Indonesia Rise

9
O ver the past 15 years, Indone- sia has man- aged a spectac- ular turn- around. In terms of diplo- macy, business and econom- ics, this country of 240 mil- lion people – the fourth most populous nation in the world – has dramatically raised its international profile. A for- mer home of President Obama, it shares similar multicultural traits as the U.S. across an archipelago of over 17,500 islands, more than 6,000 of which are inhabited and where no fewer than 300 local lan- guages are spoken. Built on the principle of ‘Unity in Diversity,’ it draws strength from its harmonious ethnic mix and has earned the respect of world leaders. Since recovering from the 1997-98 Asian financial cri- sis, it has achieved stable GDP growth of 5-6% per year and this year it is expected to be the world’s fastest grow- ing economy. Fitch Ratings returned the country to investment-grade status in December 2011 for the first time since 1997, and Moody’s followed suit a month later, reflecting the increasing optimism for the country’s future. After successfully guiding the country through the 2008- 2009 global financial crisis, President Susilo Bambang Yudhoyono (who is also known as SBY) won a second term in the July 2009 elections, with the next round scheduled for 2014. In May 2011, he offi- cially launched his administra- tion’s ambitious Rp 4,000 ($437 billion) trillion national development roadmap cover- ing 2011 to 2025. “When discussing eco- nomic growth we must remember that it is directly related to investment,” says Kuntoro Mangkusubroto, Chairman of the President’s Unit for Development Con- trol and Monitoring (UKP4). “We need $200 billion-worth of gross investment per year, coming from both foreign and domestic sources. This is a very high amount.” Known as the Master Plan for the Acceleration and Expansion of Indonesian Economic Growth (MP3EI), the development initiative aims to attract greater for- eign investment to boost economic growth nation- wide and raise Indonesia’s gross domestic product (GDP) to around $4.5 tril- lion by 2025, which will place it among the world’s 10 largest economies. At the launch ceremony, Suryo Bambang Sulisto, Chairman of the Indonesian Chamber of Commerce and Industry (KADIN), said the business community had committed to provide $150 billion in new investment for the MP3EI programs, adding: “This is the first time that the business community has been asked to be involved in the laying out of the mid and long-term eco- nomic development – send- ing a strong signal, especially for foreign investors, that the government is really serious and will go all out with this master plan.” The MP3EI divides the country into six economic corridors, namely Java, Suma- tra, Papua-Maluku, Kaliman- tan, Sulawesi, and Bali-Nusa Tenggara. The President said that projects falling under the new plan, some of which were already under way, include nationwide Internet broad- band access, hydropower and solar power plants, a modern steel mill, a palm oil industry zone, access roads, toll roads, airports, dams, reservoirs, as well as nickel, cobalt and alu- minum facilities. In March 2012, the gov- ernment announced it would launch 84 infrastruc- ture projects worth Rp 536.3 trillion this year as part of the MP3EI. The statement detailed that 15 projects val- ued at Rp 66.2 trillion would be financed by the govern- ment, with another 20 pro- jects worth Rp 90.3 billion to be backed by state-owned companies, and 38 projects totaling Rp 301.76 trillion to be funded by the private sec- tor. Public-private partner- ships (PPPs) are to develop the remaining 11 projects, worth Rp 78.2 trillion. Internationally, Indonesia is becoming more prominent as a member of the G20 and chaired ASEAN in 2011 with various accomplishments to its credit. Indonesia’s Ambassador to the U.S. Dr. Dino Patti Djalal says, “We used to call ourselves a third- world country, but now due to our economic transforma- tion, we consider ourselves an emerging economy. We are now the largest economy in Southeast Asia, with its largest middle class, and the third-highest growth in Asia. At a time when everybody has been downgraded, we have reached investment grade. We are very much in a good place now and Indone- sia sees itself as a regional power with global interests. We hope that this will be the Asia-Pacific century, and Indonesia very much hopes to be part of the group of countries that moves, shakes, and shapes the Asia-Pacific region in the 21st century.” Our World Insert is produced by United World. USA TODAY did not participate in its preparation and is not responsible for its content This supplement to USA TODAY was produced by United World Ltd.: Suite 179, 34 Buckingham Palace Road - London SW1W 0RH - Tel: 44 20 7409 3106 - [email protected] - www.unitedworld-usa.com Our World DISCOVER INDONESIA AT worldfolio.co.uk INDONESIA Rise of the world’s fourth-largest nation A longtime destination of choice for Indonesians seeking a degree abroad, the United States now has to compete with other coun- tries to attract foreign students. But many bright young Indonesians still dream of gaining an American degree, and President Obama says he wants to double the number of Indonesians studying at U.S. colleges. Prominent among Indone- sian educational institutions that are eager to send students to study Stateside is the Putera Sampoerna Foundation. An independent social business institution, its mission is to edu- cate bright but under-privileged children and prepare them to become the leaders that Indone- sia needs for its future. More than 75 American universities were represented at a higher education fair in Jakarta last year that was co-sponsored by the Foundation and the U.S. Com- mercial Service. “We are pretty much at the forefront of the U.S. Govern- ment’s attempts to attract stu- dents from Indonesia,” says leading businessman Putera Sampoerna, who founded the institution in 2001. “Providing students from emerging major- ity-Muslim nations with the opportunity to attain a quality tertiary education in the States so they can then return to work on the improvement of their home country is the best way to build upon and nurture sus- tainable relations that are mutually beneficial.” In Indonesia, education is a luxury that many can not afford: around 1.5 million young people have to abandon their studies owing to financial difficulties every year, and only 18% of high school graduates can afford higher education. “There is a lot of human potential we are missing out on,” says Mr. Sampoerna, who received his own university edu- cation in the States, and now runs four senior high schools, named Sampoerna Academy, and two colleges. “We take the smartest of the smartest and we mold them so that they have leadership quali- ties, and can be the country's future leaders,” he says. A degree from an American university remains the goal of Indonesia’s brightest young people Students still aim for the States “Partnerships, more so than military alliances, will be the defining feature of the international system in the 21st century... This is the time for new thinking.” SUSILO BAMBANG YUDHOYONO, President of the Republic of Indonesia A U N I T E D W O R L D S U P P L E M E N T P R O D U C E D B Y : Vincent Rifici, Charlotte Rose, Marc Joly, David Barbolla, Stuart West and Amanda Janoo For information about career opportunities with United World, please contact: [email protected] Thursday, April 12th, 2012 SUSILO BAMBANG YUDHOYONO, President of the Republic of Indonesia

Transcript of Indonesia Rise

Page 1: Indonesia Rise

Over the past 15years, Indone-sia has man-aged a spectac-ular turn-

around. In terms of diplo-macy, business and econom-ics, this country of 240 mil-lion people – the fourth mostpopulous nation in the world– has dramatically raised itsinternational profile. A for-mer home of PresidentObama, it shares similarmulticultural traits as theU.S. across an archipelago ofover 17,500 islands, morethan 6,000 of which areinhabited and where nofewer than 300 local lan-guages are spoken. Built onthe principle of ‘Unity inDiversity,’ it draws strengthfrom its harmonious ethnicmix and has earned therespect of world leaders.

