Update News November 23, 2016

In The News

Bank Indonesia to Set Average Reserve Requirements in 2017
Tempo, 23 November 2016

Bank Indonesia (BI) in an annual meeting last night announced that it will implement new policy of average reserve requirement ratios in 2017.
BI Governor Agus D.W. Martowardojo said the system will be introduced and is planned to be implemented in the second half of 2017.

“We have to prepare banking industry to better understand the principles of the average reserve requirement ratios which has become a best practice in developed countries,” Agus said at Jakarta Convention Center in Senayan on Tuesday, November 22, 2016.

Agus explained that the average reserve requirement ratios will create better depth to money market in the future. In addition, the main goal is to create flexibility in terms of bank liquidity.

Therefore, Agus expects that money market activities among banks to become more active and bank treasury management to run more efficiently. “Under the new average reserve requirement ratios, banks will no longer need to keep their minimum [deposit] on a daily basis, they will only need to keep an average ratio at the end of or higher than or just meet the requirements in early period of reserve requirements.”

Under current rule, BI’s primary reserve requirement is 6.5 percent. According to Agus, BI has formulated an appropriate period of the average reserve requirement ratio. “The period to be agreed upon is either two weeks or a week.”

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Regional Economic Partnership More Reliable Than TPP: Minister
Tempo, 23 November 2016

The Regional Comprehensive Economic Partnership (RCEP) is considered more reliable than the Trans-Pacific Partnership (TPP), especially if the United States eventually withdraws from the cooperation, the government has stated.

If the United States (US), under the leadership of President-elect Donald Trump, withdraws from TPP, the cooperation will be less interesting, Trade Minister Enggartiasto Lukita said Tuesday."RCEP is seen as more advanced and provides certainty as compared to the TPPs whose initiator plans to withdraw," Enggartiasto said.

Indonesia just stated its interest in the cooperation which was initiated by President Barack Obama, but has not declared its intention to join, Enggartiasto said.

The Trans-Pacific Partnership is a block that not only regulates trade and services, but also removal of import-export tariffs and equal treatment between State Owned Enterprises (SOEs) and private sectors.

TPP was initiated by the United States and has 12 members from Canada, Australia, Japan, New Zealand, Mexico, Chile, Peru, and four Southeast Asian countries of Malaysia, Singapore, Brunei and Vietnam. However, the agreement has still not been ratified.

Meanwhile, RCEP is an idea to integrate ASEAN cooperation with other trading partner countries. These are China, Japan, South Korea, India, New Zealand, and Australia."However, we are also prepared if President-elect Donald Trump sticks on or leaves the TPP," Enggartiasto said.

In addition to making improvements in the country on priority, the government also seeks to increase trade diplomacy with partner countries. Such improvements are in the schemes of bilateral and multilateral cooperation.

Earlier, in his campaign, Donald Trump had stated that he would cancel the US participation in the Trans-Pacific Partnership. The Trans-Pacific Partnership was at odds with his government's agenda that prioritizes US interests, Trump had stated.

However, the Asia-Pacific Economic Cooperation (APEC) leaders are committed to fighting all forms of protectionism that will be applied by the US.At the APEC Summit in Lima, Peru the leaders agreed to continue the Trans-Pacific Partnership without the US.

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Citizen Database Opened To Help Capital Market Investment
The Jakarta Post, 23 November 2016

Hundreds of Indonesian capital market entities, including securities firms and investment management firms, sealed on Tuesday a memorandum of understanding (MoU) with the Home Affairs Ministry to utilize a citizen database to ease the registration process for new capital market investors.

Financial Service Authority (OJK) commissioner for capital market supervision Nurhaida said the access to such data would help speed up the making of the so-called Investor ID from three days to only 15 minutes, which is hoped would attract more people to invest in the capital market.

“With the help of the civilian database, our investor ID data will be more accurate and faster to make,” Nurhaida said during the MoU signing ceremony.

Home Affairs Ministry director general for population and civil registry Zudan Arif Fakrulloh said that 97 other institutions had also signed a similar MoU.

Among the institutions that most frequently use the ministry’s citizen database are the Healthcare and Social Security Agency (BPJS Kesehatan) and state-owned lender Bank Rakyat Indonesia (BRI).

"We gave them access to [the database] so that they can crosscheck data from their customers,” Zudan said, adding that the process would need less than a minute.

Indonesia, Southeast Asia’s most-populated nation, is home to more than 250 million people. The citizen database, Zudan said, had so far included 95.8 percent of the population.

