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Economic and Financial Review

Economic Bearing Capacity


in Border Areas

| Development in Border Areas : A Solution to Economic and Social Security in Indonesia | Branchless Banking: Financing Access Availibility in Remote Areas | The Economic Policy in The Special Zones | Development of Health in Border Areas | Infrastructure in Border Areas

Coordinating Ministry for Economic Affair - Republic of Indonesia PBC & SME 29

People Business Credit Realization of July 2013 Period Cultural Preservation Through Business

ECONOMIC BEARING CAPACITY IN BORDER AREAS 8

Infrastructure in Border Areas | The Forgotten Border Areas | Development of Health in Border Areas | The Condition of Education in the Border Areas of Indonesia | Development Strategies for Underdeveloped Regions in Border Areas | Development in Border Areas : A Solution to Economic and Social Security in Indonesia |

EXPERT OPINION FINANCE 23

5 Agenda of Border Areas Development by BNPP

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STATE OWNED ENTERPRISE

Branchless Banking: Financing Access Availibility in Remote Areas

ECONOMY POLICY COORDINATION INTERNATIONAL ECONOMY DOMESTIC ECONOMY 4


Food Commodity Stabilization Policy and Economic Growth

FISCAL AND REGULATION ECONOMY 25 MP3EI


The Economic Policy in The Special Zones Development Acceleration in Papua and West Papua: "Te Doorway to the eastern Border Areas" Changes in The Labor Force Participation Rate
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The Role of State-Owned Enterprises (BUMN) in Improving the Development of Underdeveloped, Leading, and Outermost Areas (3T)

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The Dinamic of Asian Economic Growth 2nd Quarter 2013 Economic Slowdown and the High Inflation Pressures

EMPLOYMENT

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REGIONAL ECONOMY 6

FIELD REPORT

The Borders of Indonesian Archipelago

The Coordinating Minister for Economic Affairs Inaugurated Festival Serayu Expo Banjarnegara 2013 |

Coach : Minister of Coordinating Ministry for Economy Affairs Steering : Secretary of Coordinating Ministry for Economy Affairs, Deputy of Fiscal & Monetary Coordination Coordinator : Bobby Hamzar Rafinus Editor : Edi Prio Pambudi, Puji Gunawan Ratih Kania, M. Dani Iskandar Analyst :
Alexcius Winang, Alisa Fatimah, Dara Ayu Prastiwi, Fitria Faradila, Insani Sukandar, Masyitha Mutiara Ramadhan, Oktya Setya Pratidina, Riski Raisa Putra, Windy Pradipta Translator: Trias Melia Distributor : Chandra Mercury Contributor : Suprayoga Hadi, Triyono Budi Sasongko, Vitri Nurmalasari, Erns Saptenno, Aang Anggara, Predi Muliansyah, Adji Dharma, Inflation Monitoring and Control Team, PBC Policy Committee, Primary Food Price Stabilization Team.

Tinjauan Ekonomi dan Keuangan had been published to improve the understanding of regional leaders about the progress of macro-economy indicators and national budget revenue expenditure, as one of President instruction at coordination meeting in Bogor in 2010

Editorial
Deputy of Fiscal & Monetary Coordination
The prolonged economic crisis in the developed countries since 2008-2009 has caused widened income gap. Profesor Stiglitz, the winner of 2001 noble prize for Economics, in his latest book The Price of Inequality (Penguin Books, 2013) explained that the Gini index in the United States is currently at 0.48, equals with Iran and Turkey and several European countries. The rate of Gini index according to Stiglitz has not reflected the worsening welfare condition of the American lower-middle class. Currently, most of the US citizen have limitation in house ownership, limitation in health services, and fulfilling education fees of their children. During the 2007-2010 recession, the lower-middle class Americans welfare rate is decreased for almost 40%, which is just like what happened in early 1990s. The widening gap in the US is mainly caused by the bigger and faster welfare accumulation on 1% of the high income group. The gap process was caused by the market formed by the governments policy. Stiglitz stated that governments omission on the limitation of most citizen to get education and health services and the minimal adequate nutrition is an example of the policy. Besides, the omission of unhealthy business competition encourage the gap of wages between companies. On the other hand, governments intervention through progressive fiscal policy and pro-social protection expenditures will minimize the gap. Stiglitz also stated that political system is the source of income and opportunity gaps. The US democracy also gave authority to the leaders to redistribute the income and formulate the provision and use of budget. In the use of

Bobby Hamzar Rafinus

authority, there are a lot of welfare diversion process rather than welfare making process. This caused income gap because it tends to be given to the 0.1% of rich society. If it keeps going on, there will be a divided society in 2053. The income gap caused lessefficient and less-productive economy. The development in the US should be a lesson for the rest of the world. For Indonesia, the inclusive development strategy that has been proclaimed in the last four years has showed commitment to minimize the income gap. However, with the rising Gini index, which reached 0.42% in 2012, and the huge inter-regional gap indicate that the market force has not support equal income distribution. This cannot be separated from the role of rent economic activity which can be found in business and politics. The effort to minimize the income gap needs integration of various sectors and governmental institutions involvement. Other than that, the support from leaders can be reflected from the reviews of welfare in border areas, which is the focus of Tinjauan Ekonomi dan Keuangan for this edition. The success of development in border areas can be measured with different indicators. Long live the Republic of Indonesia.

Economic Indicator, August 2013

Tinjauan Ekonomi dan Keuangan August 2013

Economy Policy Coordination

Food Commodity Stabilization Policy and Economic Growth


Following the issuance of Stabilization and Economic Growth Policy on 23 August 2013, the government thinks that there should be a policy issuance in the framework of price and inflation stabilization for several food commodities. One of the policies that is implemented is the change on the trade system of beef and horticulture import from quota-based to price-based system. This is one of the main points discussed in the Coordinating Meeting of Ministers that was held on 27 August 2013 at the Coordinating Ministry for Economic Affairs office. In the explanation, The Minister of Trade and the Minister of Agriculture agreed to make changes on a number of regulations that are related to the beef import from quota to price reference mechanism. By doing so, the agreement related to the acceleration of cattle import realization from the fourth quarter to the third quarter and the plan to add import of 15000 ton equivalent to beef will not be continued. the import allocation that has been established based on the Regulation of Agriculture and the Regulation of the Minister of Trade will be valid until the end of 2013. The kinds of horticultural products that will be managed through reference price mechanism that contribute to inflation are onion and red chili. The percentage of increasing/decreasing retail price to decide the customs clearance for every kind of horticultural products that will be managed with reference price mechanism.

The rise in soy prices is caused by the weakened Rupiah towards US Dollar and the weather anomaly in the United States as it is the biggest soy distributor to Indonesia. Even though the import from other countries like Brazil and Argentine has been done, it does not significantly affect the changes of soy prices. The current soy stock http://www.iberita.com/wp-content/uploads/2013/03/daging-sapi.jpg is predicted to be enough for fulfilling soy needs of tofu/fermented soybean producers for the next 2.5 months. Meanwhile, related to domestic soy needs, it is expected that the need of soy amounts to 580000 ton. Soy import can be done by IT Import allocation that has been appointed by the government, but established based on the http://img.okeinfo.net/dynamic/content/2012/08/09/56/675590/QSLsBEF zKX.jpg?w=400 accompanied by the previously established Regulation responsibilities for the IT to buy of the Minister of Agriculture and the Regulation of the Minister of Trade still remains valid soy from local soy farmers and distribute the soy to until the end of 2013. The Ministry of Agriculture and the KOPTI in the determined amount and price. To guarantee the stability of soy supply and price, especially Ministry of Trade are expected to secure domestic beef the need of tofu and fermented soybean producers, for production and guarantee the continuity of distribution the moment the government will not limit the amount of to the consumer. soy import with 5% import duty. The reference price will be established by referring to the For corn commodity, the main issue that needs to be average retail price in the last few years or the concerned on is the hike of corn commodity price in the calculation of breeding business cost and distribution international market. On the other hand, the biggest cost to the retail level. If the beef retail price based on the projection for the next two months raises above 15% corn necessity in the country is to fulfill the needs of cattle feeding industry that reached 6 million ton. from the reference price, the import will be granted. If Therefore, for the year of 2013, the government has the retail price decreased under 5% from the reference issued corn import permission of 3.5 million ton and has price, the import will not be granted. The reference pricing decision will be done by considering the balance been realized for 2 million ton. between the interest of breeder and consumer. Along with the live cattle and beef commodity, the import for horticultural product rules (especially for 36 horticultural products) will be changed from quota mechanism to reference price mechanism. Meanwhile,

