Century Case Drowning by Gayus

Reimbursement to the Century Bank bailout cost the state assessed as 6.7 trillion or 6700 billion. Formation of Special Committee Questionnaires Rights Century which has been calling witnesses and parties deemed responsible for any has been done. Various elements of society, so spirits guarding the case of Century Bank until demonstrations happen everywhere.

Century Bank is now drowning case by case with the suspect Gayus tax broker, Director General of Taxation Ministry of Finance officials RI. If compared to the value, Century Bank case is much greater 268 times than the value of the findings in the case of Gayus. However, mass media or TV rarely preach the extent to which follow up the case of Century Bank.

Once again, a case that cost the state came from the department or institution that deals with finance: the Ministry of Finance. The high salaries and allowances of employees of these institution have not been able to reduce the intention to avoid bribery, a broker case, and other things that smell KKN.

Tommy still owes government Rp 2.3t, says Finance Ministry

Car company PT Timor Putra Nasional owned by Hutomo "Tommy" Mandala Putra, son of late former president Soeharto, should pay debts up to Rp 2.37 trillion (US$263.07 million) to the state, the Finance Ministry said.

The amount is exclusive of a 10 percent administration fee, meaning Timor should pay Rp 2.61 trillion in total, the ministry said in a statement on Monday.

This is another government's attempt to recover state debts from Timor, established in 1995 and granted "national car producer" status when Soeharto was in power, in a legal case that began more than a decade ago.

According to the ministry, Timor was given a credit facility at Bank Bumi Daya (now merged with Bank Mandiri) using the firm's current account and deposit account as collateral.

On March 31, 1999, the credit was taken over by the now-defunct Indonesian Bank Restructuring Agency (IBRA) after Timor defaulted on its debts.

On April 30, 2003, the IBRA sold Timor's assets to PT Vista Bella Pratama, excluding the current account and deposit account, which were seized by the tax office.

On Aug. 8, 2008, the sale of Timor was cancelled by Finance Minister Sri Mulyani Indrawati, who took over the responsibility of IBRA, after the Corruption Eradication Commission found out that Vista was affiliated with Timor and Tommy and did not represent an independent buyer.

The cancellation of the sale was confirmed by an agreement signed between the Finance Ministry and Vista, and a ruling made by the Central Jakarta District Court on Nov. 27, 2008.

Therefore, all debts belonging to Timor automatically became state debts, including the current account and deposit account that have never been sold to Vista, the ministry said.

On Nov. 26, 2008, Mulyani asked Bank Mandiri to disburse and transfer the funds in the current account and deposit account to the state treasury's account to be set off against existing Timor's debts. This leaves Timor owing a remaining Rp 2.37 trillion in state debts.

Bibit: I respect due process of law

Corruption Eradication Commission (KPK) leader Bibit Samad Rianto said Tuesday he respected the South Jakarta District Court’s order for him and fellow deputy chairman Chandra M Hamzah to face trial for alleged power abuse and bribery.

The court ruled in favor of bribery suspect Anggodo Widjojo, who had filed a pre-trial request against suspension of a criminal investigation into Bibit and Chandra.

Bibit said that the Criminal Procedure Code allowed individuals to file pre-trial requests verdict.

“However, as the media know, I have never committed the acts as charged. On Nov. 3 last year at the Constitutional Court we all heard that we were framed,” Bibit was quoted by kompas.com.

He said he appreciated the prosecutors who appealed the court’s verdict.

House against cigarette production cut

The House of Representatives’ Commission XI on finance has opposed the government’s plan to lower cigarette production to 248.4 billion sticks from 261 billion this year.

Golkar Party lawmaker Nusron Wahid said on the sidelines of a budget revision hearing on Tuesday the production cut would cause the state to lose Rp 10 trillion in potential revenue.

“The production should stand at 261 billion as originally planned,” Nusron said.

He suggested that the government stop drafting a regulation on control of tobacco impacts, which would require the government to lower national cigarette production.

Nusron also suggested that the government lower excise tax imposed on clove cigarette products but increase that imposed on unflavored cigarette products. “Consumers of unflavored cigarette usually have a higher income than clove cigarette consumers,” he said

The government has proposed an increase in tax excise for all cigarette products in a bid to boost revenue to Rp 57 trillion (US$6.27 billion) in 2010, up from Rp 54 trillion in 2009.

