Problems relating to Trade and Investment on Indonesia

 
26. Others
Issue
Issue details
Requests
Reference
(1) Inadequacy of Infrastructure on Road and Transport - Due to the non-availability of public mass transportation, great congestions prevail within the Jakarta metropolitan area and its vicinity all the time. It takes time for movement of people and goods.
- Due to the heavy traffic congestions, transportation has been delayed.
- With special capital region of Jakarta at the hub, chronic traffic congestion prevails. It takes much time for moving from one place to other, severely interfering with running business.
- Great economic loss results from the idling, due to the chronic traffic congestion at every nook and corner of the special capital region of Jakarta.		 - While GOJ led ODA, etc. overhaul of infrastructure is in progress, there is a far cry from perfection. There is no direct request for the moment.
- It is requested that GOI overhauls the public transportation, and makes effective traffic control toward elimination of the traffic jam.
- Construction of MRT has begun since 2014, due for completion by 2017. However, its coverage is insufficient and its continued development is mandatory.		 - Ministry of Public Works (PU)
  (Action)
- For lack of proper harbor facilities, about 80% of ports in Indonesia are not efficiently operating. Some imported goods must therefore be routed via Malaysia and Singapore at extra cost and handling.
- In March 2003, at Jakarta Japan Club, the RI government made a request to the Ambassador of Japan for Japan to assist Indonesia for improving or upgrading of public facilities, such as highways, ports, stable supply of electricity, upgrading of transport by sea, communication, railway, airport, airlines etc.
- GOI has taken the measure to establish the exclusive seaport for automotive vehicles. (Japan-Indonesia Strategic Investment Action Plan ("SIAP") Report of November 2006).
- On 15 November 2007, Department of Transportation (Departemen Perhubungan) promulgated Decree No.KM59/2007 on expansion plan of Tanjung Priok Port. Upon completion of the construction for expansion, two-way passage is made available at Tanjung Priok Port, while the parking space for large vessels is secured. The expansion plan is envisaged in three steps, a short-term (2008-2012), mid-term (2014-2017) and long-term (2018-2027). At the 2nd/3rd steps, infrastructure for the logistics will be expanded, more precisely, (1) Cargo terminal along the coastal area of the north side of Tanjung Priok Port, and (2) multi-purpose terminal along the coast of the south side of Tanjung Priok Port will be expanded. By this expansion, Tanjung Priok Port will be connected to the External Ring and the Jakarta Railroad.
- On 5 November 2009 President Yudoyono released "The 1st 100 days State Economic Plan (100SEP)", which is the de facto 5-year Socio-Economic Development Plan that comprises of 45 programmes (including 15 priority programmes) beginning in the first 100 days of the 2nd Yudoyono Administration. The top three priority programmes are: Judicial reform, Revitalisation of defense industry and measures against terrorism. Other priority programmes include overhaul of infrastructure, resolution of electric power supply problems, and measures against the climatic changes. To accelerate these reform plans, a new institution directly reporting to the President was established. The domestic private concerns in general terms welcome the plan, while showing some anxieties on the undisclosed details of 100SEP. They also appreciate the manner in which this plan has been prepared, namely, through the policy formation process in the National Summit in late October 2009, declaring that this is the first correct step of the long way heading for reform. Indonesian Chamber of Commerce and Industry (KADIN) and Indonesian National Economic Recovery Committee (KPEN, Komite Pemulihan Ekonomi Nasional,), influential economic lobbyist group, are proceeding with the knitting operation for the oversight team (comprising of representatives of domestic industries, foreign chambers of commerce and industries, and economists) to monitor the Plan.(Ref. Indonesian Chamber of Commerce and Industry (KADIN) (http://www.kadin-indonesia.or.id/))
- Based on the Agreement between GOJ and GOI of October 2013, JICA initiated, in December 2013, the project study on construction of the Java rapid transit railway toward introducing the Japanese Shinkansen System by consignment of a Japanese consultant, etc.
- In February 2014, JICA signed Agreement on the ODA Loan Project for the Jakarta Mass Rapid Transit (MRT) North-South Line Project (Phase I) and the Java South Line "Doubling" Project (Phase IV) with GOI.
