All posts by Victor

Indonesia urges ASEAN countries to improve maritime security

Foreign Affairs Minister Retno LP Marsudi urged the Association of Southeast Asian Nations (ASEAN) members to improve security in the regions waters during the ASEAN Ministerial Meeting (AMM) Retreat in Boracay, the Philippines, on Feb 20-21.

“Every country has the main responsibility of securing its waters. Hence, Indonesia calls on the ASEAN countries to take steps to improve maritime security, especially in the Sulu Sea, Sabah waters, and the surrounding areas,” Minister Marsudi stated during her visit to the Philippines, as quoted by a release on Tuesday.

The two maritime areas are prone to crimes at sea, since within the last two years, several Indonesian citizens had become victims of kidnapping in those waters, Minister Marsudi remarked.

Hence, Indonesia has taken several initiatives to help improve maritime security in the ASEAN waters through coordinated patrols, she noted.

Indonesia and the Philippines will also launch a roll-on/roll-off route serving Bitung in North Sulawesi and General Santos and Davao of the Philippines. The sea route is expected to improve connectivity and economic integration in the ASEAN region.

The AMM Retreat is the first foreign ministerial meeting of the ASEAN under the chairmanship of the Philippines in 2017.

The Philippines has set six priorities for the ASEAN during its chairmanship: People-Oriented, People Centered ASEAN; Peace and Stability in the Region; Maritime Security and Cooperation; Inclusive, Innovation-led Growth; ASEANs Resiliency; and ASEAN: A Model of Regionalism, A Global Player.

During the meeting, Minister Marsudi addressed several issues, such as the follow-up of the 28th and 29th ASEAN summits, the Philippines priorities in 2017, external relations of the ASEAN, and several regional and international issues.

Indonesia also highlighted the importance of ASEAN member countries to deliver concrete results to society.

The ASEAN should also strengthen its unity and centrality in facing regional and global challenges.

Several issues to be put forth by Indonesia are maritime security, counterterrorism, ASEAN economic cooperation, and protection of migrant workers, among others.

Source: Antara News

Indonesia-US want cooperation based on bilateral agreements

Industry Minister Airlangga Hartarto has said Indonesia will try to strengthen bilateral cooperation with the United States to boost trade between the two countries.

“For Indonesia, America is one of our strategic markets. Therefore, trade between the two countries should be increased,” Airlangga said in a statement after meeting with US Ambassador to Indonesia Joseph R. Donovan Jr. on Monday.

During the meeting, the minister said he was informed that the US government preferred to cooperate with countries through bilateral agreements.

The US is Indonesia’s third largest trading partner after China and Japan. The trade value from January to July last year reached US$13.2 billion, with Indonesian trade posting a surplus of $5.23 billion.

Airlangga said bilateral agreements between the two countries needed to be expanded because Indonesia wanted to increase textile exports to the country.

“Currently, the tariff on our textiles is 12.5 percent, while for Vietnamese textiles it is zero percent because the two countries have a bilateral agreement with one another,” he added.

Airlangga said US investors were expected to invest money in several industrial zones such as the Dumai zone in Riau, the Berau zone in East Kalimantan, the Gresik zone in East Java and the Kendal zone in Central Java. (bbn)

Source: The Jakarta Post

Fintech lending opens up opportunities for SMEs

The Indonesian Financial Services Authority (OJK) has just released a regulation on financial technology (fintech) lending, which stipulates rules in the provision of lending services based on information technology.

This fintech-based lending will not only play an important role in supporting the financial inclusion program that the government has recently promoted, but will also become an important alternative for unbankable individuals and micro, small and medium enterprises (MSMEs) to access funds to start and develop their businesses.

According to the World Bank, only 36 percent of Indonesians have access to banking services and merely 13 percent borrow from formal financial institutions. While there are almost 60 million MSMEs, which provide over 100 million jobs in the country. Most of them cannot get the financing they need to expand.

Conventional micro credit and the government-subsidized micro lending scheme micro credit program (KUR) have not been able to boost up young entrepreneurs and MSMEs on a massive scale. Despite the government’s guarantee, banks are still reluctant about lending to these potential borrowers, mainly due to administrative issues.

Inexperienced aspiring entrepreneurs and micro-scale enterprises often have neither sufficient collateral to secure a bank loan nor the financial track records for lenders to evaluate. Geographical constraints also remain a challenge that has hindered people in rural and eastern part of the archipelago to get access to traditional bank services. KUR loans are provided by only a small number of banks, which rely on their limited branches, thus financial access remains pretty low in remote areas.

Fintech lending could definitely address these issues. Through leveraging technology, fintech makes capital available to the underbanked and unleashes potential economic activity, creates job opportunities and generates growth in a more inclusive manner.

Fintech-based lending can potentially fill the country’s existing financing gap of almost Rp 1 quadrillion (US$75 billion). In addition, peer-to-peer lending and crowdfunding fintech particularly can tap into the MSMEs, of which only 20 percent are currently bankable. Giving them access to initial or additional funding will definitely enable them to launch or to expand their business.