Indonesia's $100 billion budget: Is debt an issue?

I have received many encouraging responses to my first blog. Thank you. This time, let's look at Indonesia's budget. Last year, Indonesia's budget reached the magical threshold of US$100 billion. With total expenditures of Rupiah 985 trillion and an average exchange rate of 9,750 Rupiah per US dollar, Indonesia's government spent exactly US$101 billion. In 2009, the budget may not increase and will likely decline in US$ terms. With the global financial crisis the Rupiah has depreciated against the US$, similar to most other developing countries currencies. However, it is safe to assume that in the next few years Indonesia will have a budget which exceeds US$100 billion and is set to reach its own magical threshold of Rp 1,000 trillion in the near future.

One of the most contentious topics over the past decade has been Indonesia's debt and the role of international institutions. Some still think Indonesia has a debt problem and that loans from international institutions, such as the World Bank, have contributed to Indonesia's previous debt burden. The opposite is true, and here's why.

First, let's look at Indonesia's debt. Indonesia's debt levels have declined at an unprecedented rate. As mentioned in my previous blog post, Indonesia is possibly a world-record holder in debt reduction – at least of any large country in recent history – with debt levels declining from 80 percent (2001) to close to 30 percent (2008). In 2001, Indonesia's government had to spend 23 percent of its budget on debt service. Today, it is down to 11 percent, freeing up enormous potential for spending on Indonesia's development.

This performance is remarkable even within East Asia, a region which has generally done well the past decade. Most major countries have kept their debt levels stable. Some countries, like the Philippines, kept their levels stable at relatively high levels (although also declining markedly since 2005); others, like Malaysia, kept debt levels at moderate levels; meanwhile, China stayed in a low range of below 30%. Indonesia is the only country that shows a continued and sharp decline in debt levels and is poised to be one of the countries in the region with the lowest debt levels (see chart 1).


Second, let's look at the role of financing by international institutions such as the World Bank and other development partners. Financing by these international partners has been surprisingly stable over the past 15 years. It has been below or around US$5 billion, except during, and shortly after, the 1998 crisis. During the same period, Indonesia's budget increased from an estimated US$30 billion (1995) to US$100 billion today. In short: in the past, donors made an important financial contribution to Indonesia's development program; today, it is Indonesia's own resources that are driving 95 percent of expenditures (see chart 2).


Loans from official lenders, although declining in relative terms, have actually helped to reduce Indonesia's debt. How is this possible? The main reason is that loans from institutions such as the World Bank are much cheaper than borrowing from the national and international bond markets, the costs of which have increased substantially in recent years. Like almost any other country Indonesia is borrowing to finance its (modest) deficit, to refinance its stock of debt and to attract specific investments, including investment in the infrastructure and social sectors. Had it not been for official lenders, Indonesia would have needed to borrow from other sources at higher interest rates, thus increasing its debt level compared with where it is today.

So where is the problem? Debt is clearly not the main problem, but there is no reason for complacency. Before the 1997/98 Asian crisis, Indonesia also had low debt levels that exploded almost overnight when its banks failed. In addition, recent months have demonstrated that even strong performing developing economies can face difficulties in raising funds.

In my next post, I'll look more closely at what Indonesia is spending its resources on today and the country's opportunities for the next five years.

Fitch Upgrades Indonesia Debt Rating to Decade High

Jan. 25 (Bloomberg) -- Fitch Ratings upgraded Indonesia’s long-term foreign and local-currency credit ratings to the highest level since the Asian financial crisis, citing the economy’s resilience to the global crisis and better finances.

The ratings were raised to BB+ from BB, and are now one level below investment grade, the company said in an e-mailed statement today. The outlook on both ratings is stable, it said.

“The rating action reflects Indonesia’s relative resilience to the severe global financial stress test of 2008- 2009, which has been underpinned by continued improvements in the country’s public finances, a fundamental sovereign rating strength, and a material easing of external financing constraints,” Ngiam Ai Ling, a Fitch director of Asian sovereigns, said in the statement.

Indonesia, which needed a bailout from the International Monetary Fund during the 1997-98 Asian financial crisis, avoided following the world’s largest economies and neighboring countries into a recession last year. The Fitch upgrade comes after the government this month sold $2 billion of 10-year bonds at a higher yield than the Philippines.

