POLITICAL & ECONOMIC UPDATEON JOKOWI ADMINISTRATION UP TO APRIL 2015
PARLIAMENT VIEWS
SATYA WIDYA YUDHA
Deputy Chairman of Comission VII DPR - RI
PRESENTED TO CRANFIELD INDONESIAN SCHOLARS COMMUNITY (CRISCOM) –
CRANFIELD, UK 6th of May 2015
AGENDA
Satya Yudha Page 1
IMMEDIATE CHALLENGES Political Configuration in Parliament
National Security Issues and Foreign Policies- Demographic Bonus : Opportunity or threat- Illegal economy activities- Strong Armed Forces and Foreign policy
Domestic Economy Issues- State Budget
- Shifting Paradigmn on Energy Sector
- Improving Oil Storage and Refineries Capacities
- Increase in Tax Revenue
- Increase Electricity Generation Capacities
- Improve Infrastructure Quality
IMMEDIATE CHALLENGES
Satya Yudha Page 2
Government Challanges
National Security issues& Foreign Policies
Political Configuration
in Parliament
Domestic Economics issues
PDIP 109
HANURA 16PKB 47
NASDEM 35
PPP; 39
Demokrat; 61
GERINDRA22; 73
PAN; 49
PKS; 40
GOLKAR; 91
PDIP 109
HANURA 16PKB 47
NASDEM 35
Demokrat61
GERINDRA22 73
PAN; 49
PKS; 40
GOLKAR; 91
PPP; 39
1. Political Configuration in ParliamentBefore and after Presidential Inaguration
Red & White
Coalition
45 %
Great Indonesia
Coalition 44%
Presid
en
Inagur
ation
Red & White
Coalition
52 %
Great Indonesia
Coalition 37%
PRESIDENTIAL
INAGURATION
30 Oct 2014
Satya Yudha Page 3
Internal conflict
within Golkar
and within PPP
Presidential system in Indonesia
• Indonesia’s parliament and government work on the “check and balance” system.(A Little dispute on BG Case, Minister of Law and Human Rights)
• To secure the administration program, Government needs cooperation with the parliament. (At least Two Consultation Meeting taken place at the Palace & DPR)
• Parliament, by law, has the right to approve the state budget. If disapprove, government is unable to implement the new state budget.
• Voting is the last resort to approve or disapprove any new law
- if deliberation fail to reach consensus.
Satya Yudha Page 4
2. National Security Issues
1. Radicalism becomes a serious issue due to poverty and low
level of education
2. Drugs and narcotics are an issue because it attacks the
young generation of Indonesia
3. Illegal mining, fishing & logging and human trafficking
1. Create Economic policies focusing on growth & equality
2. Provide affordable access to quality health & education
3. Improve police and military capability especially in
modernization of military equipment & technology
Satya Yudha Page 5
Solutions
Demographic Bonus : Opportunity or threat
Opportunity
Proper economic policies
towards growth and equality as
well as key polices in education
and health
to increase quality of human
resources will transform
demographic bonus as key
factor to prosper Indonesia.
Source : demografi.bps.go.id
Satya Yudha Page 6
Threat if...inequality continuous to
persist & no sufficient job
opportunities are available.
- since unemployment among
young population is a strong
ingredient for radicalism and
terrorism.
To Protect This, We Need Strong Armed Forces
Lost Due To Illegal Economy ActivitiesEstimated size of illegal coal
mining in Indonesia in 2013 is
~71.9 million tonnes, equal with
total export of South Africa…
On the marine sector, estimated
size of potential loss due to
illegal fishing is US$ 20 billion…
Source: FAO, 2011, Ministry of Marine and FIsheries
Satya Yudha Page 7
bn
0
5
10
15
20
25
Fisheries Export Loss due to illegalfishing
Output withoutilegal fishing (export
potential)
3,3
2320
Strong Armed Forces and Foreign policy
Protect its own sovereignty in land, sea and air
A strong and modern armed force uplift Indonesia to become arespected power in East Asia region.
Building its our own defense industries
Security cooperation against extremist such ISIS based on equaltreatment in exchange of information by respected intelligence agencies.Today, we believe there are more than 300 Indonesians joined the ISIS.