Erns Saptenno

Tinjauan Ekonomi dan Keuangan August 2013

International Economy

The Dynamic of

Asian Economic Growth

2nd Quarter 2013

n the 2nd quarter of 2013, the whole economic growth in Asia is increasing, even there was a dynamic caused by the accelerating economic growth of Philippines and the decreasing economic growth of India. However, during this quarter, most countries in Asia have good prospect in the economic growth, especially the Newly-Industrialized Economies (NIEs) like South Korea, Hong Kong, Taiwan, and Singapore which are predicted to receive huge positive impact from the global economic recovery. Based on the data launched by Thomson Datastream, it is known that the economic growth of Asian countries is rising, except India. The weakened Rupee towards USD by 14% in the last three months that is followed by the decreasing industrial production in the last four years becomes the factor of the decreasing economic growth in India. On the other hand, the

economic growth of Philippines accelerates sharply at the level of 7.8% in the 2nd quarter of 2013 as an impact of balance of payment surplus and the low foreign loan. It is known that the average economic growth of NIEs countries and ASEAN is 3.7% (yoy). Even the economic growth of several ASEAN countries surpassed the economic growth of NIEs countries, regionally, there are still significant gaps of economic growth between countries. This happened because of the weakening condition of Thailand economy in the last quarter of 2011. With the recovery of global economy, there is a fear that the gap will grow if ASEAN cannot get positive sentiments from the recovery. Along with that, global demands, especially from the United States and Europe will rise. This condition is very good for the export market in Asia if the exporters could take advantages of the opportunities smartly. The NIEs countries are the countries orienting to the higher export than

the ASEAN countries, so the global economic condition recovery will be more beneficial for NIEs than for ASEAN. The enhancement of ASEAN export is the right move to decrease the economic growth disparity with NIEs that would probably happen because of the global economic recovery. However, we need to realize that the effect of the rising global export demand will impact indirectly to the domestic demands, especially ASEAN countries. This is because the raw materials of ASEAN countries are imported raw materials, so the graphic of export growth will be in line with the import growth. Therefore, even the rise in export will be able to decrease disparity nominally, but structurally, there is still gap between the economic growth of ASEAN and NIEs. For that, the ASEAN countries need to prepare themselves in improving the quality and quantity of export to fulfill the global market demands independently, which is by using the potentials of local raw material optimally.

GDP NIEs & ASEAN

Source: Thomson Datastream, Capital Economics

Dara Ayu Prastiwi

Tinjauan Ekonomi dan Keuangan August 2013

Domestic Economy

Economic Slowdown and the High Inflation Pressures

I
...the government is currently arranging economic growth to reach the target of 6.3%. The effort is done through the increased household consumption which is the main contributor to the growth itself....

ndonesia encountered economic slowdown in Q22013. The growth of 5.81% (yoy) is the lowest value since Q4-2010. Indonesias GDP over the current price reached IDR 2.210 Trillion and IDR 688.9 Trillion based on the constant price in 2000. The GDP of oil and gas over the current price is at IDR 154.9 Trillion, and the non-oil and gas GDP is at IDR 2.055,2 Trillion. Spatially, more than half of Indonesias GDP came from Java Island (58.15%) and followed by Sumatera and Kalimantan Island. By sector, processing industry, agriculture and trade, hotel and restaurant are still the main bases of Source: BPS Indonesias GDP. The GDP of each sector amounts IDR 525,4 T; IDR 331,2 T and IDR 318,1 T. Based on the growth rate, eight out of nine sectors increased. The highest increase is on the transport and communication sectors for 11.46% (yoy), followed by finance sector, real estate, and corporate services that grew 8.07% (yoy).

Based on the expenditure, the highest PDB increase is on household consumption which is 5.17% (yoy). In line with the high growth, household consumption is the component that support the economic growth in Indonesia. Household consumption over the current price reached IDR 1.225,2 T Q2-2013 or had contributed 55.44% over

http://edorusyanto.files.wordpress.com/2010/06/pabrik-tvs-karawang.jpg

Tinjauan Ekonomi dan Keuangan August 2013

the total of Indonesias GDP. According to the Minister of Finance Chatib Basri, the increased economic activity after Idul Fitri was the main factor of high household consumption. Moreover, Chatib stated that the government is currently arranging economic growth to reach the target of 6.3%. The effort is done through the increased household consumption which is the main contributor to the growth itself. In August 2013, general inflation reached 1.12% (mom) and 8.79% (yoy). By month, general inflation tends to drop compared to the previous month that reached 3.29%. The price correction after Idul Fitri suppressed the price to the lower level. However, yearly general inflation is still higher than the previous month that reached 8.61%. Based on its components, three inflation components still shows high value. The impact of the

subsidized fuel price hike is still reflected by the high administered price inflation of 0.62% (mom) and 15.40% (yoy). Next, the price of subsidized fuel encouraged commodity price through high distribution cost. This causes volatile food inflation of 1.82% (mom) and 16.53% (yoy). Meanwhile, the core inflation component is relatively stable compared to the other two inflation components. The core inflation is recorded at 1.01% (mom) and 4.48% (yoy). Spatially, the whole 66 IHK cities encountered inflation in August 2013. Generally, the highest inflation mostly happened in the eastern parts of Indonesia. The highest inflation happened in Sorong, Papua which was at 6.47% (mom), followed by Ambon (4.79%) and Ternate (3,66%). The constrained commodity distribution is the main factor of high price hike

in the eastern Indonesia. One of the factor of the constrained commodity distribution because the infrastructure condition which is not enough and expensive cost. To overcome this condition, the government needs to prioritize infrastructure development, especially in the eastern Indonesia. This aims to make the distribution runs smoothly. Besides, Bank Indonesia through TPI and TPID forum needs to enhance coordination in deciding strategic steps to fulfill the supply in the regions.

Fitria Faradila
http://www.beritafoto.net/foto_berita/23DSC_1272.jpg

...the government needs to prioritize infrastructure development, especially in the eastern Indonesia. This aims to make the distribution runs smoothly...
Tinjauan Ekonomi dan Keuangan August 2013

Regional Economy

The Borders of Indonesian Archipelago

he outermost islands in the border areas of Indonesia are located strategically because they determine the state borders of Indonesia. As a result, both local and central government should pay more attention to the regional development and the welfare acceleration of the people. The outermost islands are generally remote and poor areas, some are uninhibited and have very limited infrastructure. Indonesia has 92 small outermost islands and some of them need more attention. The development in those islands is quite important in enhancing national security. The condition reflected in the border areas of Indonesia lies on the infrastructure. The accessibility to the location is difficult because of the limited facility and the absence of harbor. Electricity is also very limited and it is hard to find telecommunication facility in those islands. Nipa Island, one of the outermost islands that shares border with Singapore, is a part of Batam, Riau IslandsProvince. At the moment, the accessibility to Nipa Island is very difficult because in order to reach Nipa Island, people need to use a lot of means of transportation. In Nipa Island, there is no freshwater, so the officers who guard in the island use kegs to hold rain water for fulfilling the needs of clean water. Meanwhile, the other infrastructural facilities are o alarming such as the limited electricity supply. The central government has done a reclamation by heightening the island for more than 5 meters, so during the high tide, the large of Nipa Island is still the same. Berhala Island is the outermost island in Malaka Strait which is the islands with a lot of reefs. Berhala Island has a mountainous topography with forests and clean beaches. The islands is not inhibited yet. Currently, Berhala Island is guarded by Indonesian Navy. Because of its nature, Berhala Island becomes a potential tourist attraction. The security in Berhala Island is the priority of border areas in Indonesia. The other outermost islands that share borders with Malaysia is Lingian Island. Lingian Island is located in

the northwest of Gorontalo, is part of Toli-Toli, Central Sulawesi Province. Ligian Island has quite complex ecosystem with rocky and sandy beaches. The facilities available there are roads, electricity, clean water, elementary school buildings, residence, place of worship, and information facility. In Lingian Island, the clean water supply to bathe comes from the well, and the water supply for drinking comes from Ogotua mainland. Besides that, there are also people who use rainwater reservoir as the source of clean water. The electricity available is solar power. The majority of livelihood in the area are fisherman and copra farmers. Besides having potency in fishery, seaweed cultivation has also been initiated. The southernmost island of Indonesia is Dana Island that shares border with Australia. This island is 0.95km square, but it has rich natural resources and beautiful nature, so it is very strategic economically. Dana Island is not inhibited up until now, but there are Indonesian National Army that guard there. Dana Island is an administrative area in the southwest Rote sub-district, Kupang District, Nusa Tenggara Timur. The small outermost islands in the border areas of Indonesia should be maintained to keep the integrity of Indonesia. The central and local government need to prioritize the development of those area, especially infrastructural, educational, and health facilities. Economic development is implemented in line with the development in other sectors, so it would not be underdeveloped.

