B2

Indonesia

Jakarta Globe Thursday, May 6, 2010

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Today
Britian Parliamentary elections Ljubljana, Slovenia Libyan Prime Minister al-Baghdadi Ali Al-Mahmoud to visit Washington Toyotas US sales chief Jim Lentz to testify at House Energy and Commerce Committee on safety issues

Rampant Economic Inequality Threatens To Poison Indonesias Healthy Reforms

Titania Veda
Seen from Jakartas glass-walled towers, the governments reform drive is bearing fruit, with rising economic growth and foreign investment promising an even brighter future. But in the grimy Pasar Senen market, char-ridden from a recent fire, the economic benefits reaped by the citys financiers have yet to trickle down to small informal businesses. A seller of locally made handbags, Sri Wahyuni, shares a tiny kiosk with another merchant because she cannot afford renting her own. Indonesias reputation as one of Southeast Asias star performers after sailing through the global financial crisis relatively unscathed means nothing to her. She continues to struggle for her livelihood as she has done for 25 years. Since Reformasi, the government has tried to reduce corruption within public institutions. The Finance Ministry was the first to undergo bureaucratic reform, in 2007. But poverty levels have not dropped and the access to economic resources continues to be unbalanced. Joachim von Amsberg, the World Banks country director for Indonesia, said although its main focus was on tackling corruption and ensuring a healthy fiscal position, the government also needed to take social indicators into account. You have a committed government that wants to make a difference but it has a huge implementation challenge, he said. According to the World Food Program, 52 percent of Indonesians live on less than $2 a day, with an estimated 35 million people living on less than 65 cents a day. Central Statistics Agency (BPS) data show an average factory worker earns Rp 248,000 ($27.28) per month, while universities charge Rp 1 million or more for tuition per semester. Von Amsberg said it was critical that everyday people felt that growth benefited them and that development was not just something for people living in highrise apartments. The huge informal sector needed to feel the positive effects as well. Last year, 68 percent of Indonesians worked in the informal sector, according to the International Labor Organization. Like many business owners in the sector, Sri Wahyuni does not have a taxpayer registration (NPWP) number and does not pay taxes. Her imitation Chanel and Gucci bags cost Rp 35,000 each to produce and sell for around Rp

Friday
Zagreb, Croatia Canadian Prime Minister Stephen Harper to visit

There has to be more formal than informal workers to sort out poverty
Djimanto, deputy chairman of Indonesian Employers Association
39,000, leaving her with an extremely narrow profit margin. Most of them dont register themselves for an NPWP number because theyre afraid to be chased by the tax men, said Sudianto, who is in charge of regional sales management and marketing at PT Bank Danamons micro business savings and loans unit. They dont really understand how the tax system works. The informal sector is also overcrowded, with high numbers of people trying to scrape by as ojek drivers or bakso sellers creating too much competition and reducing wages. There has to be more formal than informal workers so we can have job security, income security and social security, said Djimanto, deputy chairman of the Indonesian Employers Associa-

Saturday
Moscow Commonwealth of Independent States, made up of former Soviet republics, to hold summit Global World Red Cross Red Crescent Day

Sunday
Westphalia, Germany State elections Hampton, Virginia US President Barack Obama to address 2010 Hampton University graduates

Monday
Philippines Presidential elections to be held Brussels Euro-zone heads of state expected to hold a special summit to activate aid package for Greece Washington Afghan President Hamid Karzai to visit United States Harare, Zimbabwe High Court judge expected to rule on whether to drop terrorism, banditry and sabotage charges against senior Zimbabwean Prime Minister Morgan Tsvangirai ally Roy Bennett

tion (Apindo). That way we can sort out poverty, which has to be reduced. Nevertheless, the small- and micro-sized informal business sector is growing, with Bank Indonesia data showing a 16 percent increase in loans to the SME sector, from Rp 633.9 trillion in 2008 to Rp 737.4 trillion in 2009. The strength of the sector may help President Susilo Bambang Yudhoyonos cabinet reach its second-term targets of lowering poverty levels to 8-10 percent, decreasing unemployment to 6 percent and achieving GDP growth of 7 percent by 2014. But Center for Information and Development Studies economist Umar Juoro is not convinced the targets can be reached. We havent got a step-by-step measure to get delivery, he said. Meanwhile, experts are calling for the government to use its strong economic position to address infrastructure problems. Indonesia as a whole has many different islands, but from one island to another, the Indonesian economy is not really linked in terms of trading, Bank Danamon economist Anton Gunawan said. For example, a product like corn in Gorontalo is cheaper and easier to buy abroad. And in Java, when they need corn its cheaper to import it for many reasons, such as expensive transport costs or