OJK has also previously promoted branchless banking system, locally known as Laku Pandai, which enables banks and financial service firms to reach out to new customers without having to open physical branches.

While Laku Pandai has increased access to saving in rural areas, its services unfortunately have not included lending. The agents still require a borrower to apply through the bank’s local branch. The OJK argues though that Laku Pandai agents will soon be able to administer lending.

With its less bureaucratic style, fintech also offers innovative methods to evaluate its prospective creditors. Tala Mobile, for instance, comes up with an alternative for creditworthiness evaluation for traditionally unbankable population in various countries. Its smartphone app evaluates daily mobile activities of potential borrowers, from simply making frequent calls to parents to paying bills on time, to determine their reliability.

Once a potential borrower is approved, the money will be delivered digitally in minutes.

Smartphones are inevitably enabling capabilities in the lending industry. With Indonesia’s rapid mobile penetration and growing online commerce, fintech lending increases financial accessibility to the unreachable and accelerates financial inclusion.

M-Shwari in Kenya, for example, leverages the success of mobile money, M-Pesa, to offer paperless and branchless banking services, ranging from saving to accessing micro credit.

Indonesia’s smartphone owners are flourishing and are able to access the mobile internet. These are the perfect infrastructures for fintech lending to explore and expand throughout the archipelago.

Peer-to-peer lending can also open up economic opportunities for women. Social norms, like the burden of domestic chores and property ownership, are most of the time unfavorable to women, leaving them with limited access to capital.

Darrell West from the Brookings Institute argues on his book,

Going Mobile, that smartphones have significantly enabled women and minorities to obtain a broader range of financial access. Fintech lending lets women make their own economic decisions.

On the other hand, with the newly launched regulation, fintech lending provides investors with access to an alternative investment portfolio and within a safe and regulated setting.

Modalku, a local peer-to-peer lending platform, for instance now offers individual investors to chance to provide funding to chosen MSMEs with a deposit as low as Rp 10 million.

Diversifying one’s investment portfolio, even if only within one platform, by lending small amounts to as many different borrowers as possible, will diversify an investor’s risk.

It is expected that this fintech lending regulation will create a more conducive regulatory environment for both existing and upcoming fintech players. Fintech can potentially help the government to achieve its goals, producing 1,000 technopreneurs and digitizing 8,000 MSMEs by 2020. These are the areas where fintech has the potential to have a major impact.

Through fintech, MSMEs will be more administratively neat and transparent, thus it enables the government to better oversee their commercial activities and eventually generate more tax revenue. Conventional banks or the government collaborating with fintech firms could also increase the number of governmentbacked loans KUR being delivered.

To take into account, MSMEs now contribute to around 60 percent of Indonesia’s gross domestic product (GDP). This suggests that these micro, small and medium sized companies are in fact the backbone of the Indonesian economy, and in the event that they grow rapidly, then the economy of the whole country will accordingly develop more rapidly.

Indeed, digitalized lending is not a simple quick fix to the issue of financial inclusion. Fintech needs to further improve customer experience while maintaining its prudential responsibility. The government also needs to adapt its policy and administration to provide a more accommodating environment following fintech dynamics. Simplification and responsiveness should be key for the government to help fintech grow. By doing so, the government would facilitate MSME expansion and eventually create a more inclusive economic development.

Source: The Jakarta Post

Ambassador Donovan encourages more Indonesian students to study in the U.S.

US Ambassador to Indonesia Joseph R Donovan has encouraged more Indonesian students to study in the US, and vice versa, as a medium of better understanding.

Speaking to hundreds of students of Daar el-Qolam Islamic boarding school, Tangerang, Banten, on Monday, Donovan said that both nations unfortunately lacked sufficient historical people-to-people relations across generations.

He explained that Indonesia and the US have so much in common as diverse nations whose tolerance and respect are the sources of strength and inspiration.

“In America, these values had been questioned from time to time; but like Indonesia, I am confident that they will always prevail,” he noted.

Donovan previously discussed the positive impression of foreign students in the US, while speaking to groups of Indonesian students who just returned after their study in the US.

The advantage of studying overseas is to get new experiences. Such unique experiences might not always be good, because as in many parts of the world, there are also some intolerant people who have negative attitudes, he added.

Donovan was also impressed by the efforts taken by the students to help American students get a better knowledge of Indonesia.

“I believe they taught the beauty and tolerance of our country to their American friends. Hopefully, they will encourage more American students to come to Indonesia,” former Managing Director of the Washington Office of the American Institute in Taiwan stated.

According to Donovan, the US Embassy in Indonesia has been working hard to increase the number of Indonesian students studying in US universities, community colleges and high schools.

After having achieved success with almost 7 percent growth in the number of Indonesian students studying in US last year, the embassy will continue to encourage more Indonesians to pursue their study in US by holding the upcoming education fairs in Jakarta, Surabaya and Medan.

Donovan suggested that Indonesians who are interested to pursue their studies in the US should not only consider the university or colleges location, size, and focus of the study but also get the right combination offered by the university that really meets the students need.(*)

Source: Antara News