Global Business Guide Indonesia

APINDO | Viewpoint on the Indonesian Government’s Plan to Increase
Electricity Prices

The Indonesian government plans to raise the price of electricity by 15% starting from 2013. This step was taken in accordance with the electricity subsidy reduction plan as per the 2013 State Budget. The plan has drawn mixed reactions from various groups as many business owners and entrepreneurs feel that this increases the burden on them in particular. In response to these planned price hikes, APINDO has actively sought out the opinions of industry associations in order to present the private sector’s stance to the government.

At an arranged hearing of the views of industry bodies, the representatives from each association presented a variety of view points on the matter. Some agreed to the rise in prices, but that it must be done gradually at maximum of 3-10% at each stage. This method, it was argued, would give time to industries to adjust to the increase in gas prices which are due to be implemented in Q2 2013. Others argued that the increase should be applied to all groups of customers without exception including household consumers. Only a few of those present demanded that the increase should be delayed to after 2013. Some industry representatives put forward that the increase in the price of electricity will trigger a rise in product prices and wages which in turn will reduce the competitiveness of domestic industries in the face of an invasion of imported goods as a result of the ASEAN One Market in 2015.

Chairman of APINDO Sofjan Wanandi urged industry associations to submit their input regarding the plan to increase electricity prices, complete with calculations and analysis of the impact on their respective industries. This input is to then be compiled and referenced in policy advocacy to the government, parliament and the media. So far APINDO has received input from ten industry associations including the Association of Basic Inorganic Chemical Indonesia (AKIDA), Glass Sheets & Safety Association (AKLP), Garment and Accessories Suppliers Association of Indonesia (APGAI), the Indonesian Textile Association (API), Association of Footwear Indonesia (Indonesian Footwear Association), Joint Electronics (Gabel), Food and Beverage Association of Indonesia (GAPMMI), Industrial Estate Association (HKI), the Association of Cosmetic and Herbal Medicine Companies and the Association of Indonesian Hotels and Restaurants (PHRI).

APINDO also held a meeting with the Director of PT PLN Nur Pamudji to obtain information about the plan to increase their electricity tariff. During the meeting, Sofjan Wanandi voiced the mixed opinions of the business community about the plan and stressed that a heavy burden will be placed on industries due to the simultaneous increase of gas and electricity prices. Mr Nur Pamudji made PLN’s position clear that the government should raise the price in order to reduce the electricity subsidies which account for 14.8 trillion RP. He did however add that he is open to the prices being increased gradually yet the final decision lies in the hands of the Directorate General of Electricity.

The idea of sharing the cost of electricity price rises with household consumers as well as for 450 VA (R1) and 900 VA (R2) was also raised at the meeting whereby consumers will also be subjected to a 5 % price increase which would generate 3.17 trillion RP of the total target of 14.8 trillion RP. However, Sofjan Wanandi said that this scheme still requires a complete review and in depth analysis.

APINDO - 2012

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Indonesia Snapshot

Capital: Jakarta
Population: 247 million (estimated, 2012)
Currency: Indonesian Rupiah
Nominal GDP: $878 billion (2012)
GDP per capita: $5,000 at PPP (2012)
GDP Growth: 6.2% (2012)
External Debt: 28% of GDP (CIA, 2012)
Ease of Doing Business: 128/183 (WB, 2012)
Corruption Index: 118/176 (TI, 2012)