News Digest – April 1, 2013

Saturday, 06 April 2013

Indonesia’s Healthcare Spending Set to Expand

March 30, 2013, The Jakarta Post

 

Indonesia’s healthcare expenditure is predicted to reach US$60.6

billion in 2018 with a growth of 14.9 percent over the 2012-2018

period on account of faster growth in age groups above 35 years,

urbanization and an increase of lifestyle-related diseases such as

cancer and diabetes, says research and consulting firm Frost &

Sullivan.

 

Hannah Nawi, Frost & Sullivan’s Healthcare Practice Associate

Director for Asia Pacific, said Indonesia’s median age was 28 years

and that age groups beyond 35 years were projected to grow faster than

the average from 2010 to 2014.

 

“Urbanization and a slowly aging population will the drive demand

for healthcare in Indonesia,” Hannah said recently.

 

She added that increasing chronic and lifestyle-related diseases,

including cancer and diabetes, especially in big cities in the

country, would also play a large role in the increasing public demand

for healthcare services in the next few years.

 

“In terms of the healthcare burden, once you are a cancer patient,

you’ll be in treatment for life. The same goes for diabetes,”

Hannah said, adding that it could put a strain on healthcare

institutions.

 

Separately, the head of the Indonesian Hospital Association (PERSI),

Sutoto said that the national healthcare system under the Social

Security Providers (BPJS) Law would also play a significant role in

increasing the country’s total healthcare expenditure.

 

The health insurance, which will cover 121.6 million people as of Jan.

1, 2014, will be made available in stages for all eligible Indonesians

through 2019.

 

“Many hospitals questioned their readiness ahead of the

implementation of the BPJS next year, when in fact it actually opens

more opportunities for the healthcare industry, especially for private

hospitals,” Sutoto said. “Around 86 million low-income people who

have no access to healthcare services, will be able to receive

hospital services by the time it is implemented, and the government

will pay their premiums,” he added.

 

The country, however, still faced a lot of challenges in fulfilling

the increasing demand for healthcare services, Nitin Dixit, Frost &

Sullivan’s healthcare senior industry analyst, said.

 

“The first challenge is the uneven distribution of resources. The

hospital, the doctors, the entire healthcare infrastructure is

unevenly distributed,” Nitin said.

 

Sutoto said that the country’s doctor-to-people ratio was only 3

doctors per 10,000 people, much less than Malaysia, which has 9

doctors for every 10,000 people and Cuba, which has 64 doctors for

10,000 people.

 

“We have a total of 73 medical faculties across the country, but yet

we are still lacking doctors, especially specialist doctors,” he

said.

 

He also said that hospitals should start recalculating their service

costs and make it more efficient ahead of the BPJS, as the government

would apply an equal healthcare tariff across all healthcare

institutions to ease insurance claims.

 

“We urge all hospitals to reduce their costs and make it more

efficient ahead of the BPJS,” Sutoto said. “At the same time, we

hope the government assists us and lowers taxes, as well as

electricity and water tariffs for hospitals, as we will have to

provide more third class rooms for low-income people,” he said.

 

The Living Noodle Bowl: ASEAN Trade Agreements

 

March 29, 2013, East Asia Forum

By Christopher Findlay and Shandre Thangavelu

 

Mega-regionalism is a major feature of trade strategies in the Asia

Pacific today. The ‘spaghetti bowl’ of interwoven bilateral FTAs

offers no real future, a realisation that has led to greater action on

multi-country agreements. These agreements include the Trans-Pacific

Partnership (TPP), the Regional Comprehensive Economic Partnership

(RCEP), ASEAN+1 agreements, and the proposed China–Japan–South

Korea Free Trade Area (CJK). The ASEAN Free Trade Area is a

longstanding regional initiative that lies at the core of RCEP. The

important question now is whether this work on multi-country

agreements will help with global integration, or whether it will it

simply add new noodles, like slabs of lasagne, to the ‘pasta bowl’

of Asian trade agreements.

 

East Asian economies have been debating the appropriate size and

makeup of regional arrangements. ASEAN chose the larger RCEP, which is

open to all its plus-one partners, due to recent progress on the TPP

in the light of renewed US interest, and a search for new sources of

growth and an increased focus on ASEAN centrality following the global

financial crisis. The CJK would have linked three of the big East

Asian economies and could have been a threat to the centrality of

ASEAN in regional trade, but the grouping is not big enough to manage

the relationships among its partners. Japan has been searching for a

way to manage the rise of China, largely through its relationship with

the United States, and has chosen instead to sign up with the TPP. The

tension between Japan and China over the Senkaku Islands would make

the CJK difficult to achieve in any case. South Korea already has an

FTA with the United States, meaning the TPP has less to offer it. The

South Koreans may prefer an FTA with China, but have decided to work

within RCEP.

 

The prospect, then, is for an RCEP bloc on one side and a TPP bloc on

the other — although there will be some joint members, including a

number of ASEAN countries, Australia and most likely Japan.

 

TPP negotiations will progress slowly — new members will be added

and talks will be dominated by the US trade representative, whose

interests may derail negotiations. The TPP is open to new members, but

many, such as China and Indonesia, will find it difficult to meet the

agreement’s expectations. It is also less relevant to East Asian

supply chains. RCEP is likely to reach a conclusion sooner than the

TPP. The agreement is less demanding, and its contribution will depend

on whether it adopts a top-down or bottom-up approach. A top-down

approach would require new negotiations and would lead to a greater

‘lasagne risk’, with many layers of overlapping multi-country

agreements. A bottom-up approach would build on the existing plus-one

agreements between each of the members. This approach would not be

easy either because of the diversity of agreements, but it may offer a

more substantial outcome and could strengthen existing supply chains.

 

RCEP members, if they can agree early enough, can make significant

progress because of their size and the complementary nature of their

economies. They could headhunt new members in the TPP and in Central

Asia. Members could also establish a link with the European Union,

which would be a great advantage. The United States would likely then

take a concerted new approach to ASEAN. But several challenges remain.

For example, Hong Kong could be rolled into RCEP but how could Taiwan

be accommodated?

 

The two economic agreements — RCEP aligned with China and the TPP

aligned with the United States — may add to the tensions surrounding

the global leadership ambitions of both these countries. But China and

the United States also have a lot of common interests, to the point

where the China–US relationship could arguably now become too big to

fail. On the other hand, RCEP could still be put at risk because of

tensions between its members. Tension between China and Japan is based

on domestic politics, which adds to the chance of accidental

escalation. And the South China Sea dispute involving China and

several ASEAN countries has still not been resolved. As Peter Drysdale

puts it: ‘political instinct might dominate rational calculation’.