Indonesia’s free and active foreign policy obliges it to remainautonomous in dealing with large and small power.
Indonesia has demonstrated its utility in bridging between powers andregions with disparate interest, such on the South China Sea dispute.
Satya Yudha Page 8
3. Domestic Economy Issues(Limited State Budget)
Satya Yudha Page 9
Tax Income Rp 1.294,3 T
74%
Revenue from Non tax sources
Rp 269,1 T15%
Customs Rp. 195 T
11%
Grants Rp 3,3 T0%
Gov't Institution Expenditure Rp.795,5 T; 40%
Other Expenditure Rp. 156,2 T; 8%
Dept Interest Payment Rp. 155,7 T; 8%
Subsidy Rp. 212,1 T; 11%
Tranvers to regions Rp. 643,8 T; 32%
Village Fund Rp. 20,8 T;
1%
GOVERMENT EXPENDITURE
RP 1.984,1 TSTATE REVENUE
RP 1.761,6 T
30% (Rp 81,4 T) of
it from Oil and gas
3. Domestic Economy Issues
5 Immediate Economic Challenges
1. Shifting Paradigm on Energy Sector
2. Improving Oil Storage and Refineries Capacities
3. Increase in Tax Revenues
4. Increase Electricity Generation Capacities
5. Improve Infrastructure Quality
Satya Yudha Page 10
Shifting Paradigm on Energy Sector
Satya Yudha Page 11
• Shifting Paradigm
o Commodity Subsidy to Targetted Subsidy (Reallocation Subsidy)
o Oil to Gas
o Industry follows the Energy Concept
o Revenue Based to Economic Growth Based
o Promoting Renewable Energy in the energy mix strategy for 2030
• Challenges;
- Control the Subsidy
- FUEL Subsidy v/s Gas and Coal
- Create the pricing scheme which is viable for the Development of
Renewable Energy such as Geothermal, Microhydro, nuclear.
Shifting Policies on Energy Subsidies
Energy subsidy has increased from IDR
95 Tn(~US$ 10 bn) in 2009 to IDR 351
Tn(~US$ 31 bn) in 2014…
Source: GoIAudited Financial Statement 2009-2013, internal calculation Satya Yudha Page 12
165,2211,9 210
240276
64,7
90,4
94,6 100101,8
68,7
73,1
0
50
100
150
200
250
300
350
400
2011 2012 2013 2014 2015 2015 R
23 2322 22
20
11
Trillion
IDR
In Trillion
IDR
Fuel &LPG
SubsidyAPBN2015
Oil PriceDecrease
Increaseon DieselRp 2.000
Increaseon
Gasoline
RevisedSubsidies
2015
276
64,5
83,6
82,3
45,6
SAVINGS
…Recent fuel price hike provide at least Rp
129.2 Trilion to be reallocated for
infrastructure, education & healthcare
development in 2015.
Improving Oil Storage and Refineries CapacitiesTo Strengthen National Resilience…
…Indonesia heavily depend on Import to fulfill demand on fuel product due to
insufficient refineries capacity
Fuel OilDiesel
Satya Yudha Page 13
179
Upstream
Downsteram
Crude Import
Refinery
Crude Export
Production : 290Oil and Condensat
111
121 247
CTP
Fuel &Etc Import
243
449
Non Fuel
Fuel
96
308
Other Inputs
64
Transportation
Household
Industry
Electricity Generators
Storage
CTP = Custody Transfer Point
Storage
179
2010 2011 2012 2013 2014
Crude Export 130 130 115 117 111
Crude Import 103 97 96 118 106
Crude Balance 27 33 19 -1 5
Fuel Import 124 195 198 -154 179
Net Balance -97 -162 -179 -155 -174
Oil Fuels account for 77% of a refined barrel of crudeoil hence more crude oil “volume” must beimported and stored to produce the same quantityof Oil Fuels domestically vs direct Oil Fuels imports
On Million
Barrels
Million Barrels
Improving Oil Storage and Refineries CapacitiesTo Strengthen National Resilience…
Although Indonesia ~20 days operating
reserve, but it has zero strategic
inventory compare to its peers in Asia,
Comparison of Oil Strategic InventoryJet/Kero Fuel OilDieselGasoline
Satya Yudha Page 14
To have 30 days of energy buffer inventory
30 days (year 2025)EBR
Indicative InvestmentUS$ 17,250,000,000
Assumes new greenfield terminals cost US$ 800/KL
Inventory Days
0
20
40
60
80
100
120
140
160
14 1030 40 45
56
83
0 0
37
30
3336
40
65
Product Crude
Increase in Tax RevenueTax ratio comparation in 10 Countries 2013
Increasing tax ratio should be one of the top priority.
