Update News February 28, 2017

In The News

Indonesia, Iran Explore Economic Cooperation
Tempo, 28/02/2017

The Coordinating Minister for Economic Affairs Darmin Nasution led Indonesian delegates in a visit to Iran to follow up President Joko Widodo’s recent state visit to the country. Among the delegates were Energy and Mineral Resources Deputy Minister Arcandra Tahar, the Indonesian Ambassador to Iran, state officials and executive officers of state-owned companies and national companies.

Darmin had a formal meeting with Iran’s President Hassan Rouhani, Vice President for Science and Technology Sorena Sattari, Central Bank Governor Valiollah Seif, Oil Minister Bijan Zanganeh and Communication and Information Technology Minister Mahmoud Vaezi.

“I have met with President Hassan Rouhani and delivered a letter from President Joko Widodo to strengthen economic ties between Indonesia and Iran,” Darmin stated in a press release on Sunday.

Among the key points in Indonesian delegates’ visit to Iran was the submission of proposals for two oil refineries operatorships in Ab Teymour and Mansour, Bangestan Province, southern Iran, from state-owned oil and gas company Pertamina to the National Iranian Oil Company (NIOC).

A study conducted by Pertamina show that the two refineries hold over 1.5 billion barrels of crude oil reserve each, with a potential production of 200,000 barrels per day each.

In the energy sector, Indonesia and Iran explored opportunities in liquefied natural gas (LNG) trade for power plants, industrial areas (petrochemicals and fertilizers), as well as special economic zones in Indonesia. Iranian investors were wooed to invest in Indonesian refineries.

In financial services and banking, Darmin said that both countries discussed efforts to achieve safe, quick and easy financial transactions. The respective central bank emphasized cooperation in monetary, macroprudential policies and payment systems.

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Financial Authority Launches Banking Regulation Digital Library
The Jakarta Post, 28/02/2017

The Financial Services Authority (OJK) launched on Monday its new website that compiles hundreds of scattered banking regulations.

The website, called the Online Banking Regulation Information System (SIKePO), functions as a digital library that provides information about banking regulations that is accessible not only to the industry but also the public, OJK commissioner for banking supervision Nelson Tampubolon said in his remarks during the launch in Jakarta.

There are 96 regulations and 85 derivative regulations on conventional banking industry that are being implemented.

"With their number and complexity, stakeholders probably do not have comprehensive understanding of a particular regulation so it is important to have codification of the regulations based on their topics and track records," Nelson said.

The system will provide users with the regulations' track records, which shows whether they have been replaced, revoked or are still implemented.

The regulations are classified as follows: institutional, business activity, banking services and support, principle of prudence, accounting standards and reports, banking supervision, consumer protection and others (supporting institutions and infrastructure and payment system).

The system's soft launch had been carried out on Dec. 30 last year after preparations started in 2015.

"Going forward, the OJK will continue to develop the system, especially to complete the conventional banking database then followed by sharia and BPR [regional development bank] regulations," OJK banking research and regulation department head Trisnawati Gani said.

At present, SIKePO only presents regulations on conventional banking.

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Philippine Investors Eyeing Bitung Special Economic Zone
Tempo, 28/02/2017

The Chamber of Commerce and Industry (Kadin) sees a great potential in the Special Economic Zone (SEZ) of Bitung that waits to be exploited by foreign investors in line with its development as an international hub.

Kadin North Sulawesi deputy chairman Daniel Singkal Pesik said that Philippine investors were among those showing interest to invest in Bitung. “Investors from Manila are wishing to invest in Bitung SEZ,” he said on Monday, February 27, 2017.

Daniel said that during his visit to the city of Davao in Mindanao, Japanese and Korean firms in the southern Philippine’s major city expressed their interest in investing in Bitung.

According to him, Bitung is situated in a very strategic location that is deemed suitable to be turned into a production base in Asia-Pacific region.

Bitung will be more valuable for the investors because Davao-Bitung sea route will open in April, which will cut travel time between North Sulawesi and the Philippines.

Bitung and Davao are only 336 sea miles apart. Meanwhile, the travel time needed by North Sulawesi businesses through the conventional route for export and import from and to the Philippines is 1,517 sea miles because they have to go through Manila-Singapore-Jakarta route.

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Australia, Indonesia Strengthen Ties Through Trade, Security
The Jakarta Globe, 28/02/2017

President Joko "Jokowi" Widodo's state visit to Sydney over the weekend proved successful in strengthening cooperation between Indonesia and Australia, with progress in trade and military relations.

In his joint media statement with Jokowi, Australian Prime Minister Malcolm Turnbull highlighted the strategic depth and strength of the Indonesia-Australia partnership.

"We are both vibrant democracies that stand for mutual respect and diversity," Turnbull said, adding that both countries share a commitment to democracy, freedom, the rule of law and a rules-based international order to provide stability for the region.

According to Turnbull, the Lombok Treaty signed in 2006 is the "bedrock of our [Indonesia and Australia’s] strategic and security relationship."