Yet RCEP also provides an opportunity to practice rational

calculation. Members can put immediate issues into a longer-term

context and identify common interests.

 

RCEP can establish good economic policy and integration as long it has

some higher-level principles. Without them, there is still the risk of

the ‘lasagne outcome’. This could be the case whether the members

take a top-down or a bottom-up approach. Jayant Menon argues, for

instance, for the promotion of multilateralisation as a guiding

principle. Members would pass on established preferences to

non-members, providing a way to manage the ‘lasagne risk’. The

principle of multilateralisation would also generate greater gains and

provide a way to deal with non-members of the formal agreement,

including Taiwan.

 

Christopher Findlay is Executive Dean of the Faculty of the

Professions at the University of Adelaide.

 

Shandre Thangavelu is Associate Professor in the Department of

Economics, National University of Singapore.

 

Indonesia Should Ban All Private Cars From Using Subsidized Fuel: Adviser

 

March 29, 2013, Reuters/Jakarta Globe

By Randy Fabi and Janeman Latul

 

Indonesia should slap a nationwide ban on the use of subsidized fuel

by the country’s 11 million private cars, a move that would save the

government $8.6 billion this year and erase a widening fiscal deficit,

a presidential adviser said.

 

President Susilo Bambang Yudhoyono is struggling to find a way to deal

with runaway fuel subsidy costs that now account for more than 30

percent of state spending and are draining funds that should be used

for much-need infrastructure in Southeast Asia’s largest economy.

 

Despite the massive cost, government officials have made clear that

raising fuel prices is not an option for the moment, fearful of the

impact on inflation and a repeat of the social unrest that past price

hikes have triggered.

 

“We recommended halting the subsidy for rich people by taking out

the subsidy from private vehicles,” said Chairul Tanjung, chairman

of Yudhoyono’s main economic advisory group.

 

The advisory committee’s proposed cuts would not cover motorcycles

and public transportation, including buses and taxis. Most Indonesians

cannot afford their own cars.

 

Tanjung, a 51-year-old billionaire and founder of CT Corp estimated

the bold measure would cut consumption of subsidized fuel by 52

percent. He spoke to Reuters on the resort island of Bali after

lengthy meetings there with the president on fuel subsidies and trade.

 

The president will discuss the recommendations in a cabinet meeting

next Thursday, when a final decision could be announced.

 

Critics say the plan would be difficult to enforce and that previous

measures, such as banning the use of subsidized fuel for government

cars, have done little to ease the crushing burden on the national

budget. Last year, the subsidy bill was $22 billion — nearly 4

percent of total economic output.

 

The committee estimated the proposed plan would save the government 84

trillion rupiah ($8.64 billion) this year, from a cost of more than

300 trillion if nothing is done.

 

The finance minister said earlier this month the subsidy bill would

likely drive the fiscal deficit to more than 2 percent of gross

domestic product and could force the government to cut spending in

other programs.

 

Many economists, including senior officials from the International

Monetary Fund and World Bank, have urged the government to scrap all

subsidies and hike fuel prices to free up funds for infrastructure,

education and health care.

 

But with general and presidential elections looming next year, and

memories fresh of violent protests over fuel-price rises in 2005 and

2008, Yudhoyono has indicated he would only boost pump prices as a

last resort.

 

Tanjung, whom Forbes says is the 5th richest Indonesian with a net

worth of $3.4 billion, argued that the rise in fuel prices for private

vehicle owners would not have a significant impact on inflation.

 

“This actually will not directly impact inflation because you are

taking the subsidy only from rich people,” he said.

 

The World Bank estimates the average car owner saves around $100 a

month from the cheaper fuel, while a motorcyclist’s benefit is $10

and those riding on public transport only $1.

 

The Much Needed EU Pivot to East Asia

 

March 29, 2013, East Asia Forum

By Patrick A. Messerlin, ECIPE and SNU

 

The EU is facing formidable challenges. The euro crisis is far from

over, with expected ‘debt walls’ higher than those predicted a

year ago. Less visible, but much more pernicious and damaging, is the

lessening of competition in many sectors due to the past several years

of crisis, a trend that is evident to varying degrees across all EU

member states. This lessening of competition favours the most powerful

rent-seekers, and is a sure recipe for increased inequality and

political turmoil.

 

Against this backdrop, the EU’s current macroeconomic and budgetary

policies are not politically sustainable. One solution to the EU’s

predicament is further trade liberalisation, which could buttress

domestic reforms and boost growth. In the absence of an increasingly

unlikely Doha deal, steps toward greater trade liberalisation will

rely on preferential trade agreements (PTAs).

 

This raises two questions for the EU: first, which PTAs are most

likely to provide the biggest and fastest boost to its growth, and,

second, which PTAs will best insure EU member states against the

discriminatory effects of the PTAs concluded among large, non-EU

economies? The latter is a key question because PTAs, by definition,

favour trade between signatories to the detriment of trade between

signatories and the rest of the world.

 

The first question focuses on the ‘growth’ dimension of trade

policy. PTAs will only be able to boost domestic growth if the

economies of the EU’s PTA partners fulfil three conditions. They

should be big enough to generate economies of scale and scope capable

of having a substantial impact on the EU’s relative prices —

important because changes in relative prices are the source of welfare

gains. They should also be well regulated because modern economies are

dominated by services, the efficiency of which depend largely on the

quality of the regulatory schemes in place. Finally, they should have

a wide network of good-quality PTAs, capable of offering EU firms

better opportunities to access the economies already covered by those

PTAs (the ‘hub’ quality).

 

Apart from the US, Japan and Taiwan are the only economies in the

world that meet these three conditions (the EU already has an FTA with

South Korea). Although China, and to a much lesser extent India, offer

better growth opportunities in the long run when it comes to size,

they score poorly on regulatory quality, ranking 92 and 132

respectively in the 2012 Doing Business report. By contrast, Japan and

Taiwan are ranked 20 and 25 in the same report (better than many EU

Member States). Additionally, when it comes to the ‘hub’

criterion, Japan has PTAs with ASEAN countries, while Taiwan has a key

PTA in place with China. The capacity of Japan and Taiwan to meet all

three conditions indicates the need for a resolute EU pivot to East

Asia.

 

The second question focuses on the ‘insurance’ dimension, which is

important given the emergence of non-EU ‘mega’ PTAs around the

world, such as the US-led Trans-Pacific Partnership (TPP) and the

China–Japan–Korea initiative. Remarkably, factoring in the

insurance dimension still leads to the same set of preferable PTAs for

the EU: a PTA with Japan will insure EU firms against the potential

discriminatory impacts of the TPP, while a PTA with Taiwan will do the

same with respect to the China–Japan–Korea initiative.

