Indonesia Update: OJK Board of Commissioners' Selection Update

INDONESIA UPDATE | February 9, 2017
Authors: Kim Yaeger, Artha Sirait and Ian Saccomanno
 
LOOKING AHEAD
 
 

The Financial Services Committee and the ICT Committee are working to hold a Digital Economy Mission to Indonesia, taking place on May 3-4, 2017, in Jakarta. An official invitation with additional details will be distributed soon. Please contact Ian Saccomanno at isaccomanno@usasean.org and Matt Solomon at msolomon@usasean.org for further information.

 
THE COUNCIL'S TAKE
 
 

OJK Board of Commissioners’ Selection Update

With the incumbent OJK Board of Commissioners’ (BOC) terms of service ending on July 23, President Joko “Jokowi” Widodo tasked a selection committee chaired by Finance Minister Sri Mulyani to take charge of the selection process of a new BOC. The BOC is responsible to organize a system of regulations that would facilitate Indonesia’s financial system to grow in a sustainable and stable manner while protecting the interests of the Indonesian consumers. The selection committee consists of nine representatives from the government (which includes Bank Indonesia, Ministry of Finance and Coordinating Ministry for Economic Affairs), academics and private sector representatives (both banking and non-banking financial institutions). On February 8, the selection committee announced that out of 843 applications, 107 candidates made it to the next round, including all of the seven incumbent commissioners. By law, OJK BOC’s structure consists of seven selected commissioners and two ex officio commissioners from the Ministry of Finance and the Board of Governors of Bank Indonesia. The shortlisted candidates also include several well-known political figures currently holding legislative roles with the House of Representatives. The next round of selection will be from February 8 – 24, involving the assessment of public input on the candidates. The selection committee will further scrutinize the applicants and name its 21 final candidates to President Jokowi in March, who will then shortlist it further and propose his 14 candidates to the House of Representatives for yet another screening from March through June. The new commissioners are expected to be inaugurated on July 21. Please click here for the official announcement listing the 107 candidates.  

Land Registration and Certification Reform Effort by National Land Agency

On February 8, the Minister of Land and Spatial Planning, Sofyan Djalil, stated that the government is in the process of improving its land registration and certification program to allow all qualified lands in Indonesia to be registered and certified by 2025. This effort is in line with the 7th and 8th Economic Policy Packages which among others, aim to improve the land registration and certification system, and to develop a “one-map policy” to harmonize the utilization of lands in Indonesia across industries. The National Land Agency will proactively assist by directly reaching out to landowners, especially small business owners who have not been able to expand their businesses due to the unclear status of their land ownership. Under the Indonesian Agrarian Law, a land certificate (hak milik) is considered the strongest evidence of a land title right. However, despite the importance of a land certificate, significant parts of lands in Indonesia (particularly outside of Java) remain unregistered and uncertified. Historically, Indonesia’s land law was created to abolish the dual system introduced during the Dutch colony. The law and its implementing policies were then expanded to also combine the new system with the traditional land tenure system, which resulted in a complex land system. Setting the traditional land rights aside, there are generally two classifications of land rights in Indonesia, state-owned lands or private lands. The rights over private lands are further sub-classified into:

  • Right of ownership (hak milik) which offers ultimate ownership, only available to Indonesian citizens including certain Indonesian legal entities (excluding foreign investment companies despite obtaining an Indonesian PMA company status).
  • Right to build (hak guna bangunan – HGB) which is the most common right utilized by both Indonesian and foreign investors. The right allows its holders to build facilities over a particular land to be utilized, though limited in duration.
  • Right to cultivate (hak guna usaha – HGU) which is typically utilized for agriculture purposes, available to Indonesian and non-Indonesian citizens including legal entities. This right is limited in duration.
  • Right of management (hak pengelolaan) which is only available to government institutions.
  • Right to utilize (hak pakai), which grants permission to utilize lands or collect products from such land, available to Indonesian and non-Indonesian citizens. This right is limited in duration.
 
