POLITICS

Palm oil is one of the strategic commodities that has a big role in the lives of the people of Riau Province. Apart from playing a good role in the economic aspect,

oil palm also plays a role in the social aspect. Executive Director of the Palm Oil Agribusiness Strategic Policy Institute (PASPI) Indonesia, Tungkot Sipayung said that the export value of palm oil products from year to year continues to increase in Bumi Lancang Kuning. Even from the data provided by PASPI, from 25 palm oil producing regions in Indonesia, Riau has the top position in producing Crude Palm Oil (CPO) in Indonesia. "Annually, CPO from Riau accounts for 20 percent of the total CPO of all palm oil producing areas in Indonesia. After Riau, Central Kalimantan is in second place with 17 percent," said Tungkot Sipayung, who currently has the largest palm oil plantation in Indonesia, almost 3 million hectares. Of that amount, about 2 million hectares are community gardens. "So, of the 3 million hectares of oil palm plantations in Riau, 65 percent are community gardens. 33 percent are privately owned and only 2 percent are state-owned," said Tungkot. According to Tungkot, the distribution of CPO from 12 regencies/cities in Riau, Pelalawan Regency is in the top position of 1.4 tons per year. Followed by Rokan Hulu with 1.2 million tons and Siak with 1 million tons. From all of this, Tungkot believes that palm oil products are the largest foreign exchange-producing commodity in Riau Province outside of non-oil and gas exports. "Moreover, Riau's oil and gas exports are decreasing every year. If you calculate it, last year's palm foreign exchange from Riau was close to 5 billion USD. It's a little different from Oil and Gas," he said.

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The World Bank recommends that Indonesia mitigate and overcome the employment crisis that has the potential to increase unemployment and the poor due to the ongoing economic uncertainty due to the Covid-19 pandemic.

Social assistance programs need to be continued and jobs, especially for the middle class, also need to be created. Director of the World Bank for Indonesia and Timor Leste Satu Kahkonen, said that the world, including Indonesia, was experiencing a recession due to the COVID-19 pandemic. However, Indonesia's recession rate is not as severe as the world average. In 2020, world economic growth will be minus 3.5 percent, while the Indonesian economy will grow minus 2.1 percent. This crisis has caused millions of people in Indonesia to lose their jobs and fall into poverty.” However, with the policies introduced by the government, Indonesia can prevent more people from falling into poverty. One of them is through social assistance policies," said Kahkonen at the launch of the World Bank report on "Indonesia's Economic Prospects to Accelerate Recovery" June 2021 edition which was held virtually. The World Bank noted that during February 2020 to February 2021, around 1.8 million Indonesians were unemployed, 3.2 million people lost their jobs, and approximately 300,000 young prospective workers entered the labor market. Meanwhile, 2.8 million people have fallen into poverty as of September 2020.

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The World Bank in its Indonesia Economic Prospects June 2021 report entitled Boosting The Recovery which was released yesterday,

highlighted the fiscal strategy implemented by the government. In the report, the World Bank noted that medium-term tax reforms are very important to help recover revenues and increase fiscal resilience. One of the points proposed by the agency is to reduce the value of the taxable income layer at a rate of 30%. This means that the 30% Income Tax (PPh) rate is imposed on income below IDR 500 million. This step is believed to be able to expand the tax base and increase state revenue from the side of personal income tax. As for the Draft Law on General Provisions and Tax Procedures (RUU KUP), the government does not change the layer and amount of tariffs for taxable income of Rp. 500 million and below. The 30% rate is only used for layers of taxable income above IDR 500 million – IDR 5 billion. “There are several avenues for increasing revenue in the medium and long term. One of them is changing individual tax rates for lower incomes, thereby increasing revenue potential,” wrote the World Bank. The agency also advised fiscal authorities to increase oversight of the rich and super-rich in order to explore potential revenues. The trick is to form a special supervisory team. Meanwhile, the government has a different scheme compared to the World Bank's proposal. Instead of using a 30% tariff limit, the fiscal authority added a new layer of 35% tariff for taxable income above IDR 5 billion. The World Bank also criticized the application of final PPh to a number of sectors. The final PPh scheme is considered to have eroded state revenues and this scheme is only enjoyed by the upper class.