Since recovering from the1997-98 Asian financial cri-sis, it has achieved stable

GDP growth of 5-6% per yearand this year it is expected tobe the world’s fastest grow-ing economy. Fitch Ratingsreturned the country toinvestment-grade status inDecember 2011 for the firsttime since 1997, andMoody’s followed suit amonth later, reflecting theincreasing optimism for thecountry’s future.

After successfully guidingthe country through the 2008-2009 global financial crisis,President Susilo BambangYudhoyono (who is alsoknown as SBY) won a secondterm in the July 2009 elections,with the next round scheduledfor 2014. In May 2011, he offi-cially launched his administra-tion’s ambitious Rp 4,000($437 billion) trillion nationaldevelopment roadmap cover-ing 2011 to 2025.

“When discussing eco-nomic growth we mustremember that it is directly

related to investment,” saysKuntoro Mangkusubroto,Chairman of the President’sUnit for Development Con-trol and Monitoring (UKP4).“We need $200 billion-worthof gross investment per year,coming from both foreignand domestic sources. This isa very high amount.”

Known as the Master Planfor the Acceleration andExpansion of IndonesianEconomic Growth (MP3EI),the development initiativeaims to attract greater for-eign investment to boosteconomic growth nation-wide and raise Indonesia’sgross domestic product(GDP) to around $4.5 tril-lion by 2025, which willplace it among the world’s 10largest economies.

At the launch ceremony,Suryo Bambang Sulisto,Chairman of the IndonesianChamber of Commerce andIndustry (KADIN), said thebusiness community hadcommitted to provide $150billion in new investment forthe MP3EI programs,adding: “This is the first timethat the business communityhas been asked to beinvolved in the laying out of

the mid and long-term eco-nomic development – send-ing a strong signal, especiallyfor foreign investors, that thegovernment is really seriousand will go all out with thismaster plan.”

The MP3EI divides thecountry into six economiccorridors, namely Java, Suma-tra, Papua-Maluku, Kaliman-tan, Sulawesi, and Bali-NusaTenggara. The President saidthat projects falling under thenew plan, some of which werealready under way, includenationwide Internet broad-band access, hydropower andsolar power plants, a modernsteel mill, a palm oil industryzone, access roads, toll roads,airports, dams, reservoirs, aswell as nickel, cobalt and alu-minum facilities.

In March 2012, the gov-ernment announced itwould launch 84 infrastruc-ture projects worth Rp 536.3trillion this year as part of theMP3EI. The statementdetailed that 15 projects val-ued at Rp 66.2 trillion wouldbe financed by the govern-ment, with another 20 pro-jects worth Rp 90.3 billion tobe backed by state-ownedcompanies, and 38 projects

totaling Rp 301.76 trillion tobe funded by the private sec-tor. Public-private partner-ships (PPPs) are to developthe remaining 11 projects,worth Rp 78.2 trillion.

Internationally, Indonesiais becoming more prominentas a member of the G20 andchaired ASEAN in 2011 withvarious accomplishments toits credit. Indonesia’sAmbassador to the U.S. Dr.Dino Patti Djalal says, “Weused to call ourselves a third-world country, but now dueto our economic transforma-tion, we consider ourselvesan emerging economy. Weare now the largest economyin Southeast Asia, with itslargest middle class, and thethird-highest growth in Asia.At a time when everybodyhas been downgraded, wehave reached investmentgrade. We are very much in agood place now and Indone-sia sees itself as a regionalpower with global interests.We hope that this will be theAsia-Pacific century, andIndonesia very much hopesto be part of the group ofcountries that moves, shakes,and shapes the Asia-Pacificregion in the 21st century.”

Our World Insert is produced by United World. USA TODAY did not participate in its preparation and is not responsible for its content

This supplement to USA TODAY was produced by United World Ltd.: Suite 179, 34 Buckingham Palace Road - London SW1W 0RH - Tel: 44 20 7409 3106 - [email protected] - www.unitedworld-usa.com

Our World

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INDONESIARise of the world’s fourth-largest nation

A longtime destination of choicefor Indonesians seeking a degreeabroad, the United States nowhas to compete with other coun-tries to attract foreign students.

But many bright youngIndonesians still dream ofgaining an American degree,and President Obama says hewants to double the numberof Indonesians studying atU.S. colleges.

Prominent among Indone-sian educational institutions thatare eager to send students tostudy Stateside is the PuteraSampoerna Foundation. Anindependent social businessinstitution, its mission is to edu-cate bright but under-privilegedchildren and prepare them tobecome the leaders that Indone-sia needs for its future. Morethan 75 American universitieswere represented at a highereducation fair in Jakarta last yearthat was co-sponsored by theFoundation and the U.S. Com-mercial Service.

“We are pretty much at theforefront of the U.S. Govern-ment’s attempts to attract stu-dents from Indonesia,” saysleading businessman PuteraSampoerna, who founded theinstitution in 2001. “Providingstudents from emerging major-ity-Muslim nations with theopportunity to attain a qualitytertiary education in the Statesso they can then return to workon the improvement of theirhome country is the best wayto build upon and nurture sus-tainable relations that aremutually beneficial.”

In Indonesia, education is aluxury that many can not afford:around 1.5 million young peoplehave to abandon their studiesowing to financial difficultiesevery year, and only 18% of highschool graduates can affordhigher education.

“There is a lot of humanpotential we are missing out on,”says Mr. Sampoerna, whoreceived his own university edu-cation in the States, and nowruns four senior high schools,named Sampoerna Academy,and two colleges.

“We take the smartest of thesmartest and we mold them sothat they have leadership quali-ties, and can be the country'sfuture leaders,” he says.