lack of warehousing or some kind of quarantine system. It is less expensive to send a container from Shanghai to Belawan than from Tanjung Priok port to Belawan, said Richard Lino, president director of stateowned port operator PT Pelindo II. The company is pushing upgrades to Tanjung Priok so it can compete with regional ports in Southeast Asia. The port has collaborated with the customs and excise department to increase its efficiency, and as of April 1 the import gates of Tanjung Priok port are fully automated. If we dont solve this matter, in the long term Java, as the factory of Indonesia, will lose its competitive position, Richard said. If the port can be efficient, the ships can be efficient, and logistics cheaper. Based on Indonesias strong fiscal position, some experts saythe country is ready to make the big leap forward. But to ensure delivery of government targets, aggressive steps towards a better investment climate, improved infrastructure and a stable broadbased society need to be taken. Von Amsberg said if Indonesia could achieve development that was broad-based and lifted people out of poverty it would contribute to consolidating a stable democratic system

Tuesday
Ankara, Turkey Russian President Dmitri Medvedev to visit Canberra Australian parliament begins budget session Lisbon Pope Benedict to visit Portugal Paris French parliament debates proposal to ban the wearing of full-face veils in public Los Angeles Second reading of law that would ban restaurants in California from giving away toys and other incentives with unhealthy kids meals

Diluted Expatriate Property Rule Nearly Completed

Arti Ekawati
The government has backpedaled on a proposal to allow foreigners to own property in Indonesia for 90 years and will now only simplify the extension process and not change the maximum length of title from the current 70-year tenure. The changes are contained in a new regulation which will be presented to President Susilo Bambang Yudhoyono for approval before the end of May, the Ministry of Public Housings Jamil Ansari said on Wednesday. The regulation is expected to take effect within two months of the president approving it, he said. The draft review of the regulation is almost finished and we expect it will be ready by the end of May, Jamil said. Currently, foreigners can hold property for 25 years. After the term expires, they may renew their property rights with the National Land Agency (BPN) for an additional 25 years and then extend it once more for 20 years, making for a total of 70 years. Under the new regulation, foreigners will be able to renew for the additional 25- and 20-year terms at the same time, effectively meaning they will be able to renew for 45 years. Many foreigners find that the extension process for their property is really unpractical. Therefore, we decided to simplify it, Jamil said. Teguh Satria, chairman of the Indonesian Real Estate Developers Association (REI), said it would make more sense for foreigners to be able to own property outright so they did not have to go through time-consuming extensions. Not allowing foreigners to own property meant Indonesias property sector was less competitive compared to Singapore and Malaysia, Teguh said. He said there were around 83,000 foreigners living in Indonesia. If 10,000 of those foreigners bought a $250,000 apartment it would translate into $2.5 billion of foreign investment, Teguh said.

Wednesday
Brussels European Commission to make a proposal on how to strengthen European Union budget rules and economic surveillance in the euro zone to avoid crises like the Greek disaster in the future Sichuan, China Anniversary of a devastating earthquake in mountainous Sichuan province
Reuters

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Indo mini. The Tawon, an Indonesian-made natural gas-fueled car with a 500cc engine, is getting attention at the IndoAutomotive Expo. The four-day show at Jakarta International Expo runs through Saturday, and has drawn 127 firms from Indonesia, China, Taiwan, Malaysia and Russia. The expo aims to clock up more than Rp 25 billion ($2.75 million) in orders. JG Photo /Clara Prima

