Indonesia Update: August 29, 2018

Indonesia Update | August 29, 2018
Authors: Kim Yaeger, Artha Sirait, Ian Saccomanno and Bryan Yeoh
 
 
THE COUNCIL'S TAKE
 
 

OJK Issued New Fintech Regulation

On August 15, the Indonesian Financial Services Authority (OJK) issued Regulation No.13/POJK/2018 on Digital Financial Innovations within the Financial Services Sector (full text of the regulation here in Bahasa Indonesia). Regulation 13/2018 is a new regulation that came into effect on August 16. This regulation provides a comprehensive framework for OJK to monitor and regulate the burgeoning fintech industry in Indonesia as the previous fintech regulations only covered peer-to-peer (P2P) lending.

The regulation covers many issues, including transaction settlement, investment management, fund collection and distribution, insurance, market support, and digital financing, and dives into key areas of innovation such as artificial intelligence, big data, blockchain, cloud computing, open-source information technology, virtual technology, and the sharing economy.

Under Regulation 13/2018, fintech companies are required to register with OJK unless an exemption has been given. This requirement will make it easier for OJK to monitor fintech companies considering last month’s discovery that there are 227 unlicensed P2P companies. Similar with Bank of Indonesia’s regulation earlier this year, OJK has also set up a regulatory sandbox for the testing of new products and services. Companies can be in the regulatory sandbox for at most 1 year with the possibility of a six-month extension. Registered fintech companies are required to send monthly self-assessed risk reports while those that are in the regulatory sandbox need to send quarterly performance reports.

The regulation also sets out provisions for protecting consumers and data confidentiality. Fintech companies are required to establish onshore data centers and disaster recovery centers under the new regulation. While this OJK regulation does not make any reference to GR82, the data localization requirement is consistent with GR82’s Article 17. However, OJK may amend the data localization requirement in the near future as the Government of Indonesia is in the process of softening GR82’s data localization requirement.

OJK hopes this regulatory framework will further improve the domestic startup ecosystem to better enable fintech’s growth to be a new source of growth in Indonesia’s economy. The fintech industry is expected to contribute up to IDR 25.97 trillion (US$ 1.7 billion) to the economy. Besides policy changes, OJK recently inaugurated the OJK Innovation Center for Digital Financial Technology (OJK Infinity) to support the integration of the fintech sector into the national financial system. Additionally, OJK is interested in establishing fintech courses in universities as part of their efforts to cultivate the Indonesian fintech industry.

Indonesia Planning New Tariffs on Imported Goods in Effort to Lower Current Account Deficit

Indonesia is developing plans to apply new import tariffs to 900 commodities following the tariff guidelines of PMK 34/2017 on Income Tax for Imported Goods (PPh 22). The announcement came following Indonesia’s initial plan to apply new import tariffs to a list of 500 classes of goods earlier in August. The regulation’s rates are divided into several layers based on the good’s classification and the importer’s status: 2.5 percent, 5 percent, 7.5 percent, and 10 percent. Soybeans, wheat, and wheat flour, when importers use import identification numbers (API) would be charged a tariff of 2.5 percent while those without APIs would pay 7.5 percent, for example. The draft of the full regulation is currently with the Fiscal Policy Agency (BKF), headed by Suahasil Nazara and is expected to be issued in September.

Goods covered would include consumer goods, including B2C e-commerce purchases, and capital goods for state-led projects. The government is hoping the tariffs will encourage local substitution of the products and reduce the country’s trade deficit. The capital goods tariffs are part of a plan to increase local content in infrastructure projects led by the government and State-Owned Enterprises. This policy also includes a 6-month suspension in imports of capital goods for some projects, likely significantly delaying their completion. The consumer goods tariffs will focus on products where local companies could use the increased market power to expand their production. It would likely include vegetable oils, paper, rubber, and plastics according to the Central Bureau of Statistics (BPS). The list is under review by the Ministries of Industry, Trade, and Finance.

Responses to the plan from the local business community were cautious or even negative.

  • The Indonesian Employers' Association (APINDO) warned the government's plan to limit imports could reap sanctions from the World Trade Organization (WTO). APINDO also proposed the government should be very careful in determining the list of 500 goods since the domestic supply some of the commodities are insufficient.

  • KADIN, Indonesia’s Chambers of Commerce, also reminded the government to be careful to determine which commodities will be restricted.