The main target is to increase tax ratio to 15% from current level at 13.7%. This will
increase tax revenue by ~US$ 25-35 billion per year for the next 5 years.
One key step to increase tax revenue is to give autonomy in human resources
budget, and organizational structure to the tax office, and reducing corporate
income tax to make it competitive with Singapore, hence avoid transfer pricing
Satya Yudha Page 15
05
10152025303540
36,734,732,925,424,3
19,719,414,314,3
10,3
Source: Budget in Brief APBNP 2015
723,3 873,9 980,5 1.077,30 1.246,10 1380 1489
2010 2011 2012 2013 2014 2015 2015P
14,5 15,4 15,5 15,1 15,8 15,713,7
11,3 11,8 11,9 12,2 12,4 12,4 12,7
Tax Ratio definisi Luas
Tax Ratio definisi sempit
%
In Trillion IDR
Increase Electricity Generation Capacities
Indonesia has the lowest
electrification ratio among its
peers in southeast Asia at 73.7%
Source: Tusk Advisory
To achieve higher economic
growth, Indonesia needs to
significantly increase its
electrification ratio.
We estimate, the country
needs to double its electricity
production capacity by 2019
which need ~ $90 billion
investment.
In addition to that, significant
investment is also needed to
replace diesel fired power
plant with coal or gas to
reduce electricity subsidies
that currently absorb $7-10
billion per year
Satya Yudha Page 16
0
20
40
60
80
100
Electrification Ratio (%)
99,3
73,7
99,489,7
97,3
Thailand indonesia Malaysia Philippines Vietnam
Increase Electricity Generation Capacities
Satya Yudha Page 17
Project PLN IPP
35.000MW
25.904MW
10.681MW
FUNDING NEEDS 2015-2019 (trillion Rupiah)
Details PLN Private Total
Generation 199 615 814
transmission and substation 313 - 313
Total 512 615 1.127
35,000 MW project is
absolutely necessary to
support the growth of the
national economy; as stated
in Electricity Provider’s
business plan (RUPTL) 2015-
2024 which stated that each
year takes additional capacity
of 7,000 MW
Nuclear Gen is Possible
Option
Increase Electricity Generation Capacities
0
2
4
6
8
10
12
14
16
Construction Committed Procurement Planning
3,24,3
11,39,6
4,22,9
2,2 5,1
PLN
IPP
MW Progress on accelerating 35.000 MW
Simplification of of licensing
Accelerating Independent Power
Purchasing (IPP) appointment
Accelerating IPP price negotiations
Guarantees from government if required
by the power and developers
Government support in the provision of
land, in accordance with Law no. 02 in
2012
Excess power price equated with the
price of IPP;
Private sectore is able to participate in
building transmission.
Powerplan development Status
Satya Yudha Page 18
Improve Infrastructure QualityTransportation Cost Ratio to Total Cost in
Indonesia is 3x higher than in Japan due to
poor transportation infrastructure
…Indonesia needs US$ 545 billion in the next 5
years to improve its infrastructure quality to
support economic growth
Source: Government Mid Term Development Plan 2015-2019
Support from private sectors as well as government funding resulting from
reallocation of fuel subsidies, eradication of illegal activities and increased tax
revenue will be key sources to finance infrastructure development in the next 5 yearsSatya Yudha Page 19
Conclusion
1. To secure the Government program, it should be in line with the
parliament
2. Create Economic policies focusing on growth & equality
3. We need strong Armed Forces.
4. Law enforcement should be in place
5. Shifting Paradigm on Energy Sector
6. Increasing tax ratio
Satya Yudha Page 20
THANK YOU
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