BI Holds Key Rate, Citing Low Inflation

Muhamad Al Azhari
Bank Indonesia kept its key interest rate steady at 6.5 percent on Wednesday, saying it was comfortable with the countrys low inflation and that it hoped to continue spurring economic growth by keeping lending rates low. The central bank has held its key rate at a record low for nine months, in contrast to many of Asian neighbors that are raising interest rates or restricting lending to contain inflation and avert potential asset bubbles. In regard to prices, inflationary pressure was held at modest levels during April, Bank Indonesia said in a statement. Subdued inflation was reflected in the continued downward trend in core inflation at said Gundy Cahyadi, an econo3.7 percent [year-on-year] in mist at OCBC Bank in Singapore. April compared to 4.43 percent But sooner or later the rate hike [year-on-year] in January, con- needs to come. Loan growth is sistent with the appreciation in expected to surge 20-25 percent the rupiah, supply-side response by end of the year, consumer demand is expanding recommensurate to risally fast and the coning demand and a com- Sooner or later sumer price index has fortable level of infla- the rate hike tion expectations. needs to come. shown that food inflaBank Indonesia said BI needs to shift tion is now at its highest level since May it was optimistic about back towards 2009. the global economic re- domestic Bank Indonesia said cover y despite the tightening. Greek debt crisis. The Gundy Cahyadi, last week it wanted to rupiahs recent gains economist at maintain the rupiah at had helped Indonesia OCBC Bank around Rp 9,000 to the dollar to keep rising cut import costs and commodities, such as keep a lid on prices, it oil, from adversely afsaid. fecting domestic pricI think the policy es, Gundy said. statement is pretty BI needs to shift much as expected, back toward domestic tightening, Gundy said. Ma Tieying, a Singaporebased economist at DBS Group Research, said it was forecasting that Bank Indonesia would start hiking its key rate in the third quarter and that it would reach 8 percent by the end of the year. Our expectation is that the growth recovery will continue and inflation will rise to 5 percent in mid-2010 and 6 percent by the end of 2010. The central bank also said year-on-year loan growth had reached 14.5 percent by the end of April, in line with forecasts and bank business plans. This is consistent with the growing confidence among economic actors in the improving economic outlook, it said.

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Indonesian, Malaysian Palm Oil Makers Join Forces Against Critics

Kuala Lumpur. Palm oil producers from Malaysia said on Wednesday they had formed a coalition with their counterparts in Indonesia to counter intensified campaigns that blame the industry for rapid deforestation. The Indonesia-Malaysia Palm Oil Group brings together six organizations from the two nations, which account for 85 percent of global production. They said they had joined forces after being attacked by nongovernment organizations that have accused them of causing deforestation and threatening the survival of endangered species. The group will enable us to get together to defend some allegations that were made by the NGOs, said Mamat Salleh, chief executive of the Malaysian Palm Oil Association, a member of the group. The NGO had influenced some large corporations to boycott the use of palm oil. Mamat said. Its getting serious, we are not as bad as portrayed by those people. Palm oil, which is used extensively across the globe for biofuels, processed food and toiletries, is a key export for the two nations, earning them more than $25 billion last year. As well as the MPOA, the coalition includes the Indonesian Palm Oil Association, the Association of Plantation Investors of Malaysia in Indonesia and the Indonesia Oil Palm Smallholders Association. It also includes the Sarawak Oil Palm Plantation Owners Association and Federal Land Development Authority. The announcement comes after Indonesian producer Sinar Mas Group was dropped by highprofile clients following allegations it was not following environmentally sound practices. In a statement, the coalition said it agreed to engage with the existing Roundtable on Sustainable Palm Oil for a more practical scheme. The RSPO was formed in 2004 to establish stringent social and environmental criteria including a ban on clearing forests in order to plant the crop. Mamat did not elaborate on the practical scheme or whether the group will shun the RSPO, but said we will decide what we want to do. Sinar Mas has been hit hard by campaigners after Anglo-Dutch multinational Unilever and Switzerlands Nestle this year dropped it as a supplier in response to protests by Greenpeace. In March, US food company Cargill asked Sinar Mas to respond to Greenpeaces allegations and sought an investigation by the RSPO. The environmental group accused the producer of wiping out rainforests and destroying endangered orangutan habitats. Sinar Mas has rejected the claims.
Agence France-Presse

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