Ratih Purbasari Kania

Tinjauan Ekonomi dan Keuangan August 2013

MAIN REPORT
| Infrastructure in Border Areas | The Forgotten Border Areas | Development of Health in Border Areas | The Condition of Education in the Border Areas of Indonesia | Development Strategies for Underdeveloped Regions in Border Areas | Development in Border Areas : A Solution to Economic and Social Security in Indonesia

Laporan Utama

Infrastructure in Border Areas

he availability of infrastructure affects the economic growth in a region positively. As it was explained in the model of economic growth theory by Harrord-Domar, the growth rate of GNP (Y/Y) is determined by the national savings ratio (s) and national capital-output ratio (k). Infrastructure is included in the capital stock, so there is a positive correlation between the infrastructure availability with economic growth. This is proven by the higher amount of GRDP in Java Island compared to the areas outside Java. One of the factors causing this is the higher electricity supply rate in Java Island. Along with the changing time, electricity demand for economic activity growth grows bigger, so there is a change in electricity demand rate from tertiary to primary need. If the economy of a region becomes more developed, the electricity demand also grows bigger.

also limited. For example, in Skouw Village, Papua, which shares land borders with Papua New Guinea, there is no electricity power that reaches the area. Most of the people use diesel as the source of electrical energy, but the fuel price for the diesel is expensive that the electricity cannot be turned on all the time to save the fuel. Even for most of the diesel machine does not work because of the inability to buy fuel. The limited electricity power in Skouw inhibits the activity of health and educational service, especially the residential activity. The service of clinics in Skouw cannot be optimized. For example, for the blood sample examination still uses conventional way. Moreover, the medical supply is also limited because it needs refrigerator to sterilize the equipment and medicines, but the diesel power and microhydro are or enough to turn on the refrigerator. The source of diesel power in the clinics is only used for administrational activities, meanwhile microhydro is used for turning on the lamp of microscope. PLN or State Electricity Company has been building Holtekamp Steam Power Plant (Holtekamp PLTU) located not far from Skouw Village because it is still in the same district. From this PLTU, most of the power supply will be used to fulfill the electricity demand in Jayapura, but Muara Tami District only gets small amount of electricity power. Based on the information by one of the technicians of PLTU Holtekamp, there is still no plan of electricity distribution from Holtekamp to Skouw up until now. One of the reasons is the land ownership status in Papua that is still based on customary land ownership system, so it is difficult to get permission to build electric transmission poles. The limited electricity supply also happens in Entikong, the border areas of Indonesia and Malaysia. Based on the observation to Entikong, the disparity of infrastructure availability between Indonesian and

Source: BPS

Based on the graphic above, we can see that there is a disparity of electricity supply between Java and areas outside of Java. In the areas outside of Java, especially in the border areas, are usually subordinated in the development and electricity distribution. As a result, the daily activities in those regions are usually disturbed by the absence of electricity supply. Not only for economic activity, the electricity supply for residential lighting

Tinjauan Ekonomi dan Keuangan August 2013

Malaysian regions is very clear. The lighting in Malaysia is much better than it is in Entikong that has limited power supply. It is because most of the power supply is distributed to the mining areas in East Kalimantan that needs huge amount of power supply. Belu District that shares a land border with Timor Leste also experiences shortage of power supply. According to a data released by Bappeda of Belu District, 90% of the villages in Belu do not have lighting. Even the power grids are already available in several villages, they are still cannot be used because of the expensive cost, so the people of Belu cannot afford to access it. The infrastructure shortage in border areas does not only about the electricity supply but also in the clean water supply. The access to clean water is not the only main issue in Indonesia but also in the world. This can be seen from the target of 7C Millenium Development Goals 2015 about access to the potable water. Not only the access to potable water, the water source supply in border areas also limited and turbid. If the people of Entikong need potable water, they have to buy gallon water from the city that is 20% more expensive than the price in the area of Java. As a result of this condition, the people of Entikong often buy the potable water produced by Malaysia because the price is cheaper than the local product and it is more accessible. For taking shower and cooking, they tend to use the rain water. The clean water supply in Skouw, Papua, and Belu, NTT, is also limited. The kind of soil in Skouw is wetlands, so the ability to absorb rainwater is not good. The well water used by the people is turbid which is not good to be consumed. The people of Skouw always buy bottled water sold in Koya Barat, the closest city to Skouw. Meanwhile in Belu, the demand of clean water is an urgent problem. The land of Belu that is dry causes a shortage of clean water. Even the government has provided water well, the people still need to buy water from tanks or PDAM for about IDR 50.000-60.000 per tank to fulfill the daily water needs. The problem in border areas is not only about electricity and clean water supplies. There are still other

problems related to basic infrastructural problems that have not yet been resolved, such as health, education, telecommunication, logistic, etc. The isolation in border areas is caused by the limited transportation and telecommunication access which become crucial issues to be resolved soon. If there is no long-term solutions, it will affect the welfare rate in the border areas. It contradicts the Solus Populi Suprema Lex Esto principal by Marcus Tullius Cicero which means the welfare of the people should be the priority, so wherever the place we live as long as it is in the territory of Republic of Indonesia, the welfare should be concerned. The welfare of people in border areas that is usually forgotten is a threat of the unity in the Republic of Indonesia. It would be even worse if the welfare of the neighboring country is more secured than it is in our country. This will trigger local people to move both legally and illegally to the neighboring country. The worst case that would probably happen is the changing of citizenship like what happened in Entikong. There is one remote area in Entikong where the people are now having Malaysian citizenship. Therefore, border areas development needs to be concerned by the local and state government. Moreover, there should be an improvement in the coordination of border areas development plan implementation coordination between the stakeholders, so development target can be achieved.

Dara Ayu Prastiwi

Tinjauan Ekonomi dan Keuangan August 2013

The Forgotten Border Areas

ust like any other regions of Indonesia, the border areas has so many potentials in both its land and sea. However, the potencies have not yet been well managed and the development in the border areas is still limited that the condition is so alarming just like a neglected porch. The problem of border areas has a complex dimension. There are a number of crucial factors affecting it such as jurisdiction and national sovereignty, political, social, economic, and security factors. There are three main issues in managing border areas, which are: (1) determination of land and maritime boundary lines (2) Security of border areas (3) development of border areas. The problem resolution on these three main issues still has some issues, especially related to institutional aspects.
Papua

low, so it affect the health, education, and housing aspects. Related to the social reality that the people of Papua Province still share similar custom and tradition, customary value and norms tends to be stronger than national value and norms. This could be a problem in managing the border areas. The problem lies on the inability of government in implementing development programs that are based on public interest. Meanwhile, the programs related to capacity and competitiveness enhancement in Papua from the central government, local government, and stateowned enterprises are not optimal yet. This is because of the strong ego-sector and weak coordination between agencies which still run on its own. Private sector involvement in developing border areas is also still limited, so the development is not fast nor organized.

Papua is Indonesias biggest island and has very rich natural resources. Ironically, this province is one of the poorest region in Indonesia. Poverty can be found in remote and border areas. This problem has grown to be more complex considering the region is so large and the typology is various. The border area management in Papua Province has not run a management that also manage the people. This is because the policy makers focus on governments interest. Just like the other regions in Indonesia that share borders with other nations, the general obstacles faced by Papua Province is the development disparity with the characteristics of: limited accessibility, limited infrastructure, low population density, low quality of human resources, and the not optimum development. The population in border areas are not highly skilled and the revenue is

West Kalimantan

Geographically, the border of West Kalimantan and Serawak is located in the northernmost part of West Kalimantan that range from the west to the east for 966 kilometers (km) that includes Sambas District until Kapuas Hulu District. There are five districts and 14 sub-districts in West Kalimantan that share borders directly with Malaysia. Based on the observer team, the challenges of border area management in West Kalimantan-Serawak border are: First, the low human resources quality. This condition is reflected in the low educational level and welfare quality with uneven distribution compared to the total area and long border line which implicate on the

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Tinjauan Ekonomi dan Keuangan August 2013

illegal crossing border activity. There are also many migrant workers that work overseas as labor, house maids, and other rough jobs that clearly reflect the low quality of human resources. Second, poverty. Even currently the border areas are rich of natural resources and it is easy to access the market in Serawak, there are 45% of poor villages with 35% of poor residents. Compared to the population of Malaysia, there is a huge revenue disparity. As a result, the population in border areas does not have comparable bargaining position in the economic activity in border areas. Another impact is it encourage the population to be more involved in illegal economic activity to fulfill their needs. Third, infrastructural constraints. The availability and quality of public service in border areas are still very limited such as transportation and telecommunication, electricity supply and clean water, and other facilities such as health, education, and market. This causes the people in border areas to be more oriented on the neighboring country which has better infrastructure and information facility. The roads in West Kalimantan are still not enough which make the people tend to travel and interact with the people of Serawak. For the electricity supply, from the 14 sub-district, there are only 6 sub-districts (43%) that have the electricity. This shows the disparity of welfare between Indonesian and Serawak population who have already had electricity. As a result, this region is underdeveloped and most of its population suffer from poverty.
NTT

Second, the inadequate educational, health, transportation, information, and communication infrastructure and facility that causes isolation in the border area. Third, environmental destruction as the cause of the change in forests function to be farmlands. The mining activity that uptake manganese, marble, and entrenchment classification C that does not concern about the environmental sustainability, and the peoples lack of awareness in managing the watershed areas in the border areas. Forth, the orderliness and security in the border areas still show high dynamics. There are still some land dispute problems related to the completion of state boundary lines and the disobedience of boundary line regulation that cause illegal border crossing. Several issues related to border keep raising, but the resolution is still sporadic and incidental. Several bilateral meetings about state border also keep going and produced various commitments on cross border cooperation, but the resolution of this problem is still unclear. To achieve the aim of effective border area management, there should be a coordination between ministries and governmental sectors and institutions in running the program in border areas that has significant effect on the people in the border areas. Whether a community development policy will be successful or not, it depends on the planning scenario. In the scenario, there should be points of activities that will be implemented in the organization and community development governance. Therefore, the making of scenario should be started from the root of the problems that will be developed.