  • The Association of Indonesian Fresh Fruit and Vegetable Exporters and Importers said that the restrictions on imports of consumer goods were inappropriate and had the potential to slow down the growth of the consumer sector.

  • The Indonesian Food and Beverage Entrepreneurs Association (GAPMMI) said that principally the business players oppose the import restrictions, especially if the regulation includes raw materials and capital goods. The regulation might disrupt the sustainability of the food and beverage industry which now accounts for 30 percent of non-oil and gas industry.

The decision was motivated by the latest foreign sell-off of Indonesian assets that followed reports showing the current account deficit had widened in the second quarter, putting further pressure on interest rates and the Rupiah. The current account deficit was US$8 billion in the second quarter, twice the total value of consumer goods imported in the same period. Because the tariffs are so small and on such a narrow range of products, mostly in the relatively small consumer sector, it is unlikely they will have a significant short-term effect on the deficit. Ordinarily, Indonesia’s current account deficit and reliance on foreign portfolio investment to finance it is not a significant challenge. However, it did leave the country particularly exposed to last quarter’s instability in developing markets, which the government fears will continue. At the same time, foreign direct investment, which is much steadier during periods of turbulence, has been falling as election season begins.

 
 
IN THIS UPDATE
 
 
Regional Affairs
India, Indonesia ink Memorandum of Understanding for cooperation in science and technology
Australia Expects Free-Trade Deals With Indonesia, Hong Kong This Year
Indonesia offers massive investment opportunities

National Affairs
BNPB: Lombok Quake Losses Reach IDR 7.7 Trillion
Sri Mulyani Resigns from Jokowi-Ma`ruf Amin`s Campaign Team
Indonesia should find new markets for palm oil: Minister
Businesses want to be involved in drafting import limitation rule  
Government targets 12.9 percent growth in 2019 state revenue
Jokowi cites OSS as achievement in licensing reform
Prabowo picks Sandi as running mate

Customs
Indonesia considers reducing imports of 500 consumer goods
US requests WTO to allow retaliation against Indonesia
How Indonesian customs is affecting cross-border B2C ecommerce
Time to Restrict GSP Benefits to Fight Trade Mercantilism

Energy
Pertamina finds new oil and gas reserve
Govt temporarily revokes export permit for 4 miners

Financial Services
Indonesia welcomes its first Blockchain Hub
Minister: 3 Percent Account Deficit is a Yellow Signal
Finance Ministry prepares regulation on import tariffs
Upcoming OJK Regulation on Fit and Proper Test Reassessment

Health & Life Sciences
Indonesia's top Islamic body issues fatwa against measles vaccine

ICT
OSS system not fully integrated yet: Kadin
Adopt a unicorn': Indonesia eyes plan to help startups expand across Southeast A...
Govt's OSS issues 7,004 business permits in first month
Telkom repairs Lombok infrastructure, opens aid portal for quake victims
Kominfo Cracks Down on Non-certified Jammers Sold on E-commerce
OJK issues regulation on financial technology
Association launches code of conduct for fintech

Infrastructure
Jakarta MRT has second successful trial run
Adhi Karya to Build Solo - Yogyakarta Toll Road Next Year
No new infrastructure project other than dams: Minister
Jokowi defends his infrastructure program

Manufacturing
Manufacturing industry makes impact on economic growth - ANTARA News

Travel & Tourism
Lombok Hotels Face Difficult Times, Association Says
 
ARTICLE CLIPS
 
 
Regional Affairs

India, Indonesia ink Memorandum of Understanding for cooperation in science and technology OpenGov 22nd Aug 2018
The Union Cabinet chaired by the Prime Minister Narendra Modi approved a Memorandum of Understanding (MoU) between India and Indonesia on Scientific and Technological Cooperation. 

Australia Expects Free-Trade Deals With Indonesia, Hong Kong This Year Jakarta Globe 18th Aug 2018
The Australian government expects to seal free-trade agreements with Indonesia and Hong Kong by the end of this year, its trade minister said on Friday (17/08).

Indonesia offers massive investment opportunities Borneo Bulletin Online 17th Aug 2018
Indonesian Ambassador to Brunei Darussalam Dr Sujatmiko has invited prospective Bruneian businessmen to invest in Indonesia’s booming economy which he said offers massive opportunities in various fields.