 

Finally, the EU should ask itself how it will balance any pivot to

East Asia with the PTA negotiations that it already has underway. This

is important when it comes to creating an order of priority for

negotiations, all of which will inevitably consume a huge amount of

time, staff and funds.

 

Regarding the US, the EU should bear in mind that despite fitting the

three conditions related to the first ‘growth’ dimension of trade

policy, any negotiations on an EU–US PTA are likely to be difficult.

This is mostly because the US insists on harmonisation and/or

convergence with US regulations in its TPP negotiations (as the EU was

systematically doing a few years ago). This is inconsistent with the

EU’s current approach, which increasingly insists on unconditional

mutual recognition, as it does internally among member states.

 

The cases of South Korea and China are quite different. They raise the

problem of time consistency, since PTAs are negotiated one after the

other. In both cases, the EU, Japan and Taiwan should eliminate

possible negative spillover effects on any earlier negotiated trade

agreements with South Korea and China.

 

Finally, Brazil and India raise the issue of what to do with

negotiations that are currently going nowhere. In both instances, the

EU should consider abandoning the too-ambitious goal of gaining

full-fledged PTAs for the time being. It should instead focus on

narrower topics with higher chances of success, such as building norms

on some key farm and manufacturing goods, and regulations in services

of prime interest to both sides.

 

None of these major trading partners has as much to offer the EU

through a PTA as Japan and Taiwan. To improve its domestic growth

prospects, the EU should pivot to East Asia by concluding ambitious

PTAs with both economies.

 

Patrick A. Messerlin is Chairman of the ECIPE Steering Committee and a

Visiting Professor at Seoul National University, South Korea.

 

Indonesia's Brand Baron Reaches Out to Backwaters

 

March 28, 2013, The Wall Street Journal

By Eric Bellman

 

MAKASSAR, Indonesia — The Indonesian retailer that built Starbucks,

Barbie, Burger King and 100 other global brands into one of the

archipelago's biggest retail empires is taking its brand wagon to the

country's booming backwaters.

 

PT Mitra Adiperkasa has grown as Indonesia's brand-loving middle class

has ballooned, snapping up more from its diverse portfolio of Western

food and clothing chains. It is the master franchisee for everyone

from Domino's to Krispy Kreme to Lacoste to OshKosh B'gosh. It runs

more than one out of three stores in many of Jakarta's top malls.

 

Bolstered by Indonesia's continuous shopping spree, the company

announced Wednesday that its revenues jumped 29% last year to 7.59

trillion rupiah ($780 million), pushing its profits up 22% to 761

trillion rupiah.

 

The strong earnings come as the company is building up its presence in

far-flung islands of the archipelago, in places such as Makassar, a

sprawling city of 1 million on the southern tip of Sulawesi, 1,500

kilometers across the Java Sea from the capital, Jakarta. Few large

global brands had set up shop here until recent years. Now, new retail

spaces are sprouting across the city thanks to economic growth,

turbocharged by sales of the island's coal, cocoa and minerals.

 

Past the city's new floating mosque and construction sites for a

hotel, a hospital and a highway is Trans Studio Mall, the city's

newest mall and theme park. What used to be a stretch of rice paddies

is now more than 500,000 square feet of air-conditioned shopping and

rides.

 

"The city now has lots of new buildings and roads, but the biggest

change is this mall," said Sintya Kusumawati as she sipped an iced

cocoa at Starbucks.

 

For Mitra Adiperkasa, which also runs the Payless Shoes Source and

Samsonite 1910.HK -0.92% stores as well as its own toy and sports

stores in the mall, Makassar represents one of the world's greatest

growth opportunities. For Indonesia's economy—which is 60% powered

by domestic demand rather than exports—international brand expansion

into the country's smaller cities demonstrates how far down the income

ladder Indonesia's consumption explosion is spreading.

 

The size of Indonesia's consumer class will triple to 135 million

people in the next 17 years and they will be spending $1 trillion a

year more than they do today, according to a recent McKinsey & Co.

report. The Boston Consulting Group this month said a growing slice of

the middle class will live outside of the main island of Java. On

Sulawesi, the number of people in the middle and affluent class will

grow more than anywhere else, the BCG report said.

 

International brands looking to venture beyond the islands of Java and

Bali usually look to local partners such as Mitra Adiperkasa to

navigate confusing local laws as they choose locations, hire employees

and set up supply chains.

 

Mitra Adiperkasa, or MAP, was set up in 1995 with just a few

international brands, including Lacoste. With the rest of the region,

it struggled to survive during the 1997 Asian financial crisis. But as

many of its competitors went out of business, it took over troubled

franchises and signed long-term leases on retail space at record-low

rates. As Indonesia's economy found its feet and took off over the

last decade, MAP has grown to more than 16,000 employees working at

more than 1,400 retail outlets selling more than 100 brands.

 

"After China, Indonesia is the world's biggest opportunity," said V.P.

Sharma MAP's group chief executive who has led the company since its

birth in the 1990s. "This is the last Shangri-La for retail."

 

Mr. Sharma's growth with the company over two decades has given him

unique insight into the Indonesian consumer. Indonesian spenders, he

says, like a little flash for their funds, so they prefer clothes with

character or kitsch, such as Zara or Massimo Dutti, rather than The

Gap or Levi's. Indonesians love rice. That's why he convinced Burger

King last year to allow him to sell chicken and rice sets at their

outlets here.

 

Rich Indonesians like luxury, he says, but won't pay extra for it.

Charge them a little more for a bag or expensive shoe and they will

pop over to Singapore or Paris to buy.

 

In new markets such as Makassar, the emerging middle class likes to

splurge first on their children and on sportswear. So MAP usually

reaches out to a new city with its sports store Sports Station and toy

store Kidz Station before it takes in a Starbucks.

 

It is not just Mr. Sharma's picks that are thriving in Indonesia

today. Yum Brands Inc.'s YUM +0.67% KFC has hundreds of outlets across

the archipelago, and there are more than 115, 7-Eleven convenience

stories in the country already. European brands, such as Spanish

clothing store Mango and Japanese beef bowl giant Yoshinoya, 9861.TO

-0.18% are also chasing the new Indonesian consumer.

 

Some retailers and even the government are worried that large

international chains are going to overwhelm local players. Indonesia

recently slapped new restrictions on franchises in Indonesia so that

any food or beverage franchise with more than 250 branches or any

convenience store chain with more than 150 stores will have to bring

in more local partners.

 

While some retailers complain this could discourage international

investment just as Indonesia needs more dollars to grow and better

serve its increasingly affluent consumers, Trade Minister Gita

Wirjawan says the restrictions are just to force the chains to share

the opportunity with more entrepreneurs.