  (Improvement)
- GR No.81/2001 provided the establishment of Committee for the Policy of the Acceleration of Infrastructure Development ("KKPI").
1. The tasks of the Committee are as follows:
-- Formulate policies and strategies for the acceleration of infrastructure development;
-- Coordinate the integration of planning and programs and monitor the implementation of policies; and
-- Determine efforts required to solve various issues relating to infrastructure development.
2. The scope of work for the Committee is as follows:
-- Transportation infrastructure and facilities: roads, bridges, railways, piers, seaports, airports, and river and lake crossing facilities;
-- Water infrastructure and facilities: dams, dikes, irrigation networks, flood control structures, coastal retaining walls, and hydro power plants;
-- Infrastructure and facilities for settlements, industry and trade: buildings, industrial and trade estates, large-scale housing areas, land reclamation, water supply installations and networks, wastewater networks and treatment, solid waste treatment and drainage systems; and
-- Public utility structures and networks: gas, electricity and telecommunication.
- The outgoing members of DPR also passed a bill on Toll Road/Highways on 29 September 2004. The bill is seen as pro-investment, forcing landowners to surrender land needed for roads at government-determined prices. It was designed to open the toll road sector to private investors, while eliminating barriers that often surfaced during the construction phase of toll roads.
Articles 59, 60 and 61 of the bill reduce the power of landowners whose property stands in the way of a road project. Landowners have blocked many toll roads, including the Jakarta Outer Ring Road, hanging out for unreasonable prices and, in many cases, speculators have acerbated the problem. The articles will allow land disputes to be resolved in court while a construction project continues, while article 62 allows for landowners to file complaints with the courts demanding reasonable compensation.
The bill also separates the functions of the current regulator and operator, PT Jasa Marga. It requires the establishment of an agency called the Toll Road Regulator Agency (BPJT) tasked with regulating and supervising the toll road sector.
- MOT's Public Notice No. PM.2/2004 (30 March 2004):
-- Early termination of exclusivity right of PT Telkom and PT Indosat through a compensation scheme determined by a mutually agreed independent appraiser ;
-- The Decree of MOT No.KM.28/2004 replaced MOT's Decree No. KM. 20/2001 as a legal basis of the national technical basis in the development of national telecommunication system:
(1) Universal usage of 3 (prefix) digits for all local-long-distance and international calls,
(2) Operators of all local-long-distance and international calls are normally opened and freely selected by callers;
-- The Decree of MOT No.KM. 29/2004 replaced MOT's Decree No. KM.20/2001, and the Decree of MOT No. KM. 30/2004 replaced MOT's Decree No. KM. 21/2001 regarding the implementation of telecommunication services:
(1) Provider of fixed local-long-distance and international calls may also provide basic services,
(2) These providers has the right to set retail charges to their customers and to provide related services;
-- The Decree of MOT No. KM.31/2004 replaced MOT's Decree No. 23/2001 on the provision of Internet for public.
-- The Decree of MOT No. KM.32/2004 regulates the interconnection issues;
-- The Decree of MOT No. KM.33/2004 establishes monitoring aspect of competitiveness practices;
-- The Decree of MOT No. KM.31/2003 (11 July 2003) established the National Telecommunication Regulating Agency, headed by the Director General of Post and Telecommunication.
-- The Decree of MOT No.KM.34/2004 addressed the universal service provision to areas, which have no telephone access. This provision is the responsibility of the GOI; and
-- The Decree of MOT No.KM.35/2004 addressed the Fixed Wireless Access issue.
- On 27 March 2007, New Railway Bill (to amend No.13/1992) pass the Parliament. The monopoly by the National Railway Kereta Api was repealed, opening business opportunities for private sectors including foreign capital and local government to enter the market.
(2) Capacity shortage and Inadequate Port Facilities - Shortage of bonded warehouse. High port charges relative to other countries.
- Import/export cargoes suffer negative impact from the shortage of the container stowage capacity and the poor traffic conditions.