A degree from anAmerican university remainsthe goal of Indonesia’sbrightest young people

Studentsstill aim forthe States

“Partnerships, more so than military alliances, will be the defining feature of the international system in the 21st century... This is the time for new thinking.”SUSILO BAMBANG YUDHOYONO, President of the Republic of Indonesia

A UNITED WORLD SUPPLEMENT PRODUCED BY: Vincent Rifici, Charlotte Rose, Marc Joly, DavidBarbolla, Stuart West and Amanda Janoo

For information about career opportunities with United World, please contact:[email protected]

Thursday, April 12th, 2012

SUSILO BAMBANG YUDHOYONO, President of the Republic of Indonesia

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A survey carried out for theBBC’s Extreme World serieslast year found that Indonesiais the best place in the world tostart a business, followed bythe U.S., Canada and Australia.The conclusion was based onthe results from polling morethan 24,000 people across 24countries. Interviewees wereasked if creativity and innova-tion were highly valued in theircountry; whether it was diffi-cult for budding entrepreneursto get a new business off theground; and if people who dotake the initiative to go it alonewere highly valued.

Entrepreneurship, in all itsforms, is a vital catalyst in kickstarting and maintainingdynamism and diversity withinfast-growing economies. Bam-bang Suryo Sulisto, the Chair-man of the Indonesian Cham-ber of Commerce and Industry(KADIN), firmly believes inthe importance of engenderingan enterprising spirit: “Creat-ing entrepreneurs is necessarybecause entrepreneurs createjobs. They are vital for eco-nomic development, and thatis why KADIN has made nur-turing entrepreneurship a pri-mary objective.”

Whether seen as a progres-sive addition to Indonesia’sfavorable geopolitical position,or as a means to create a sus-tainable economic future forall of its citizens, and investors,

entrepreneurship has becomecentral to the thinking of thecountry’s present and futurebusiness leaders.

Many business develop-ment experts share this view,and Giuseppe Nicolosi, Over-seer of the Ernst & YoungEntrepreneur of the Yearaward, is feeling optimistic: “Adeveloped economy requires

a minimum of 2% of the coun-try to become entrepreneurs.In Indonesia the figure is cur-rently at around 0.4% of thepopulation. However, we havea large population so, in real-ity, that is a large number.”

The notion of entrepreneur-ship is not limited to sole-operating individuals, asShinta Widjaja, of Sintesa

Group and GEPI (GlobalEntrepreneurship ProgramIndonesia) reveals: “Someonein our Human Resourcesdepartment does not have tojust do HR work. If they hold aproject, they are in charge ofthe whole thing ... this hasreally developed entrepre-neurial skills; our employeescan now work together with usand become an entrepreneur,or what we call an ‘intrapre-neur’, within the organization.”

U.S. Secretary of StateHillary Clinton arrived inBali last July to take part in athree-day ASEAN RegionalEntrepreneurship Summit(RES) under the theme:‘Emerging Entrepreneurs:The Next Big Chapter.’

“We are seeking to nurturethe spirit of entrepreneurshipwithin all the Indonesian peo-ple so that we can become justlike Singapore or Japan. What-ever you want to do, if youhave this mentality, it willmake the process easier,” saysRaja Oktohari of the Indone-sian Young EntrepreneursAssociation (HIPMI). “We arespecializing in empoweringfemales. This is because webelieve in them and theirunique strengths and drive. Insome areas of Indonesian cul-ture, the females are moreactive, especially in Bali andWest Sumatra. About 30% ofour members are women.”

Bayu Djokosoetono, Com-missioner of Indonesia’s BlueBird Group, adds: “The gov-ernment initially did not have

enough confidence that awoman could run a companyin the taxi industry [in 1972].My grandmother eventuallyconvinced them she wascapable of running a com-pany and received a licensefor 25 taxis. This year, withover a 21,000-strong fleetnationwide, BB Group hasestablished a position as thebest and most reliable luxurytaxi provider, expanding itsbusiness in not only the taxiindustry, but also in property,manufacturing, services andmore. This is a testimony tothe entrepreneurial spirit dri-ven through this family anddeveloped further by thefamily members to take it towhere it is today.”

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Distributed by USA TODAY Thursday, April 12th, 2012 3INDONESIA

Record FDI – and noweasier to get started “THERE OUGHT TO

BE MOREINDONESIANSTUDENTSSTUDYING IN THEU.S. AND VICEVERSA. IT ISSOMETHINGOBAMA RECENTLYFLAGGED UP”

GITA WIRJAWAN, former Chairmanof BKPM and recently-appointedMinister of Trade

“OUR ROLE IS TOWORK AS APARTNER OF THEGOVERNMENT SOTHEY CAN IMPROVETHE BUSINESSCLIMATE. WEUNDERSTAND HOWTHE BUSINESSWORLD WORKS.”

SURYO BAMBANG SULISTO, Chairman of KADIN, the IndonesianChamber of Commerce & Industry

“NOW IS THE RIGHTTIME TO ISSUEBONDS WITHLOWER YIELDS FORINDONESIA. THE PERCENTAGEFROM THE LOANPORTFOLIO INFOREIGNCURRENCY ISABOUT 16%..”

ZAMZAM REZA, President Director of AAA Investment

“I WOULD SAY THE MOSTIMPORTANT ASPECT IS TOWORK VERYCLOSELY WITH AREPUTABLEINDONESIANPARTNER. THIS IS CRITICALFOR SUCCESS.”

GIUSEPPE NICOLOSI, CEO of Ernst & Young Indonesia

“WE HAVE OVER243 MILLIONPEOPLE; 70% AREUNDER 50, 38% OFTHAT ARE 15-50YEARS OLD. THIS ISAN INCREDIBLEPHENOMENONTHAT WE SHOULDEXPLOIT.”

RAJA SAPTA OKTOHARI, Chairman of the Indonesian YoungEntrepreneurs Association (HIPMI)

SHINTA WIDJAJA, of Sintesa Group andGlobal Entrepreneurship ProgramIndonesia (GEPI)

QUOTED

Last year Indonesia received anational record amount of $20billion in foreign direct invest-ment (FDI). “If we use datafrom the Jakarta StockExchange, in 2015 we will havearound 3 million investors, upfrom 400,000 currently,” saysZamzam Reza, PresidentDirector of AAA Investment.

During an official visit toBeijing in March, PresidentSusilo Bambang Yudhoyonoannounced that Chinese andIndonesian companies hadsigned partnership agree-ments on infrastructure, min-ing and steel projects inIndonesia worth more than$17 billion. “The sectors inwhich cooperation has beenestablished include seaports,roads, alternative energy, themotorcycle industry, mining,construction in strategic areasand the Sunda Strait, planta-tions, tourism, and the steelindustry,” he said. Also, in thetwo weeks alone prior to thePresident’s visit, Japanese com-panies – including HondaMotor Co., Nissan Motor Co.and Sharp Corp. – announcedmassive expansion plans inIndonesia totaling more than$1 billion in investment.

