Indonesia Update: June 28, 2018

July 3, 2018 9:00 AM - 10:00 AM EDT - Energy Committee Quarterly Call: Please join us for the second Energy Committee Quarterly Call of 2018. During the call Mr. Ali Al-Saffar, Energy Analyst at the International Energy Agency's Directorate of Global Economics and one of the authors of the IEA's Southeast Asia Energy Outlook 2017, will provide a briefing on energy trends in Southeast Asia. A Q&A session will follow the briefing. Mr. Al-Saffar's official bio can be found here. You can register for the call here.

July 5, 2018 10:30 AM - 12:00 PM WIB - Indonesia Committee Members Meeting: Please join us to discuss and review the latest on the Council's key advocacy efforts, in addition to streamlining our next steps. The meeting will also explore the broader strategy for U.S. business engagement Indonesia. You can register for the meeting here.

Indonesia Holds Largest Simultaneous Regional Elections to Date

On June 28, Indonesia held elections for governors, mayors, and regents in districts across the country. The elections mark the beginning of positioning for the national elections that will be held in 2019 and various factions claimed victories in different parts of the countries, though local party coalitions are often not reflective of the national coalitions. President Jokowi remains the front-runner for next year, though it is clear he will face serious challengers and his campaign has effectively already begun. The Council’s analytical update discussing the regional elections and the races to watch can be found here.

Ministry of Manpower Introduces New Regulation on Foreign Workers and Language Teaching

On March 26, President Joko “Jokowi” Widodo issued Presidential Decree No. 20 of 2018 on the Utilization of Foreign Workers (Decree 20) which enters into force on June 29, replacing Presidential Decree No. 72 of 2014 (Decree 72). The decree provides a variety of new facilities to ease the process of employing foreign workers and aims to boost foreign investment. It simplifies foreign work permits by removing the requirement for a separate IMTA (Permit to Employ an Expatriate), treating the required RPTKA (Expatriate Deployment Plan) as both RPTKA and IMTA. The decree also introduced a requirement in Article 26 obliging employers to facilitate Indonesian language training to foreign workers, excluding those employed in emergency situations, those employed temporarily, members boards of commissioners/directors, and members of management and supervisory boards. Further details on how this requirement will be enforced will be included in an implementing regulation that is expected to be issued by the Ministry of Manpower as soon as this week. The language class requirement will add additional costs for some business that do not already support language learning, though it is significantly less burdensome than the language proficiency requirements from Minister of Manpower Regulation No. 16 of 2015, which President Jokowi revoked to increase foreign investment but some interest groups have been trying to bring back. Though some initial reporting implied the Decree 20 would be a de facto local language requirement, Ministry of Manpower officials have given assurances that this will not happen. The full text of the regulation can be found at this link (in Bahasa).

While likely a net positive for foreign investors in Indonesia, domestically, Decree 20 was met with criticisms from the opposition when it was signed in March. Prabowo Subianto, who is expected to run against Jokowi in the 2019 election, said the decree makes it easier to hire foreign workers, taking Indonesian jobs away and even compared it to a new form of colonialism. Former President Susilo Bambang Yudhoyono also weighed in and warned Indonesians of an invasion of foreign workers as a result of Decree 20. According to the Ministry of Manpower’s data, Indonesia currently has approximately 126,000 foreign workers in a total population of 255 million people. It seems clear that employing foreign workers is a topic that makes for a perfect campaign wedge issue and business should expect to see more on subject as the 2019 elections approach.

Update on Indonesia's National Single Window

The Government of Indonesia introduced Presidential Regulation No. 44 of 2018 on the Indonesia National Single Window (INSW) (Regulation 44/2018) to create an integrated national system to process import-/export-related documents. The regulation went into effect on May 30. There are two updates in Regulation 44/2018 that clarify and specify provisions in former regulations on INSW, Presidential Regulation No. 10 of 2008 and Presidential Regulation No. 76 of 2014. The full text of Regulation 44 can be found here (in Bahasa).

First, on its use, the regulation sanctions the online system to continuously operate and fill in the relevant information security standards, synchronize data and information between users, and provide access to trade-related data. INSW users are required to ensure the validity of the data they provide, back-up the data of all electronic transactions processed by the system, and pay the fee for the use of the service. The regulation does not define the penalties for misuse of the system.

