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BSD Bulletin
Indonesia Trade & Investment News 3/15
INDONESIA AND THE REGION
THIS MONTH’S BULLETIN
The Economist’s Indonesia Summit 2015 “The Decision: New Light
or False Dawn?”
Indonesia and the Region
 The Economist’s Indonesia Summit
2015 “The Decision: New Light or False
Dawn?”
Government Ministers, CEO’s, academics, ambassadors and journalists gathered at the Shangri La hotel on February 11 to analyze the first 100 days of
Jokowi’s Presidency. The
Economist’s
Indonesia
Summit for 2015 raised
insightful discussion on
themes such as economic
growth, Jokowi’s control,
the importance of the service sector, the new forestry and environmental
management ministry, the
potential for Indonesia’s
digital economy and the
changes needed for the
energy sector. Cross cutting themes that the panelists could not avoid included the burden of poor infrastructure, land rights and the lack of policy implementation.
The event was opened by Jon Fasman, The Economist’s Southeast Asia Bureau
Chief and Mardiasmo, the Vice Minister of Finance. Mardiasmo said the government wants to focus on revenue collection, in particular increase the collection of
personal income tax. Experts later joined him and Benedict Bingham from the International Monetary Fund ran the audience through Jokowi’s new growth model.
Bingham warned that the challenge for 2015 will be laying the foundations for this
model so that they can build confidence and attract investment. This strategy
which focuses on trade and skilled labour will be the biggest shift in policy compared to previous administrations which have been protective and inward looking.
Budi Sadikin from Bank Mandiri used very convincing numbers to demonstrate the
cost of the infrastructure that the Jokowi administration hopes to build. With a
very shallow money market in Indonesia, the government needs to incentivize
companies to bring their money back to Indonesia. The crowd laughed when
Sadikin said “I bet many people here have more money in Singapore than Indonesia”.
When discussing Jokowi’s power within the parliament, Peter Mandelson, the
chairman of Global Counsel, was adamant that the public is Jokowi’s main ally. It is
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Industry News
 Commemoration of SED-TVET Project
by GIZ
 Indonesia’s Downstream Rubber Industry - Waiting for Investors
Entrepreneurship Gathering
 How to Start a Franchise Business
KADIN Indonesia
 Jakarta Food Security Summit 2015
 BKPM One-Stop-Service (OSS) Centre
Socializations at KADIN Indonesia
Internship at BSD
 Learning “the Indonesian Way”
IBCSD’s Column
 Building Capacity in Resolving Land Use
and Resource Conflicts
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Events & Imprint
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vital for the president to maintain transparency, accountability and take the public with him. He must ensure the public understands his long term objectives and explain how the short term changes will have good long term results.
This will allow him time to implement his strategies.
Anies Baswedan, the Minister of Education and Culture, emphasized his three main priorities: empowerment of
education actors, quality of education and reform of education bureaucracy. He hopes ‘Kartu Pintar Indonesia’ will
help families afford education and reduce the opportunity cost of children not going to school. Rather than leaving
school to bring in money for the family, he wants children to want to go to the ‘taman’ again, the fun ‘park’ which
they don’t want to leave. He hopes this can be achieved by getting more involved in students’ lives and asking them
what they want. A major problem hampering the sector is the uneven distribution of teachers across Indonesia which
is caused by poor access to rural areas. “If you have a school on a main road you will have an oversupply of teachers,
if the school is two kilometers from a main road you will have a deficit” said Baswedan.
The audience was graced with the presence of Sofyan Djalil, the Coordinating Minister for Economic Affairs to
close a day full of interesting discussions on both problems and opportunities that face the President. “We live in an
era when booms and busts are common. So, if you can’t control the outside, fix the inside and make it investor
friendly” said Djalil. He explained that their two top priorities will be reforming bureaucracy and improving infrastructure. In his opinion the first will be easy, as Jokowi is one of the best leaders he has ever worked with. The second will
be tough, but not impossible.
Minister Djalil sees new light but infrastructure means false dawn. So the decision, only time will tell. (KR)
INDUSTRY NEWS
Commemoration of SED-TVET Project by GIZ
As a commemoration and reflection of the previous five years of Sustainable Economic Development through
Technical and Vocational Education and Training (SED-TVET) Project from German Federal Enterprises for International Cooperation (GIZ), an event entitled “A reflection of the project’s work during the past 5 years and a look into
the future” was held on February 11 at The Foundry No. 8, SCBD area. This event focused on the shared experience
during the project by inviting partners such as
related ministries, vocational schools at secondary level and higher, government local agencies, industry representatives and TVET experts. Regarding TVET Project improvement in
Indonesia, GIZ prepared seven booths to explore, which consist of School-to-Work Transition Classroom, TVET Management in Aceh &
Nias, Policy Lounge, Futurebooth, SED-TVET
Library, Trilateral Cooperation between Indonesia, Germany & Myanmar and Teaching Industry Showcase.