“Our biggest challenge isinfrastructure development.Without that, you cannot

expect that we will become anefficient and competitive econ-omy,” says Suyo BambangSulisto, Chairman of KADIN,the Indonesian Chamber ofCommerce and Industry.

Gita Wirjawan, Chairman of

the Indonesia InvestmentCoordinating Board (BKPM)and Minister of Trade, says:“The new land acquisition lawwill provide certainty withrespect to timing and pricingfor anyone requiring land forinfrastructure developmentwhether it is roads, airports,power generation and more.We have not had this for a longtime, over 30 years, so this willbe a game changer.” The BKPMhas implemented a one-stopshop system to minimizebureaucracy and its NationalSingle Window for Investment(NSWi) enables investors toapply for license and non-license services online.

Indonesia’s Ambassador tothe U.S. highlights ample

opportunity for greater Ameri-can participation, saying:“There is a lot of Americaninvestment in oil and mining,but there are many morepromising sectors, such as thehealth sector, and I would liketo see more American manu-facturing in Indonesia. I defi-nitely think the IT sector couldbenefit, as well as other sectorswhere there is a lot of innova-tion needed.”

In January, Indonesiareceived its second credit rat-ing upgrade in as manymonths, as Moody's ratingsagency restored its debt toinvestment grade, raising itsrating to Ba1 from Baa3 with astable outlook. The country’srise above speculative grade forthe first time since the 1997Asian financial crisis is likely toencourage further foreigninvestment. In December,Fitch returned Indonesia to aninvestment grade rating, citingsteady economic growth,declining debt and generalmacroeconomic stability.

“We are a haven for invest-ment,” says Raja Oktohari,Chairman of the IndonesianYoung Entrepreneurs Associa-tion (HIPMI). “We are one ofthe 10 biggest countries in theworld for investment, with asubstantial number of oureconomy’s sectors not beingbuilt up or touched by theinvestors. I think that withPresident Yudhoyono’s MP3EIprogram we can, for the firsttime, communicate this hugepotential effectively to theinternational community.”

The government has beenworking hard to improvethe nation’s business andinvestment climate, andboost its appeal for foreigninvolvement in thecountry’s development

Indonesia the “best place tostart a business,” says BBCEntrepreneurship is being increasingly encouraged as akey element within the national strategy for sustainingeconomic progress

“WE ARE A HAVENFOR INVESTMENT.”

RAJA OKTOHARI, Chairman of theIndonesian Young EntrepreneursAssociation (HIPMI)

Entrepreneurship has becomecentral to the thinking of thecountry’s present and futurebusiness leaders

INDONESIA USAT pages 1-7.qxd 2/4/12 21:25 Página 3

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Distributed by USA TODAYThursday, April 12th, 2012 INDONESIA2

In recent years, Indonesiahas become an increasinglyactive member of regionaland global organizationssuch as the G-20, UN Secu-rity Council, and Associa-tion of Southeast AsianNations (ASEAN). Politi-cally and economically, thecountry’s heightened inter-national profile hasundoubtedly been helped bythe nation’s stability, in addi-tion to the popularity – bothat home and abroad – ofPresident Susilo BambangYudhoyono, who in 2009became the first Indonesianpresident to be re-elected indemocratic elections for asecond term.

In 2011, it was Indonesia’ssecond turn at the helm ofASEAN. Established inBangkok on August 8, 1967,ASEAN was created toaccelerate socioeconomicgrowth and cultural develop-ment among member states,as well as promote regionalpeace and stability. Indone-sia was one of the originalfounding members of theASEAN community, and itsnational motto of ‘Unity inDiversity’ (Bhinneka Tung-gall Ika) brought a harmo-nizing cultural message tothe union last year that isechoed in the fundamentalethos of the group.

“Our founding fathers atthe very beginning explainedwhat our diversity should be,and that is what we are usingas an instrument to maintainthis diversity and to bring ournation forward,” says DjokoSuyanto, Indonesia’s Coordi-nating Minister for Legal,Political and Security Affairs.

The nation appears todemonstrate how multicul-turalism can work. “Indone-sia is the largest Muslim-pop-ulated country in the world,and despite the stigma thatIslam has of being radical,violent, intolerant andclosed, we would like to say

that Islam in Indonesia is notlike that,” says Mr. Suyanto.“Islam in Indonesia is moretolerant because it was devel-oped through tradition, cul-ture and personal relationsand not through a dogmaticapproach.”

Dr. Dino Patti Djalal,Indonesia’s Ambassador tothe U.S., believes the BaliConcord III was Indonesia’sbiggest achievement duringits year as the ASEAN chair.The agreement was signedon November 17, 2011 bythe leaders of ASEAN’s 10member states. It outlineshow member countriescould increase cooperationin conflict resolution, tackletransnational crimes, fight

corruption and work towardnuclear disarmament.Social-cultural issuesdetailed include the reliefand prevention of naturaldisasters, climate change,health, education and cul-tural issues. In line withASEAN’s goal to become anintegrated economic com-munity by 2015, the declara-tion also calls for the adop-tion of regionwide produc-tion standards, a distributionsystem for commodities,greater transparency, tech-nological progress andenergy diversification.

“Discussions have alwaysbeen about the ASEANcommunity up until 2015.But after the Bali summit last

year, we now have a muchbetter idea of what ASEANshould do in a global con-text,” says Dr. Djalal. “Theother achievement has beenon the Declaration of Princi-ples via members of the EastAsia Summit (EAS). This isvery important because thisis a region with a lot of hope,but also still has some insta-bility and clash points, forinstance in the KoreanPeninsula, the South ChinaSea, the Taiwan Strait, and soon. Having all of the membercountries of the EAS sign upto a Declaration of Principleson how to manage regionalaffairs is quite a milestone forus. We hope that this issomething that will be

m o r a l l ybinding to all countries thathave signed on to it.”

Indonesia’s position as aregional leader and respon-sible global citizen was alsodemonstrated last year as itstepped in to diffuse risingtensions between Cambo-dia and Thailand. In July2011, the InternationalCourt of Justice orderedboth countries to withdrawmilitary troops from a 1.78square mile area on the bor-der, which surrounds thedisputed Preah Vihear tem-

ple, and appointed Indone-sia as observer.

“You can see the [peace-keeping] role of Indonesiain terms of pushing Thai-land and Cambodia to sittogether, for example, andthe conflict in the SouthChina Sea,” says FreddyTulung, Director General ofInformation and PublicCommunication at theMinistry of Communica-tion and Information Tech-nology (Kominfo). “It isplaying quite a significantrole. In terms of socialissues and culture, we havethe ASEAN HumanitarianAssistance Center and apeacekeeping force.”