National Affairs

BNPB: Lombok Quake Losses Reach IDR 7.7 Trillion Tempo 22nd Aug 2018
The National Disaster Mitigation Agency (BNPB) estimated that the loss and damages caused by the earthquake in Lombok, West Nusa Tenggara, had reached IDR 7.7 trillion, according to BNPB spokesperson Sutopo Purwo Nugroho. 

Sri Mulyani Resigns from Jokowi-Ma`ruf Amin`s Campaign Team Tempo 21st Aug 2018
Finance Minister Sri Mulyani Indrawati resigned from the campaign team of Joko Widodo and KH Ma'ruf Amin, the presidential candidate pair. 

Indonesia should find new markets for palm oil: Minister The Jakarta Post 21st Aug 2018
Finance Minister Sri Mulyani has said that Indonesia should be aggressive in looking for new palm oil markets because of various problems in the traditional markets, such as negative campaigns against the commodity and the impact of the ongoing trade war.

Businesses want to be involved in drafting import limitation rule   The Jakarta Post 16th Aug 2018
Businesspeople have called on the government to involve them in drafting a regulation on import limitation of raw materials to ease the country's current account deficit (CAD) because many of their factories still rely on imported raw materials.

Government targets 12.9 percent growth in 2019 state revenue The Jakarta Post 16th Aug 2018
President Joko “Jokowi” Widodo is eyeing 12.9 percent growth in government revenue to Rp 2.14 quadrillion (US$146.5 billion) in his final year in office.

Jokowi cites OSS as achievement in licensing reform The Jakarta Post 16th Aug 2018
President Joko “Jokowi” Widodo has said the operation of the online single submission (OSS) system since last month is a government achievement in bureaucratic reform, particularly in the effort to eliminate red tape in business licensing.

Prabowo picks Sandi as running mate The Jakarta Post 10th Aug 2018
The Gerindra Party, PAN and PKS decided to pair Gerindra leader Prabowo Subianto and Jakarta Deputy Governor Sandiaga Uno without the support of the Democratic Party.

Customs

Indonesia considers reducing imports of 500 consumer goods The Jakarta Post 15th Aug 2018
Finance Minister Sri Mulyani said on Tuesday the Finance Ministry, together with the Industry Ministry and Trade Ministry, would team up to identify more than 500 imported consumer goods that could be replaced by local substitutes. 

US requests WTO to allow retaliation against Indonesia Lexology 10th Aug 2018
On August 2, 2018, the United States delegation to the WTO notified the WTO Dispute Settlement Body (DSB) that The United States considers that Indonesia has failed to comply with the recommendations and rulings of the DSB in the dispute Indonesia — Importation of Horticultural Products, Animals, and Animal Products (DS478). 

How Indonesian customs is affecting cross-border B2C ecommerce Tech in Asia 10th Aug 2018
With a population of 650 million and an extremely fast growing middle class, Southeast Asia is fast becoming a battleground for many brands. Most are choosing to penetrate and explore the market via cross-border ecommerce, as it requires the least cost and risk. 

Time to Restrict GSP Benefits to Fight Trade Mercantilism Information Technology & Innovation Foundation 20th Aug 2018
Duty-free access to U.S. markets represents a major benefit for many trading partners that clearly do not provide fair and reasonable market access or treatment of U.S. firms and their goods and services. 

Energy

Pertamina finds new oil and gas reserve The Jakarta Post 23rd Aug 2018
PT Pertamina EP, a subsidiary of state-owned oil and gas holding company Pertamina, has discovered a new oil and gas reserve, said Pertamina EP exploration and new discovery project director Achmad Alfian Husein on Thursday.

Govt temporarily revokes export permit for 4 miners The Jakarta Post 20th Aug 2018
The government has temporarily revoked four concentrate export permits because the mining companies had failed to fulfill their commitment to develop smelters as part of the permit's requirements.

Financial Services

Indonesia welcomes its first Blockchain Hub Digital News Asia 23rd Aug 2018
Indonesian Chamber of Commerce and Industry (Kadin), Blockchain Association, Agency for Creative Economy (Bekraf), and Hara (a blockchain project for social impact) came together to set up the country’s first Blockchain Hub. 

Minister: 3 Percent Account Deficit is a Yellow Signal Tempo 22nd Aug 2018
Coordinating Minister for Economic Affairs Darmin Nasution said that he cannot predict the current account deficit (CAD) for the end of 2018. Darmin asserted that the CAD will continue to change in accordance with the ongoing growth and development of the export and import. 

