indonesia corners

indonesia corners

Thursday, November 28, 2013

A Weird DPD First Interpellation

Nine years have elapsed before members of Regional Representatives Board (DPD)  one day in October this year realized that they had interpellation right to question the government if they did not agree with its policy.

But what a surprise,  the first interpellation right they use after so many years kept silent was about the Low Cost Green Car (LCGC), not the strategic issues related to the regional autonomy, say, for example, the creation of new autonomous regions.

Spearheaded by A.M Fatwa, a regional representative from Jakarta, around three fourth of 132 DPD members agreed to use such right. They argue that the infrastructure is not enough to support the existing cars. The rich people will have greater possibilities to buy LCGCs and rent them to poor people.

DPD members thought that they find a better solution by proposing to the government to sit down with rich people and discuss how to settle the problem of mass rapid transportation, rather than enabling common people to buy LCGCs.

How come that those distinguished DPD members have such mediocre arguments? Don’t they know that Indonesia is not Jakarta? More than half of the car population is concentrated in the Capital city. Look to the street in small cities outside Jakarta, look to the road in outer islands that the majority of DPD members represent, aren’t they all deserted?
Those grim conditions are caused by the fact that the cars sold in the market are too expensive so that most people cannot afford to buy. Of course, the policy cannot accommodate common people to buy such LCGC but at least it increases the opportunity to buy.

Irman Gusman, DPD head, said that the interpellation was raised because he got a lot of questions from people in small cities. His argument seems paradoxical. If those notable members are fair, they should question expensive cars circulating in Jakarta and welcome instead the cheap cars. 

Actually there is no need to respond such dim questions but constitutionally the government should answer the interpellation. The President, represented Coordinating Minister of Economics, Hatta Rajasa, Minister of Industry, MS Hidayat and Minister of Transportation, E.E. Mangindaan, responded that the policy of LCGCs is enacted to anticipate the upcoming ASEAN International Free Trade in 2015 and to meet the need of common people to have a car.

LCGCs will not become the causal factor of a traffic jam because the cars will be distributed mainly in a small city and villages where the cars are still very limited and traffic jam never happens. Besides, the government has taken priority to develop public transportation in six metropolitan cities and buffer zones to curb the traffic jam.

The honorable DPD members,

Next time you raise an interpellation, it should be the one that is more strategic and more valuable for the regions you are represented.

Thursday, September 19, 2013

Quo Vadis the Low Cost Car Mass Productions?

A big controversy arises when the government launches a policy supporting the mass production of low cost green car (LCGC). Such cheap cars are classified as the ones which consume one liter for 28 kilometer-distance, 60 percent local contents and the selling price below Rp 75 million  (the US $6,800).

Just a couple of days after launching, almost 18,000 cheap cars have been sold out where most of the buyers are those who live in Jakarta and nearby cities. Low and middle-class people are eager to buy such cars as they cannot afford to buy a normal car which price beyond their purchasing power and buy motorcycles instead.

Now having such a low price car available, some of them may convert from riding motorcycles to cheap cars. The haves may also buy the car as a second [or higher] vehicle especially for their kids.

The number of cars in Indonesia compared to its population is among the lowest in the world. The availability of the LCGC will certainly increase the car population in Indonesia. Huge investment up to US$ 3.5 billion is required and it might absorb thousands of workers to fabricate the cars.

Definitely the LCGC mass productions will give a positive impact on the country economy as they improve the quality of the private transportation mode in term of fuel saving, transportation efficiency as compared to bigger and expensive cars, the condition of transportation mode especially for those using motorcycles and, last but not least, the environment.

Isn’t that the people car (“mobil rakyat”) that the country is longing for? The car which is not exclusively for the haves but also for middle and lower class? Of course, to become a national people car, it is hoped that at the latest stage the local content  would be close to 100 percent.

At everybody’s surprise, the launching of such LCGC has got various negative reactions. Most of the reasons that the opponents put forward are related to the traffic density. They are afraid that the traffic will be stagnant as the infrastructure would not be able to afford the additional amount of vehicles caused by the LCGC.

Under such a mindset, Jokowi, the popular Jakarta Governor, sent a letter to Vice President calling for the postponement for the sales of LCGC in Jakarta. Even some other prominent public figures have asked for the reduction of such people car mass productions.  

Certainly Jakarta is not Indonesia. In many other cities in the country, one may count the vehicles that run on the road. After twilight, the roads in many small cities are almost deserted. Out of around 60 million families in Indonesia only 10 percent possess passenger cars which means that in our country one car is for 40 people, much lower than the ratio in developed countries which is around 1 : 3.

