 18/01/2017

As many as 26 people from 10 different countries participated in an oil and gas management training held at Bojonegoro on Monday, January 16, 2017.

Representatives from Myanmar, Indonesia, Vietnam, Philippines, Australia, India, Timor Leste, Mexico, Mongolia, and Afghanistan were present in the training.

A member of the trainer team from the University of Gadjah Mada Nanang Indra Kurniawan, said that the participants will study about management and accountability in the extractive industry.
"Bojonegoro was chosen because it is considered to have good [oil] management," Nanang said on Monday, January 16, 2017.

Participants will also be exposed to the 'Dana Abadi' (Eternal fund) program that is sourced from the oil and gas revenue-sharing (DBH). The training is also intended to build a network to increase partnership in the Asia-Pacific extractive industry.

The participants are accompanied by a team of experts from the University of Gadjah Mada together with a number of non-governmental organizations. The team will then visit a number of spots such as the Cepu Block oil refinery located at Gayam, Bojonegoro, which is managed by Exxonmobil Cepu Limited.

Regent of Bojonegoro, Suyoto, said that his region will attempt to achieve policy innovations that are related to the natural resources management to anticipate social conflicts caused by oil and gas extraction activities.

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Indonesia to Register 1,106 Islands to UN
Tempo, 18/01/2017

The Marine and Fisheries Affairs Ministry is planning to organize small islands in Indonesia, including those located in the country's outlying territories.

Marine and Fisheries Affairs Minister Susi Pudjiastuti said that the Ministry will register 1,106 unnamed islands with the United Nations (UN). “We hoped that the president can register and name the islands,” Susi said on Tuesday, January 17, 2017.

The government is also preparing a draft on Land Use Rights (HPL) for 111 islands located in Indonesia’s outlying area. "[The registration] will be conducted as soon as possible to prevent chances of foreign parties or individuals to control the islands," Susi added.

Susi further explained that the organizing of the islands is also intended to strengthen Indonesia's sovereignty and to allow the islands to be included as state assets.

In addition, Susi expected that by organizing the islands, it would prevent environmental damages or cultural distortion because each island has its own unique resources and culture. Susi also hoped that the registration will help prevent Indonesian islands from being used as a hub for crimes such as illegal logging or drug smuggling.

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Indonesia, Japan Turn Waste into Renewable Energy
Tempo, 18/01/2017

The Indonesian Environmental Affairs and Forestry Ministry (KLHK) and the Ministry of Environment Japan (MoEJ) has teamed up to turn waste into renewable energy by adopting waste-to-energy-plants (PLTSa), the news agency Antara reported.

Environment Minister Siti Nurbaya said that the waste-to-energy-plants partnership is the solution to addressing the waste problem, while also help educates citizens in handling and utilizing waste. Public education includes dissemination of ways to reduce, sort and process waste.

Japan is known for its leading waste-to-energy-plants.Minister Siti Nurbaya said that Indonesia faces a serious waste problem: as many as 64 million tons of waste produced annually.

Mrs. Siti said that the MoEJ has shown great enthusiasm. Japan's Environment Minister Tadahiko Ito said that the country will assist with the preparation of guidelines for, models, capacity improvement of and supervision team for waste-to-energy-plants, which involve Japanese personnel.

Having named Surabaya as pilot waste-to-energy-plant project, Mr. Ito plans to roll out the program in other major cities, such as Jakarta, Bandung Semarang, Solo, Tangerang, Makassar and Manado.

Also discussed in the meeting was a partnership in waste management in coastal and marine areas considering that Indonesia is one of the world’s largest marine waste producers. Marine waste management has been sparsely implemented in the Seribu Islands, North Sulawesi and Yogyakarta, among others.

Indonesia will commemorate the National Waste Awareness Day (HPSN) on February 21. Indonesia has also been named Global Cleansing Champion Country by the UNEP.

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Indonesian FLEGT-Compliant Timber Arrives in the UK
The Jakarta HGlobe, 18/01/2017

Indonesia's first legally certified timber shipment arrived in England, on Monday, January 16, 2017, local time. Indonesian Ambassador to London Rizal Sukma, paid a visit to Tilbury harbor located in London to unbox the cargo that contains the Indonesian FLEGT ( Forest Law Enforcement, Governance and Trade)-compliant timber.

"I'm proud to witness Indonesia's first FLEGT timber product being sent to England. This is the result of hard work from a number of parties that continuously monitored the implementation of Timber Legality Verification System (SVLK)." Rizal said in his official statement on Tuesday, January 17, 2017.

The company that imported the product is identified as James Lathams Ltd and Falcon Panel Product Ltd, and importer agent Plaut International Ltd. Both companies were present at the event, which was held at the warehouse owned by both companies. A representative from the Department for International Development of England was also present.

"By implementing the FLEGT license, I believe that importers would place more trust regarding the legality of Indonesia's timber exports," Rizal stated.

Indonesia-England trade reached US$ 127 million in 2015. Rizal hoped that the amount would continue to increase in the coming years.

Chairman of James Lathams, Piers Latham, welcomed the implementation of FLEGT certification on Indonesian wood products. "The FLEGT license will help assure UK-based companies about the legality of Indonesian timber and wood products", Piers said.

Indonesian Wood Panel Association (APKINDO) recorded that there were around 17 cargo loads that were sent through Tilbury, Liverpool, and Grangemouth.

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Indonesia Has An Important Role: US Ambassador
Antara News, 18/01/2017

American Ambassador to Indonesia Joseph R. Donovan Jr. said that Indonesia plays an important role, not only in its cooperation with the United States, but also in its position in the ASEAN region.

"Indonesia is a key member of ASEAN, which is also very important to the United States, and Indonesia is a member of the G20. It is the largest economy in South-East Asia.

For me, all of this means Indonesia and the United States can be great partners and I look forward to working to deepen our relations," he said following his opening speech at the U.S. - Indonesia Aviation Working Group Seminar in the Ministry of Transportation building in Jakarta on Tuesday.

Ambassador Donovan, who officially took office on January 12 when he presented his credentials to President Joko Widodo, said that the cooperation between Indonesia and the US strongly revolves around four main issues, including trade and investment, democracy, security, and global priority issues.

He further stated that he wishes to continue the efforts that have been carried out by his predecessors, Ambassadors Bob Blake and Scott Marciel.

"I certainly hope that we identify our priorities, as we have common interests and common values, and its a great foundation on which our relationship can continue," he remarked.

Before serving as the US Ambassador to Indonesia, Donovan most recently was Managing Director of the Washington Office of the American Institute in Taiwan.

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