 

Local and international franchises say they are not too worried about

the new restrictions as few of them have reached the ceiling yet, and,

even when they do, it should be easy to bring in new franchisees

without hurting their brands.

 

Mitra Adiperkasa still plans to reach out to all members of the middle

class, no matter where they live. It is planning to double sales over

the next three years to close to $2 billion and it has new brands

begging to come to Indonesia every month. Years ago, the company had

to beg for years to get the Starbucks franchise. Today, it has to

regularly turn down big international names.

 

Bali UN Panel Sets ‘Ambitious yet Achievable’ Framework

 

March 28, 2013, The Jakarta Post

By Ina Parlina and Novia D. Rulistia

 

Bali talks on the global agenda beyond 2015 concluded with an

“ambitious yet achievable” framework ready to be submitted to the

UN secretary-general in May.

 

The co-chairs of the fourth High Level Panel Meeting on Post-2015

Millennium Development Goals (MDGs) stated the panel agreed to renew a

global partnership “that enabled a transformative, people-centered

and planet-sensitive development agenda that was realized through the

equal partnership of all stakeholders.”

 

The co-chairs — President Susilo Bambang Yudhoyono, Liberian

President Ellen Johnson Sirleaf and UK Prime Minister David Cameron

— agreed that financing for the development agenda would be clearly

specified.

 

The agenda would require honoring international, regional and national

financing commitments as well as finding innovative sources of finance

such as private investment, public-private partnerships and market

mechanisms, they said.

 

Yudhoyono said the panel discussed a framework that resulted from the

international Rio+20 conference on the environment.

 

“We promote a single and coherent post-2015 development agenda that

integrates economic growth, social inclusion and environmental

sustainability, known as the Sustainable Development Goals (SDGs),”

he said.

 

At the Rio+20 meetings, governments agreed to launch a process that

would set up an open working group, composed of 30 government

representatives from all regions, to develop a stakeholders engagement

plan to build the framework for the SDGs.

 

The communiqué apparently failed to please the Civil Society

Organizations Forum , which was tasked with submitting input to the

panel. Sugeng Bahagijo of the International NGO for the Indonesian

Development Forum (INFID) questioned Indonesia’s position between

the two sides.

 

“Which side does Indonesia take on this matter? The side of the SDG

as resulted from Rio+20 or that of the UK, which wants a bigger role

for market in the new framework?” he said.

 

Earlier on Wednesday, Cameron said he opted for the involvement of

private sectors for sustainable growth.

 

“I don’t think the market approach can link up with the SDGs as

the market will also mean consumption. SDG tries to reduce it and will

highly regulate investment,” Sugeng said.

 

Sugeng said Indonesia should be able to bridge the two ideas, saying

that in inclusive growth, as Yudhoyono offered, the government’s

role was supposed to be bigger “by imposing stern regulations

and solid financing to encourage private sectors to pay higher

taxes”.

 

Heru Prasetyo, of the Presidential Working Unit for Development

Monitoring and Control (UKP4), which oversees the Bali meetings, said

he hoped the new framework would not repeat the dominant feature of

charity from rich to poorer countries in the current MDG framework.

 

Listed Firms Step in to Oppose OJK Fee scheme

 

March 28, 2013, The Jakarta Post

By Tassia Sipahutar

 

Opposition to the Financial Services Authority’s (OJK)

fee-collection scheme continues as several publicly listed companies

demand a delay in implementation.

 

The Indonesian Publicly Listed Companies Association (AEI) expressed

its objection to the scheme during the association’s gathering in

Jakarta on Wednesday, attended by OJK commissioner Nurhaida and

Indonesia Stock Exchange (IDX) business development director Friderica

Widyasari Dewi.

 

AEI deputy chair Haryanto Adikoesoemo, who is also the president

director of petroleum and chemical distributor PT AKR Corporindo

(AKRA), said the fee would be a burden that would deter new companies

from venturing into the country’s stock market.

 

“We did not pay fees when supervision was by Bapepam-LK [the Capital

Market and Financial Institutions Supervisory Agency], but now we are

obliged to finance OJK’s operations,” he said.

 

The OJK was created to monitor financial services, a duty previously

carried out by the Bapepam-LK and Bank Indonesia. The fee-collection

scheme was floated last November.

 

Financial institutions must pay 0.06 percent of total assets to the

OJK, starting this year with 0.03 percent, rising to 0.045 percent in

2014 and ultimately to 0.06 percent in 2015.

 

For a company like Bank Mandiri, this means hundreds of billions of

rupiah.

 

The AEI believes the amount is too much. AEI executive director

Isakayoga says member companies object because they have already paid

taxes.

 

“Our financial burden will increase with this fee and we are worried

that the fee will jeopardize OJK independence. An independent

supervisor should not have financial relations with the companies it

supervises,” he said.

 

With the fee already regulated by the OJK Law, the AEI wants

implementation postponed until 2018.

 

Nurhaida thinks it unlikely that the scheme will be implemented in

2013 because of the objections and says the OJK is developing a new

scheme.

 

“We may base the fee on the type of industry instead of assets. We

have not decided on any amount because every option is on the table

right now. The fee may be able to reduce the APBN [state budget]

allocation for the OJK,” she said.

 

There are 465 firms listed on the IDX and the bourse hopes as many as

30 new companies will enter the stock market this year, higher than

last year’s figure of 22.

 

Event organizer PT Dyandra Media International (DYAN), the latest

company to go public, would prefer the OJK to base the scheme on share

transactions.

 

Dyandra corporate secretary Budi Yanto Lusli said, “We will study

the future results, but we hope the government will come up with a

policy that will boost companies’ interests in going public, not the

opposite,” he said.

 

Govt Opens Tender for $2.15b Projects

 

March 28, 2013, The Jakarta Post

By Nurfika Osman

 

About 2,000 packages of road and bridge construction projects worth Rp

20.98 trillion (US$2.15 billion) across the archipelago are currently

under auction as part of the government’s long-term

infrastructure development plan.

 

Djoko Murjanto, the director general of highways at the Public Works

Ministry, said in Jakarta on Wednesday that the road projects would

begin in the second half of 2013 through to the end of 2014.

 

“The figure represents 87.94 percent of the total [project] packages

we plan to put on tender this year. We started the tender process in

November last year because we need to accelerate the development of

our infrastructure,” Djoko said on the sidelines of a hearing with

the House of Representatives’ Commission V overseeing transportation

and infrastructure.

 

The packages included major projects like Tebing Tinggi-Medan in North

Sumatra and Pekanbaru-Dumai in Riau to the Pemali Sipait bridge

project in Central Java that is aimed to help reduce congestion

between Semarang and Tegal.

