SBY AND THE INDONESIAN ECKONOMY TODAY

IBRAHIM ISAS – SELECTED NEWS AND VIEWS

FOCUS: SBY AND THE INDONESIAN ECKONOMY TODAY

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--- Cluttered development concepts

--- SBY lists 5 obstacles in development programs

--- More tax, the greater the development . . .Yudhoyono

--- SBY holds to speed development in three provinces

--- RI tough conditions for resending workers to Malaysia

--- Analysis: BBM price hike is cheap political fuel

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Cluttered development concepts

The Jakarta Post Editorial:

President Susilo Bambang Yudhoyono last week expressed his frustration over the failure, and, sometimes even the refusal of regional leaders and lower-ranking officials to implement decisions or programs adopted at his Cabinet meetings.

The problems, we think, can be blamed partly on the excesses of regional autonomy, bureaucratic incompetence, negative inertia and Yudhoyono himself, who has been notorious for his weak leadership.

But the President also is well-advised to reflect on whether the development programs decided on by his Cabinet could be easily understood by regional administrations.

For example, many may have been confused by development concept jargons so often propagated by the government these days.

Try to digest these: Economic corridors, integrated economic development zones, special economic zones, free trade zones and industry clusters.

During the national working conference with his ministers and regional leaders in Bogor on Tuesday the President launched economic corridor programs which will develop industry clusters and business centers to support local economies along the coastlines of Java, Sumatra, Kalimantan, Sulawesi and Papua.

The corridors, he said, would serve as development highways to connect new growth centers on the five major islands.

One day later, on Wednesday Investment Coordinating Board chief Gita Wirjawan talked about another issue. He told a hearing with the House of Representatives that of the 14 integrated economic development zones launched on the five major islands in 2005, only three had been realized and able to attract private investors.

The other 11 have remained undeveloped and unable to attract private investments due to acute lack of infrastructure, licensing red tape, inadequate fiscal incentives and overlapping authorities.

As part of the action programs during the first 100 days of Yudhoyono’s second-term, Coordinating Minister for the Economy Hatta Rajasa and several other economic ministers launched the development of clusters of resource-based industries in several provinces in January 2010.

In February last year, Hatta promoted another concept of special economic zones (SEZs) for development of three agriculture-based SEZs. Two SEZs in Medan (North Sumatra) and Dumai (Riau) would focus on palm oil-based industries while the third in Merauke (Papua) would focus on food crops, notably rice.

We find it difficult to understand why the government uses so many seemingly different and confusing concepts when what it really means is simply the development of SEZs based on the SEZ law enacted in September 2009.

SEZs essentially call for the development of special regions with streamlined procedures for business licensing and the hiring of expatriates, flexible labor regulations, tax breaks, customs duty exemptions and good infrastructure to woo investors in export-oriented industries.

In essence, the economic corridors, integrated economic development zones, industry clusters, free trade zones and export-processing zones are actually almost identical to the SEZ development concept that has been successfully implemented in China, India, Malaysia and Vietnam.

Natural resource-based industry clusters can generate localized economies arising from specialization and integration of manufacturing operations, reduce transportation costs and significantly improve supply chain management.

SEZs are also capable of enhancing development of economic corridors, which in turn will help form development highways through economic linkages between one SEZ to another.

But then, at the end of the day, whatever the name of the concept may be, nothing will happen without adequate infrastructure.

SBY lists 5 obstacles in development programs

The Jakarta Post

President Susilo Bambang Yudhoyono in a working meeting Monday listed five factors hindering the country’s development.

The first is the bureaucracy lag, especially in the central government, in implementing plans that have been agreed upon.

“We make a decision in the Cabinet session. The respective minister understands it, but [the execution] in the ministry is delayed, they say it needs to undergo more talks…” Yudhoyono said Monday as quoted by antara.com.

The second hindering factor is regional governments having their own interests, which become obstacles in carrying out agreed development plans.