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Many acts of tackling coal because it is claimed that it is not environmentally friendly do not necessarily make the price of the stone fall freely.

Supported by strong fundamentals, coal prices have even crawled up again. After the rich countries joined in the G7, now it's China's turn as the world's largest coal consumer to act. China seeks to reduce carbon emissions. One of them is by canceling the investment in foreign coal-fired power plant capacity. "The amount of capacity canceled since 2017 is 4.5 times higher than the amount that went into construction during that period," Reuters wrote, based on research by the Center for Clean Energy and Air Research (Crea). Crea said since 2016, the top 10 banks involved in global coal financing have been Chinese. About 12% of all coal-fired power plants operating outside China can be attributed to Chinese banks, utilities, equipment manufacturers and construction companies. But although 80 gigawatts of China-backed capacity are still a work in progress, many projects could face further setbacks. The report claims this is due to increased public resistance and financing is becoming more difficult.

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The meeting of the G-7 or Group of Seven countries has agreed to increase efforts to overcome the impacts of climate change.

One of the efforts made is to stop the use of coal. The seven countries, namely Canada, France, Germany, Italy, Japan, Britain and the United States, also renewed a pledge to raise 100 billion US dollars per year to help poor countries reduce emissions. Environmental expert and "People's Champion" UK COP26, Sir David Attenborough, at the G-7 meeting in the UK said, our world is currently experiencing a tremendous setback. “The climate is heating up fast, no doubt about it. The inequality of our society and nation is clear,” said Sir David Attenborough as released by the British Embassy in Jakarta, “Coal power generation is the biggest cause of greenhouse gas emissions. Global investment in coal-fired power plants is incompatible with keeping the Earth's temperature rise to no more than 1.5 degrees Celsius," their official statement said. With the G-7 statement to end coal, China will become a country that will dominate the use of coal. So far, China is responsible for more than half of the world's coal burning each year, both domestically and by investments abroad, including in Indonesia. British Ambassador to Indonesia and Timor Leste Owen Jenkins said the meeting of the G-7 leaders had shown progress in overcoming the crisis. He hopes to work with Indonesia on a number of new positions from the G-7, including access to Planet Blue funds to restore and protect the oceans.

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Director of the Center of Economic and Law Studies, Bhima Yudhistira Adhinegara,

said that the imposition of VAT on groups of goods and services that are basic needs of the community has the potential to raise inflation rates and hit people's purchasing power. "The calculation is that a 1 percent increase in the VAT rate will increase inflation by 2-4 percent because of the potential for price rounding up by sellers of goods and service providers," Bhima told Tempo yesterday. This condition will directly erode household consumption, which is currently being boosted to return to the range of 5 percent. As is known, public consumption has been the main contributor driving economic growth. "As a result of this policy, consumption growth could drop to only 2-3 percent," said Bhima. Thus, not only the middle-upper society, all levels of society will also be exposed to the risk of being affected by the imposition of VAT. Instead of increasing the realization of tax revenues, this policy has the potential to erode revenue. Moreover, VAT is a type of tax with the second largest proportion of total tax revenue. Economist from the Center of Reform on Economics (CORE) Indonesia, Yusuf Rendy Manilet, added that the detailed requirements and classification of goods and services that will be levied with VAT must be carried out clearly to avoid public misperceptions.

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POLITICS

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Coal Commodity: Production Rate Is Still Sloping

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Sinar Mas Insurance Pays CAR Insurance Claims IDR 1,363,350,410,-

Palm Oil Supports Riau's Economy

Employment Crisis Mitigation

Tax Scheme Changes: Less Progressive Tariff Adjustments

The price of coal is difficult to shake, even though it is strangled from anywhere

Coal Usage Support Discontinued

New Stumbling Block for Economic Growth

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