 

“Some of the multiyear projects will need around two years to finish

but some are more than that, depending on the size of the project,”

he said.

 

Out of the 2,378 packages, he said that 496 packages worth Rp 4.04

trillion were now entering the tender process.

 

The ministry aims to tender as many as 3,134 packages with an

investment of Rp 28.45 trillion throughout 2013, around a 10 percent

increase from last year.

 

In addition, he said that several major projects using soft loans from

foreign companies were hampered because the funds had not been

disbursed.

 

The first phase of the Cileunyi-Sumedang-Dawuan (Cisumdawu) toll road

worth Rp 1.02 trillion, which will connect Cileunyi and Rancakalong in

West Java, and the Medan-Kuala Namu toll road in North Sumatra, are

among the affected projects.

 

He said that 90 percent of the project would be financed by a loan

from the Export-Import Bank of China with the remaining 10 percent

from the state budget.

 

“We have disbursed our part but we cannot continue the project

because we have not received the loan,” he went on.

 

Cisumdawu was part of the TransJava toll road project that is

projected to smooth the transportation of both people and goods across

Java.

 

Meanwhile, Medan-Kuala Namu is a project that will connect the

province’s capital city to the new airport, Kuala Namu International

Airport, that is expected to commence operations in August.

 

Moreover, Toll Road Regulatory Agency (BPJT) head Achmad Gani Ghazaly

said that 11 sections of toll roads across Java were currently below

minimum service standards and needed improvement. The sections include

Cawang-Tomang-Cengkareng, Jakarta-Cikampek, Jakarta Outer Ring Road,

Cipularang-Padaleunyi and Surabaya-Gresik.

 

Four out of 11 sections are operated by state run publicly listed toll

road firm PT Jasa Marga. Most of the problems are potholes,

insufficient lamps and traffic signs.

 

Indonesian Licence Reciprocity Issue May Impact M'sian Banks

 

March 28, 2013, The Star (Malaysia)

By Ng Bei Shan

 

PETALING JAYA: Indonesia's incoming central bank governor Agus

Martowardojo's comments have reignited concerns on the reciprocity in

dealing with foreign bank licences, an issue that could affect

Malaysia's biggest banks.

 

Agus is Indonesia's Finance Minister and has been approved by a

parliamentary panel for financial affairs to be the next governor of

the banking regulator Bank Indonesia starting May. He had reiterated

his stance on reciprocal banking policies during a parliamentary

hearing.

 

He was quoted by the news wires as saying: “Regarding banking

regulations, there's a need to apply reciprocal regulations to foreign

banks on ownership and licences, based on the mutual benefit

principle.”

 

An industry observer told StarBiz that the impact on Malaysian banking

players was unknown as it was in the preliminary stage and that the

issue was now at the regulatory level.

 

Local banking groups with sizeable stakes in Indonesian units include

Malayan Banking Bhd with a 97.3% shareholding in PT Bank Internasional

Indonesia (BII) and CIMB Group Holdings Bhd with a 92.3% stake in PT

Bank CIMB Niaga Tbk, Bloomberg data showed.

 

Meanwhile, RHB Capital Bhd is in the process of acquiring a 40% stake

in PT Bank Mestika Dharma.

 

Last year, Bank Indonesia announced that the regulator would impose a

cap on single ownership in the country's banks at up to 40% for

financial institutions and up to 30% for individuals or families.

However, the rule was applicable for new investors only.

 

Following this announcement, it was reported that Maybank was required

to refloat 20% of its stake in BII.

 

A banking analyst said the notion should be aimed at the Singaporean

central bank as Bank Negara had allowed Bank Mandiri to enter

Malaysia.

 

The Malaysian regulator had granted a full banking licence to

Indonesia's largest lender to perform full banking services, including

raising third party funds, opening automatic teller machines and

channeling loans in the country.

 

Bank Mandiri is the only bank from the Asean region of five foreign

banks that received a full-fledged banking licence here.

 

Singapore's DBS Group Holdings' bid for Indonesia's Bank Danamon had

been long delayed. “There will be a lot of factors and challenges in

meeting this reciprocity issue as central banks or regulators of

different countries work at a different pace,” the analyst

explained.

 

Other factors like the maturity of the market and the country's

economic development would affect the feasibility of reciprocity, he

added. “It is natural for the Indonesian central bank to press for

reciprocity as foreign banks had benefited from the economic growth

there so they would also hope to grow in other markets now that some

of the Indonesian banks had the capital and capacity to expand

overseas,” he said.

 

Indonesia to Rely on Soybean Imports Beyond 2014

 

March 27, 2013, Reuters

 

Indonesia will miss its ambitious goal to be self-sufficient in

soybeans by next year due to a shortage of convertible land, its

agriculture minister said, signalling the nation will continue to rely

heavily on imports of the meat substitute.

 

Indonesia, which has a rising population of more than 240 million,

last year abandoned a 2014 self-sufficiency target for white sugar and

has been struggling to meet similar aims for staples corn, beef, rice

and soybeans.

 

“We are facing problems on soybean and sugar,” Agriculture

Minister Suswono told Reuters in an interview on Wednesday. “The

problem for soybeans and also on sugar is limited farm land.”

 

He said the country would need at least 500,000 more hectares of

soybean plantation area if it were to achieve its 2014 goal, nearly

doubling the current 600,000 hectares.

 

It would require more than 350,000 hectares of extra sugarcane

farmland to meet its objective for sugar, he added, way more than the

450,000 hectares cultivated now.

 

“It is so difficult for us to achieve the sugar and soybean

targets.”

 

Soybean shipments to Indonesia, which meets around 70 percent of its

annual needs of the oilseed through imports, are likely to rise 3

percent to 1.8 million tons this year, say industry groups.

 

Major buyers include FKS Multiagro, Sungai Budi Group and Cargill.

 

Indonesia, which mostly uses soybeans as a protein-rich substitute for

costlier meat, largely ships in the oilseed from the United States,

and imposes a 5 percent import duty.

 

Consumption is about 2.5 million to 2.7 million tons of soybeans each

year, with the main domestic harvest in late August.

 

Last week, an industry ministry official said it aims to link

traders’ imports of soybeans to the volume of the oilseed they buy

at home, to help protect domestic farmers and promote their interests.

 

Policy Puzzle

 

Southeast Asia’s largest economy, which relies on agriculture for

about 15 percent of GDP, is struggling to balance the interests of

farmers and consumers.

 

As wealth increases in Indonesia, changing eating habits incorporate

more meat and convenience foods, boosting imports of grains used in

feed, such as corn and soybeans.

 

The government has put in place strict import controls and often uses

import tariffs or quotas to protect domestic farmers.