How come that we should be against the relatively poor people for having a little comfort by possessing LCGC replacing their motorcycles in favor of the relatively rich people enjoying their “luxury” cars? Shouldn't we  have an opposite standpoint by encouraging people to have LCGC and imposing the luxury car (more than 3000 cc) usage limitation, by for example allowing them to circulate only beyond the office time?

The postponement of the cheap car mass productions will be a blunder as it will cause Indonesia suffer a big loss, as by 2015 any ASEAN countries under AFTA can easily export their cheap cars into their neighboring countries. They have kept eyes to take any opportunities to market their cheap cars here and certainly will establish their sole agents in our country selling their home-made cheap car.

Fortunately, the Minister of Industry holds firm his standpoint and pointing out that the LCGCs are not merely on sales in Greater Jakarta but will be distributed in 500 other cities. Quo vadis the LCGC mass productions? Will it give beneficial for the country or curse?

Folks, it is now you to make up your mind. 
Hoping that you have the right opinion. 

Tuesday, July 9, 2013

Oil Palm Plantations, the Indonesian Wealth and the World View Controversy

The Indonesian middle class increased significantly from 89 million in 2003 up to 134 million in 2012, more than half of 237 million of Indonesian people. Such 45 million of middle-class increase is undoubtedly a result of the socio-political stability enjoyed by Indonesian people within the corresponding 10 year-period.

The value of money spent by the Indonesian middle class is fantastic. The annual spending in the corresponding year for clothes and shoes, household articles, transportation  and abroad was the US $ 12 billion, US $ 20 billion, the US $ 24 billion and the US $ 6 billion, respectively.

Some of the causal factors which make such significant progress among other the mass use of motorcycles as a relatively cheap mode of transportation, massive use of mobile phones as the means of effective communication, massive people mobility within the country thanks to low-cost air transportation, massive exploitation of coal mining and, last but not least, the extensive expansion of oil palm plantations.

Out of 200 million hectares of the country’s lands, 9.3 million hectares have been converted to oil palm plantations. In 2012 the output of crude palm oil (CPO) was 23.5 million tons, absorbing a direct workforce of around 2.8 million people, which put the country into the world top CPO producer. The CPO export was 16.5 million tons gaining foreign exchange up to US$ 20 billion.

The palm oil industry employs approximately 2.8 million people directly on the plantation, 1.6 million of whom are small planters, involving 3.6 million people as family members of the employees who work in the plantation companies  enjoying benefits and facilities provided by the company they work in. Most of the small plantations held by the farmers yield low productivity, only 2.5 tons of CPO per hectare as compared to 4.8 tons per hectare of that of state-owned company.

Globally Indonesian CPO production is 45% as compared to Malaysia, 42% and both countries absolutely dominate the world CPO production. However, more than half of the Indonesian oil palm plantation is owned by neighboring countries’ companies which give less salary to the local labors compared to those working in their native countries. As such they get more benefits for having access to both fertile land and cheap labors, thus morally obliged to give more welfare to their local workforce.

The oil palm plantation can be the pioneer to boost the development in remote areas. The opening of the plantations has led to the construction of roads and bridges to facilitate transportation. More people came to the spots and new schools were constructed.

Expansion of new oil palm plantations on an ongoing basis will be able to absorb continuous labors. Each hectare of mature oil palm plantations takes 0.2 man-days. If half a million hectares of new plantations could be annually developed nationwide, the annual minimum amount of labor that can be absorbed is 100,000 or 40 percent of the new workforce entering the labor market.  

The oil palm plantation if cultivated in the degraded, barren areas could become the solution to the reforestation where the growth of oil palms change the area into the greenery spot. The oil palm plantation is able to absorb carbon mono-oxide, the same amount of man-made secondary forest can do. 

However, a lot of NGOs do not agree with this, saying that the opening of a new plantation is frequently followed by a hostile takeover of local people’s land. They argue in addition, that an oil palm absorbs water at the amount of 20 liters per day, reducing the earth water supply. An oil palm can absorb only one part of carbon mono-oxide but releases 7 parts bigger than that, causing the greenhouse effect even worse. Exaggerated worrisome?  Yes, we may suspect that the underlying of such black campaign against CPO is, in fact, the desperate competition between the vegetable oil they produce and CPO which may be produced abundantly in tropical lands. 

Even some big foreign food and toiletries companies boycott Indonesian CPO accusing the Indonesian businessmen for having violated the cultivation principles in accordance with Roundtable on Sustainable Palm Oil (RSPO). Many European buyers, absorbing 9% of Indonesian palm oil export, still, need RSPO certificate which put Indonesian farmers into trouble as they have to spend extra fund for such administrative fulfillment.

Another issue that concerns Indonesia as the big CPO producer is that the CPO price is stipulated in Rotterdam, Netherlands, albeit the small European market share. There is an idea to establish Indonesian Sustainable Palm Oil (ISPO) as an alternative to RSPO, which may be compared to OPEC Crude price as against posted price in the case of the crude oil market in the 1970s.