IN THIS UPDATE
 
 
Regional Affairs
Indonesia aiming to intensify economic diplomacy with African countries: Minister
Indonesia, South Africa talk to boost trade
Indonesia will remain strategic partner of US: Ambassador Donovan
Indonesia-S. Korea hold first meeting of high working level strategic dialogue

National Affairs
Indonesia`s economy could grow higher than projected: Minister Nasution
Indonesia to issue regulation on water level monitoring systems to tackle forest fires
Government Needs New Fuel, Sweetened Drink, Vehicle Excises to Meet Massive Revenue Target
SOE Assets to Grow 11% in 2017
Indonesia's GDP growth slows to 4.9% in Q4
Investments in 2017 will be Better, Minister Says
Indonesia adopts cautious stance on US new trade policy

Customs
Food and beverage exporters lament ‘high import tariffs’ in new markets

Economics
Moody's Outlook Upgrade Promises Robust Future for Investors: Analysts
Govt Spending to Shore Up 2017 GDP Growth: Finance Minister
IMF Keeps Positive Assessment, Outlook on Indonesia
Indonesian economic growth accelerates to 5.02%

Energy
Disruptions at Top Two Copper Mines Threaten Global Supply
Risk of gas shortage haunts Indonesia
Power Producers Must Hand Over Their Plants to PLN at the Contract's End
Electricity Price Rule May Hamper Geothermal Exploration: INAGA

Financial Services
Names of OJK commissioner candidates announced
Indonesia’s First Online Lending Service Stretches Wing to Bali
Fintech Talk: Fintech in Indonesia: Between fragmentation and financial inclusio...
Indonesian court postpones hearing in billion-dollar dispute of Goldman, tycoon

Food & Agriculture
Indonesia needs to rejuvenate palm oil plantations
Local breeders welcome court decision on cattle and meat imports
Gov't Accelerates Land Certification Program  
Pakistan boosts orange exports to Indonesia

Infrastructure
Govt prioritizes communication infrastructure development in E. Indonesia
Chaos at Indonesian ports disrupts coal shipping
North Sumatra Ports Infrastructure to Complete This Year: Pelindo
Indonesia Port Disruptions Cause Coal Shipping Delays
Switzerland to spend millions on development projects in RI
Jakarta's Airport Express Train Unfeasible, Gov't Back to Drawing Board
IDB approves $488 million in financing for Indonesia
Gov't Seeks Ways to Finance LRT Projects  

Manufacturing
Company to construct factory in Palu economic zone
Indonesia December Retail Sales Grow 10.5% Y/Y: Bank Indonesia Survey
Gaikindo auto show to showcase latest models, driverless car prototype
 
ARTICLE CLIPS
 
 
Regional Affairs

Indonesia aiming to intensify economic diplomacy with African countries: Minister Antara News 8th Feb 2017
Indonesia is targeting strengthening diplomacy with African countries in 2017, particularly for improving economic ties, Foreign Minister Retno Marsudi stated at a bilateral meeting with South African President Jacob Zuma in Cape Town, Monday evening. "Africa is a region having huge potential, hence it is important for Indonesia to continue improving and expanding cooperation with countries in the continent, especially with South Africa," she noted in a statement received by ANTARA, Wednesday.

Indonesia, South Africa talk to boost trade The Jakarta Post 8th Feb 2017
Indonesia and South Africa are strengthening their economic cooperation, Indonesia’s top diplomat has revealed, as a delegation of state officials and businesses seeks to bolster the country’s presence on the African continent. Foreign Minister Retno LP Marsudi was in Cape Town on Monday for bilateral talks with her South African counterpart. She encouraged state-owned firms in her entourage to seize the available trade and investment opportunities in South Africa.

Indonesia will remain strategic partner of US: Ambassador Donovan Antara News 7th Feb 2017
Indonesia will remain an important and strategic partner of US despite significant steps already taken or will be taken in future by the new administration under President Donald Trump, US Ambassador to Indonesia Joseph R Donovan Jr stated. "Although I cannot predict the future, I can tell you that your country will remain an important and strategic partner of US. For our part, we wish to continue to work with you on a wide range of issues that affect both our nations," Donovan said, in a public lecture at Daar el-Qolam Islamic boarding school, in Tangerang, Banten, on Monday.