 

Late last year, the president signed a new food law to hasten

self-sufficiency targets that critics say will further add to curbs on

the trade of staples.

 

Such policies on food and agriculture trade have been criticized by

international trading partners, including the Organization for

Economic Cooperation and Development.

 

Suswono said domestic rice output would meet 90 percent of the

country’s needs by 2014 - which is the government’s benchmark for

self-sustainability.

 

Earlier this week, an agriculture ministry official told Reuters that

due to a rising rice surplus, imports of the staple grain would not be

necessary this year.

 

Indonesia usually imports around 1-2 million tons of rice each year

from Thailand, Vietnam, India or Cambodia, in order to build stock

levels and guard against possible food inflation.

 

Consumers have also been critical of government policies, after it

slashed import quotas for beef, which then helped drive up prices in

Java. The country is also battling a garlic and onion shortage.

 

High Food Prices Cause Grief in Indonesia

 

March 27, 2013, The Straits Times

By Zubaidah Nazeer

 

First the price of soya beans soared. Then up went beef, garlic and

onions. Now the price of sugar is not sweet any more.

 

In fact, the costs of some staple foods have shot up five times.

 

Critics blame Indonesia's import policies that aim to promote

self-sufficiency. These have led to cartels, they say, with large

players sometimes sitting on their stocks in an attempt to drive up

prices and fatten profits.

 

Ahmad Junaidi, a spokesman for the Business Competition Supervisory

Committee (KPPU), said: "In the case of garlic and onions, some

approved importers park their goods in the warehouse and delay

completing administration procedures while waiting for prices to

soar."

 

In one instance, KPPU's investigations revealed that at least 109

containers of garlic with their permits in order remained parked in a

warehouse at Surabaya's Tanjung Perak port early last week, while the

importers dragged their feet on distributing them.

 

Meanwhile, the price of garlic shot up to 100,000 rupiah (US$10) per

kg in areas like Malang, Central Java, from a low of 20,000 rupiah per

kg last November. Last month, inflation rose to its highest level

since June 2011. The consumer price index hit 5.3 per cent, led by

escalating food prices.

 

Members of the Indonesian Traditional Market Traders Association

questioned the government's lack of foresight. They argued the

Agriculture Ministry should have been able to predict when stocks of

such commodities would rise and fall, depending on harvests.

 

In a knee-jerk response, the Trade Ministry forced importers to

deliver supplies stuck at the ports, a move that lowered the price of

garlic and onions by 15 per cent. It told importers to sell the stock

at 15,000 rupiah per kg.

 

But critics say this remains a short-term solution because the import

system is riddled with complex processes that require permits to be

approved by two ministries - agriculture and trade.

 

Agriculture Minister Suswono told reporters: "The approval process

takes time... with sometimes over 3,000 documents (for one permit)...

One company should just require one document."

 

Trade Minister Gita Wirjawan said there ought to be one window to

approve the process, and advocated putting it online to ensure

transparency. Yesterday, his director-general inspected a warehouse to

ensure onions were being distributed, not withheld.

 

While some say a better distribution process will reduce price

fluctuations, others like Hermanto Siregar of the National Economic

Committee, which advises the President, said import quotas should be

replaced with food tariffs to prevent abuse.

 

The import quotas encouraged bribes and price spikes in Indonesia. One

high-profile politician has been charged with accepting bribes in

return for preferential treatment for a beef importer.

 

The recent price hikes prompted an irate President Susilo Bambang

Yudhoyono to tell the two ministries to sit down and stabilise prices.

"What I heard was blame pointed out from one ministry to another. This

is bad," he said last week. "(The Trade Ministry and Agriculture

Ministry) should work night and day. People need certainty and

solutions from these ministries."

 

Depok mayor Nur Mahmudi Ismail has taken matters into his own hands,

urging 900 housewives in a family welfare movement to plant garlic and

shallots. "(Home gardening) could become a solution in dealing with

the increasing prices of shallots and garlic," he was quoted by The

Jakarta Post as saying.

 

7-Eleven Indonesia Franchisee Plans Hundreds of New Stores

 

March 26, 2013, The Wall Street Journal

By Eric Bellman

 

JAKARTA, Indonesia—The operator of 7-Eleven convenience stores in

Indonesia will open hundreds of new outlets in the coming years,

seeing no sign that strong consumer demand is slipping despite rising

prices.

 

Henri Honoris, chief executive of PT Modern Putra Indonesia, one of

Indonesia's largest retailers, told The Wall Street Journal that the

country's growing middle class, particularly its youth, still has the

extra cash and time to splurge on snacks and prepared meals.

 

"Indonesians' lifestyles have been changing," Mr. Honoris said. "They

now want ready-to-eat food, packaged food and chilled food," and they

want access to it 24 hours a day.

 

Indonesia's robust economy has given greater spending power to a wider

portion of the population, driving domestic demand and making the

country an attractive destination for multinational businesses. Around

74 million of 250 million people in the country live in households

that spend more than $200 a month, and that number is likely to rise

to 141 million by 2020, according to a report by the Boston Consulting

Group.

 

Seven-Eleven is the world's largest convenience store chain, with more

than 40,000 outlets from Mexico to Malaysia overseen by parent Seven &

i Holdings Co. 3382.TO 0.00% of Tokyo.

 

In Indonesia, 7-Eleven has evolved into a kind of self-service cafe.

In addition to the standard chips, Slurpees, hot dogs and beer,

Jakarta's 7-Eleven stores offer salads, lasagna, fried chicken and

even rice and noodle dishes.

 

Most of its 119 outlets have tables and chairs, restrooms, free Wi-Fi

and even valets to help park people's scooters. All the extras are

aimed at encouraging customers to linger.

 

PT Modern Internasional, MDRN.JK -1.01% the listed parent company of

Modern Putra Indonesia, is still doing the final calculation of last

year's earnings but is likely to report a 20% jump in sales for 2012

to around $100 million, said Mr. Honoris, who is also a director of

Modern Internasional. Most of the growth and around half of those

sales came from 7-Eleven, he said.

 

Modern Internasional also controls a national chain of around 1,200

Fuji Image Plaza photo processing shops. The company plans to convert

nearly 200 of them into 7-Eleven stores, Mr. Honoris said. In the long

run, he said there could be more than 2,000 7-Elevens in Jakarta

alone.

 

Whether the company can follow through on its optimistic plans depends

on Indonesia's middle class expanding as expected and the company

being able to withstand competition from big local and international

chains. Meanwhile, some analysts are worried that the consumption boom

is already slowing in some parts of the country.