The condition of the border areas in NTT which is located in Belu District, Timor Tengah Utara District, and Kupang District has not shown ideal portrayal. The basic problems that are faced by the people are: First, the low level of welfare in border areas. Those three districts are marked by the low income and the limited opportunity because the land is dry. It is worsen by the absence of skills to cultivate dry land and the limited means of capital investment in plantation, the low level of health marked high mortality rate of infant and mother who give birth, the rising HIV-AIDS from year to year, and the unavailability of healthy residential and clean water supply.

Riski Raisa Putra

Tinjauan Ekonomi dan Keuangan August 2013

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Development of Health in Border Areas

ealth problem in border areas is the inaccessible geographical condition and the changing weather. Besides, because of the spatial detail that has not available, the health infrastructure is often located in bad quality land. The high living cost, poverty rate, and illiteracy will prevent promoting and preventive efforts which are the health problems in border areas. In incentive provision, it is seen that the additional incentive for the medical personnel is very limited. The ministry of health has prioritized 45 underdeveloped districts in the border islands to be the priority in health development.

Leste is Silawan Community Health Center which is located in Mottaain Sub-district, Belu District. From the observation, there community health center has been built according to the standard that has just been established by the local government. Unfortunately, the tools are not enough because there is no roentgen facility and other facilities. From the side of medical personnel, Silawan Community Health Center has doctors, dentists, pharmacists, nurses, and administrational staff. The community health center serves approximately 25 patients from both Indonesia and Timor Leste. The diseases that are often being cured are Myalgia and HIV/AIDS which infected 15 people and 13 of them died because of the diseases. The top health program in Silawan Community Health Center is Mother and Children Health that covers picking up of the mother that has been or will be on labor. Skauw is the area that shares border with Papua New Guinea. The health problems in Skauw is the high number of infected people and the lack of health facility. Therefore, the Health Agency of Papua has made health policy that covers protection by having bed nets for mother and children. Health promotion in form of counseling on healthy lifestyle and preventive activities such as immunization and free milk distribution.

Skauw Community Health Center is in the border of Skauw, but the standard of the basic facility is far from the basic standard. The building still looks new, but the building and the tools are not wellmaintained. Several complaints from nurses related to the absence of clean water are often heard. Different from the portrayal of health service above, in Entikong, West Kalimantan, the health center is better. It is located not far from the border line of Malaysia and Entikong Sub-district office. The building has been supported by complete medical tools that enhance the quality of Entikong Community Health Center. There are several services such as: general health service, dental care, mother and infant health service, laboratory, and care units for several beds. From the observation, it is known that health service has been done well, even in the evening, the health center still receives outpatients. Most of the medical personnel live not far from the location. However, the maintenance of the health center is not a priority. The building does not look well-maintained and the small garden in the middle of the building remains empty. Entikong Community Health Center is in the scope of Health Agency of Sanggau District. Up until now, the health service has reached the smallest level of community by

Health Development in Belu, Skauw, and Entikong


Belu has dry geography and limited clean water that cause problems in environmental health and the occurrence of environmental disease. Generally, health development in Belu District is oriented to enhance the health service, health prevention, and health promotion. Facility and infrastructure provision needs to be done in line with the health program enhancement. The good health service can be reflected from the composition of hospital, community health center, clinic, and maternity homes in Belu District. One of the health service in the border of Atambua and Timor

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Tinjauan Ekonomi dan Keuangan August 2013

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having Village Health Centers in every village that support the Community Health Center in the Sub-district. The facilities and infrastructure are already available that can be seen from Health Regional Budget which ranks the third in Sanggau District which shows the strong commitment of the region in health. Based on the health profile of Sanggau District in 2012, it is seen that the performance of integrated health service post has reached 96,9% and the good nutrition coverage of 78,67%, lack of nutrition of 1,71% and malnutrition of 0,1%. The achievement in environmental health sector is at 81,56% of family with the sheltered drinking water source. The health program that is the priority in Sanggau District is the school kid health program as the base of healthy lifestyle in the society. The other programs are integrated health service post that gives health service directly in the society. The problems on medical personnel is the need of midwive, nurses, laboratory assistant, nutrition personnel, and sanitarian.

of DPTK is the increasing of quality health service scope and spread in DPTK society. One of the strategies is increasing access of DPTK society to the quality health service. From the data of planning bureau of the Ministry of Health, the special target of DPTK program is 101 community health services (land borders and inhibited small outermost islands (PPKTB)), 45 border districts, and 50 districts that are alleviated from 183 underdeveloped areas. The Ministry of Healths program covers: 1) Enhancement of availability, equity, and health facility and service in DTPK, 2) Enhancement of health facility and infrastructure such as public health insurance (jamkesmas), etc., 3) Enhancement of health service funding such as Jamkesmas, 4) Provision of medicine and medical tools in DTPK, 5) Community empowerment in DTPK through integrated health service post activity, alert villages, medicinal plants, and PHBS activities, 6) Development of innovation such as mobile hospitals. Several research activities has been done since 2007 until 2011 through basic medical research,

MDGS research, and heath facility research which is done to portray the whole problems and health facilities in Indonesia. From the research result, there is a data that can be used as the base of policy making and health planning beside from the integrated health budget program (P2KT) in district/city level. The budget allocation for health development DTPK mainly comes from Special Allocation Budget (DAK) and health operational assistance (BOK) in 9.323 community health services, including DTPK in Indonesia. The allocation for DTPK is added for IDR 100 million in every community health service. BOK for the community health service such as mother and infant health/Family Planning, immunization, nutrition, health promotion, environmental health, and disease control. One of the other agendas is additional food for undernourished toddlers age 6-59 months and pregnant women who suffer from chronic lack of energy. The quality and quantity enhancement of health service in DTPK and Areas with Health Problems from year 2011 until 2012. This shows development

The Ministry of Health Program


The policy of the Ministry of Health in health service program

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Health Service

trained workers are not handling nutrition program anymore. Based on the Risfaskes data, there are 2000 community health centers that do not have nutritional practitioner. The obstacles in the implementation of DPTK health program which is vaccination management program that needs cooler during the distribution when the vaccine is already in the DTPK location. The other problems are the difficult mobilization for the healthy lifestyle program in border areas. Coordination between the central and local government is done through the Rapat Kerja Kesehatan Nasional (Rakerkesnas) which is a forum attended by the Minister, Head of Health agency of the district/city, and the directors of General Hospital in Indonesia. During the forum, there is a discussion about health problems faced by the regions. Besides, there is also an observation by the team from the Ministry of Health and special calling for the Head of Health Agency in DTPK. From several observed areas, there is seen a program connectivity by the central government through the Ministry of Health and commitment from the local government in allocating budget for health sector. The problem on the lack of health personnel needs to be concerned by the central government, meanwhile the local government needs to develop the health services in every level. Moreover, the maintenance of facility and infrastructure needs to be concerned by the health practitioner and the local government.

Source: Planning bureau of the Ministry of Health

performance enhancement from its quality and quantity which is reflected in this table:
....The problem on the lack of health personnel needs to be concerned by the central government, meanwhile the local government needs to develop the health services in every level. Moreover, the maintenance of facility and infrastructure needs to be concerned by the health practitioner and the local government....

In enhancing doctors willingness to be placed in DPTK, there is a special incentive that amounts IDR 2-5 million every month. In 2012, there is a strategic medical personnel appointment which is 1.431 residential doctors and 4.354 other personnel such as nurses, midwife, sanitarian, and health analyst. The result of community empowerment activity to have healthy lifestyle in DTPK in 2012 are 266.827 integrated health service post, 3.000 PTM integrated service post, and 1.500 malaria post in high endemic and remote village. In 2013, DPTK activity is the enhancement of national priority community health center and the provision of 12 special unit of solar cell for Papua and West Papua. To support the clean water supply in DTPK, STBM activity is implemented to review the drinking water quality, but the budget for that activity is just a stimulant, and the provision is done by the Ministry of Public Work and the local government. In the nutrition enhancement program, it is orienting on the lack and malnutrition by targeting the whole regions of Indonesia, including the border areas. Currently, the nutrition program has been included in the Planning of Medium-Term National Development Program. One of the programs is food provision in the district/city as a buffer stock. The problems that are often found are the lack of workers with expertise in nutrition and job rotation in the community health center level, so the

Ratih Purbasari Kania

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Tinjauan Ekonomi dan Keuangan August 2013

The Condition of Education in the Border Areas of Indonesia


(Case Study: Entikong, Skouw dan Belu)

uman Development Index (IPM) of Indonesia in 2011 raised by 72,77. The IPM of Indonesia kept growing compared to 2010 which was by 72,27 and in 2009 by 71,76. Indonesia was ranked 121 worldwide, where it was ranked the 124th. With the current IPM, Indonesia is included in the middle category. The raise of IPM was caused by several factors such as education. Education plays an important role in the economic development of a country. According to Todaro, education is one of the capitals for sustainable economic development. This is because the economic development is encouraged by the quality human resources. The enhancement of human resources quality can be done through education. Educated human resources will have broader knowledge and better skills, so it can enhance productivity. The productivity of human resources can create valuable output and encourage economic equity of a nation. Awareness on the importance of education has been a concern of the government. It is because the budget for education in the state budget 2013 aims to enhance the quality of human resources and to give the same opportunities for all members of society to get education with affordable price. The allocation of education is prioritized to: (1) Continuing the BOS (School Operational Assistance) program to ease the completion of 9-yer compulsory basic education; (2) providing scholarships for poor college students; (3) providing allowances for teachers; (4) rehabbing damaged classrooms for all educational levels.