Indonesia-S. Korea hold first meeting of high working level strategic dialogue Antara News 7th Feb 2017
Indonesia and South Korea held the first meeting of the High Working Level Strategic Dialogue (HWLSD) at the Pancasila Building of the Indonesian Foreign Affairs Ministry here on Monday. "This is a mandate of the meeting between the Korean and Indonesian presidents last year who had tasked two vice ministers of foreign affairs to hold a dialogue," Vice Minister of Foreign Affairs A.M. Fachir stated after the meeting here on Monday.

National Affairs

Indonesia`s economy could grow higher than projected: Minister Nasution Antara News 8th Feb 2017
Indonesias chief economic minister Darmin Nasution expressed optimism here on Wednesday that the country's economy could grow higher than projected at 5.1 percent this year with government support and policies."We are optimistic that the economy in 2017 will grow above the 5.1 percent baseline," he stated. He added that the efforts to boost growth would be done through the acceleration of development of infrastructure, issuance of deregulation package, boosting industrialization process and improving the quality of vocational education.

Indonesia to issue regulation on water level monitoring systems to tackle forest fires Channel NewsAsia 7th Feb 2017
Indonesia will soon issue a regulation to make it compulsory for land concession owners to install water level monitoring systems to ensure the peatlands are kept moist. The Peatland Restoration Agency (BRG) told Channel NewsAsia that the decree will be signed by the Environment and Forestry Minister within the next few weeks. "We’re right now discussing the details of the technical guidelines of how to do the restorations with our colleagues from the Environment and Forestry Ministry," said head of BRG Nazir Foead on the sidelines of a work visit in central Kalimantan.

Government Needs New Fuel, Sweetened Drink, Vehicle Excises to Meet Massive Revenue Target Jakarta Globe 7th Feb 2017
The government needs to revisit its plans to impose excise on sugar-sweetened beverages, fuel and vehicles if it were to bring up the $13 billion in additional revenue it needs to meet the massive tax collection target this year, tax expert and lawmaker said on Tuesday (07/02). Without a tax amnesty program — that exempts tax dodgers from fines on back taxes as long as they agree to pay a small amount of fees to the government — the government would only have been able to meet 87 percent of its tax collection target last year, reflecting the country's limitation in growing its domestic taxpayer base while facing an increasingly uncertain global economy that has also hit its commodity exports hard.

SOE Assets to Grow 11% in 2017 Tempo 7th Feb 2017
The Ministry of State-Owned Enterprises (SOE) projected SOE assets to reach Rp7,035 trillion in 2017, or an 11.22 percent increase compared to last year’s figure of Rp6,325 trillion. Data from the SOE Ministry as of February 6 shows that the projected SOE assets in 2016 increased by 9.8 percent compared to Rp5,760 trillion in 2015. “Assets growth was, among others, helped by improved SOE investments, which were funded by PMN [state capital investment],” the data revealed.

Indonesia's GDP growth slows to 4.9% in Q4 The Straits Times 7th Feb 2017
Indonesia's gross domestic product grew 4.94 per cent in the fourth quarter to mark the slowest pace since the opening three months of last year, as household consumption cooled and government spending contracted, data showed yesterday. South-east Asia's largest economy also faces uncertainty surrounding US policies under President Donald Trump and in one of its other main trading partners China, even as a spate of interest rate cuts last year should start to pay dividends by supporting investment.

Investments in 2017 will be Better, Minister Says Tempo 7th Feb 2017
Finance Minister Sri Mulyani Indrawati, expressed her confidence that investments in 2017 will be much better compared to last year. "[Investment rate] will probably still under five percent. This is one of [the government's] homework for 2017," Sri said on Tuesday, February 7, 2017. Sri explained that several factors, including results of a meeting between the Financial System Stability Committee (KSSK), Financial Services Authority (OJK), and Bank Indonesia (BI), indicated that the banking industry has shown an improving projected credit growth.

Indonesia adopts cautious stance on US new trade policy The Star Online 6th Feb 2017
Indonesia’s central bank gave its strongest signal yet that it may be done with cutting interest rates as it adopts a cautious stance with the US Federal Reserve set to tighten further and president Donald Trump pursuing a new trade policy. Bank Indonesia cut its benchmark rates six times in 2016, by a total of 150 basis points, in a bid to boost lending and revive economic growth. The bank left rates unchanged last month while maintaining at the time that there was room for further easing.