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RI Vows Greater Liberalization Under APEC
The Jakarta Post, 23 November 2016

Indonesia pledged that it would keep its market open for trade and investment and fight against protectionism as part of its commitment to the 2016 Leaders’ Declaration of the Asia-Pacific Economic Cooperation (APEC) signed by 21 APEC leaders in Lima, Peru on Sunday.

The leaders’ declaration reaffirmed the group’s commitment to the Bogor Goals, an APEC commitment made in Indonesia in 1994 to embrace open and free trade and investment by 2020, amid the growing trend of protectionism among APEC members.

The biggest blow to the Bogor commitment was the pledge made by US president-elect Donald Trump to scrap various free-trade deals initiated by his predecessors including the North America Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership (TPP).

The Lima commitment has been made amid warnings from the International Monetary Fund (IMF) that trade growth has been “too low for too long” and is expected to remain below 3 percent in the next couple of years.

Vice President Jusuf Kalla said in spite of the IMF’s projection, Indonesia would continue pushing for economic reform to boost trade with its APEC partners.

To lure investment and trade, President Joko “Jokowi” Widodo has issued a total of 14 economic packages, since taking office in 2014, with more investor-friendly policies in the pipeline.

“All APEC members must be ready to reform their economies as the slow trade is projected not only for this year but also in the following years,” Kalla said after the closing ceremony of the APEC Summit in Lima late Sunday local time.

Kalla said the government would also improve people’s purchasing power in the country to protect domestic interests without disrupting the country’s free trade agenda with APEC members.

“I spoke with [Japanese] Prime Minister Shinzo Abe during the meeting, asking him what efforts Japan would make to improve people’s purchasing power and he said his government would increase the salary of civil servants by up to 2 percent. We can have a 8.5 percent increase in Indonesia,” said Kalla.

During the closing ceremony, Kalla also had an encounter with US President Barrack Obama during which he asked the outgoing leader if Trump would make good on his promise to kill the TPP.

Kalla said Obama calmed him and told him that Indonesia and APEC members should have no reason to worry because it was not possible for Trump to realize all his campaign promises.

Meanwhile Peru’s President Pedro Pablo Kuczynski said on Sunday that it was too early to write off the TPP following Trump’s surprise win in the US presidential election, after campaigning on promises to scrap it.

Kuczynski said economic hardship had fueled support for Trump in the US and the Brexit decision in the UK. “[It’s] more than protectionism, it’s a reflection of difficult economic conditions,” Kuczynski said as quoted by Reuters on Sunday.

Separately on the submit’s sidelines, Kalla also held a meeting with Prime Minister Abe, who reaffirmed Japanese commitment to support economic, industrial and infrastructure development in Indonesia.

“Japan is very open about private sector investment especially in the sector of car manufacturing. We hope that our export capacity can grow faster than Thailand’s,” Kalla said.

On the summit’s final day, 21 APEC leaders including Kalla had an informal meeting with IMF managing director Christine Lagarde.“The IMF recommends that APEC members conduct economic reform because global trade is predicted to be under 3 percent this year and next year,” Kalla said.

In addition to preventing protectionism, the Lima agreement also secured commitments from 21 APEC leaders to strengthen cooperation in three thematic priorities: regional economic integration and quality growth; enhancing the regional food market; the modernization of micro, small and medium-sized enterprises (MSMEs) in the Asia-Pacific; and developing human capital.

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Central Java Invites Netherlands to Build Offshore Dam
Tempo, 23 November 2016

Central Java Province plans to build an offshore dam. The provincial government and the Government of the Netherlands are now exploring the possibility to collaborate in building the offshore dam as a way to prevent sea-water from spilling to lands in some areas.

"The meeting with the Governor of Central Java discussed many things, among them the protection of the beach and exploring the possibility of creating an offshore dam," Dutch Prime Minister Mark Rutte said in Semarang, Tuesday, November 22. 

Mr. Rutte on Tuesday had a closed meeting of about 1.5 hours with Central Java Governor Ganjar Pranowo, Minister of Public Works and Public Housing Basoeki Hadimoeljono, Mayor of Semarang Hendrar Prihadi, and Central Java DPRD speaker Rukma Setyabudi at Wisma Perdamaian.

He also said that the meeting also discussed on how to handle high tides, as well as a number of collective agreements. "One of the agreements is related to the management of the old town neighborhood in Semarang," he said.

Central Java Governor Ganjar Pranowo said the saw various collective agreements made, such as on flood mitigation, restructuring the old town area, as well as investment and cultural cooperation.

"We hope there will be P2P (parliament to parliament), G2G (government to government), and B 2B (business to business) partnerships, including in culture," he said.

Ganjar said the provincial also offers to collaborate in water management, energy and technology transfer, as well as trade cooperation.