Indonesia is also a vocifer-ous proponent of the cre-

ation of an ASEAN sin-gle visa. “Weinherited thesingle visaidea from theEU,” says Mr.Tulung. Theproject aimsto establishASEAN as asingle desti-nation andmeans thatthere will beno individualvisas requiredfor ASEANm e m b e rc o u n t r i e s ,

enabling foreign tourists tovisit the region on a singletourist visa.

After a successful year incharge, Indonesia handedthe annually rotatingASEAN chair to Cambodiafor 2012. It will then bepassed on to Brunei in 2013,Myanmar in 2014, and Laosin 2015. As a former mili-tary-backed dictatorshipthat successfully transitionedto a democracy, Indonesiaserves as a useful role modelfor Myanmar as it pushesahead with its political andeconomic reform.

Asean chairmanship successIndonesia's accomplishments as the 2011 ASEAN chair have further raised its position as a regional leader and responsible global citizen

“DISCUSSIONS HAVE ALWAYS BEEN ABOUT THE ASEANCOMMUNITY UP UNTIL 2015. BUT AFTER THE BALI SUMMITLAST YEAR, WE NOW HAVE A MUCH BETTER IDEA OF WHATASEAN SHOULD DO IN A GLOBAL CONTEXT”

DR. DINO PATTI DJALAL, Indonesia’s Ambassador to the U.S.

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Distributed by USA TODAY Thursday, April 12th, 2012 5INDONESIA

Competition for places atacademies run by the PuteraSampoerna Foundation isfierce, and the selectionprocess rigorous. To qualify,students have to be in the top5% academically in junior highand show leadership potential.But those selected are oncourse for a bright future.

“I will personally guaranteethat they will get a tertiaryeducation once they are in ourhigh schools,” says PuteraSampoerna, who establishedthe social enterprise institu-tion that bears his name.

Education is at the heart ofPutera Sampoerna Founda-tion’s Pathway to Leadershipstrategy, which also encom-passes entrepreneurship,women’s empowerment, andcompassionate relief pro-grams. Its founder believesthat if Indonesia is to thrivetomorrow, it must pay atten-tion to nurturing its futureleaders today.

The Sampoerna Academyselects the brightest studentsfrom disadvantaged back-grounds and puts themthrough a secondary schoolcurriculum of internationalstandard to prepare them for auniversity education. In addi-tion to their academic studies,the students take part in pro-fessional and other experi-ence-based programs basedon the Academy’s core valuesand learning expectations.

“We want all our students tobe smart leaders and entrepre-neurs, and they must have val-ues,” says Putera Sampoerna.

Since it was established in2001, the Putera SampoernaFoundation has distributedmore than 34,600 scholar-ships, provided training formore than 22,038 teachersand principals, and adopted23 public schools and fiveIslamic schools. The first twoboarding schools opened inMalang, East Java, and inPalembang, South Sumatra,in 2009. Last year saw thelaunch of two more, one inBali and another in the city ofBogor, in Greater Jakarta.This year, 232 students willgraduate from the acade-mies, with 500 expected tograduate in 2013.

All courses are delivered inEnglish to enable students toqualify for any English-speak-ing university which imple-ments 21st CenturyLearning, while thecurricula meet bothnational and interna-tional requirements,leading to the Inter-national GeneralCertificate for Sec-ondary Education(IGCSE), accreditedby University ofCambridge Interna-tional Examinations

(CIE) and Cambridge Interna-tional A / AS level, and theNational Examination (UjianNasional), accredited by theNational Education Depart-ment of Indonesia.

First steps towards estab-lishing a world-class univer-sity have been taken by estab-lishing two colleges: Sampo-erna School of Education(SSE), and the SampoernaSchool of Business (SSB).There are collaborative pro-grams with Cornell and MIT,and the Foundation is seekingpartnerships with other uni-versities overseas.

The Foundation’s AccessEducation Beyond program isan international higher educa-tion exchange initiativeenabling Indonesian studentsto enroll at universities over-seas and vice versa. It also fos-ters university-to-universitypartnerships between nations.

In broader terms, PuteraSampoerna sees the Founda-tion as a catalyst for change,and its educational and lead-ership-building activitiesextend beyond the classroomsof its academies.

The Foundation acts as aprovider of Corporate Social

Responsibility (CSR) pro-grams for corporations, orga-nizations and associations,and its MEKAR EntrepreneurNetwork aims to strengthenthe Indonesian entrepreneur-ial community by fosteringrelationships among entre-preneurs and investors.

Sahabat Wanita, or Friendsof Women, has beenlaunched to promote theempowerment of women andgender equality, while Bait Al-Kamil is a humanitarian insti-tute that aims to improve thewelfare of fellow citizens andprovide relief to underprivi-leged families in communitiesafflicted by natural disasters.

“We provide an educationecosystem servicing somany things that worktowards creating future

leaders,” says Nenny Soe-mawinata, the Foundation’smanaging director.

She stresses that theFoundation is actively seek-ing sponsors, patrons andpartners to help it in itswork. “Whatever we do, wealways have to think aboutthe sustainability of the pro-gram. We need help in anyshape or form, whether apartnership or student assis-tance. The more assistance,the more people we can helpin Indonesia.”

For further information, or ifyou wish to contribute to thePutera Sampoerna Foundationprograms for the betterment ofIndonesia, please visit:www.sampoernafoundation.org

Nurturing the leaders of tomorrowIn its academies, colleges and beyond, the Putera Sampoerna Foundation is dedicated to providing the knowledgeable, entrepreneurial, and compassionate leaders the country needs

For the students enrolled at itsacademies, the Putera Sampo-erna Foundation is their ticketto a first class education. Manyof them will seek to completetheir education in the UnitedStates and other countries.

They will be equipped withthe academic qualifications,confidence, and entrepre-neurial spirit needed tolaunch successful careers.And, if the Foundationachieves its goal, they will alsoemerge from its academieswith a socially committedmindset, understanding thatthey are expected to make acontribution to society andhelp shape Indonesia’s future.

For the Foundation, thedonors, and partners who pro-vide support, and for the stu-dents themselves, their educa-tion represents an investment.

The students agree to con-tribute and fund the next gen-eration through Siswa BangsaCooperatives once they gradu-ate and start their career, buttheir commitment is muchmore than merely financial.

Other than in military acad-emies, boarding school educa-tion is unusual in Indonesia,but Putera Sampoerna sees itas essential to the Foundation’s

mission to nurture leadership.The ethos of the Foundation’s‘Pathways to Leadership’ strat-egy extends beyond develop-ing academic potential toinstilling core values, such asmoral integrity and a strongcommitment to social justice.