Customs

Food and beverage exporters lament ‘high import tariffs’ in new markets The Jakarta Post 7th Feb 2017
Domestic food and beverage producers have raised concerns about high import duties charged by non-traditional export destinations in Africa and Latin America. Indonesian Food and Beverage Association (GAPMMI) chairman Adhi Lukman said these import tariffs ranged between 20 percent and 40 percent.

Economics

Moody's Outlook Upgrade Promises Robust Future for Investors: Analysts Jakarta Globe 9th Feb 2017
Moody's Investors Service's decision to upgrade its credit outlook on Indonesia to "positive" from "stable" late on Wednesday (08/02) provided investors with a much-needed assurance of the country's long-term prospect. A better outlook indicates a possible rating upgrade that allows the country to attract more foreign investors by selling government bonds at lower rates.

Govt Spending to Shore Up 2017 GDP Growth: Finance Minister Jakarta Globe 7th Feb 2017
The Indonesian government wants to ensure that spending contributes more to economic growth this year, Finance Minister Sri Mulyani Indrawati said on Tuesday (07/02), as it tries to respond to weaker-than-expected growth in the fourth quarter last year. $10 billion of spending cuts announced by Sri Mulyani within a week of her appointment as finance minister in mid-2016 were one of the reasons economic growth slowed in the second half of last year, economists say.

IMF Keeps Positive Assessment, Outlook on Indonesia Jakarta Globe 7th Feb 2017
The International Monetary Fund has lauded Indonesia's prudent mix of macroeconomic policies and structural reforms which have preserved stability amid challenging shifts in the global environment, an IMF end-of-mission statement released on Friday (03/02) said. The Indonesian government managed to keep a robust economic growth of 5 percent last year — compared to 4.8 percent a year earlier — on the back of solid economic policies and increased household consumption, keeping it among large emerging market economies with the highest growth.

Indonesian economic growth accelerates to 5.02% The Jakarta Post 6th Feb 2017
Indonesia's GDP rose by 5.02 percent last year, compared with 4.88 percent in 2015, the Central Statistics Agency (BPS) reported on Monday. Looking just at the fourth quarter of the year, however, the country’s economy experienced a slowdown, with year-on-year GDP growth falling to 4.94 percent from 5.02 percent in the third quarter.

Energy

Disruptions at Top Two Copper Mines Threaten Global Supply Jakarta Globe 8th Feb 2017
Disruptions at the world's two biggest copper mines by strikes and other issues this week are threatening to reduce global supplies of the metal, pushing benchmark prices back towards their highest levels for the year so far. BHP Billiton said it would halt output in Chile at its Escondida mine, the biggest copper producer, during a strike to begin on Thursday (8/2).

Risk of gas shortage haunts Indonesia The Jakarta Post 8th Feb 2017
The risk of a gas shortage is haunting Indonesia as demand continues to soar on the back of lower supply and poor infrastructure, with 2019 predicted to be the starting point of potential shortages. State-owned oil and gas giant Pertamina estimates that demand for gas in the form of liquefied natural gas (LNG) will increase by 4 percent to 5 percent every year, mostly boosted by the power and industrial sectors.

Power Producers Must Hand Over Their Plants to PLN at the Contract's End Jakarta Globe 7th Feb 2017
Starting this year, the government will require independent power producers to transfer new power plants to state power company Perusahaan Listrik Negara when their contracts expire, in a move to ensure state control over the critical sector.

Electricity Price Rule May Hamper Geothermal Exploration: INAGA Tempo 6th Feb 2017
The Indonesian Geothermal Association (INAGA) is disappointed with the Energy Ministry's regulation No.12/2017 on the use of new renewable energy for electricity. INAGA fears that the rule will hamper efforts to discover geothermal reserves. "The clauses are so biased, they could hamper geothermal exploration," INAGA chairman Abadi Purnomo said on Sunday, February 5.

Financial Services

Names of OJK commissioner candidates announced The Jakarta Post 8th Feb 2017
The government-sanctioned committee to select the Financial Services Authority (OJK) board of commissioners has announced the 107 candidates who have made it through the selection's first phase. They were shortlisted from 843 applications. The participants come from various backgrounds, such as academia, financial authority officials, industry players and politicians, according to an official letter from the committee.