To protect the local and indigenous people, whose lives are depending on the forest products, from a hostile takeover by companies granted the plantation area, the government prepares a bill to exclude the customary land from state land classification. The government should encourage big companies to closely cooperate with small partners in a mutual benefit scheme. 

Monday, February 11, 2013

Simple Elements that Make Indonesia Grow

Amid the economic recession experienced by developed countries which slow down their economic growth hampering the global trades, Indonesia amazingly sustains its economic growth well above the average of 6%. 

Within the region, the size of the Indonesian economy in term of gross domestic product (GDP) reached 42% that of Asean countries. Coupled with the growing Indonesian middle economic class with the annual income up to US$ 4,000 reaching over 50 million people, the purchasing power of Indonesian people are significantly increasing. 

What are the driving forces that make Indonesian economic so resilience? There should be, for sure, something fundamentals which are overlooked by most people including the policy-makers i.e. the mobility and intense communication among the people that make them fluid and dynamic. 

Along with the advance of the technology which is appropriate for the big and vast country like Indonesia such as more efficient and cheap motorcycles, effective and affordable mobile phones and low-cost wide-body carriers that are capable to massively transport people across the archipelago boost the national economic growth without due expense to the government budget. 

The statistical data show that in 2011, there were around 68,8 million motorcycles and 9,5 million cars distributed all over Indonesia, aside from 2,3 million buses and 4,9 million trucks. Considering the Indonesian population is around 238 million then there are about 3.5 motorcycles per capita on top of passenger cars and buses. This means that every family in Indonesia possesses one motorcycle. If the trend of increasing motorcycle use continues, the short-distance public transportation will soon cease to exist. 

The traffic jams caused by motorcycles in the big cities which most people are blaming to are not the portrait of the traffic condition within the whole country. In rural areas, this kind mode of transportation is still scarce restricted by peasants' low purchasing power. The traffic problem in the metropolitan cities cannot and shall not be used as a barometer to restrict the use of motorcycles within the country.

The positive upshot of people mobility is speeding up by the tremendous increase of mobile phones ownership among the people throughout the archipelago which recently reach around 250 million. This means that every person in Indonesia, babies included, possesses one mobile phone. Indonesia ranks as the biggest four after China, India, and the USA. However, in term of the number of mobile phones per capita, Indonesia slightly leaves China, India, and the USA behind.

In term of money circulation which drives the economic dynamics of the country, the figure is very significant. Indonesian people are very talkative spending on average around Rp 50,000 per capita per month for pulses or around Rp 150 trillion annually, equivalent to one-tenth of the national budget. 

This dynamic pace is further amplified by the low-cost carriers (LCC) which last year was capable to carry 50 million passengers out of 66 million total air passengers. The market growth of LCC aviation is in average 18% per year, passing over the overall national airlines market growth averaging 16.3%. It is expected that in 2015, LCC passengers will reach 80% or 73 million out of the total 90 million passengers.

However, there should be an extra effort to overcome the infrastructure shortfall. The tremendous increase of the passengers is not matched by the improvement of the runways in many airports outside Java to accommodate wide-body carriers such as Boeing 737. Even Soekarno-Hatta airport which was designed for facilitating 22 million passengers annually now are overloaded by around 52 million passengers.

Low-cost carriers help accelerate the economic growth as people mobility across the archipelago is enhanced, breaking through the distant barrier that hinders the inter-trading across the country. One of the good solutions to break the frontier areas isolation is the use of the amphibious airplanes which are capable to land on the beach and lakes which may also attract the foreign as well as domestic tourists to visit the beautiful but isolated watery spots and isles.

Notwithstanding, there is a negative factor that may hinder the country's economic growth in the long term. People are not aware that the extremely asymmetric economic gains distribution where the minority of around 5% of the total population holds 80% of the economic wealth is the consequence of the government policy that keeps holding cheap labor wage (and also low paid civil servants) used as the national competitive advantage. 

This long-standing fallacy makes the wage of Indonesia labor gradually become lower and lower compared to that of the neighboring countries such as Malaysia, which was in par around the 1960s. The high gap of labor wage culminates in the “exodus” of many Indonesian males and female work-forces abroad surrendering their fates on the mercy of their foreign masters.

To overcome this irregularity, the government, as well as all the stakeholders, should have shifted their mindset. The danger to keep this erroneous policy is that the social tension (not mingle with political upheaval) will grow up marked by intensive strikes led by various labor unions. The government should heavily scrutinize the financial report of the "big" established company which claims that they cannot afford to pay the minimum wage.

The human resources quality improvement, the motto which is repeatedly uttered, is just lip service if not genuinely supported by their welfare improvement.