Finance Ministry prepares regulation on import tariffs The Jakarta Post 20th Aug 2018
Finance Minister Sri Mulyani Indrawati has said her ministry was preparing a ministerial regulation draft to regulate import income tax (PPh) to curb imports in response to the increasing country’s current account deficit (CAD).

Upcoming OJK Regulation on Fit and Proper Test Reassessment Hadiputranto, Hadinoto & Partners 13th Aug 2018
The Financial Services Authority ("OJK") is currently preparing a new regulation on fit and proper test reassessments for "primary parties" in the financial service sector. 

Health & Life Sciences

Indonesia's top Islamic body issues fatwa against measles vaccine ABC News 21st Aug 2018
Indonesia's peak Islamic body has issued a religious decree — or fatwa — declaring the Rubella-Measles vaccine to be "haram" or religiously forbidden.

ICT

OSS system not fully integrated yet: Kadin The Jakarta Post 10th Aug 2018
The Indonesian Chamber of Commerce and Industry (Kadin) has called on the government to improve the online single submission (OSS) system as it has not fully integrated the business licensing issuance service as applicants still need to go to several other government offices. “The OSS system only deals with business registration numbers (NIBs). There are still other things that we have to arrange at ministerial level and in the regional administration,” said Kadin deputy chairman Shinta Widjaja in Jakarta on Thursday as reported by kontan.co.id. 

Adopt a unicorn': Indonesia eyes plan to help startups expand across Southeast A... The Jakarta Post 10th Aug 2018
Indonesia wants Southeast Asian nations to cooperate in helping startups in the region worth at least $1 billion expand outside their home countries, the communication minister said on Friday. 

Govt's OSS issues 7,004 business permits in first month The Jakarta Post 10th Aug 2018
The government has issued 7,004 business permits through the online single submission (OSS) system within its first month of operation, a senior official said on Thursday. 

Telkom repairs Lombok infrastructure, opens aid portal for quake victims The Jakarta Post 27th Aug 2018
State-owned telecommunications company PT Telkom Indonesia is repairing its infrastructure that was damaged by the recent earthquakes in Lombok, West Nusa Tenggara. 

Kominfo Cracks Down on Non-certified Jammers Sold on E-commerce Tempo 25th Aug 2018
The Communication and Informatics Ministry (Kominfo) is set to crack down on the sales of radio frequency jammers that have been sold on many e-commerce sites. 

OJK issues regulation on financial technology The Jakarta Post 24th Aug 2018
The Financial Services Authority (OJK) has issued a regulation on financial technology (fintech), which is more comprehensive than a prevailing regulation that only regulates peer-to-peer lending. 

Association launches code of conduct for fintech The Jakarta Post 23rd Aug 2018
The Association of Indonesian Financial Technology (Aftech) has launched a code of conduct for responsible lending signed by 43 players in peer-to-peer lending. 

Infrastructure

Jakarta MRT has second successful trial run The Jakarta Post 23rd Aug 2018
The MRT train successfully completed its second trial run from Lebak Bulus Station to the Hotel Indonesia Traffic Circle in Central Jakarta on Thursday.

Adhi Karya to Build Solo - Yogyakarta Toll Road Next Year Tempo 21st Aug 2018
Tbk. targets to start the construction of the Solo - Yogyakarta toll road next year. The ADHI-coded SOE will share with the Gama Group to work on the toll road that is estimated to spend an investment of Rp19 trillion.

No new infrastructure project other than dams: Minister Antara News 17th Aug 2018
Public Works and Housing Minister (PUPR) Basuki Hadimuljono said the government has no plan to build new infrastructure projects in 2019 excepting dam projects. 

Jokowi defends his infrastructure program The Jakarta Post 16th Aug 2018
President Joko “Jokowi” Widodo defended his expansive infrastructure development on Thursday, which was often blamed for current economic problems, including the price increase of basic commodities.

Manufacturing

Manufacturing industry makes impact on economic growth - ANTARA News Antara News 18th Aug 2018
The manufacturing industry was consistent in making an impact on national economic growth, according to Industry Minister Airlangga Hartarto.

Travel & Tourism

Lombok Hotels Face Difficult Times, Association Says Tempo 22nd Aug 2018
Chairman of the Indonesian Hotel and Restaurant Association (PHRI) Haryadi Sukamdani, said that hotels in East Lombok, West Nusa Tenggara, is currently facing difficult times because of the recent earthquakes.