Indonesia’s First Online Lending Service Stretches Wing to Bali Jakarta Globe 7th Feb 2017
After only two years on the scene, UangTeman, Indonesia's first online lending service, which allows Indonesians in Jakarta, Bandung, Yogyakarta, Solo, Magelang, Surabaya, Semarang and now Bali greater access to quick and transparent loans, has become a lucrative business. UangTeman chief executive and co-founder, Aidil Zulkifli said there is certainly a market to be tapped in Bali, with 35% of Balinese still not having access to mainstream loans.

Fintech Talk: Fintech in Indonesia: Between fragmentation and financial inclusio... The Jakarta Post 7th Feb 2017
Imagine yourself ordering a bowl of instant noodles from a small food stall in a remote village. When it’s time to pay, the stall owner presents you with their low-end smartphone, on which you would place your finger to confirm payment. In a blink of an eye, a sum of money has just been transferred from your account to the owners’ to pay for the noodles. This is what financial technology (fintech) is all about. A feature of fintech that must not be ignored is that it is not just a simple matter of technological marvels; it is also about financial inclusivity. What was illustrated above has become a reality in India.

Indonesian court postpones hearing in billion-dollar dispute of Goldman, tycoon Reuters 7th Feb 2017
An Indonesian court postponed on Tuesday the hearing of a billion-dollar dispute between Goldman Sachs (GS.N) and a local tycoon by two weeks, granting him time to gather more evidence to prove a claim the U.S. bank's unit unlawfully sold shares he owned. Goldman had taken the unusual step of counter-suing the retail-to-property businessman - Benny Tjokrosaputro - in a Jakarta court claiming reputational damage. The court hearing on Tuesday was set to have given Tjokrosaputro a chance to rebuff Goldman's assertion, but it is now delayed until Feb. 21.

Food & Agriculture

Indonesia needs to rejuvenate palm oil plantations Antara News 8th Feb 2017
With some 11.6 million hectares of plantations, Indonesia needs to rejuvenate its palm oil trees to maintain its position as the worlds largest crude palm oil (CPO) producer. The country needs to rejuvenate its palm oil plantations to increase its CPO production, as in the midterm, the Industry Ministry has accorded priority to increasing investment in the palm oil processing industry that needs raw material.

Local breeders welcome court decision on cattle and meat imports The Jakarta Post 8th Feb 2017
Local breeders have welcomed the Constitutional Court’s decision on cattle and meat imports, which they claim will ban buffalo meat imports from India, except in emergency situations. Cow and Buffalo Breeders Association (PPSKI) chairman Teguh Boediyana said that meat purchased from countries prone to foot and mouth disease (FMD) could only happen during specific occurrences like natural disasters leading to beef shortages.

Gov't Accelerates Land Certification Program   Tempo 8th Feb 2017
Land and Spatial Planning Minister Sofyan Djalil said that the government is in the process of accelerating the land certification program to allow all lands across Indonesia to be registered and certified in 2025. "This year, we have set a target to certify 5 million patches of land," Sofyan said to Tempo on Wednesday, February 8, 2017.

Pakistan boosts orange exports to Indonesia The Jakarta Post 7th Feb 2017
Indonesian fresh fruit importers say Pakistan will face tough rivalry from China. Pakistan hopes to see an increase in exports of its famous Kinnow oranges to Indonesia, as it has started to infiltrate the market through giant retailers. A press statement from the Pakistani Embassy made available to The Jakarta Post states that consignments of the Pakistani Kinnow have started arriving in Jakarta, and are currently being sold in many major grocery chains, including Carrefour, Ranch Market, Hypermart and Giant.

Infrastructure

Govt prioritizes communication infrastructure development in E. Indonesia Antara News 8th Feb 2017
The government of Indonesia has prioritized the development of communication infrastructure in the eastern part of Indonesia. "The government is developing communication infrastructure in the eastern part of Indonesia, and it has become our priority," Minister of Communication and Information Rudiantara said in his remarks during the National Press Day (HPN) 2017 held in Ambon here on Wednesday.