- The volume of cargo handling has increased at major ports, side by side with the Indonesian economic growth. Especially before and after Hari Raya, it takes many days for customs clearance of raw materials.		 - It is requested that GOI redoubles its effort in the infrastructure overhaul.
- It is requested that GOI takes steps to expand the port area and resolves the traffic congestion.
- It is requested that GOI expedites overhauls of the infrastructure at the Port Facilities.		 - MP3EI (Economic Master Plan)
  (Action)
- On 29 March 2016, President Joko Widodo announced 11th economic policy package aimed at reduction of cargo dwell time at port (from the current 4.7-days to 3.7-days by August 2016, and 3-days by 2017).
- GOI aims at playing the role of the major distribution centre in the South-East Asia. On 10 March 2016, President Joko Widodo stated: "11-bonded distribution centres will open simultaneously in the 11-major islands and provinces in Indonesia".
(3) Extremely High Domestic Logistics Freight Cost - The ocean freight cost is prohibitively high for moving resin products produced in the Eastern Java. It undermines the idea of concentrating and expanding the capacity of all manufacturing operations into the Eastern Java as the MFS's production depot. - It is requested that GOI overhauls the Distribution Infrastructure.
(4) Raise in Electric Power Charge by Large Margin - Blackout and momentary power off are frequent, while electric power bill has gone up.
- Electricity Bill has gone up by 10%.
- Due to the abrupt hike in electricity charge by PT PLN (Listrik Negara, (National Electricity Power Company)) MFS sustained loss in P/L, being unable to pass on timely the cost increase to its selling price to the customers. Price increase decision was made with only one month lead-time, moreover, up by radical 40%.		 - While price increase cannot be negated, it should have been made with ample lead-time. Moreover, it is incumbent upon PT PLN to improve the frequent blackouts (to justify the price increase). - Electric Power Act
  (Action)
- On 3 July 2002, it was announced to resume the 14 large-scale development projects including electric power supply, which had been suspended for economic crisis.
- In April 2002, PLN, National Power Corporation, announced that an electric power shortage is occurring in 21 Provinces, excepting the 6 Provinces in Jawa and 1 Province in Bali.
- Blackouts frequently occurred without prior notice from P.T. Perusahaan Listrik Negara (PLN), national electric power company after the hike in the oil fuel price by 28.7% in average on24 May 2008. The blackouts are said to have been caused by the reduced capacity usage ratio triggered by the PLN's shortage of ability to supply, increase in the power generation cost due the surge in oil prices, and the problem of financing the operation. Jakarta Japan Club as a result made the following requests to PLN:
1) Appropriate disclosure of information to users;
2) Proper discharge of its responsibility to supply electric power to users; and
3) Convening of explanatory meeting to users.
- On 5 November 2009 President Yudoyono released "The 1st 100 days State Economic Plan (100SEP)", which is the de facto 5-year Socio-Economic Development Plan that comprises of 45 programmes (including 15 priority programmes). One of the priority programmes include resolution of electric power supply problems.
- On 17 September 2012, the Working Group of the 7th Committee (Energy and Mineral Resources) of the Parliament agreed on the staged price increase, finally to 15% for "The 2013 Electric Power Supply Tariff" as proposed by GOI.
- The 2013 Budget incorporates increase of 35.7% as energy subsidy, 24.5% up for electricity, and 10% up for electric bills.
- In April 2014, Minister of Energy and Mineral Resources Regulation, raising the power charge to the listed enterprises by 64.7% maximum, was promulgated. After May, the raise continues in every two-month.
- In June 2014, the bill to reduce power subsidy was approved in the Parliament. From July onward, power charge increase applies universally, including the unlisted enterprises and the household, as well.
  (Improvement)
- The items classified under "the resolved items" are "the resolved items as they concern Power Producers (IPP)" discussed during the 8th (final) General Conference between the JJC and the GOI, in Jakarta, 25 Feb. 2004 under the "Sub-committee for Electric Power."
- According to the "Electric Power Sub-Committee" Report, agreement was reached on the renewed negotiation for the IPP27 Business under the existing agreement, which had been suspended during the economic crisis. A series of thermal plant by PLN has been started off.