“When we select kids, notonly are they academicallysmart, but we look for leader-ship potential as well,” says Put-era Sampoerna.

“If we did not provide board-ing facilities, we could doublethe number of students. But forme, having the students forthree years at boarding schoolis important. From day one,they are told that their educa-tion is not a free gift. It is aninvestment in them so thatthey can invest back.”

The Foundation providesvarious types of financial assis-tance to students. Scholarshipswere offered in the past but theFoundation realized that thiswas not a sustainable model toimprove the quality of educa-tion in creating future leaders."If you give scholarships, thekids think that they are entitledto it because they are smart".This is not the reasoning thatwill produce future leaders andsustain the program. A better

way is "to find patrons, likeExxon and the large compa-nies, to basically adopt thekids... they are supporting whatI call the assistance portion."

Putera Sampoerna empha-sizes the concept of GotongRoyong which means ‘givingback’ so that the existing gener-ation of students will eventu-ally fund the next generation."Once they enter tertiary edu-cation, I expect that assistanceportion to keep going". This‘giving back’ asks students dur-ing their profitable working lifeto contribute 20% of theirincome to continue supportingthe program.

“At first, this may sound a lit-

tle rough... There is riskinvolved. If you put it in termsof an investment (in Indone-sia's future), then everythingchanges.”

In addition to a full schoolday, the students are involvedin extra-curricular activity,including community service.

“We have programs whichwe call ‘Learn to Live’, abouthow to live with the commu-nity around you,” says NennySoemawinata, the Founda-tion’s Managing Director.

Students leave the acade-mies knowing that a lot isexpected of them. They areinstilled with a clear under-standing that they are expected

to contribute to the develop-ment of the country and theircommunities.

Ms. Soemawinata says: “Ourgoal is to create leaders in dif-ferent fields. We want to makesure that while we have thesestudents we inculcate our val-ues, rights and rituals intothem so they can come homeand contribute to the country.People say it is a big wish-list,but all of us are very commit-ted and we are working hard toget there.”

The values of the Founda-tion are clearly reflected inhow the children see theirfuture. Typically, they aspire tobe doctors, teachers, lecturers,

scientists, and the businessleaders of tomorrow.

Student Muhammad NurSiddia ‘Aceh’ wants to becomea doctor. “The school provideseverything I need to achievemy dream. I would like to con-tinue my education abroad,and become a nerve specialist.”

Dwiki Febri Ristanto sharesthe same ambition. “I want tobe a doctor because manyIndonesian people do not getgood medical services,” he says.

Another student, Siti ArsyahRosyada ‘Ocha’, sums up theacademies’ ethos in a singlesentence: “You have to givesomething back to the com-munity in everything you do.”

“Education is an investment, not a gift.”Students emerge from the Putera Sampoerna Foundation’sacademies equipped with knowledge, leadership skills, andan understanding of their social responsibilities

“WE WANT ALLOUR STUDENTS TOBE SMART LEADERSANDENTREPRENEURS,AND THEY MUSTHAVE VALUES.”

“WE PROVIDE ANEDUCATIONECOSYSTEMSERVICING SOMANY THINGSTHAT WORKTOWARDSCREATING FUTURELEADERS.”

PUTERA SAMPOERNA, founder ofthe Putera Sampoerna Foundation

Putera Sampoerna (centre) says students at the Putera Sampoerna Foundation’s schools are guaranteed to go on to receive a tertiary education

“From day one, they are told that this is not a gift just because they are smart. It is an investment in them so that they can invest back.” Putera Sampoerna, founder of the Putera Sampoerna Foundation

All courses are delivered in English to enable students to qualify for any English-speaking university

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Our World Insert is produced by United World. USA TODAY did not participate in its preparation and is not responsible for its content

Distributed by USA TODAYThursday, April 12th, 2012 INDONESIA4

“Strong growthopportunity” inIndonesianbanking systemThe country’s banks have weathered the global financial storm with relative ease,and are well placed to provide extra support for the country’s economic development

Indonesian workers havebeen calling for comprehen-sive social security for all forsome time and the govern-ment recently responded byinitiating a process to reformthe system.

Agung Laksono, Coordi-nating Minister for People’sWelfare, acknowledges thatthe current social securitysystem is not comprehensiveenough. He says changes setin motion by the SocialSecurity Providers (BPJS)bill, passed in November lastyear, will deliver improvedsocial protection to Indone-sians, pledging: “The reformwill revitalize social securityin Indonesia.”

Under the changes, socialsecurity will be managed bytwo non-profit, public or-ganizations: Jamsostek,responsible for workers’benefits and services, andAskes, the new healthagency.

The government will allo-cate a total of 4 trillionrupiah ($447 million) fromthe state budget, with 2 tril-lion rupiah going to supporteach agency. Employers andemployees will finance thesystem with their contribu-tions, and the governmentwill cover those who areunable to pay the insurancefee.

At present, Jamsostekruns an employee providentfund, employee accidentinsurance, health benefitsand death benefits. By 2015it will have been divested ofits responsibility for healthprotection, which will passto Askes, but will take onresponsibility for pensions.

Hotbonar Sinaga, Presi-dent Director of PT Jam-sostek, says running the pen-sion program will give thecompany the opportunity togrow faster and become abigger organization in termsof the total funds it manages.

“We will be in a positionto invest in long-term pro-jects, including infrastruc-ture and so on,” he says. “Ofour total investment fund,90% will be long-term ori-ented, such as providentfunds and pensions. As aresult we will have moreflexibility to invest.”

Wholly state-owned Jam-sostek manages an invest-ment portfolio consisting ofapproximately 40% in theform of bonds, 30% in timedeposits, 20% in equity orstocks, and 3% in mutualfunds, with the remainder in

direct investment. “We utilize all these

investment vehicles toenable the banks to giveloans, to get the real sectormoving, so that public-listedcompanies can expand theirbusiness,” says HotbonarSinaga.

The company is raisingthe level of its investment. In2011, it invested a total of111.87 trillion rupiah, com-pared to 98.98 trillion rupiahin 2010. This produced aninvestment gain of 11.87 tril-lion rupiah, compared to11.06 trillion, an increase of8.8%. In 2012, there are plansto increase the size of theportfolio by 12% to 125.7trillion rupiah.