The third is investors failing to fulfill their promises, thus halting development programs.

“The fourth [factor] is when one knows that a regulation is hindering [the process], and that it can be improved, and yet it is not. The fifth is an unhealthy political process at central and regional [levels]. Let us think clearly,” Yudhoyono said.

He added that Indonesians needed to know why a plan was not carried out.

“In the era of democracy and transparency, once a master plan is agreed upon, do admit if there is an obstacle. The people need to know who is hindering it, who is irresponsible and who is failing to keep promises, and finally, who caused the failure. Let’s find solutions,” Yudhoyono said. — JP

— JP

The more tax, the greater the development, says Yudhoyono

Rangga D. Fadillah, The Jakarta Post, Jakarta | Tue, 03/20/2012

President Susilo Bambang Yudhoyono and other top officials submitted their annual tax forms (SPT) in drop boxes provided at the Finance Ministry in Jakarta on Monday.

Together with Yudhoyono, People’s Consultative Assembly (MPR) chairman Taufik Kiemas, Finance Minister Agus Martowardojo, Bank Indonesia Governor Darmin Nasution and Constitutional Court chairman Mahfud M.D. also dropped off their forms, followed by all ministers in the second United Indonesia Cabinet.

“Paying taxes is very important for the country. The government has the duty to develop the country and provide welfare for the people. To do that, we need a lot of money and the highest revenue for the government comes from the taxation sector,” Yudhoyono said.

“The more discipline the people have in paying their taxes, the more development and welfare we can provide,” he said.

Lastly, Yudhoyono requested that all tax officers provide the best services to tax payers and avoid any misconduct that might lead to legal problems like corruption.

“Tax officers must do their jobs within legal procedures. There must be no illicit practices or corruption,” he said.

Agus said in a speech that the Tax Directorate had made strides in bureaucratic reform over the past several years.

“That achievement is reflected through a public survey conducted by the Corruption Eradication Commission [KPK]. We got 7.65 out of 10, above the minimum standard set by the commission of 6,” he said.

Last year, the office also received a good mark, 3.79 out of 4, in the tax payers’ satisfaction survey conducted by the Bogor Agricultural Institute (IPB).

Agus said the Tax Directorate was committed to increasing the state’s revenue from taxes. In 2011, the government received Rp 872.6 trillion (US$95.11 billion) in taxes, or 99.3 percent of the government’s target.

This year, the directorate is aiming to boost its collected taxes to Rp 1,032 trillion, or 78 percent of the nation’s total revenues.

Agus claimed that the tax office was committed to increasing tax revenue. In 2011, total tax revenue reached Rp 872.6 trillion, or 99.3 percent of the target set by the government.

To secure this year’s tax revenues, the tax office has launched several strategic programs, including the National Tax Survey (SPN), exploring potential revenues from certain sectors, improving administration for businesspeople and educating small- and medium-size enterprises.

“The coming of the President and other top officials today to submit their tax forms is a show of the state institutions’ obedience to their tax obligations. I hope this can set a good example for all citizens,” Agus said.

To make the form submission easier and simpler, the tax office has provided drop boxes in strategic locations across the country and utilized post offices to facilitate the submission. The office has also introduced electronic filing, which can be done on the office’s official website.

He said he agreed with Yudhoyono that tax officers should operate within the law to ensure the public did not doubt the success of bureaucratic reform at the tax office.

SBY holds meeting to speed development in three provinces

Nani Afrida, The Jakarta Post,

President Susilo Bambang Yudhoyono held a meeting Thursday to accelerate development in three provinces; Papua, West Papua and Sulawesi Tenggara.

Vice President Boediono and ministers from the Indonesian United Cabinet (KIB) II attended the meeting to hear presentations from the three governors.

"We must direct more attention to provinces that require more resources and budget to speed development," Yudhoyono said before the meeting.

Yudhoyono said successful development in the province was not only about development itself, but about management, collaboration, and concepts and synergy, between the central and local government.