Second, on the system’s organization, the regulation stipulates the establishment of the National Single Window Agency. Supervised directly by the Minister of Finance, it is defined as a non-echelon agency tasked to: 1) formulate and implement guidelines related to the INSW management and the system’s organization; 2) facilitate the submission, attachment, and termination of provisions related to post-border through the system, and 3) simplify and standardize the INSW in relation with regards to trade policies. The regulation also established Single Window Service Units in related line ministries and agencies in order to improve the service quality of INSW. These Units will assist the Agency in coordinating its functions across relevant ministries and agencies. Lack of coordination among them in the past has caused implementation issues for INSW.

In addition to two new matters above, Regulation 44/2018 maintained the establishment and organization of INSW Board of Advisors, as mandated in Regulation 76/2014. The Board is to be served by the Coordinating Minister of Economic Affairs as its head and Minister of Finance as its deputy, with members being other relevant ministries and agency heads such as Minister of Trade, Minister of Industry, and Minister of Transportation.

These updates should improve the institutional infrastructure of INSW, which has had some implementation challenges, and support interconnection within the ASEAN Single Window (ASW). Launched on January 1, ASW is a network connecting the national single windows of ASEAN member states and promises to significantly reduce the cost of trading within the region.

Constitutional Court refuses to pave way for Kalla to seek third term The Jakarta Post 28th Jun 2018
The Constitutional Court (MK) has rejected judicial review petitions challenging a provision in the 2017 Elections Law that prevents a president and vice president from seeking a third term in office.

Prabowo, Zulkifli discuss possible coalition for 2019 presidential election The Jakarta Post 25th Jun 2018
Gerindra chairman Prabowo Subianto and National Mandate Party (PAN) chairman Zulkifli Hasan, who is also the People's Consultative Assembly speaker, held a meeting at the latter's official residence in the Widya Chandra complex in South Jakarta on Monday.

Why West Java election matters to Jokowi, Prabowo The Jakarta Post 25th Jun 2018
Many have noted the political significance of West Java, the nation’s most populated province, which shares a border with the capital city of Jakarta. In the words of West Java Governor Ahmad Heryawan: “If you win the election in West Java, you’ll win the presidential election.”

Govt declares voting day 'public holiday' The Jakarta Post 25th Jun 2018
The government has officially declared Wednesday, the day during which 171 provinces, cities and regencies across Indonesia will hold regional head elections simultaneously, a national holiday.

What you need to know about East Java election The Jakarta Post 24th Jun 2018
With a few days to go until voting day, the East Java gubernatorial election is still a dead heat between incumbent Deputy Governor Saifullah "Gus Ipul" Yusuf and former Social Affairs Minister Khofifah Indar Parawansa.

2018 regional elections: The basics The Jakarta Post 22nd Jun 2018
With 171 elections simultaneously taking place on June 27, the 2018 regional elections are surely something to keep an eye on. More than half the country’s population with 152,066,685 registered voters will choose the new executive heads for 17 provinces, 115 regencies and 39 cities. The General Elections Commission (KPU) has set a target of 77.5 percent voter turnout.

Prabowo raises funds; Gerindra denies being 'cash-strapped' The Jakarta Post 22nd Jun 2018
Gerindra Party central executive board chairman Habiburokhman has rejected speculations that the party is cash-strapped. He made the statement in response to Gerindra patron Prabowo Subianto’s decision to raise funds to cover the party’s political costs.

Prabowo accuses Jokowi govt of weakening TNI The Jakarta Post 21st Jun 2018
Gerindra Party chairman Prabowo has accused the government of trying to weaken the Indonesian Military (TNI) and putting the country at political risk.

Indonesian Air Force to go ahead with Hercules aircraft purchase plan Antara News 28th Jun 2018
The Indonesian Air Force (TNI AU) will go ahead with its plan to purchase Hercules aircraft of type J to replace its aging fleet, Air Force Chief of Staff Marshal Yuyu Sutisna stated.

Bank Indonesia Expected to Raise Rates Again on Renewed Rupiah Weakness WSJ 28th Jun 2018
Perry Warjiyo, governor of Bank Indonesia, reiterated last week that the central bank will discuss measures to strengthen economic stability, primarily the stability of the rupiah including further rate increase.