The Indonesian government through the
Ministry of Education has set a target to increase the vocational school graduates to
about 20 million graduates by 2020. Through
the given presentations, it was mentioned that
the TVET graduates are now already in demand from industry and the demand already exceeds the current number of
TVET graduates. Furthermore, 50% - 70% of TVET graduates are already employed. Based on this data and through
the good cooperation between Indonesian government, German government and industry, it shows that the industry
has already paid more attention to TVET graduates and given them more opportunities to be employed in labor market. However, the question on how to improve the key competencies or work ethic came out in the discussion session, whether it is possible to conduct and adapt an internship at earlier level (class 10 in the secondary level).
As the closing of this event, a MOU signing between GIZ and Astra was made in order to conduct and support
vocational teacher training. (GIZ, WL)
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Indonesia’s Downstream Rubber Industry - Waiting for Investors
By Global Business Guide
With global prices for natural rubber trading near five-year lows, Indonesia's push to develop the country's downstream industries takes on a new significance. Falling to USD 1.50 per kilogram in late 2014 (from more than USD 6 in
2012), the price for tire-grade rubber reached a level that is too low to cover the production costs of many Indonesian
growers, especially smallholders. Earlier efforts to lift prices by the main producing countries by curbing output had
proven ineffective.
For Indonesia, processing more of the commodity domestically rather than shipping it abroad in unprocessed
form is a way to increase domestic demand and thereby alleviate the impact of low global prices, but building the
processing and downstream industries requires substantial capital expenditure. Given the country's rising need for
rubber, this is an opportunity investors should consider.
Overview of the industry
National rubber output reached 3.1 million tons in 2013, and the Indonesian Rubber Association (Gapkindo) expected a similar or slightly lower performance in 2014. The vast majority of produce is exported, with the domestic
automotive sector consuming most of the remainder. Altogether, Indonesia exported USD 9.39 billion worth of rubber and rubber-made goods in 2013, amounting 5.1% of the country's overall exports (6.3% when excluding oil and
gas).
Production and exports of natural rubber (in million tons):
2010
2011
2012
2013
2014 *
Production
2.7
3.0
3.0
3.1
3.0 – 3.1
Export
2.4
2.6
2.4
2.7
2.5 – 2.7
Sources: Statistics Indonesia (BPS); Ministry of Agriculture
* 2014 figures: Estimates from Gapkindo
Adding value to natural resources
In recent years, the Indonesian government has been stressing the need to nurture downstream industries in
both the agricultural and mining sector. Thanks to rapidly rising demand from the domestic automotive and other
industries, rubber could be one of the foremost beneficiaries of this policy. With around 85% of Indonesian rubber
leaving the country, there is ample resource that could potentially support a thriving rubber goods industry.
Currently, downstream activity in rubber is less than impressive and is limited both in scale and scope (mainly
tires and gloves). According to BKPM, most investment in the rubber industry from 2011 to 2013 went into upstream
activities, such as rubber curing and the production of crumb rubber and smoked sheets. One of the main obstacles to
building latex processing facilities and rubber goods factories is the lack of infrastructure in remote regions, especially
reliable access to gas and electricity. Another difficulty is that the natural rubber industry needs to grow hand in hand
with chemical industries (including synthetic rubber) to produce the compounds used in end pro-ducts.
Unlike rubber, other major Indonesian plantation crops have seen active downstream developments. It is interesting to note that Indonesia has in place a progressive export tax regime to support downstream palm oil and cocoa
businesses, while no equivalent exists for rubber.
Meanwhile, a 10% value-added tax (VAT) imposed on numerous commodities, including rubber latex, in July 2014
was heavily criticized in the industry with producers warning it would hurt rubber output and exports.
Rubber industry clusters
As an incentive to spur development of specific regions and industries deemed important for the country's overall
economic development, Indonesia grants a multifaceted tax facility on certain investment projects. Investors can apply for a reduction of corporate net income tax amounting to 30% of the investment value (spread out over six years)
and reduced income tax on dividends paid to offshore taxpayers.