The quality of education can be measured by the literacy rate of the population. Literacy rate (AMH) is a measurement for the population who are able to read, write, and count. Based on BPS data, in 2012, AMH for the population aged above 10 years old was by 93.98% and the other 6.02% are still illiterate. The service of education is meaningless without participation of people who go to school. The Net Enrollment Ratio (APM) shows the participation of school-aged population in certain educational level. For example, the APM of primary school is the indicator of school-aged population (7-12 years old) absorption for primary school level. According to BPS data in 2012, APM of primary school in Indonesia was by 92.49%. It means that from 100 Indonesians aged 7-12 years old, 93 of them are in primary school level. The portrayal above reflects the general condition of Indonesia. How about the condition in border areas? Indonesias border areas are located in three regions, which are Entikong (shares border land with Malaysia), Skouw Village (shares border land with Papua New Guinea), and Belu District (shares border land with Timor Leste). An indicator of development of an area can be seen from the magnitude of human development index (IPM) the area. IPM with an index above 72,2 said that the construction of the area is at the green zone. IPM with an index between 60,68 until 72,2 is in yellow zone. And IPM with an index helpdown 60,68 is at the red zone.

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Entikong District is a part of Sanggau District, West Kalimantan. Quantitatively, the educational condition in Sanggau District can be seen from the AMH. In 2011, the AMH of Sanggau District was by 89.98% and the other 10.02% were still illiterate. The IPM of Sanggau District was by 68,9. The population of that region still finds it hard to access education which consists of road access to school, teachers, and the facility of learning and teaching activity that is still limited. Similar condition happens in Skouw Village which is the cross border of Indonesia and Papua New Guinea. Even though the interest of student in Skouw is high, the people still face some obstacles to access education. Those obstacles are road access to school, teachers, and the limited teaching and learning activity facilities. Skouw Village is a part of Jayapura District. Quantitatively, the condition of education in Jayapura District can be seen from the AMH. In 2011, the AMH of Jayapura District was by 96.89%, and the other 3.11% were still illiterate. IPM in Jayapura District was by 72,7. Another border area is Belu District. The population in Belu District are already able to access education.

The facility and infrastructure of Belu District are also able to be accessed by the population around the area. In fact, there are also Timor Leste citizens who are enrolled in schools in Belu. Quantitatively, the educational condition in Belu District can be seen from its AMH. In 2011, the population of Belu aged above ten years old was by 84.37%, the other 15.63 % were the population of Belu who are illiterate. The IPM of Belu was by 64,7. The border areas that are the frontier or gate to enter Indonesia become the backward regions in education and teacher welfare. Each citizen has the right to get education. Both the population in the cities and in the villages have the same right to get quality education.

Oktya Setya Pratidina

...Each citizen has the right to get education. Both the population in the cities and in the villages have the same right to get quality education ...

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Tinjauan Ekonomi dan Keuangan August 2013

Development Strategies for Underdeveloped Regions in Border Areas

B
Dr. Suprayoga Hadi
Deputy Minister for The Development of Special Region Ministry for The Development of Disadvantaged Regions

order areas has an important role in maintaining the unity of a nation. The development in border areas should be the main priority. Less optimal development in border areas will cause social economic disparity between the border areas of a country and the neighboring countries. The more rapid development of border areas in a nation will attract the society in the border areas of the neighboring country to do economic activities. Therefore the nations with less optimal border areas development tend to be left behind. In Indonesia, there are 38 districts and cities in the border areas, 27 of them are categorized as underdeveloped areas. This is the factor underlying the Ministry for Acceleration Development Backward Region (PDT) in implementing the acceleration development for backward regions in border areas. The strategic steps by PDT in developing the border areas are; (i) improving the coordination between the central governments in developing the underdeveloped regions in border areas; (ii) establishing the policies in the strategic plan of development acceleration for underdeveloped regions in border areas 2010-2014; and (iii) facilitating with social support for the governments in underdeveloped regions in border areas. According to the Deputy for Special Regional Development in PDT, Dr. Suprayoga Hadi, one of the main activities by the ministry of PDT is facilitating with social support. The social support is focused on

infrastructural development to create productive economy in the underdeveloped regions of border areas. There are three main aims of infrastructural development in the underdeveloped areas of border areas, which are to support connectivity, food security, and energy security. The infrastructural development program is based on the connectivity such as, road, bridge, and road axis construction. Beside the landline, PDT also facilitates the small outermost islands that are underdeveloped to improve the connectivity of sea line and between islands, such as harbor development and giving feeder ships. Furthermore, for the development of infrastructure based on energy security, the PDT focuses the social support on electrification program through PLTS development and providing lights for the society in border areas. Beside connectivity and energy security, PDT also builds infrastructure that is based on food security through giving tractor and the equipment to cultivate the harvest. Beside infrastructural development, the provision of facilities and infrastructure is also the focus of the PDT Ministry in developing the border areas. One of the facilities and infrastructure enhancement programs is clean water supply. This program focuses on the coastal areas which usually do not have clean water. The clean water supply in coastal areas is usually provided through reverse osmosis. PDT Ministry, under the coordination of BNPP has several prioritized border areas districts. The development of

...In Indonesia, there are 38 districts and cities in the border areas, 27 of them are categorized as underdeveloped areas...

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prioritized border areas districts through the Border Development Center or PKSN aims to change the paradigm of border areas development which previously the development of rear areas to front areas. To date, there are 26 regions that will be established as PKSN. The development of these areas focuses as the gate of economic and trade activity with the neighboring countries. According to the BNPPs Master Plan for 2011-2014, the direction of border areas development policy for economy is to accelerate economic growth in border areas by paying attention to the environmental sustainability. The strategies to support this policy are: (i) enhancing facility and infrastructure in border areas; (ii) developing the growth centers; (iii) strengthening the relation of city and village, especially PKSN and the surrounding areas; (iv) enhancing the development of local economy; (v) enhancing the economic independence of the border villages; (vi) creating positive economic interaction which is mutually beneficial with the neighboring countries; (vii) enhancing investment for business; and (viii) population distribution. Furthermore, Dr. Suprayoga Hadi also stated that in enhancing border areas, interaction with other governmental programs is needed, such as with MP3EI. The border areas is currently untouched in the MP3EI economic corridors, especially the Kalimantan corridor. There are two things to be concerned in developing the border areas, which are border development and construction in border areas as the frontier. The development of border areas needs to be
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concerned by both government and private sectors. Therefore, in developing the border areas, strong coordination between the central and local governments which optimally involves business and private sectors is needed.

Reference:

Management of State Borders and Cross Border Areas Masterplan for 2011 - 2014, BNPP

...Furthermore, Dr. Suprayoga Hadi also stated that in enhancing border areas, interaction with other governmental programs is needed, such as with MP3EI...

Fitria Faradila

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Tinjauan Ekonomi dan Keuangan August 2013

A Solution to Economic and Social Security in Indonesia

Development in Border Areas

ndonesia should be proud because in the report by McKinsey in 2012, Indonesia was predicted to be one of the strength of global economy. In 2030, Indonesia is potential to be one of the seven countries with huge global economic power. This achievement is followed by the increasing number of middle class society which is predicted to reach 135 million people. Indonesias economic growth is quite promising globally. This is indicated by the flow of foreign investment. In 2012, the realization of foreign investment reached US$ 24.564,7 million or increased by 51.50% compared to 2010. Another reason why McKinsey to predict the fast economic growth in Indonesia is the great move in macroeconomic management. In the last few years, the inflation rate has been under control, the debt portion per GDP has decreased and the economic growth is stable during the global crisis. Along with the many Indonesias economic achievements in the eyes of the world, other problems arise and need to be handled. The economic disparity tends to increase in the last 5 years. In 2012,

Indonesias Gini index reached 0.41 which is the highest level in history. This indicates the expansion of revenue disparity between groups. Until the second quarter of 2013, Java Island still dominates the national economy. Java Island contributes 58.15% of Indonesias total GDP. Sumatera contributes 23.9% and Maluku and Papua only contribute 1.9%. The disparity can also be seen from other indicators. Seen from the Human Development Index (IPM), the eastern parts of Indonesia is below the IPM average. In 2011, Papuas IPM is by 65.36 and the National IPM is by 72.77. The disparity can also be seen from the border areas of Indonesia with the neighboring countries. The development of border areas is important because it is related to the national defense and peoples welfare in the border areas. The example for this condition is the development of Indonesias borderland with Malaysia and Timor Leste. Entikong is one of the sub-district in Sanggau District, West Kalimantan, which borders with Sarawak, Malaysia. Because it is located close to Malaysia, the economy in Entikong is greatly influenced by

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...The disparity of development is caused by the limited basic means such as transportation, education, and health. The development of infrastructure in the border areas needs to be improved...

seen from the domination of Indonesias product that is sold in Timor Leste. Besides, import goods are also sold in Timor Lestes markets. Belu district is one of the five districts in NTT province that is located in Timor areas. Even it is considered as dry area, the economy is supported by agricultural sector. Corn, buckwheat, and coffee are the main commodities produced in Belu. In 2011, the growth rate in Belu district reached 5.58% with the revenue per capita reached IDR 5.399.744 per year. Belu has many hidden economic potentials. Its strategic location could be a transit route for ships that are heading to Timor Leste. To date, the ships heading to Timor Leste and crossing Belu water has not been utilized optimally. If these ships can be utilized well, it is predicted to be the factor that encourage economic growth in Belu. From these two examples, we can conclude that the economy will be drawn to more developed areas. The economic activity in the developed areas is like a magnet that attract the economy of underdeveloped areas. Therefore, there should be a mapping of economic potential and strategic plan to make the areas more developed. The economic dependency to the neighboring countries needs to be reduced. Specifically for the economy of Entikong, Malaysias domination cannot be resisted. Therefore, the bargaining power of the people in Entikong needs to be increased. The main step that needs to be done is by fulfilling the basic needs to support economic activity. Border areas are the frontline that represent Indonesia. Inclusive economic development is responsible to reach equity, especially in the border areas.