May records Rp 685t revenue, Rp 94.43t deficit The Jakarta Post 26th Jun 2018
The Finance Ministry has announced that through May, the government had reaped Rp 685.09 trillion (US$48.33 billion) in state revenue, mainly supported by a greater collection in non-oil and gas income taxes and value-added taxes.

Tax allowance rule revised to include more sectors The Jakarta Post 26th Jun 2018
After issuing a revised regulation on tax holidays, the government is now revising a regulation on tax allowance to expand the number of sectors that are eligible to receive the fiscal incentive and simplify the procedure of granting it.

Government reviews impact of US-China trade war Antara News 26th Jun 2018
The government is reviewing the impact of the trade war between the United States and China on Indonesia, Vice President M. Jusuf Kalla stated.

Bank Indonesia to help boost property business The Jakarta Post 25th Jun 2018
Bank Indonesia (BI) Governor Perry Warjiyo has said the central bank will introduce loan to value (LTV) relaxation and other policies to help boost the property business during BI's board of governors meeting on Wednesday and Thursday.

Economic chief pledges to end trade deficit The Jakarta Post 25th Jun 2018
Coordinating Economic Minister Darmin Nasution pledged on Monday to end the country’s trade deficits after the Central Statistics Agency (BPS) announced another trade deficit in May.

Indonesia books US$1.52b trade deficit in May The Jakarta Post 25th Jun 2018
Indonesia booked a trade deficit of US$1.52 billion in May as oil prices continued to soar, although Indonesian exports also increased, the Central Statistics Agency (BPS) announced on Monday.

Indonesia books US$356.9 billion in foreign debts The Jakarta Post 22nd Jun 2018
Indonesia’s foreign debt stood at US$356.9 billion as of April, growing by 7.6 percent year-on-year (yoy), which was slower than the 8.8 percent growth recorded in the previous month, Bank Indonesia (BI) revealed on Thursday.

Govt. Sets Guidelines for the Implementation of Good Mining Techniques Hukum Online 27th Jun 2018
In a bid to provide proper guidance relating to good mining techniques, as well as to implement Regulation of the Minister of Energy and Mineral Resources (“Minister”) No. 26 of 2018 on the Implementation of Good Mining Principles and the Supervision of Minerals and Coal Mining,[1] the Minister has issued Decree No. 1827 K/30/MEM/2018 on Guidelines for the Implementation of Good Mining Techniques (“Decree 1827/2018”).

China's First-Half Coal Imports Surge, Indonesia the Winner: Russell Jakarta Globe 26th Jun 2018
China's seaborne coal imports are on track to have surged by around 14 percent in the first half of the year, with Indonesia emerging as the big winner among exporters.

Green finance to fund Indonesia's new development projects Eco-Business 26th Jun 2018
Indonesia, one of the world’s biggest greenhouse gas emitters, is turning to green finance markets to fund new development projects it promises will be both environmentally and socially friendly. In February, the Indonesian government raked in $1.25 billion from issuing a “green” Islamic-compliant bond, or sukuk, hailed as the first sovereign green sukuk in the world. (The first corporate green sukuk was issued by a Malaysian company in July last year.) The funds raised will go to finance government projects that are both environmentally friendly and compliant with Islamic financing laws.

Incremental Regulatory Changes for the Indonesian Mineral and Coal Mining Industry Lexology 21st Jun 2018
The key changes introduced by MEMR Regulation 25/2018 are as follows: Ore exports: For several years, the Indonesian ore export ban has been implemented by only allowing products which achieve a certain mineral content or rock quantity to be exported outside of Indonesia (by obtaining the necessary export permits). MEMR Regulation 25/2018 updates the list of minimum mineral content and rock quantity applicable to such exports. New products on this list include nickel sulphide nickel and nickel sulphide hydrate with nickel content of 20% or higher and nickel oxide with nickel content of 65% or higher. Importantly, MEMR Regulation 25/2018 also clarifies that any mineral or rock products which are not expressly regulated by this list can only be exported after MEMR determines the minimum content of such products.