“Fitch’s rating move will increase the attractiveness of Indonesian assets,” said Eric Alexander Sugandi, a Jakarta- based economist at Standard Chartered Plc. “Indonesia must attract more foreign investors to accelerate economic growth.”

Moody’s, S&P

Holders of Indonesian debt, including Aberdeen Asset Management Plc and Vegagest SGR SpA, have said the country would need to offer higher yields as a rally in emerging-market bonds slows after the biggest gains in six years.

Government bonds rose after the Fitch upgrade. The yield on the 11 percent note due November 2020 fell four basis points to 9.68 percent, according to midday prices at the Inter Dealer Market Association. A basis point is 0.01 percentage point and bond yields move inversely to prices.

Moody’s Investors Service said on Jan. 21 its Ba2 rating on Indonesia remains stable, while Standard & Poor’s raised the outlook on its BB- rating for the country to positive on Oct. 23. S&P’s rating is three levels below investment grade, and Moody’s is two levels less than investment grade.

The last time Fitch ranked Indonesia’s foreign-currency rating BB+ was in early January 1998. Before today, Indonesia’s local-currency long-term debt was last rated BB+ in April 1999.

Political Boost

Southeast Asia’s biggest economy avoided the global recession following nine interest rate cuts by the central bank and after President Susilo Bambang Yudhoyono’s re-election in July boosted confidence he will maintain policies that have helped the economy expand more than 6 percent in the two years to 2008.

Fitch’s rating upgrade reflects Indonesia’s economic resilience and an improving balance of payments, Bank Indonesia Deputy Governor Hartadi Sarwono said in Jakarta today. Indonesia’s foreign-exchange reserves rose to $69 billion as of Jan. 22, he said.

“There is fiscal stability for the authorities to embark on an ambitious agenda to tackle longer-term developmental issues, such as addressing infrastructure constraints and investment promotion as well as raising industrial and export competitiveness,” Fitch’s Ngiam said.

President Yudhoyono pledged to double infrastructure spending to as much as $140 billion in his second five-year term until 2014 to help boost economic growth.

Bank Indonesia forecasts the economy will expand as much as 5.5 percent this year from an estimated 4.3 percent in 2009. Indonesia may grow an average 6.6 percent annually over the next five years, President Susilo Bambang Yudhoyono said Jan. 4.

Govt moves carefully in offering oil and gas blocks

After failing to find investors for most of the oil and gas blocks offered last year, the government is now making more careful preparations to auction up to 35 new fields later this year.

The Energy and Mineral Resources Ministry has announced the names of the 35 blocks on its official website, but Edy Hermantoro, an upstream oil and gas director at the ministry said the actual number of blocks to be auctioned could be less.

“This is what we call early market research. We announce the blocks so that we can get responses from the oil and gas contractors. The blocks reaching the actual tender process could be only 15 or 20 blocks, depending on the responses of contractors,” Edy said on Monday.

He added that expected contractors’ responses included reactions to the completeness of data on blocks. “They may give us inputs if they think the data is incomplete,” said Edy, adding that the government was focusing on finding serious investors.

On its website on Monday, the ministry announced the maximum 35 blocks planned to be auctioned this year. Of the 35 blocks, 19 are to be offered under regular tender procedures and the remaining 16 blocks are planned to be offered under joint study mechanisms.

Under the latter tender method, interested investors may propose to the government to undertake a joint study to assess oil and gas reserves in one or more blocks.

Once the studies find positive indications of reserves, then the government opens a bidding
process where the first bidding rights will go to the company that proposed, financed and undertook the studies.

The 19 blocks planned to be offered under the regular tender are: East Natuna, SE Baronang, Nias I, Nias II, Tanjung Jabung, Sunda Strait I, Sunda Strait II, Sunda Strait III, West Kangean I, West Kangean II, South Kangean I, South Kangean II, SE Mandar, SW Makassar, West Sebuku, Saliki, East Tarakan, SW Bird Head and Wokam.

The oil and gas blocks planned to be offered under the joint study arrangements include: North Sokang, NW Natuna, Gurita, Sumbagsel (southern Sumatra).