Malaysia. The influence can be seen from the huge amount of Malaysian products and the usage of Ringgit that become more common there. The disparity of development is caused by the limited basic means such as transportation, education, and health. The development of infrastructure in the border areas needs to be improved. This can be seen from the roads to Entikong that are damaged. It is different from the roads in Malaysia which are already paved. The accessibility has also become a strategic issue in Entikong. Entikong has high dependency on the neighboring country. This is reflected on the high amount of the primary needs of the society that are brought from Serawak. Besides, the easy access to Malaysia encourage the surrounding communities to cross the border. Based on the data from Entikong immigration office, there are about 400-500 people cross the border to Malaysia each day. The good domestic access becomes an incentive for economic actors to involve in domestic market activities. Ironically, the bad infrastructure condition forces the pepper sellers to sell their pepper to Malaysia rather than to Pontianak. This is because the cost of sales to Malaysia is cheaper. It is different from the condition in Indonesias borderland with Timor Leste. One of the areas that directly borders with Timor Leste is Belu District. Belu District shares land borders with Timor Leste for about 115 km long. The condition of the people in the area is better than the condition of people in Timor Leste who live around the borderland. The basic infrastructure such as roads, education facilities, health facilities, and electricity are provided quite well. According to the explanation by Bappeda of Belu District, almost 90% of Timor Lestes economy is supported by Nusa Tenggara Timur (NTT). This can be

Masyitha Mutiara R

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Tinjauan Ekonomi dan Keuangan August 2013

Expert Opinion

5 Agenda of Border Areas Development By BNPP


Indonesia consists of 17.506 islands and two thirds of its region are sea. Therefore, Indonesia has several regions that directly share borders with the Drs. H. Triyono Budi neighboring Sasongko. Msi countries. Based on Base Point Secretary of Badan Nasional Survey by Pengelelolaan Perbatasan Hydro(BNPP) Oceanography Division Indonesian Navy (DISHIDROS TNI AL), there are 183 base points which are located in the 92 outermost islands, the rest are located in the outer headlands and in coastal areas. Several regions that share border land with the other three neighboring countries, which are Malaysia, Papua New Guinea, and Timor Leste. Meanwhile, the coastal area borders with ten neighboring countries, which are Malaysia, Singapore, Vietnam, Philippines, Papua New Guinea, Timor Leste, India, Thailand, Australia, and Palau. This condition affects Indonesia significantly, especially related to governments consequence in maintaining sovereignty of territorial borders, law enforcement, security and defense, economic and infrastructural development, and facility and basic service provision for the people in border areas. The formation of The National Agency for Border Management (BNPP) according to Presidential Regulation No. /2010 is one of the proof of governments seriousness in maintaining and managing the border areas. BNPP plays a role as the coordinator that runs the KIS (Coordination, Integration, and Synchronization) duty with ministries/institutions, private sectors and local government on handling the border areas. The five main duties of BNPP are (i) affirmation of state borders, (ii) creating defense and security, (iii)

encouraging economic development in border areas, (iv) giving basic social services, (v) improving the institutional administration. According to the secretary of BNPP, Triyono Budi Sasongko, in the framework of border line management and border areas development, BNPP has compiled a document that becomes a reference in border areas management called Grand Design Pengelolaan Batas Wilayah Negara Dan Kawasan Perbatasan 2011-2025 (the Grand Design of Border Line and Border Areas Management 2011-2025) in implementing its five main agendas. Several programs that has been run by BNPP in the first and second agenda are cross-country management, structuring asset in the crossing border posts, border violation, capacity building enhancement, mapping and survey, mounting border region, and socialization of border lines for the local people. Not only maintain the defense and security from the inside, coordination is also established with the neighboring countries that directly share borders with Indonesia, especially related to the border line management by having adhoc organization such as General Border Committee (RI-Mas), Lembaga SOsek Malindo (handling the economic development problems, RI-PNG&RI-RDTL Joint Border Committee, and Border Liaison in every border area. Adhoc organizations are chaperoned by related ministries such as the leading sector of land border is the Ministry of Home Affairs and for the water territory is by the Ministry of Foreign Affairs. Related to the defense and security program, BNPP encountered several obstacles such as the slow borderline problems solving because of the lack of institutional support, geographical condition that is hard to reach, operational to implement the activities is considered not enough, the lack of cross-border facility and infrastructure, and the illegal smuggling that involve certain people from both countries. Not only in the defense and security side, BNPP also handles infrastructural problems and economic development in the border areas. According to Triyono, infrastructural problem is the main problem faced in border areas. Inaccessible roads, the highways which are below standard, the limited water

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and electricity supply, and the lack of public facility and basic social service are still found in the border areas. In fact, those factors are often preventing investors to invest. Therefore, to implement the third and fourth agenda, BNPP keeps coordinating with the Ministry of Public Work and local government in mapping the areas that still needs more attention. To develop the border areas, the government allocated IDR 3.9 T in 2012 and IDR 7.3 T in 2013. The development focuses on 10 National Strategic Activities Center (PKSN). BNPP acts as the coordinator and executor in the infrastructural and basic social service development in border areas. Besides, in accelerating the economic growth in border areas, BNPP has stepped in to accelerate the process of permit, developed the potency of local business, and implemented affirmative policies to encourage the conducive investment climate. Up until now, the development of economy and infrastructure in border areas still faces difficulty with the Raperpres that has not been approved by the President, so the authority of BNPP to play a role as the executor in the development of border areas is

constrained. Other than that, there are lands claimed as ulayat or customary land which hinder the government in the process of land acquisition. In summary, according to BNPP, the plan of the program to develop border areas has been arranged comprehensively. However, the implementation still finds some technical problems and the role of BNPP is limited in implementing KIS function, so they cannot directly step in unless there is an approval from the related ministries/institutions.

Alisa Fatimah

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Tinjauan Ekonomi dan Keuangan August 2013

Finance
Branchless Banking: Financing Access Availability in Remote Areas

icro Small and Medium Enterprises (UMKM) plays a strategic role in Indonesias economy, which is as the absorbent of labor and as the influential contributors to GDP. According to the data of the Ministry of Cooperatives and Small Medium Enterprises, in 2011, UMKM was able to absorb 101 million workers and contributed IDR 4.303 Trillion to the GDP. Therefore, the government gives much attention on the development of UMKM through empowerment programs. One of the programs is the expansion of financing access through guarantee schemes with banking sectors. The problem arises is that the banking sectors does not reach the whole regions in Indonesia. Therefore, financing access does not reach the people in remote and border areas. The businesses that have potential usually find obstacles in the limited financing access availability. Meanwhile from the supply side, having branch offices in remote areas is not economically profitable compared to the cost spent by the bank. Facing that problem, Bank Indonesia cooperates with banking and telecommunication companies have pioneered payment and limited banking services through Financial

Intermediary Service Units (UPLK) such as agents or known as branchless banking. In its guidelines, BI regulates: i)business model and products provided, ii)its activities, iii) UPLK terms and the technology used, iv) risks management, v) compliance towards anti-money laundering and preventing terrorism funding, and vi) education and customers protection. The guidelines became the reference in the Payment System Service and Limited Banking trial activity through UPLK which had been implemented since May until November 2013. The implementation of the trial project is done restrictively in 8 provinces chosen by banks, which are North Sumatera, South Sumatera, West Java, Central Java, East Java, Bali, East Kalimantan, and South Sulawesi. The unconventional service provision is done not through branch offices or telecommunication companies but through the means of technology and third party services or the agent (UPLK). In the trial, banking will choose the agents that are its customers. The agent has to be the permanent residents and runs business, at least a store that has been run for 2 years. Next, the agent will be a place for the local residents to open an account for the first time. After collected, the banks will

open accounts, hand the Tabunganku, and the e-banking pin to the agents to be delivered to the residents. After that, the agents also give micro credit to the customers. Branchless Banking implementation needs to be done carefully considering that implementation of banking service expansion through UPLK and technology can rise the risks, especially operational, legal, and reputation risks by banks and telecommunication companies. Through the trial, it is expected to achieve a suitable business model and the obstacles and risks faced by the related parties as an input for the issuance of branchless banking provisions.