Provisions on Imports and Exports of Horticultural Seeds Amended Hukum Online 27th Jun 2018
In a bid to accelerate the implementation of licensing services for imports and exports of horticultural seeds, the Minister of Agriculture (“Minister”) has issued Regulation No. 17/PERMENTAN/HR.060/4/2018 of 2018 (“Amendment”), which amends Regulation of the Minister No. 15/PERMENTAN/HR.60/5/2017 on Imports and Exports of Horticultural Seeds (“Regulation 15/2017”).

Agriculture Ministry blacklists five importers for alleged fraud The Jakarta Post 25th Jun 2018
The Agriculture Ministry has blacklisted five companies for reportedly importing small onions they claimed to be shallots.

Farmers association to host Asian Agriculture and Food Forum The Jakarta Post 25th Jun 2018
The Indonesian Farmers Association (HKTI) will host the Asian Agriculture and Food Forum (ASAFF) from June 28 to 30 in Jakarta to try to address various problems faced by farmers in Indonesia and in other Asian countries.

Indonesia's growing thirst for coffee drains premium bean supplies The Jakarta Post 22nd Jun 2018
For decades, Indonesia has supplied coffee roasters worldwide with prized beans that give a distinctive taste to brews favored by connoisseurs. Most locals, however, preferred tea. But now, as younger generations switch to coffee and hundreds of independent coffee shops and roasters pop up across the archipelago, Indonesia's consumption of beans is rising. That's left less coffee for export and forced up prices for foreign buyers.

Unilever Indonesia sells spreads businesses The Jakarta Post 21st Jun 2018
Publicly listed consumer goods manufacturer PT Unilever Indonesia agreed to sell its food spreads businesses to KKR & Co. during a shareholders meeting on Thursday. The buyout is worth a reported Rp 2.92 trillion (US$ 210 million).

An opportunity rising from e-commerce The Edge Markets 27th Jun 2018
Just over a decade ago, e-commerce was almost an alien concept in this part of the world. Today, however, the sector is booming in Southeast Asia. As digital users grow, so will e-commerce consumers. According to BMI Research calculations, Southeast Asia’s online shopping market in six of its largest economies — Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam — is set to rake in an estimated US$64.8 billion (RM257.94 billion) in 2021, a giant leap from US$37.7 billion recorded in 2017.

Private investment firm established to help SOEs fund infrastructure projects The Jakarta Post 28th Jun 2018
A private investment firm, PT Bandha Investasi Indonesia (BUMN Fund), was established Thursday to help state-owned enterprises (SOEs) fund infrastructure projects.

Luhut, Kono discuss progress of Japanese projects in Indonesia The Jakarta Post 26th Jun 2018
Coordinating Maritime Affairs Minister Luhut Pandjaitan met with Japanese Foreign Minister Taro Kono at his office in Jakarta on Monday to discuss the progress of several cooperation projects between the two countries, including the Patimban Port project in Subang, West Java, the MRT in Jakarta and the Jakarta-Surabaya medium-speed railway and aquaculture projects in Natuna, Riau Islands.

Japan to Invest More, Strengthen Maritime, Security Cooperation With Indonesia Jakarta Globe 25th Jun 2018
Foreign Minister Retno Marsudi and her Japanese counterpart, Taro Kono, have  agreed to strengthen bilateral cooperation in maritime affairs, counterterrorism, infrastructure development and manufacturing, with the Japanese willing to expand their production base in Indonesia.

Operator starts design process for Soekarno-Hatta International Airport’s Termin... The Jakarta Post 25th Jun 2018
State-owned airport operator PT Angkasa Pura II (AP II) has begun designing Soekarno-Hatta International Airport's Terminal 4 in Tangerang, Banten.

Jokowi optimistic Trans Java toll road fully completed in 2019 Antara News 23rd Jun 2018
President Joko Widodo (Jokowi) said he was optimistic the 1,167 kilometer Trans Java toll road extending between Merak in the western end of Java and Banyuwangi in the eastern coast of Java would be fully completed by the end of 2019.

Britain Set to Ease Visa Requirements for Indonesian Students Jakarta Globe 21st Jun 2018
Britain announced this week that it will change its immigration rules to make the visa application process easier for Indonesian students, by reducing documentation requirements.