"[Indonesia and Australia's] robust relationship can be established when both countries have mutual respect for each other’s territorial integrity, non-interference in the domestic affairs of each other and the ability to develop a mutually beneficial partnership," Jokowi said in his statement.

On Sunday (26/02), full military ties between the two countries were restored after the Indonesian military suspended cooperation in January due to "insulting" teaching material found at an Australian military base. Australian Army chief Lt. Gen. Angus Campbell apologized to Indonesia earlier this month.

Additionally, the two leaders agreed that negotiations of the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) will be finalized in 2017.

The two countries also signed an agreement on trade barriers, which will see Indonesia lower tariffs on Australian sugar imports, while Australia will eliminate tariffs on pesticides and herbicides from Indonesian suppliers. Australia will also eliminate the tariffs currently in place on long-term permits for cattle exports.

Indonesia imports 887,888 tons of raw sugar worth US$396 million from Australia annually. The visit also saw Indonesian Foreign Affairs Minister Retno Marsudi and her Australian counterpart, Julie Bishop, sign a joint declaration on maritime cooperation.

During his visit, Jokowi expressed his intention to open more Indonesian-language centers in Australia. Indonesia currently only has language centers in Perth, Melbourne and Canberra.

In his statement, Turnbull announced that a new Australian consulate general will be opened in Surabaya, East Java, this year. Turnbull is scheduled to attend the Leaders' Summit of the Indian Ocean Rim Association (IORA) in Indonesia next month.

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Indonesian Govt Should Utilize King Salman`s Visit For Infrastructure Development: HIPMI
Antara News, 28/02/2017

The Indonesian government should utilize the upcoming visit of Saudi King Salman bin Abdulaziz al-Saud to access funds for infrastructure development, according to the Indonesian Young Entrepreneurs Association (HIPMI).

"In the context of Indonesia, which is building its infrastructure, Saudi Arabia can serve as an entry point for accessing unlimited funds in the Middle East," HIPMI Chairman Bahlil Lahadalia stated here on Monday.

The HIPMI chairman noted that the Indonesian government required huge funding to build infrastructure.In addition to the state budget, the government has been utilizing non-state budget infrastructure funding (PINA).

Through PINAs scheme, the government can optimize financing sources in the Middle East, particularly in Saudi Arabia, as the region has immense funding potential.

Lahadalia said that investment funds from the Middle East will come at a high cost, as they had been previously invested in Malaysia and Singapore.

"Malaysia and Singapore have been faster than Indonesia in accessing funds from the Middle East," Lahadalia remarked.

Hence, the Indonesian government should utilize the visit of the Saudi King to Indonesia.

Vice President M. Jusuf Kalla had earlier said he will express Indonesias readiness to offer several opportunities to invest in the countrys non-oil and gas sector to the Saudi King during his visit to the country on Mar 1-9.

"The move will be in line with the Saudi governments vision for 2030, which envisages increasing international non-oil and gas investment," he stated at the Vice Presidential Palace in Jakarta on Friday.

He pointed out that the Indonesian government is prepared to make some interesting offers that Saudi Arabia can explore, as it is keen to invest in several sectors, including banking and tourism.

"Most of their investments are made in western countries and some in the neighboring regions, as also in Africa. Indonesia, as a big country, would surely like to intensify such form of cooperation," he underlined.

Kalla added that the partnership between Indonesia and Saudi Arabia focuses more on religious, educational, and social affairs.

"Economic partnership is not as big a part in the ties," he remarked.

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Soekarno-Hatta Airport Train To Start Operating In July
The Jakarta Post, 28/02/2017

State-owned airport operator PT Angkasa Pura II has said the construction of a train station at Soekarno-Hatta International Airport in Tangerang, Banten, will be completed by the end of March and the airport railway line will start operating in July.

The station will connect travelers to Manggarai station in South Jakarta in only 45 minutes.

"The Soekarno-Hatta International Airport train station will be completed in March, at the same time the Skytrain station construction will be completed," Angkasa Pura II president director Muhammad Awaluddin said on Sunday, as quoted by kompas.com.

Construction progress on the station, worth Rp 160 billion (US$11.9 million), has reached 85 percent this month. The construction was started in June, 2015, and the final station is expected to accommodate 3,500 travelers.

The station will be equipped with ticket counters, a public hall, tap-in gates, a commercial area, restrooms, a prayer room, a station headroom and will be connected to the Skytrain station. The station will also accommodate six trains with a capacity of 272 passengers. The total length of the track from the airport to Manggarai station is 36.3 kilometers.

"There are currently 150,000 passengers flying every day at Soekarno-Hatta International Airport. We predict the station will decrease the volume of public and private transportation to and from the airport by 20 to 30 percent," Awaluddin said.

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Indonesia Seeks Exploration Of Two Oil Fields In Iran
The Jakarta Post, 28/02/2017

State-owned energy company Pertamina will submit proposals to the Iranian government for the exploration of two oil fields in the country, a press statement says.