 

Though consumption in some of Indonesia's far-flung islands has fallen

as lower commodity prices have left less spending money to the

country's mine and plantation workers, domestic consumption is

expected to continue to power growth, said John Rachmat, head of

equity research at PT Mandiri Sekuritas in Jakarta.

 

"The retail sector is doing extremely well," and investors have been

bidding up the prices of retail stocks like Modern, he said.

 

The rapid rollout of 7-Eleven stores and more than 10,000 other

convenience stores across the archipelago has spooked some mom-and-pop

shop owners, who say they are having trouble competing with the low

prices and long opening hours at branded convenience stores. The

government has recently added new restrictions on local and

international franchises, requiring master franchisees to bring in

more local entrepreneurs as they grow.

 

Mr. Honoris said the company had always planned on offering the

franchise to small-business entrepreneurs.

 

One restriction on 7-Eleven's growth, however, has been Jakarta's

traffic jams, he said. The store chain has to grow slower than it

would like to ensure it can deliver fresh food to each store every

day.

 

"The challenge is infrastructure; we could open faster with better

infrastructure," Mr. Honoris said. "Our product is fresh so we have

one-day and two-day expiration dates."

 

Jakarta Taking the Slow Route on Traffic

 

March 26, 2013, The Wall Street Journal (Blog)

By Resty Woro Yuniar

 

Jakarta transportation officials took their foot off the pedal this

week on a plan to try to loosen up the notoriously horrible traffic in

Indonesia’s capital city.

 

The idea is to restrict which days cars can be on the road by whether

their license plate’s last digit ends in an odd or even number.

Taxis and similar business-type vehicles, motorcycles and public

transportation wouldn’t be covered by the 6 am to 8 pm regulation.

 

The plan had already been delayed twice and was aimed to start in

June. Officials say they need more time to get reliable public buses

to provide wheels for drivers suddenly limited, and to figure out how

to enforce the rule, given they don’t feel they have enough police

to do so now.

 

Andi Riccardi supports the odd-even license plate idea, and would

start taking the bus half the time. He recalled that it took him 25

minutes to get to his office in central Jakarta from his home in

Pejaten, in south Jakarta.

 

Now it is takes more than three times longer.

 

“Jakarta’s traffic is intolerable now. This rule is the correct

short term solution to fix it,” Mr. Riccardi said.

 

The odd-even idea has been tried elsewhere, with mixed results.

 

Mexico City and Beijing, for example, have tried it out. Air pollution

in Beijing dropped to 19% after the odd-even plan went into effect,

according to a study published in 2011 by Shihe Fu, professor at

Xiamen University, and Brian Viard, of the Cheung Kong Graduate School

of Business. But the World Bank said the odd-even rule increased

congestion in Mexico City because people bought second cars to try to

outsmart the system.

 

Last year, the Ministry of Public Works of Jakarta predicted that the

city’s gridlock will be worse in 2014. There just isn’t enough

road to handle the number of cars. There just isn’t enough road to

handle the number of cars. If fact, the actual length of Jakarta roads

– 7,208 kilometers – should be 12,000 kilometers to handle

Jakarta’s 13. 3 million vehicles, explained Setiabudi Albamar, a

transportation expert at the ministry.

 

The government says the odd-even rule would increase traffic speed in

the city’s inner ring, to 47 kilometers per hour from today’s 16.8

kilometers per hour. It would also reduce how much subsidized gas

Jakartan’s use, which would help the country’s budget.

 

The Jakarta government says it expects to implement the rule next

year.

 

But Rheza Gusman, a 26-year-old lawyer, will be hoping for another

delay.

 

“This will only limit my mobility on a daily basis,” said Mr.

Gusman, who said if the rule eventually goes into effect, he will

share commuting by car with a friend from his home in Tangerang to his

office in western Jakarta.

 

Three Contenders Emerge for Indonesia Finance Minister Post

 

March 26, 2013, The Jakarta Globe

By Muhammad Al Azhari

 

As Finance Minister Agus Martowardojo undergoes vetting to become the

central bank governor, attention is now turning to who will fill his

shoes should he land Bank Indonesia’s top job.

 

A number of government sources with direct knowledge of the matter

said that potential candidates for finance minister included Anny

Ratnawati, Gita Wirjawan and Chatib Basri.

 

Anny, currently serving as deputy finance minister, has emerged as the

most likely replacement for a departing Agus, given her wealth of

experience in the ministry itself and other endeavors in the economics

and financial sectors.

 

“Anny is the most likely candidate,” said a source from the office

of the coordinating minister for the economy.

 

With a PhD in agricultural economics from the Bogor Institute of

Agriculture, Anny previously served as the Finance Ministry’s budget

affairs director general.

 

Gita, the trade minister, is tipped as another possibility, with his

strong background in investment banking. Gita is the founder of the

private equity firm Ancora Capital and was once a top executive at the

US investment bank JPMorgan.

 

Chatib is the chief of Indonesia’s Investment Coordinating Board

(BKPM). He is an economist and former senior lecturer at the

University of Indonesia. Chatib was once an adviser to the

coordinating minister for the economy.

 

“Ideally, Agus’s successor should not come from a political party,

because we are getting close to the general election,” said Eric

Alexander Sugandi, an economist from Standard Chartered bank.

 

It would be easy for political opponents to make accusations of

misappropriate budget spending to support election campaigns if the

appointment was factionally driven, he added. The new finance minister

will assume the post for 18 months, until the next general election.

 

Property Still Among Most Lucrative in 2013

 

March 25, 2013, The Jakarta Post

By Raras Cahyafitri

 

Jakarta -- Property could be one of the most profitable business

sectors listed on the Indonesian Stock Exchange (IDX) last year and is

expected to continue growing although at a slower pace on the back of

increasing demand.

 

Most property companies posted two-digit growth in net profits during

last year’s nine month period to September, outperforming the

average increase of more than 400 listed firms, according to a number

of financial reports.

 

The bourse corporate listing director Hoesen said that the average

profit recorded by listed property companies far exceeded the 4

percent average growth of the net earnings of all listed companies

during the January to September period last year. Most listed firms

have yet to submit their financial reports for the full year 2012.

 

Among the companies to already submit full year reports is PT Bumi

Serpong Damai (BSDE), which saw its profit rise around 53 percent in

2012 to Rp 1.29 trillion (US$132.87 million). Another example, Jakarta

listed PT Alam Sutera Realty booked 98 percent increase in net profit

in 2012.

 

An analyst at PT Samuel Sekuritas Benedictus Agung Swandono noted that

property developers reported a 32 percent increase in revenue on

compound annual growth rate (CAGR) basis during the 2009 to 2012

period.

 

“This year, property companies will continue to grow. In terms of

amount, the growth won’t be far different from last year’s,

however in term of percentage increase it will be smaller due to a

lower base number in 2012 from 2011,” Agung said.