"This is what we will do in the future," he said.

Yudhoyono added that over the past two years the government had allocated a huge budget amount to Papua, for example.

In 2009, Papua received Rp 16 trillion (US$1.76 billion), and Rp 19.8 trillion in 2010.

This year, Yudhoyono said, the government had allocated Rp 20 trillion to Papua.

"I just want to show that the budget amount allocated to the province has increased significantly," he said, adding that the government would make sure the development in the province would be a success.

RI applies tough conditions for resending workers to Malaysia

Ridwan Max Sijabat, The Jakarta Post, Jakarta | Tue, 03/20/2012

Indonesia will resume sending its migrant workers to Malaysia in April if both countries agree on standards of competence and monthly payments.

“We will resume the labor supply after we receive assurances from Malaysia on several crucial issues, such as monthly payments, cost structures and standards of competence. Both sides will have to monitor one another to ensure the protection of migrant workers,” Manpower and Transmigration Minister Muhaimin Iskandar said in Jakarta on Friday.

Indonesia announced a moratorium on June 26, 2009, following an increasing number of abuses against its workers in the neighboring country.

A joint task force from both countries met on Thursday and agreed on a 200-hour competence training program as required by Malaysia, and a demand by Indonesia to set the monthly minimum wage between 600 and 800 Malaysian ringgit (US$197 and $262), a significant increase from the rate of 400 ringgit prior to the suspension.

The Malaysian delegation, led by Dato Sheikh Yahya Mohamed, demanded all workers undergo a 200-hour training program prior to starting their contracts in four core jobs: housemaids, cooks, babysitters and carers for the elderly.

The Indonesian Manpower and Transmigration Ministry’s director general for overseas labor placement, Reyna Usman, said Indonesian workers would enjoy one day off every week and a maximum of 12 working hours per day.

They would also earn 108 ringgit per day’s overtime if they worked on their day off, she added.

Indonesia lifted the moratorium on labor to Malaysia in November 2011, after both governments signed a new labor agreement on Indonesian workers’ rights in Malaysia.

However, Malaysian newspaper The Star reported on Sunday that the “one maid, one task” ruling had caused an uproar in Malaysia, with the associations for both agents and employers now wanting to know whether the Malaysian officials had agreed to it, and if so, why.

“Reyna made the announcement and the meeting then moved on to other matters,” The Star quoted an Indonesian participant, who asked not to be identified.

The Association of Foreign Maid Agencies’ (Papa) acting president, Jeffrey Foo, said Malaysian officials should explain what transpired at the meeting. “If our officials agreed to it, they should explain it to us.”

Malaysian Maid Employers’ Association (Mama) president Engku Ahmad Fauzi Engku Muhsein concurred, saying: “There are many doubts that need to be cleared up. We want to know what really happened at the meeting.”

Malaysian Prime Minister Datuk Seri Najib Tun Razak expressed his surprise over the new conditions for sending maids to Malaysia.

Najib said, as quoted by The Star, that what was announced by Indonesia’s Labor Placement Development director-general Dr. Reyna Usman, was “not reasonable at all”.

“We hope on their side, they will revert to the agreement reached between myself and the Indonesian President, Susilo Bambang Yudhoyono [on this issue],” he said.

Late last week, Malaysian Human Resources Minister S. Subramaniam said Indonesia’s latest statement was not in line with the understanding reached by the two nations.

Commenting on a report from Jakarta, which said that maids would only perform one type of work, Subramaniam said that representatives from both countries would meet in Jakarta to resolve the matter.

Analysis: BBM price hike is cheap political fuel

Debnath Guharoy, Roy Morgan | Tue, 03/20/2012

Perhaps more than anything else, it is the price of fuel that influences the cost of almost everything, touching the lives of just about everybody in the country. Ever since the decision was floated as a trial balloon in February, the rumor mill has been working overtime. We’ve heard just about everything. Dark plots of a military coup right through to large-scale rioting that will set the country ablaze are among the stories that have done the rounds. The Blackberry Messenger, or BBM as it is popularly known, has been one of the instruments to engage in the ongoing and all-embracing debate on the other BBM, also the acronym for Bahan Bakar Minyak.