- Ministerial Decree No.70/2006 was promulgated concerning tariff exemption on import of machinery required for electric power generation related business. Thus tariff exemption was authorized.
(5) Inadequate Infrastructure for Communication - High-speed telecommunication via internet is available only in a limited area. High volume communication is not possible. Connection is poor, also.
(6) Inadequate Lifeline Infrastructure - Due to the poor flood control, floods are frequent during the rainy season.
- Despite the fact the floods occur at the same place in each year, effective preventive measures lag behind.		 - It is requested that GOI takes step to boost up the sewage facilities.
(7) Moral of Public Servants - Government employees' corruption continues to prevail, spreading the malady also to private sectors, here and there.
  (Action)
- The research conducted by Political And Economic Risk Consutancy (PERC) concluded Indonesia is the country in which corruption is the most widespread in the whole Asian countries. Compared to the preceding year, it was somewhat improved in 2003 (9.92-->9.33).
- Effective from 1 January 2003, Department of Finance Decision Nos. 453, 454 and 455 of 31 October 2002, seeks to improve efficiency and to prevent corruption by implanting the following measures:
1) Filing of various applications to Customs by electronic media has been made possible;
2) Payment of import duty etc to General Customs Bureau has been made possible be designating public financial institutions equipped for an online connection;
3) Obligating all importers to register with Department of Finance;
4) Obligating to file import declaration 24 hours prior to arrival of import cargoes (via sea or air);
5) Auditing all import declarations (in the second year of the import declaration).
- Indonesia is at the 130th position among 163 countries in the TI Corruption Perceptions Index 2006 by International Transparency.
- Indonesia is at the 126th position among 180 countries in the TI Corruption Perceptions Index 2008 by International Transparency, marking 2.6 points out of the full marks of 10 points.
- On 5 November 2009 President Yudoyono released "The 1st 100 days State Economic Plan (100SEP)", which is the de facto 5-year Socio-Economic Development Plan that comprises of 45 programmes (including 15 priority programmes) beginning in the first 100 days of the 2nd Yudoyono Administration. The top three priority programmes are: Judicial reform, revitalisation of defense industry and measures against terrorism. Other priority programmes include overhaul of infrastructure, resolution of electric power supply problems, and measures against the climatic changes. To accelerate these reform plans, a new institution directly reporting to the President was established.
- Indonesia occupies the 88th position out of the 168 countries in the transparency international's corruption perceptions index 2015
  (Improvement)
- Law No. 20/2002 established the Corruption Eradication Commission (KPK =Komisi Pemberantasan Korupsi). The KPK has already made its first mark with an investigation of Aceh Governor Abdullah Puteh, accused of involvement in the mark-up of a Russian helicopter bought by the Province.
- According to the questionnaire survey released on 25 September 2007 involving 587 enterprises in the major cities by Social-Economic Research Institute of Universitas Indonesia during June through August 2007, the rate of illicit payment to government officials is reduced from 1.7% to 1.3%.
- As amendment to Law No. 20/2002, President Megawati Sukarnoputri has signed Decree No. 59/2004 establishing the country's ad hoc corruption court and appointed judges to the court, including three non-career ad hoc judges, The ad hoc court will be established at the Central Jakarta District Court with jurisdiction over corruption cases across the country and acts of corruption committed by Indonesian nationals overseas. Nine ad hoc judges have been appointed to the Supreme Court, High Court and District Court (7 October 2004), with KPK serving as the prosecutor.
(8) Nonpayment/ Delayed Payment - MFS, having experienced nonpayment/delayed payment of accounts receivables, due in part to differences in traditions in commerce, business ethics, balance of power, etc., has switched to advance payment in its terms of sale. However, on products with short life expectancy cycles (such as manufacturing equipment for smartphone parts), the delivery terms and the prices claim the top priority, so that even if collection is completed successfully, the delay in payment severely affects the profitability of the MFS operation. - It is requested that GOI extends its helping hands to the less powerful SMEs by provision of information and facilitates collection of accounts receivables.

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