Chaos at Indonesian ports disrupts coal shipping Reuters 8th Feb 2017
Coal traders and ship operators cited several reasons for the loading delays. According to domestic online media suarakalimantan.com, citing statements from local authorities, coal hauling roads were closed by the South Kalimantan government in three locations, leaving "thousands" unable to work.

North Sumatra Ports Infrastructure to Complete This Year: Pelindo Tempo 8th Feb 2017
Bambang Eka Cahyana, president director of state-owned port operator PT Pelabuhan Indonesia I (Persero), also known as Pelindo I, said that North Sumatra ports will commence operations this year. Improvements to port infrastructure are expected to boost economic growth in the province. Bambang explained that the company has been stepping up construction of port infrastructure in the past two years. He is hopeful such improvements would attract more shipping lines, goods owners and investors.

Indonesia Port Disruptions Cause Coal Shipping Delays Jakarta Globe 7th Feb 2017
Loading disruptions at ports in East and South Kalimantan on the Indonesian side of Borneo island are causing a coal supply shortage in one of the world's most important export regions, causing delays as ships wait to take on new cargoes.

Switzerland to spend millions on development projects in RI The Jakarta Post 7th Feb 2017
Switzerland has allocated 75 million Swiss Franc (US$75.56 million) for various development projects in the 2017-2020 period to enhance bilateral relations with Indonesia. The funds would be allocated to macroeconomics assistance, private sector development, infrastructure and trade, the head of economic development cooperation at the Embassy of Switzerland in Indonesia, Martin Stottele, said Monday after meeting Industry Minister Airlangga Hartarto.

Jakarta's Airport Express Train Unfeasible, Gov't Back to Drawing Board Jakarta Globe 7th Feb 2017
The government is going back to the drawing board with an express train that would connect two major airports of Jakarta, after a study indicated the track would not generate enough return to attract private investors. This is another setback for the capital in its struggle to cope with growing urbanization and traffic.

IDB approves $488 million in financing for Indonesia The Jakarta Post 7th Feb 2017
The Jeddah-based Islamic Development Bank (IDB) last weekend approved a financing deal worth US$488 million to support infrastructure development and education in Indonesia. Of the total, $250 million will be used to develop Java’s southern coastal road (Pansela) to increase its capacity and thereby alleviate congestion on the northern coastal road (Pantura), which is known for often being overcrowded. The project will include the construction of a 158-kilometer new road as well as bridges in Yogyakarta, Central Java and East Java.

Gov't Seeks Ways to Finance LRT Projects   Tempo 6th Feb 2017
 The government is looking for ways to resume the light rapid transit project that was hampered by financial issues. However, solutions to the issues have not been apparent, although the government has held a limited meeting at the Presidential Palace. "We will hold another meeting to discuss the [project's] financing scheme," Transportation Minister Budi Karya Sumadi said at the Presidential Palace on Monday, February 6, 2017.

Manufacturing

Company to construct factory in Palu economic zone The Jakarta Post 9th Feb 2017
One company has received a principle license for foreign investment from the Investment Coordinating Board (BKPM) to open a factory in the Special Economic Zone (KEK) in Palu, Central Sulawesi. The president director of Bangun Palu Sulteng Ltd, which manages the KEK, confirmed that Sofi Agro Industries Ltd would invest in the Palu KEK.

Indonesia December Retail Sales Grow 10.5% Y/Y: Bank Indonesia Survey Jakarta Globe 8th Feb 2017
Indonesia's retail sales in December grew 10.5 percent from a year earlier, a slightly stronger pace than in November, a survey by Bank Indonesia (BI) showed on Wednesday (8/2).November annual retail sales growth was revised to 9.9 percent from the previously reported 10 percent.

Gaikindo auto show to showcase latest models, driverless car prototype The Jakarta Post 8th Feb 2017
The Association of Indonesian Automotive Manufacturers (Gaikindo) will showcase the latest automotive technology from renowned global car producers, including a prototype of an autonomous vehicle, during its annual car exhibition in August. Almost all the world’s major car producers, such as Audi, Honda and Lexus, will take part in the 11-day Gaikindo Indonesia International Auto Show (GIIAS), Gaikindo chair Yohanes Nangoi told a press conference in Jakarta on Tuesday.