 

Agung also cited that property developers enjoyed a growing average

selling price of their products during the 2010 to 2012 period, which

contributed to companies’ higher profit margins.

 

Developers with portfolios in industrial estates enjoyed higher growth

on the back of a jump in industrial land prices on growing demand. PT

Bekasi Fajar Industrial Estate saw its net profits during the January

to December period last year jump 293 percent. PT Jababeka also

reported 126 percent growth in net profits during the first nine

months of 2012. PT Surya Semesta Internusa — which runs its

industrial estate business through a subsidiary called PT Suryacipta

Swadaya — had a 174 percent jump in its net profit in 2012.

 

“The industrial estate sector remains attractive, benefiting from a

high foreign direct investment in Indonesia in the next few years on

the back of potential relocation of investment from China, which has

higher labor cost and a renminbi appreciation issue. Indonesia has a

demographic bonus with a potential labor supply and big consumer

base,” Agung of Samuel Sekuritas said.

 

Figures from the Investment Coordinating Board (BKPM) showed that

foreign direct investment reached Rp 206 trillion last year, a 17

percent increase compared to Rp 175 trillion in 2011. The Board is

expecting that foreign investment will touch Rp 270 trillion this

year.

 

As investment is expected to grow, industrial estate players are

preparing to acquire more land to support their revenue increases.

 

Bekasi Fajar’s corporate secretary Khrisna Daswara said that the

company planned to acquire 200 to 250 hectares of land.

 

“That is our plan in the next two years,” Khrisna said. Bekasi

Fajar has around 766 hectares in land bank as of the end of last year.

 

The index of property stocks rose by 42.44 percent in 2012, the best

performer among other sectoral indices, according to figures from the

bourse. The property stock index has increased by 34.86 percent in the

year to date — the best performer so far — according to figures

from the bourse, as of March 22.

 

“Property stocks gave the highest yield last year. The drivers were

booming residential projects, economic growth, housing backlog and the

steady central bank interest rate, which helped people looking for

mortgages,” Probo Sujono, an analyst with PT Millenium Danatama

Sekuritas, said.



Indonesia to Override Patents for Live-saving Medicine

 

March 25, 2013, IRIN News

Source: PlusNews

 

JAKARTA - The Indonesian government hopes to implement one of the

largest ever examples of “compulsory licensing”, which will enable

the generic manufacture of drugs still under patent.

 

Advocates of the move say the reduced drug costs achieved through

compulsory licensing have been instrumental in reducing HIV mortality

rates in Indonesia.

 

“One of the major reasons for decreased HIV mortality rates is the

provision of anti-retroviral [ARV] treatment, and if [Indonesia]

can’t afford the anti-retroviral treatment, the mortality rate will

return” to the higher levels of previous years, Samsuridjal Djauzi,

chairman of the Association of Indonesian Physicians Concerned about

HIV/AIDS, told IRIN.

 

The latest use of compulsory licensing - Indonesia’s third to date -

will allow the government to expand its access to the second-line

ARVs, he said, including tenofovir, emtricitabine, and

lopinavir/ritonavir.

 

Under the World Trade Organization's Trade Related Aspects of

Intellectual Property Rights (TRIPS), countries can override patents

for public health purposes by issuing compulsory licenses that enable

the generic manufacture of drugs still under patent.

 

In this latest move, a September 2012 presidential decree announced

the government would procure generic equivalents of the international

patents for seven HIV/AIDS and hepatitis B medicines, citing the

“urgent need” to control these diseases.

 

“The implementation of the third compulsory licensing depends on the

capability/readiness of the manufacturer [Kimia Farma]. I estimate

efavirenz [another HIV medication on the list] will be available in

the next three to six months. For other drugs, [we] will need more

time,” Djauzi said.

 

According to UNAIDS, an estimated 380,000 people are living with

HIV/AIDS in Indonesia. The number may not appear alarming considering

that Indonesia is a developing country with nearly 250 million people,

but the prevalence rate is now 25 percent higher than it was a decade

ago.

 

The spread of HIV is attributed to low condom use and epidemic-level

infection rates - 36.4 percent - among injecting drug users, experts

say.

 

The cost of normal treatment is around US$90 per person per month,

Usep Solehudin, who coordinates free distribution of ARVs for some 120

patients at a clinic in Jakarta called Yayasan Pelita Ilmu (YPI), told

IRIN. This is beyond the means of most of his patients, whose incomes

are generally $100 to $200 per month.

 

“The patients would not otherwise be able to buy it [the ARVs]

because they cannot afford it,” he said. “They would just ignore

their health.”

 

Jakarta first used compulsory licensing in 2004, ushering in increased

medication access.

 

The number of Indonesians receiving ARVs has quadrupled since 2008, to

30,000 today, and the government is looking to maintain this rate of

expansion, said Cho Kah Sin, country director of UNAIDS in Indonesia.

 

The latest government license focuses on second-line ARVs, which are

prescribed to patients who have developed resistance to first-line

treatment. Resistance in a population tends to develop within several

years of a drug’s introduction. The government is therefore

expecting that increasing numbers of Indonesians with HIV will require

second-line treatment, said Cho Kah Sin.

 

Critics of compulsory licensing say its usage undermines medical

innovation.

 

“Systematic issuance of compulsory licenses sets a negative

precedent and can reduce the incentive to invest in the research and

development of new medicines that address unmet medical needs,” said

Andrew Jenner, director of innovation, intellectual property and trade

at the Switzerland-based International Federation of Pharmaceutical

Manufacturers and Associations, in a written statement to IRIN.

 

“We believe that negotiated approaches, such as tiered pricing and

voluntary licensing, are generally more effective and sustainable,

both medically and economically,” said Jenner, whose organization

represents four pharmaceutical companies whose medicines are to be

generically replicated by Indonesia. Tiered pricing is the practice of

setting different prices for different markets.

 

Others studies, however, argue there is no empirical evidence that

patents increase innovation and productivity.

 

Peter Maybarduk, who directs the Global Access to Medicines Programme

for Public Citizen, a US-based NGO, advocates wider use of

“compulsory licensing” by developing countries. “We don’t

think compulsory licensing should only be used in the most dire

scenarios,” he said.

 

Switzerland-based Michelle Childs, who heads the Campaign for Access

to Essential Medicine for Médecins Sans Frontières, agrees: “If

there is a clash between access to [essential] medicines and patent

rights... the primacy of access should be promoted,” she said.

 

Maura Linda Sitanggang, director-general of the pharmaceutical

department at Indonesia’s Ministry of Health, did not respond to

requests for an interview.

 

 

 

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