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Dutch Offers Aid For Infrastructure
The Jakarta Post, 23 November 2016

The Netherlands has reiterated its commitment to participate in infrastructure projects in Indonesia, especially in port development and the strategic project National Capital Integrated Coastal Development (NCICD) in Jakarta.

Dutch Infrastructure and Environment Minister Melanie Schultz van Haegen said during her visit on Monday that the country would offer technical assistance and advice for the ongoing NCICD project.

“The next step will be to see how we can prevent Jakarta from subsiding by halting illegal ground [water] extraction and to as soon as possible repair the wall, the dikes along Pluit, North Jakarta,” she said after meeting top officials of the Public Works and Public Housing Ministry, including Minister Basuki Hadimuljono.

The Dutch minister referred to the ongoing phase A of the NCICD project, also known as the Giant Seawall, which focuses on building dikes to span 26.2 kilometers through a Rp 10 trillion (US$745.9 million) development to protect the capital city from flooding.

The Public Works and Public Housing Ministry is currently constructing two dikes in Jakarta that will reach a total length of 4.5 km. The development of these dikes, which are located in Pluit and Kali Baru, North Jakarta, is estimated to take up Rp 785.1 billion. The Dutch assistance will cover primary data collection, technical design and feasibility studies on the polder systems and land subsidence and other aspects, such as environmental, social and economic impacts of the project to coastal communities, according to the ministry.

The massive NCICD project, intended to prevent North Jakarta from sea water inundation, was initially envisioned to run in three phases. The first phase included the construction of the 600-kilometer inner wall with completion scheduled by 2017. The second and the third phase covered development of two outer walls in the western and eastern parts of the Jakarta Bay to be finished in 2025.

The Rp 400 trillion project was to be financed by the state and city funds. The creation of 17 man-made islets between the inner and western outer walls, meanwhile, was to engage participation from the private sector.

However, with the then-emerged corruption case embroiling the developers of the islets, the central government ordered the National Development Planning Agency (Bappenas) to carry out a study in a bid to determine the urgency of constructing the seawall, which resulted in an agreement to build the 26.2 km dikes until 2018.

The Dutch government had earlier handed out an €8 million ($8.52 million) grant for the project, particularly for the feasibility study for the later phases. It has been mulling over whether to provide another grant to finance the feasibility study for the construction of Jakarta Port, set to be Southeast Asia’s largest port.

The Public Works and Public Housing Ministry, meanwhile, said the Indonesian and Dutch governments had also talked about future cooperation in the design of an immersed tunnel in an Indonesian river“Maybe we want to place it in Pontianak, West Kalimantan,” Basuki said.

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Govt Fast-tracks Asian Games Infrastructure Construction
Tempo, 23 November 2016

Public Works and Public Housing Minister Basoeki Hadimoeljono is confident that the revamping of venues in Gelora Bung Karno (GBK) complex in Senayan, as well as the construction of the Kemayoran Athletes Hotel, will be completed on time by October next year. 

According to the ministry's infrastructure task force team for the 18th Asian Games, as of November 17, the GBK main stadium's rehabilitation progress has reached 4.32 percent.

For the GBK area, physical work will start in 2017, aimed at creating a high-quality outdoor space that is cohesive to the interior and the building's exterior.

Improvements are also being made on outdoor facilities including gates, booths, pedestrian paths, parking spaces, fences, seating areas, and toilets. 

"The construction progress at Kemayoran Athletes Hotel at Blok C-2 is 28.9 percent—faster than the initial plan of 27.8 percent. And in Blok D-10 the progress is at 32.7 percent, faster than the initial target of 31.6 percent," Basoeki said.

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Govt Subsidizes Short Sea Shipping Route
Antara News, 23 November 2016

The Transportation Ministry plans to subsidize the Jakarta-Surabaya short sea shipping route to attract companies to switch to sea transport mode for distributing goods.

Nearly 90 percent of the companies distribute goods by land, Transportation Minister Budi Karya Sumadi said at a discussion themed, Slashing Logistic Costs and Supporting Tourism with Long Distance Ferry Ships here on Tuesday.

Unlike Panjang Port-Tanjung Priok Port shipping route, the Jakarta-Surabaya shipping route will be subsidized since the two cities are connected by any strait, he observed."The Jakarta-Panjang route is good, " he reiterated.

Budi noted that the Jakarta-Surabaya route was part of a short sea shipping route linking Panjang, Jakarta, Semarang, Surabaya, Lembar, Bima, Maumere and Timika.

The government will begin subsidizing the Jakarta-Surabaya route from January 2017, he disclosed."We are formulating the mechanism and will decide the contours of the scheme," he added.