Alexcius Winang

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State Owned Enterprises

The Role of State-Owned Enterprises (BUMN) in Improving the Development of Underdeveloped, Leading, and Outermost Areas (3T)
Adji Dharma
Education is one of the aims to increase Human Development Index (IPM). Pertamina, through Pertamina Foundation, gave 50 scholarships to two high schools and two vocational schools in Sukabumi, Malang, Probolinggo, and Denpasar in mid July 2013 before the new term was started. This is an initiative program from Pertamina Foundation to reach the western parts and the outermost, and remote areas by transferring the scholarship recipients to theSekolah Pembina (schools that will help the implementation of curriculum in every level of education, so it will run smoothly and to minimize the obstacles in implementation) in big cities. This step is done to develop the students potentials in those areas. Beside Pertamina, other state-owned enterprises like BRI has started to see the potentials in 3T areas such as in Miangas Island which is one of the outermost islands in North Sulawesi that is geographically aligned with Philippine. The role of state-owned enterprises in improving the 3T areas is also shown by the state-owned enterprises in mining sectors, according to Indonesia Mining Association in 2006, that have important roles in developing underdeveloped areas and becoming the new growth centers along with the opening of mining in those areas. Community empowerment through partnership from state-owned enterprises in giving technical help and capital support aims to improve the creativity and the economy of the community. However, the development disparity problems should be overcome soon. Through the programs implemented by the Ministry of State-Owned Enterprises and several related aspects to improve community ability. The infrastructural improvement and development that is started by state-owned enterprises and other companies are expected to increase the economic condition in the underdeveloped, leading, and outermost areas in Indonesia.

It has been 68 years since Indonesias Independence. The improvement and development of the nation has increased rapidly. The problems of the nation become more complex along with the improvement in technology and economy. The current problem faced by this nation is that there are still some economically underdeveloped areas, while the big cities in Indonesia are already developed economically. The inter-regional revenue and the economic development disparities are still the main problems for Indonesia. The government has established various programs to overcome those problems. The seriousness of government in handling underdeveloped areas is seen from the issuance of Presidential Regulation No. 5/2010 about National Medium Term Development Plan (RPJMN) 2010-2014 that established Underdeveloped, Leading, Outermost, and Postconflict Areas as one of national priorities out of the eleven national priorities, which consist of: (1) bureaucratic and governance reform; (2) education; (3) health; (4) poverty reduction; (5) food security; (6) infrastructure; (7) investment and business climate; (8) energy; (9) environmental issues and disasters; (10) underdeveloped, leading, outermost, and postconflict areas; and (11) culture, creativity, and technological innovation. For that, the role of state-owned enterprises (BUMN) is needed as a pioneer of underdeveloped, leading, and outermost areas (3T) development. Several state-owned enterprises that has reached the 3T areas must play a role in improving the development and digging the potentials of those areas. This can be done through Partnership and Environmental Development Program that can be synergized with the other governmental programs. To enhance its role in developing the 3T areas, the Ministry of State-Owned Enterprises (BUMN) also has a program entitled Apresiasi Guru &SiswaBerprestasidari Wilayah Terpencil, PerbatasandanPulauTerluar Indonesia (Appreciation for OutstandingTeacher and Students from remote, border, and outermost areas in Indonesia) which has been held from the end of 2012 to March 2013.

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Fiscal and Economic Regulation

The Economic Policy in The Spesial Zones


Vitri Nurmalasari
Besides the policies on special economic zone, the government has already made the regulations that correlated with structuring or economic incentives in the zones, such as: Regulation that related with Bonded Zone regulated in PMK No 4 year 2011 and PMK No 225 year 2011. Those regulations explained about some incentives that given to Bonded Zone such as: import duties suspension, import free taxes, free value added taxes and luxury goods taxes, and free excise taxes based on the requierements that has been determined. Regulation that is related to taxes and customs treatment in Integrated Economic Development Zone are regulated in KMK No 11 year 2010. The government already gave some facilities for income taxes such as 30% neto income substraction,accelerated amortization, fiscal loss compensation, and income tax in article 26 for 10% deviden. Regulations about customs treatment, taxes, and import duties og Free Trade and Port Zone are regulated in PP no 10 2012, where government gave incentives such as free value added taxes based on requierements that has been determined. Regulation that are related to Special Economic Zones are already regulated on UU No 39 year 2009, it is stated that government gave facilities for income taxes in accordance with the the requierements that has been determined. some other regulations which gave facilities or incentives on taxes and services in Special Economic Zones. The giving of incentives to Special Economic Zones is a manifestation of attention and government seriousness in order to increase economic, and as an effort to implementing development equality to decrease regional disparity. The existence of those facilities, government hope it could support regional economic actitivities through export increasing, industrial growth, production diversification, creating employment opportunity, increasing the utilization of local human resources, and increasing human resources quality through increase the expertise and technology transfer.

The development of border areas is one of commitments and one of development policies that are already stated in the Long-term National Development Plan 2004-2025. Border areas development effort has been done by changing its policy orientation from inward looking to outward looking. Outward looking orientation means the effort to utilize border area as an economic activities gate and trading with neighbouring countries. Besides having economic orientation, border areas development also concerns on the aspects of security, welfare and environment sustainability. Related to the economic development in special regions which include border areas, the government has a policy to support investment through giving incentive or facilitating licensing service. These policy was stated in the context of economic special zone development. Special economic zone are the region which has special provisions about customs, taxes, imigration permit, and employment. The purpose of its development is to give the opportunity to increase investment through area preparation which has high competitiveness and ready to accomodate export import activities from industries and also economic activities which has high value of economy. Economic special zone development focused in providing many facilities that could attract the investors to invest in Indonesia. Indonesia has currently operated some economic zones such as Integrated Economic Development Zone (KAPET), Bonded Zone (KB), Free Trade and Free Port Zone (KPBPB) and Industrial Zone (KI). The provision is explained as:

Special Policy Scheme

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MP3EI

Development Acceleration in Papua and West Papua The Doorway to the Eastern Border Areas

urrently, several regions in border areas encounter problems in its development. Those problems are the geographical condition, demography, and infrastructure. The problems on geographical condition are the isolated regions, inaccessible area, etc. the problems on demography are the total population and the lack of human resources. The problems on infrastructure are the limited road access and the disconnected road access. The other problems that arise in border areas are the inadequate roads, the needs of clean water, the lack of electricity supply, and the limited telecommunication and information access. There are also some problems related to the maritime boundary such as about the Exclusive Economic Zone (ZEE). ZEE stretches for 200 mil from the coastal baseline, and in the zone, there are coastal states that have rights on the resources in there, implement its policies, freedom to navigate, or to have cable and pipes planted. However, the government still tries to develop the areas, so they can have similar kind of development with the other developed regions in Indonesia. Road access and transportation on the land and sea are very limited. This became one of the causes of slow development in border areas. Not only that, the facility and infrastructure of communication such as radio and television transmission and telephone access in border areas is limited. The lack of access makes people in the border areas more exposed to the information about the neighboring countries. The slow development is also caused by the lack of health center, school and market.

One of the regions of border areas in Indonesia that has slow development is Papua and West Papua Province which has been known as isolated areas because of the lack of connectivity with the other developed areas. Economic access in the regions relies on air transport with high rates and sea transport that takes long time. The road access is not optimized because there is not much road or infrastructural development in Papua and West Papua. This causes peoples difficulty on their mobility and the difficulty level of trade transaction is also high. It happens in Erambu that shares border with Papua New Guinea. This causes disincentive for the local people to trade to the other cities which leads to them trading in the neighboring country. The effort by the government to give a privilege to Papua is by giving the province a special autonomy. Moreover, to support the development in Papua, in the end of 2011, The President Susilo Bambang Yudhoyono established Unit Percepatan Pembangunan Papua dan Papua Barat (UP4B) or Development Acceleration for Papua and West Papua. UP4B has a duty to help the president in supporting and coordinating and synchronizing the planning, facilitating, and controlling the implementation of UP4B that covers basic infrastructure, education, economy, social and culture, security, and governance. In 2013, through UP4B and the MP3EI, the President issued Presidential Regulation No.40/2013 about the road construction in the framework of UP4B, so the acceleration to open the isolated area can be implemented soon.

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Tinjauan Ekonomi dan Keuangan August 2013

Learning from Australia in developing transportation to revive the economy, the transportation should be open, both along the border line from Jayapura-Merauke through Keerom-Bintang Mountains-Boven Digul and Merauke, and so does the line from Jayapura-Wamena or from Wamena-Bintang Mountains; Jayapura-Sarmi-Nabire-EranotaliSorong-surrounding the head of a bird which is the shape of the province-and along the southern coastal line to Merauke. By having the transportation and the mixture of peoples plantation and industry, Papua and West Papua Province will have equitable welfare with Java Island.

Beside the acceleration of infrastructural development, UP4B also has airport construction acceleration program. There are 35 airports in Papua and 14 airports in West Papua that have been constructed. Not only that, UP4B also encourages development acceleration of 21 harbors in the whole region of Papua until 2014 before the duty of UP4B ends. In the development, the UP4B has also helped accelerating the construction of roads, which are DepapreBonggrang, MeraukeJagebob, and MeraukeJagebob-Erambu. In the future, by having UP4B, it is expected to eliminate the stigma

of Papua as underdeveloped and isolated regions. Besides, it is expected that Papua will be the doorway of the eastern border line.