Two years ago Jamsostekset up a subsidiary calledJamsostek InvestmentCompany (JIC) to handle itsdirect investments. Theinsurer is substantiallyincreasing its investment inreal estate and direct place-ment. Later this year it willlaunch a new subsidiary, theIndonesia InvestmentCompany (IIC), a businessventure with the IslamicCorporation for the Devel-

opment of the Private Sec-tor (IDC), a subsidiary ofthe Islamic DevelopmentBank (IDB).

Since becoming PresidentDirector in 2007, HotbonarSinaga has taken a proactiveapproach, improving bene-fits for members by raisingservice quality. Membersenjoy additional benefits,such as cheap apartmentsbuilt close to industrial com-plexes.

This year, Jamsostek hasplans to cooperate with 20banks to disburse a 220 bil-lion rupiah fund for a hous-ing deposit program forworkers.

“We hope that throughour investments jobs will becreated and that our totalnumber of members willalso increase,” he says. “Thatis our role in relation withthe government – to createjobs, help the poor, createeconomic growth and pro-tect the environment. Notonly do the government andemployers trust us, but alsothe general public as awhole, and being a trustedcompany is very importantfor us.”

New era forsocial securityIndonesians need better protection from accidents, ill health and old age, and thegovernment says they will get it once social security has been reorganized.Jamsostek is one of the two non-profit agencies that will manage the new system

“THIS GOES BACKTO MORE THAN ADECADE OF REPAIRSAND IMPROVEMENTSINCE THE ASIANCRISIS WHICH HASMADE OURFINANCIAL SYSTEM,INCLUDING THEBANKING SECTOR,MORE RESILIENTAND ABLE TOABSORB INSTABILITYRISK.”

ZULKIFLI ZAINI, President Directorof Bank Mandiri

“THE REFORM WILL REVITALIZE SOCIALSECURITY IN INDONESIA.”

HOTBONAR SINAGA, President Director of PT Jamsostek

A couple of years ago, Price-waterhouseCoopers Interna-tional predicted that by 2050,the size of the Indonesianbanking sector could rival thatof France or Italy, while returnscould be considerably higher.

Indonesia’s growing middleclass, favorable interest rate en-vironment, and the high prof-it margin for banks due to theirconcentration on consumerand retail banking certainlysuggest a very bright future forthe banking industry.

In its most recent assess-ment, rating agency Moody’sInvestors Service said in De-cember that the outlook forthe sector remained stable incontrast to its neighbors. Beat-rice Woo, a Moody’s Vice-Pres-ident, said: “We expect the[Indonesian] banks’ positivecredit attributes such as highloan growth, wide interest mar-gins and low provisioning costsowing to good asset quality tocontinue in the next 12 to 18months and sustain the sys-tem’s resilience.”

Darmin Nasution, Gover-nor of Bank Indonesia, attrib-utes the relative ease withwhich the country’s finan-cial system weathered re-cent global turbulences toaction taken since theAsian financial crisis of1997-98. “This goes backto more than

a decade of repairs and im-provement since the Asian cri-sis which has made ourfinancial system, including thebanking sector, more resilientand able to absorb instabilityrisk.”

The stability of the banks to-day is indicated by a capital ad-equacy ratio securely abovethe minimum level—reaching16% at the end of 2011—andgross non-performing loansmanaged comfortably at 3%.

Milan Zavadjil, the IMF’s Se-nior Resident Representative inIndonesia, points out thatwhile growth in the most ad-vanced countries has beenfalling, Indonesia has been out-paced only by China and India.“I think Indonesia is the onlycountry that saw its public debtcompared to GDP fall. In aworld where debt is the prob-lem, the Indonesian story re-ally differentiates it from muchof the rest of the world.”

Zulkifli Zaini, President Di-rector of Bank Mandiri, In-donesia’s largest bank by assets,loans and deposits, says In-

donesia’s prudentfiscal policy

has given thebanks “as t r o n ggrowth op-

portunity”. Like other

I n d o n e s i a n

banks, state-owned BankMandiri has been expandinginto a domestic market thatstill has plenty of potential forgrowth; about 40% of Indone-sia's huge population of 240million has yet to open a bankaccount.

A decade ago the bank hadvirtually no presence in retailbanking. Now it has more than1,500 branches spread all overIndonesia, almost 9,000 ATMsand 100,000 EDCs (electron-ic data captures). “We want tobe dominant in credit cards,mortgages and business bank-ing as well as micro financing,”says Zulkifli Zaini.

The bank is committed toexpanding its loan portfolio,which grew by more than 25%last year. “It appears high, com-pared to banks in other coun-tries, but we believe weincreased our loan book pru-dently. In 2012 the governmentis making a concerted effort topush infrastructure develop-ment, and we think it is possi-ble for Bank Mandiri to takepart in lending to finance in-frastructure.”

In addition to supportingeconomic development athome, Bank Mandiri is ex-panding its business to allowit to compete in the regionalmarket. It aims to become oneof the top five regional banksby 2014.

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Page 4: Indonesia Rise

Our World Insert is produced by United World. USA TODAY did not participate in its preparation and is not responsible for its content

Distributed by USA TODAY Thursday, April 12th, 2012 7INDONESIA

Soekarno-Hatta Interna-tional, which serves Jakarta, isthe world’s twelfth busiest air-port. Designed in the early1980s to handle 22 millionpassengers annually, last yearit accommodated more than51 million people. And thenumber is expected to con-tinue rising rapidly.

A major – and expensive –upgrade and expansion of thedomestic and internationalterminals is getting underwaythis year, aimed at increasingthe airport’s passenger han-dling capacity to 62 million.

However, even that isunlikely to be enough to caterto the numbers of peoplewishing to fly into and out ofthe nation’s political and eco-nomic hub in the foreseeablefuture. By 2025 it is estimatedpassenger numbers couldreach 90 million a year.

There is talk of a fourthterminal and a third runway,and the government is con-sidering building an addi-tional, completely new air-port in the Greater Jakartaarea in partnership with theJapanese government.

Expansion of Soekarno-Hatta International is one offour major transport infra-structure projects beingexpedited this year as part ofthe Master Plan for theAcceleration and Expansion

of Indonesian EconomicDevelopment (MP3E1).

Tri Sunoko, PresidentDirector of state-owned air-ports operator PT AngkasaPura II, says the 11.7 trillionrupiah ($1.3 billion) overhaulwill turn Soekarno-HattaInternational into a world-class facility by 2015. Morethan 8.2 trillion rupiah of thecost will be sourced fromexternal funds.

“Our goal is to create a trulyworld-class airport in order tobe able to compete with thelikes of Singapore andother regional airportssuch as BangkokSuvarnabhumi airportand Kuala Lumpur,”says Tri Sunoko.