The impact on the KADIN-Roy Morgan Consumer Confidence index was immediate and punishing. The rating shed over 10 points in a single month, bringing back memories of a similar plunge the last time a raise was introduced. Commenting on the February results, Suryo Sulisto, chairman of KADIN, said, “This had to happen, it was inevitable. This is a good time for the fuel price hike to be introduced. Consumer confidence has been riding sky-high for a very long time, despite the gloom worldwide. It was time to burst the bubble. The increase will bring fuel prices closer to realistic levels. The subsidies have been too much for too long. Hopefully, some much-needed attention will finally be paid to the development of infrastructure and essential services.”

The Bank Indonesia monthly rating also dived, shedding six points. No surprise. But the difference between the two ratings made one noticeable difference crystal clear. The prospect of the hike is being received with even greater trepidation outside of the selected cities surveyed by the central bank each month. A look at the details will reveal the extent of the shock. Consumer confidence is down 10.2 points in February, the lowest since September 2010, when it stood at 132.3. Now it is two points lower than the 138.8 registered exactly a year ago in February of 2011.

The month’s big fall was driven by decreasing confidence across all components of the survey. In terms of personal finances 37 percent, down four points, say their family is ‘better off’ financially than a year ago. This continues to compare favorably with the 18 percent, up six points, who say their family is ‘worse off’ financially than a year ago. But the good news is that 54 percent of Indonesians still expect their family to be ‘better off’ financially this time next year. Remaining in the majority, the drop from the high of January was a mere five percentage points. I say a mere five points because the drop is relatively small in comparison with the overall crash of the index by 10 points. Similarly, the number of people who expect to be ‘worse off’ financially went up to just seven percent, up by only four points. Under the circumstances, these drops aren’t as severe as I would have expected.

In terms of the economy, 74 percent of Indonesians continue to believe that the nation will enjoy ‘good times’ financially during the next twelve months. In contrast, 26 percent, up six, say we’ll have ‘bad times’ financially. An overwhelming majority of 82 percent, down five, remain convinced that Indonesia will have ‘good times’ economically over the next five years. The people who expect ‘bad times’ economically went up by five points, to a relatively small 17 percent of the population.

A slight majority of Indonesians, 51 percent down five, continue to say ‘now is a good time to buy’ major household items. This is now closer to the 46 percent, up six points, who believe ‘now is a bad time to buy’ something like a refrigerator or TV set. Remarkably robust, under the circumstances.

To put this all in perspective, it’s an appropriate time to make a comparison with our wealthy neighbours down under. Indonesia’s score of 136.8 in these troubled times, is still higher than Australia’s best-ever of 133.2 in January 2005. These are the ratings from the same questions being asked for 40 years in Australia and seven in Indonesia, by the same institution in both countries, Roy Morgan Research. Even if we were to accept the usual stereo-typing of ‘optimistic Indonesians’ and ‘realistic Australians’, the confidence in both today and tomorrow expressed across the archipelago augurs well.

The prognosis is visible in the recent pages of Indonesia’s eco-political history. I expect confidence levels to drop some more in March and April. I’m not a fortune-teller but if the past is anything to go by, expect a plateau by June and the climb back upwards again, commencing July.

Is this why a beguilingly confident President Yudhoyono is off to China this week, ahead of the much-touted demonstrations starting today? Strange timing. And how much of the savings in subsidies will go to the common good and how much to the country’s Gayuses and Nazaruddins? Two questions I thought that were worth asking. Go figure.

The monthly rating is based on 2,106 face-to-face interviews conducted throughout Indonesia, not just a handful of cities. Men and women aged 14 and over were randomly selected during the month of February 2012.

The writer can be contacted at debnath.guharoy@roymorgan.com