He informed that he has asked the state-owned ferry operator, PT ASDP Indonesia Ferry, to allow long distance ferry boats or roro to pass through the short sea shipping route.

He made it clear that ferry boats were more viable than container ships because these were more flexible in terms of weight, size and types of goods to be sent.

Also, the loading and unloading process will take lesser time, he commented.The plan to optimize the sea lane is aimed at reducing burden on the land route, he concluded.

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Minister Conducts Groundbreaking For Central Palapa Ring
Antara News, 23 November 2016

Indonesias Minister of Communications and Information Technology Rudiantara conducted a groundbreaking ceremony for the Central Palapa Ring Project in Morotai Island, Maluku province, on Tuesday. PT Len Telekomunikasi Indonesia and its subsidiary, PT Len Industri, are working on the project.

"The Palapa Ring will provide new business opportunities for small and medium industry enterprises (SMEs) in remote areas," the minister said in a press release received by ANTARA here on Tuesday.

The Palapa Ring will facilitate education delivery by providing internet facility. It will also help the region shift to digital economy, the minister added.

He observed that the project reflected the keenness of the government in implementing strategic infrastructure projects as stated in the Presidential Decree Number 3/2016.

The project is being implemented under the Government-Enterprises Cooperation Scheme.  With the groundbreaking ceremony, the construction process has begun. It is being led by the state-owned enterprise, PT. Len Telekomunikasi Indonesia, and will take 18 months..

The project envisages setting up of an internet infrastructure by laying 2,700 kilometers of cable with a total investment of Rp.1.38 trillion (US$ 102.7 million) with a concession period of 15 years.

Meanwhile, PT Len Industris spokesman Dony Gunawan stated that Palapa Ring involved a superhighway submarine fiber optic network that will connect to districts/cities not hitherto connected by other telecommunication operators.

"This project will connect 17 cities/districts in East Kalimantan, North Sulawesi, Central Sulawesi, Southeast Sulawesi and North Maluku," he underlined.

The Palapa Ring in East Kalimantan province will reach Mahakam Ulu district, while in North Sulawesi province, it will reach Sangihe, Talaud and Siau-Tagulandang-Biaro islands. In Central Sulawesi province, it will reach four districts, namely Morowali, Banggai Islands, Banggai Laut and North Morowali.

Meanwhile, the Palapa Ring connectivity in the Southeast Sulawesi province will reach six districts of Muna, North Konawe, North Buton, Konawe Islands, West Muna and Central Buton, while in North Maluku, it will reach Morotai Island, Taliabu Island and Tidore.

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Bojonegara Refinery to Secure Domestic Gas Supply
Tempo, 23 November 2016

State-owned oil and gas company PT Pertamina (Persero) has established a partnership with Kalla Grup subsidiary PT Bumi Sarana Migas to develop an integrated energy terminal megaproject worth Rp10 trillion in Bojonegara, Serang District, Banten. Two foreign companies will also be involved in the development of the project, namely Tokyo Gas and Mitsui.

Sayed Junaidi Rizaldi, executive director of energy watchdog 98 Institute, considers that the cooperation will improve Indonesia’s capacity in securing domestic gas supply, particularly in West Java. “We now have to monitor its business transparency and accountability.

The key is that Pertamina as an SOE must not suffer loss,” he said in a written statement on Tuesday, November 22, 2016.Data from Pertamina shows that West Java suffered gas deficit of 315 MMscfd in 2015. The figure is expected to triple to 962 MMscfd by 2025.

According to Sayed, the appointment of Pertamina as the off-taker of the refinery’s products indicates that the company holds a key role in gas (LNG) supply in the future.

He expects Pertamina to become the operator of the megaproject. “The reason is simple: Pertamina is very experienced in operating refineries. All large refineries are operated by Pertamina,” he explained.

Pertamina spokeswoman Wianda Pusponegoro said earlier that the company was ready to become the off-taker in the megaproject so long as it becomes a shareholder. Moreover, Pertamina also expects to be appointed as refinery operator.

The integrated energy terminal complex in Banten will house LNG receiving terminal and regasification, a new refinery, and a thermal power plant (PLTGU) with a capacity of 1,000 MW to 2,000 MW.

The entire project will be developed outside of Pertamina master plan: Refinery Development Master Plan (RDMP) of four existing refineries and two new Grass Root Refineries (GRR).

The megaproject is expected to operate by 2020, in which LNG receiving terminal will be the first to roll out. In the first phase, LNG terminal will have a capacity of 500 MMscfd. The capacity will be increased to 1,000 MMscfd in the second phase.

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