Aang Anggara

...The effort by the government to give a privilege to Papua is by giving the province a special autonomy...

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Manpower

Changes In The Labor Force Participation Rate


continue their study to the higher educational level and retire early. Since 2008, the population of the United States has significantly left the labor market since the working prospect seemed to be hard. In fact, the low labor force participation rate has happened since 2006 because of the cyclical and structural changes. The decreased labor force participation rate which was affected by cyclical changes will show an increase after an improvement in the states economy. With the improvement in economy, there will be a tendency from the society to go back to the labor market to support economic activity and to curb the rise of wage inflation. In the long term, structural changes will be a plausible reason in explaining the continued fall of labor market after the economy improvement in 201 0. Meanwhile in Europe during 2008, there was a rise in the portion of population who is working and looking for job. Most of them are caused by the policy that is intentionally encouraging to seek for jobs or keep working, the changes in culture, and also the long-term demographic changes where the older and women population are still in the labor market. As a result, (i) there is no cyclical boost for the supply labor in Europe, (ii) there is a stable structural improvement in the labor force, and (iii) most of the countries in Europe and United States are threatened by the shortage of labor and the rise of wage inflation in the future because of the cyclical changes. The woman participation rate in the labor market increased in Europe zone and in the proportion of population above 55 years old because of the policy reformation to decrease the feasibility of early retirement. One of the G-7 countries, the United Kingdom, has succeeded in the policy reformation of job promotion. Even there was a cyclical decrease in 2008, the policy changes taken by the government of the UK still made people working. Not only that, the policy has also encouraged retirement for women and has tightened the government regulation on disability benefit. This success story can be applied and followed by other countries, especially countries like Japan. The main indicator in the labor market changes is the ration of people participation. The changes in participation which are affected by the number of labor force can affect the rate of economic growth and potentially have impact on the outlook for wage inflation rate.

On 31 July 201 3, Global Economic Focus released the newest report regarding to the manpower in the G-7 countries. Most of the G-7 members are developed countries. On the labor supply side, a rise in the number of labor force participation rate is recorded for the next one or two years. With the tendency to rise towards positive trend, it can help to hold the rise of wage inflation. Therefore, it can sustain the ongoing monetary easing. Compared to the other developed countries, Japan really needs labor supply and does not have the tendency to grow. The Japanese government has issued a policy to involve women in the labor market, but this effort does not likely to encourage a rise or significant effect in the near future. From all of the G-7 countries, Japan keeps experiencing a fall in the labor force participation rate. It is because of the low fertility and immigration rate and the low pace and low labor market participation rate which lead to concerns on Japanese labor. The working-age population has been falling by 0.75% each year since 201 0 and 2030. This is the main reason why the economic growth in Japan is predicted to stay low in the future and also predicted to bring Japan to the decreasing number of workers gradually. To anticipate it, the Japanese government is expected to improve the immigration rate and minimize the gap between man and women workers in the workplace. The United States is recorded to have low labor participation rate for a long term. This is because the youth population tends to

Insani Sukandar

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PBC and SME

People Business Credit Realization Period July 2013


Furthermore for the second step to get highest credit from agriculture sector was recorded 16%. Based on highest regional channeling was recorded at Central Java, East Java and West Java with each amount at Rp 19 trilliom, Rp 18,6 trillion and Rp 15,7 trillion. The number of total people business credit for Indonesia migrant workers report has been increase from debtor side and channeling. In July 2013 was recorded at Rp 57 billion with number of debtor at 5.100 people. Destination countries that receiving people business credit for Indonesia migrant worker i.e South Korea, Malaysia, Bruinei Darussalam and Hong Kong.

The number of total people business credit was last recorded at Rp 3,72 trillion in July 2013 compared to previous month amounted to Rp 3,80 trillion with number of debtor 233.497 people. Since November 2007 until July 2013 number of People Business Credit gain Rp 123 trillion with number of debtor 9,1 billion people. On average each debtor obtain credit of Rp 13,5 billion per person with a 3,8% rate of NPL. Bank BRI is a highest participant realization for people business credit, especially for micro credit has been channel up in June 2013 amounted to Rp 60,6 trillion. Further, retail credit has been channel up amounted to Rp 15,3 trillion. The amount of each debtor of 8,3 billion peole for micro credit and 91.745 people for retail credit. Meanwhile channeling people business credit through regional development bank in July 2013 has increase significantly recorded to Rp 48.8 billion with number of debtor 587 people. The highest chanelling through regional development bank during November 2007 until July 2013 are Jatim Bank and Jabar Banten Bank each was recorded Rp 3,67 trillion and Rp 2,7 trillion with number of debtor 35.044 people and 24.582 peole, average NPL rate of 8,3%. Basen on receiving people business credit by sector in July 2013, trade sector get a highest credit up to 57%.

Windy Pradipta

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PBC and SME

Cultural Preservation Through Business


Rumah Betawi or the traditional House of Betawi which is located in Jl. Raya Bekasi Km 17 No 43, Jatinegara Kaum, East Jakarta, is the inspiration of Emma Damayanti, the owner. She is the descendants of Prince of Jayakarta. She is the authentic citizen of Jatinegara Kaum, a historical heritage site of Jakarta. Her passion in fashion design of encim clothing, her creativity, and the absence of business that produce Betawi typical goods drove Emma to produce Betawi typical goods. Emma decided to combine encim creation and Betawi Batik just with one sewing machine, embroidery machine, two craftsmen, and creativity to make the base of her Batiks philosophy. Only with 2 million rupiah as her capital, completed by her networking and persistence to preserve and disseminate the culture of Betawi, Emma succeeded in getting attention from her colleagues. This made Emma had more spirit to expand her business and spread to bigger market. In order to realize that, Emma had started to join some exhibitions. When she joined Ina Craft in 2010/2011, her booth Rumah Betawi impressed the staffs from Ministry of cooperatives and SMEs. That made her invited to the office to be interviewed and for business inventory. After those simple steps, Rumah Betawi became the members that fully supported by the ministry in doing promotion. Not only exhibition, Rumah Betawi also participated in national and international fashion shows as the representative of Betawi culture. Rumah Betawi has successfully created three diversification of their products only in 5 years, such as kebaya encim, batik and craft which really represent Betawi culture. They will expand their products to snacks next year due to some input from society and government. In 2013, Rumah Betawi already employed 15 permanent craftsmen and 15 non-permanent craftsmen that they need if they get many orders. Rumah Betawi has its own requirement in selecting the craftsmen that they need in order to maintaining its quality. The production of its products is held in different locations. For instance, kebaya encim, it produced in Bekasi because the labor cost there is much cheaper than Jakarta. Moreover, the workers who produce kebaya prefer to work near their house due to minimize transport and living cost. For batik production, it is produced in Emmas house (Jakarta) for handwriting batik and in Yogyakarta for stamp batik. The last one, Betawi craft, made by the craftsmen who live around Jatinegara Kaum and it uses furniture waste woods. In running this business, Emma never had much constraints in expanding her business. Her business turnover could reach 100 million to 300 million rupiah per month. Orders in large quantities such as from the Government of Jakarta Province that always orders Betawi traditional clothes, KADIN that always order batik, and also other customers from Bali, Palembang and foreign officials really help Emma to increase her business onset. House of Betawi just had a cooperation with banking recently, which is BRI, through small business credit channeling in order to smoothen the expansion of this products in the future. The awards that has been achieved by Rumah Betawi are (i) best 20 crafts finalist out of 700 entrepreneurs for Jakarta Souvernir Award by DKI Jakarta Government, (ii) During Mothers Day 2012, it ranked the 2nd as the entrepreneur who preserve Betawi culture by the DKI Jakarta Government and (iii) in 2013, it ranked the 1st of small medium enterprises by the Ministry of Cooperative and Small Medium Enterprises. These achievements are so meaningful to Emma because this recognition has been longed by her. She hopes that the next generation will still recognize the Betawi cuture through her Batik that has Betawi philosophy.

Insani Sukandar

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Tinjauan Ekonomi dan Keuangan August 2013

Field Report

The Coordinating Minister for Economic Affairs Inaugurated Festival Serayu Expo Banjarnegara 2013

The Coordinating Minister for Economic Affairs Hatta Rajasa inaugurated Festival Serayu Expo 2013 in Banjarnegara, Central Java. The coming of the Ministry and the entourage was welcomed by thousands of traditional dancers who performed Amplang Dance at once. This event was also attended by the Minister of Forestry Zulkifli Hasan, the Regent and Vice Regent of Banjarnegara and the officials and local traditional leaders (28-082013). In his welcoming remarks, Hatta Rajasa showed his appreciation and support on the Festival. He stated that this festival could promote agricultural and industrial products and local cultures. This festival could also create creative industry and huge value added for both local and national economy. The Minister also emphasized the needs to develop the interest of entrepreneurs to dig the natural potency optimally. The synergy between the businessmen and local people need to be built by

developing market access inside and outside Indonesia for the entrepreneurs. Other than that, the Coordinating Minister for Economic Affairs also stated that Festival Serayu is one of the policy package issued by the government because this is an effort to maintain the stability of national economy by developing real sector. This Festival is inaugurated symbolically by hitting a lesung and continued with a discussion and a visit from the Minister to the stands available at the Festival Serayu.

Predi Muliansyah

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