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More important than these financial incentives, at least in the long run, is the government's industrial policy. The
MP3EI foresees the establishment of regional growth centres for different industries. Sumatra is set to become the
focal point for the natural resource industry in general and the rubber products industry in particular. The stated goal
is to provide simple procedures, swift permits and reliable infrastructure for manufacturers looking to set up shop in
designated industry clusters, with a view to facilitating the growth of vertically and horizontally integrated agroindustrial centres. Ultimately, this should boost the range and quality of local rubber-made products, such as conveyor
belts and other industrial goods as well as tires and spare parts for the automotive industry.
ENTREPRENEURSHIP GATHERING
How to Start a Franchise Business
Based on the Indonesian Statistical Agency (BPS), in
February 2014 there were around 44,20 million entrepreneurs from the total Indonesian population. Compared to the same data in the previous year, there is an
increase of 190 thousand new entrepreneurs within 1
year. As a partner of the government, the Indonesian
Chamber of Commerce and Industry through KADIN-BSD
intends to conduct an activity in form of gathering
“Sarasehan Kewirausahaan” to assist and support prospective entrepreneurs in developing their business plan
and entrepreneurs who have already started their business. Through this event, entrepreneurs can meet, discuss, exchange ideas about their experiences and problems they are facing and build a networking with fellow
entrepreneurs or with other related parties. A series of
this gathering will be conducted regularly by KADIN-BSD starting from February 2015 discussing various topics related
to entrepreneurs. Related speaker will be invited for each gathering to share their experiences in doing business.
The first gathering was held on February 10 by inviting Hendy Setiono (Franchise owner of Kebab Baba Rafi) as a
speaker, moderated by Peter Reger (Senior Advisor for Business Support, Entrepreneurship, Training and Sustainable
Development; KADIN-BSD) and attended by industry representatives, academicians and college students. This time,
the gathering was focused on how to start a franchise
business through the experience of Hendy in creating
and developing his franchise business. According to
Hendy, his idea to open the franchise business came
when he was in Qatar seeing many kebab sellers,
which did not exist in Indonesia yet. With only 400 US
dollars as his initial capital, Hendy Setiono opened
the business by selling kebab under the brand “Kebab
Baba Rafi”. His franchise has now expanded nationwide and international. With this success, he started
to expand his business by opening “Piramiza” and
ayam bakar “Mas Mono” restaurant.
Positive feedbacks about this gathering were well
received by KADIN-BSD and the participants had also
the opportunity to share their ideas, thoughts and
wishes regarding to the entrepreneurial situation in
Indonesia. The video of this gathering can be accessed on https://www.youtube.com/watch?v=I4rIW9XVJ9.
The next entrepreneurs gathering “Sarasehan Kewirausahaan” will be conducted in April 2015 by inviting a
speaker from one of entrepreneur communities (in confirmation). For further info: [email protected]. (WL)
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KADIN INDONESIA
Jakarta Food Security Summit 2015
Day 1
The 1996 World Food Summit defined food security as existing “when all people at all times have access to sufficient, safe, nutritious food to maintain a healthy and active life” yet according to the Food and Agriculture Organisation (FAO), nearly 20 million Indonesians are still malnourished. 28% of Indonesia’s children are underweight and 42%
suffer from stunted growth. Therefore, food
security is a major point to improve in Indonesia.
The Jakarta Food Security Summit (JFSS)
held on the 12 and 13 of February at the Jakarta
Convention Centre, organized by the Indonesian
Chamber of Commerce and Industry (KADIN).
JFSS was opened by President Joko “Jokowi”
Widodo and First Lady Iriana. During the opening of the summit, the subject mainly focused
on the agricultural sector that is the centre of
the states’ economies. This sector provides the
main livelihood for most of the citizens and consequently contributes a large share of GDP, ensures employment of the workforce, serves a
large portion of foreign exchange earnings, supplies basic food and other income for the large
rural populations. This sector is also the initial place for finding sustainable resolutions to overcome the existing food
crisis. This relates to agricultural productivity, as well as, to policy frameworks in order to resolve food shortage and
deficiencies.
“The summit will be held once every two years and it will guide the efforts of companies in the field, both national and international.” – as said by the head of the Indonesian Chamber of Commerce and Industry (KADIN)’s food
committee, Franciscus Welirang. He also added that “the increase of the global population from 7 billion people to 9
billion by 2045 is an important factor to increase more awareness regarding the importance of boosting food production and sustainability. That ‘population growth’ is why we need to produce enough food. There is a needs to increase
food production by 70%,” Franciscus said.