The statement, issued by the Office of the Coordinating Economic Minister, says the proposals will be submitted during a visit of Coordinating Economic Minister Darmin Nasution to the country from Feb. 26 to 27.

“The oil fields are located in Ab Teymour and Mansouri, Bangestan province, the eastern part of Iran,” said a press statement on Monday.

Based on a study conducted by Pertamina, the oil reserves in the two fields amount to 1.5 billion barrels. “The production potential reaches 200,000 barrel per day in each field,” the statement says.

Previously, Energy and Mining Resources Deputy Minister Archandra Tahar previously expressed the government’s wish to do business in Iran.

Meanwhile, Pertamina’s upstream director, Syamsu Alam, said the company had discussed the matter with an Iranian oil company, National Iranian Oil Company (NIOC), on Feb. 11, kompas.com reported.

Indonesia also plans to buy natural gas at competitive prices from Iran to meet domestic energy needs, particularly for power plants to supply electricity to the petrochemical and fertilizer industry, as well as for special economic zones.

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Minister Discuss Holding Company for Mining SOEs with Inalum
Tempo, 28/02/2017

The Coordinating Minister for Maritime Affairs Luhut Binsar Pandjaitan has met with state-owned mining company PT Indonesia Asahan Alumunium (Persero) or Inalum. Also present at the meeting was PT Inalum president director Winardi Sunoto.

According to Luhut, the meeting discussed the process to establish a holding company for mining SOEs. The North Sumatra-based company explained its position before the establishment.

“I asked about their total assets, we have to see their capability before they take over Freeport,” Luhut said at the Coordinating Ministry for Maritime Affairs compound in Central Jakarta on Monday, February 27, 2017.

Minister Luhut added that Freeport is not running greenfield exploration projects making it possible for Inalum to take over. “It’s easy to borrow money from banks, even easier for state-owned companies, the object to be taken over is also of good value.”

At present, the government is considering whether to take over Freeport via a holding company for mining SOEs or a particular mining SOE, Luhut added. There is a greater chance of succeeding because there is still room for negotiation with Freeport.

On possible Freeport’s divestment, Luhut said that even if the option is taken, it will be carried out gradually. He reasoned that it would be impossible to do it at once.

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Gov't to Issue Bill on Plastic Restrictions  
Tempo, 28/02/2017

Environment and Forestry Minister Siti Nurbaya said that her ministry is preparing a ministerial regulation to restrict plastic usage that is expected to be released next month.

"I want the regulation to be finalized in a month. It has to be quick since I have reviewed the draft several times," Siti Nurbaya said in Jakarta on Monday, February 27, 2017.

Siti explained that the main points of the ministerial regulation include plastic usage restrictions,  methods of restrictions, accountability, and public behavior change in relation to garbage. In addition, the regulation will also cover the mechanism of reducing, reusing and recycling plastic waste.

Previously, Siti said, the policy on the plastic was based on the "polluters pay" principle, requiring people to be responsible for the possibility of environment pollution due to plastic bag usage. However, Siti revealed that the policy raised questions among the public.

"One of the objection during the trial of the paid plastic bag policy was related to the accountability of the payment," Siti explained.

Siti claimed that the policy resulted in a reduction of plastic bag usage by 30 to 35 percent in six months. In addition, plastic imports also went down by US$11 million.

"Many supported [the policy], but we still found objections," Siti said.

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Australia To Open Fourth Indonesian Diplomatic Post In Surabaya
The Jakarta Post, 28/02/2017

Australia is set to open a consulate general in Surabaya, its fourth diplomatic representative office in Indonesia.

On the heels of President Joko "Jokowi" Widodo's state visit to the country, the Australian Foreign Ministry said in a statement released on Monday that the office in Indonesia's second-largest city was set to deepen trade and business ties in the "dynamic eastern region," including in financial services, education, health, manufacturing and infrastructure.

"Surabaya serves as East Java’s key logistics, manufacturing and services hub and is an increasingly important destination for Australian trade and investment," the ministry announced in the statement.

In 2015, Australia was East Java’s 10th largest export market, while Australia was East Java’s seventh largest import source, including in agriculture, according to the statement. About 15 percent of Indonesia’s gross domestic product came from East Java, Australia noted, adding that the region’s economy consistently rose above the national average.

The Consulate General in Surabaya would be the fourth diplomatic post in Indonesia, after the Embassy in Jakarta and consulate general offices in Bali and Makassar, South Sulawesi. In addition to economic issues, the offices would also serve Australian tourists, who were among the
highest group of visitors to Indonesia last year.

Data from the Central Statistics Agency (BPS) in 2016 show that the number of incoming Australian tourists increased by 6 percent year-on-year (yoy). The number of foreign tourists to Indonesia increased by 18.5 percent yoy to 1.04 million, mostly from China, Malaysia and Australia.

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