In order to prosper and meet the increase of demand created by rapid population growth, “Indonesia will need to
step up food production as the country has got sufficient resources, yet it has to be better managed” KADIN Chairman
Suryo Bambang Sulistyo added. Among the officials attending the first day of the summit included Coordinating Minister for Economic Affairs Sofyan Djalil, Trade Minister Rachmat Gobel, Industry Minister Saleh Husin, and Vice Governor of Jakarta Djarot Saiful Hidayat.
Day 2
On the second day of the summit, there was one participant who led the discussion to another scope. Farah
Quinn has a unique definition of food security and how this is related to prosperity and welfare. With emotional pictures shown on the presentation board, the Indonesian celebrity chef touched on the quality of the food consumed
by our children. Food security is threatened by the poor conditions of food in school canteens and shops around
schools; products are heavily modified with chemicals and proteins are lied out in the sun to rot. These chemicals and
bacteria enter the bodies of our children: the ones that are supposed to carry the Indonesian economy to further horizons. The future self-sufficiency of the country lies in the hands of the country’s children, but how are they supposed
to when we are putting poison in their hands? After all, health, productivity and prosperity are interrelated. A healthy
community is a productive community and productivity is prosperity.
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However, there is another consideration to
bear in mind with our kids. As another participant
mentioned, Indonesia’s self-sufficiency is endangered because young people are not interested in
farming due to its reputation as a low-level sector.
In order to elevate the popularity of agriculture,
one of the proposals Farah Quinn puts out is to
include it in the school program. The program has
to include sanitizing skills and teachings on composting and harvesting for which the school yards
present perfect use. At the end of the cycle, the
grown food will be provided in the school canteens
so the students can take pride in their accomplishments.
But why is it vital for a country to be selfsufficient? The Commander of the Indonesian National Armed Force, Moeldoko, was invited to answer this query. He
did not need a lot of words to explain the relation between food security and national security. What do you do when
the country is under attack and completely dependent on imports? You are doomed to starve your nation. Indonesia
needs to take care of both its current and future farmers and ensure self-sufficiency, in order to safeguard national
security. (EH)
BKPM One-Stop-Service (OSS) Centre Socialization at KADIN Indonesia
Indonesia Investment Coordinating Board (BKPM) visited Indonesian Chamber of Commerce and Industry (KADIN)
on February 5, 2015 to socialize the One-Stop-Service Centre (PTSP). PTSP is an integrated service between BKPM
with some ministries and institutions. Until now, there are already 22 ministries and institutions, which place their
staffs at BKPM office to serve business license service more effective.
Franky Sibarani, head of BKPM, mentioned that the foreign investment in Indonesia from the 3rd to 4th quarter in
2014 has increased by 16% with the amount of investment 461.3 trillion rupiah. He also stressed that
BKPM focuses on attracting investor in five sectors:
electricity, agriculture and livestock, maritime, labor
intensive industries, import substitution industries
and export oriented industries. This time, BKPM
faces a challenge, where there are 15.500 unreported principal licenses, which occurred from 2007
to 2012. The latest investment report also shows a
new record, that Malaysia has become the third
largest investor in Indonesia. Now, the investment
trend is already shifted from manufacture to service
sector.
Farah Ratna Dewi Indriani, deputy of BKPM for
Investment Climate Development, stated that the
aim of PTSP is to simplify the process and save investor’s time, so they do not need to come to different ministries in order to obtain different licenses. Investors are only
allowed to make a contact with BKPM staff and the rest of license process will be completed by the authorized ministry staff representative. She also added that investors would be able to track their documents process. The PTSP is
only a beginning; however, there are some technical licenses that are still not available on BKPM desk. Thus, investors
still have to come to different ministry offices.
The discussion about the launching of PTSP received positive responses from KADIN members. It is hoped that
this new system will attract new investors and create good investment environment. (RP)
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INTERNSHIP IN BSD
Learning “the Indonesian Way”
By Katrina Reid
‘The Indonesian Way’ was a term that came up in a few of the meetings I participated in while interning at KADIN
BSD. “Yes, of course they do it like that, that’s ‘the Indonesian Way’. Having studied Indonesia language and culture
for four years at University in Australia I thought I knew ‘the Indonesian Way’. But, as I discovered, there is a lot to
learn about ‘the Indonesian Way’ and no better place to learn it than KADIN Indonesia as the heart of Indonesia’s
Business chambers and associations.
On the first day I arrived I felt I had almost tried half of
the countries different types of “gorengan”, and after the
first week I felt I had tried almost all Indonesian dishes!
Bonding over food, sharing and trying new foods was something I learnt to love doing together every lunchtime. This is
not the ‘the Australian Way’, to eat together and socialize
every lunch time so I felt extremely welcomed. I also learnt
not to be surprised that sometimes when the clock strikes
11:30 am I might hear “Ayo, makan!”.
Before and after lunch I was busy learning the roles of
the business matching sector. I replied to numerous emails
with information about businesses across Indonesia, I verified the companies contact details by calling them and I
also referred them onto KADIN’s different associations. The
high volume of emails taught me two things about ‘the Indonesian Way’; First, My colleagues at the Business Support
Desk work very hard to serve businesses in Indonesia and
abroad, and I think their role is extremely important. Second, There are a significant number of overseas companies
wanting to do business across many sectors in Indonesia which means they see opportunity and they have confidence in this country. So I believe now is the time to show
what I have experienced, that ‘the Indonesian Way’ of doing things can more entrepreneurial because the Indonesians I know are driven, creative, cooperative and teams
players, they just need some guidance and direction from
the government. While at KADIN BSD I was lucky enough to
attend the first Entrepreneurship gathering and I believe initiatives like this will be an effective tool to help develop
businesses across Indonesia and provide them with basic information for success.
I also attended a press conference in which Suryo Bambang Sulisto addressed Economic issues for 2015. The media asked numerous questions and at first I thought they were not listening to the response, just texting instead. But I
learnt that ‘the Indonesian Way’ is to interview and write the response directly onto the phone, and perhaps directly
onto twitter. Indonesians are very connected people, connected to their phone, to people and on occasion to their
‘tongsis’. Jokes aside, being well connected empowers the people of Indonesia so I am excited to return and see how
they use this to their advantage.
I am so grateful to KADIN BSD for allowing me to experience ‘the Indonesian Way’ and gain some invaluable experience working with Indonesian and German colleagues, translating documents, liaising with Indonesian businesses,
attending high profile events and importantly, making fantastic new friends.
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IBCSD’S COLUMN
Building Capacity in Resolving Land Use and Resource Conflicts
The private sector is the primary economic driver and employer in Indonesia,
and the biggest user of land-based resources. For these reasons, the private
sector has a strong interest in finding effective approaches to addressing gaps in
order to balancing growth, equity, and sustainability.
IBCSD in collaboration with KADIN Indonesia has been going through assessment process to identify
approaches in providing the clearing house for social conflict issues. For addressing the issue, IBCSD has been
taking actions by supporting KADIN Indonesia on evaluating and pressure testing the potential opportunities for
KADIN to meaningfully address the social conflict issue involving private companies. The earlier findings were
companies lacked the capacities, knowledge and resources to effectively prevent, mitigate, and resolve social
conflict, and that there were few initiatives may designed to directly support companies in addressing these gaps.
For this purpose, on 4 February in Jakarta, IBCSD organized a sharing session to build a dialogue around
social conflict resolution, to share knowledge and update relate to social conflict on business operation, including
the opportunity for IBCSD members to learn from experience of outside Indonesia.
By Larry A. Fisher, Ph.D , a research professor from School of Natural Resources and the Environment,
University of Arizona, USA was the resource person in the session. Such mechanism on conflict resolution, sucess
factor, and institutional issue were part of the discussion. A success story of the Environment Conflict Resolution (ECR) in USA can be a reference in handling land and natural resource conflict in Indonesia, although
the complexity is vary.
Number of companies were invited and actively participated during the discussion. IBCSD, as support to
KADIN will held more sharing sessions with different topic as capacity building to business sector.
EVENTS
Date
Event
More Information
March 18 - 21, 2015
INABIKE 2015
http://www.inabike.net/
March 19 - 22, 2015
Megabuild 2015
http://www.megabuild.co.id/
th
April 15 - 18, 2015
The 13 International Hotel, Catering Equipment, Food & Drink Exhibition
http://www.foodhotelindonesia.com/
April 21, 2015
Asia Africa Business Summit (AABS) 2015
http://aabs2015.kadinindonesia.org/
IMPRINT
Publisher:
KADIN Business Support Desk (BSD) - Indonesian Chamber of Commerce and Industry
Menara Kadin Indonesia, 24th fl., Jl. H. R. Rasuna Said X-5 Kav. 2-3
Jakarta 12950, Indonesia
Tel. +62 21 527 4503, [email protected]
About KADIN BSD
KADIN Business Support Desk is the service unit of the national Indonesian Chamber of Commerce and Industry (KADIN) in the Kadin Secretariat. Its
major goal is to help foreign parties to settle in Indonesia and to support Indonesian companies on their way to international markets.
BSD also works as research partner on emerging issues in investment and trade. It draws on a network of Indonesian and international institutions.
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