“The airport willhave an impressive,e n v i r o n m e n t a l l yfriendly design. It will be

a modern airport, butwill maintain a tradi-tional Indonesian fla-vor.”

The bill for develop-ing Indonesia’s airportinfrastructure will behuge, and the govern-ment has been lookingat involving the privatesector through public-private partnerships(PPPs). “In the next 10to 15 years, we need tospend 32 trillion [$3.6billion] on buildingnew airports,” saysDeputy Transporta-tion Minister Bam-bang Susantono.

Indonesia’s BankMandiri has pledgedfunding of R5 trilliontowards expanding

and upgrading airports run byIndonesia’s other state-ownedairports operator, PTAngkasa Pura I.

Passenger capacity at Ngu-rah Rai, Indonesia’s third-busiest international airport,which serves the holiday islandof Bali, is being more than dou-bled, from the 12 million pas-sengers a year it was designedto accommodate to 25 millionpassengers. The four-phaseproject will cost an estimated 2trillion rupiah and include anew international terminal,and is due to be completed intime for the APEC summit inBali in 2013.

Also scheduled for comple-tion in 2013 is the expansion ofSepinggan airport in Balikpa-pan, Borneo, where 1.6 trillionrupiah will be spent on raisingpassenger capacity to 10 mil-

lion passengers. Constructionof a new passenger terminal atSyamsuddin Noor airport, inSouth Kalimantan, will costapproximately 500 billionrupiah and is scheduled forcompletion in 2015.

PT Angkasa Pura I is alsoplanning a new airport atYogyakarta, in Central Java.A joint project with theGVK Group of India, it willcost an estimated 1.2 trillionrupiah, and is expected toopen in 2013.

PT Angkasa Pura I also has acooperation agreement withSouth Korea’s Incheon Inter-national Airport Corporation(IIAC) to develop commercialfacilities and improve cus-tomer service at Indonesia’ssecond-largest and second-busiest airport, Juanda Inter-national, in East Java.

Sky-high prices for new airportsBillions of dollars need to be spent to give Southeast Asia’s biggest economy the top-flight airports it needs, and partnership projects with the private sector could provide the funds

TRI SUNOKO,President Director of

PT Angkasa Pura II

Passenger trains in Indonesiaare often overcrowded and it’scommon to see people cling-ing to the sides and even trav-eling on top of carriages.Undoubtedly some of these un-conventional passengers arefreeloaders, but the shortage oftrains and the level of over-crowding are also to blame.

In addition to passengers, therailway system carries cargo –bulk commodities such as pe-troleum fuel, fertilizer and ce-ment, as well as containers.However, in freight trans-portation also the trains arestraining to meet demand asthe economy expands.

Indonesia’s railway systemcurrently comprises four un-connected railway networks,the main one in Java and threeothers in Sumatra. The aver-age age of the locomotives is30 years, and lack of mainte-nance and spare parts affectstheir reliability.

Overall, a major expansionof the railways is required to re-duce pressure on the roads, andto support economic growthand job creation.

“Economic growth maydownshift in the near future ifwe do not improve the system,”says Ignasius Jonan, PresidentDirector of PT KAI, the state-owned railway company. “Lo-gistics costs need to be reducedone way or another.”

Last year, some 21 milliontons of goods were transport-ed on the railways. By 2014, thisneeds to be raised to 35 milliontons, rising to 70 million tons by2018. Capacity for passenger

traffic needs to increase from the200 million passengers who cur-rently travel on the long-dis-tance and commuter lines to600 million passengers per yearby the end of 2018.

There are plans for a $250million railway link betweenJakarta city center andSoekarno-Hatta Internation-al Airport, Indonesia’s biggestairport, that there are hopesof completing as early as 2013.A 33-kilometer express linebetween Manggarai and theairport via Angke in WestJakarta and Pluit in NorthJakarta is also planned.

“We are trying to triple the ca-pacity of passengers in the nextseven years, we want to make

freight grow more than three-fold,” says Ignasius Jonan. Therailways chief acknowledgesthat the challenge will be enor-mous. However, help is beingprovided by the United States.

In February, a deal to up-grade and maintain the sys-tem was signed in Washingtonby PT KIA and GE Trans-portation, the leading maker ofrail and transportation prod-ucts. The focus will be on im-proving Indonesian railwaylocomotives over the next 40years, developing the trans-portation infrastructure, andproviding maintenance andtechnology transfers.

Benyamin Carnadi, theChargé d’Affaires of the In-

donesian Embassy in Wash-ington, hailed the deal as a newlandmark in Indonesia-U.S. co-operation in the infrastructureand transportation sectors. U.S.officials said it would providelong-term mutual benefit forboth countries and act as a cat-

alyst for increased cooperationbetween Indonesian and U.S.private sectors.

Last September, the UnitedStates Government agreed to a$600,000 grant to support PTKAI’s expansion plan and en-sure the safety of the rail net-

work as part of the U.S.-In-donesia Comprehensive Part-nership. The grant will providetechnical assistance and train-ing of PT KAI staff, and willsupport the upgrading of therail signaling and telecommu-nications systems.

State-owned railway company PT KAI is working hard to meet Indonesia’s growing demand for passenger and freight transportation

Upgrades needed to get railways back on track

IGNASIUS JONAN, President Director of PT KAI (left), with SUSILO BAMBANG YUDHOYONO, President of Indonesia (right)

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Our World Insert is produced by United World. USA TODAY did not participate in its preparation and is not responsible for its content

Distributed by USA TODAYThursday, April 12th, 2012 INDONESIA6

The Indonesian archipelagocomprises more than 17,500islands and its total area of735,358 square miles makes itthe 15th largest country in theworld. Its population of over248 million people is unevenlyspread. For example, theislands of Java and Sumatrahold 136 million and 50 mil-lion people respectively,whereas Bali and Nusa Teng-gara are home to only 13 mil-lion combined.

Infrastructure developmentis fundamentally the greatest

area of concern if the nation’seconomy is to continue mov-ing forward. “That is whereour role as the Ministry ofTransportation comes in, tobe a leader in implantinginter-island and internationalconnectivity,” says Dr. Bam-bang Susantono, Vice Minis-ter of Transportation. “Wehave to build many airports, aswell as ports for the shippingindustry, to support our eco-nomic growth. That is themicro-situation that we arefacing right now.”

According to Prof. ArmidaSalsiah Alisjahbana, StateMinister for National Devel-opment Planning and thehead of the National Devel-opment Planning Agency(Bappenas), Indonesia’seconomy will grow by up to7% in the next few years ifinvestment in infrastructuredevelopment is increased.Currently, infrastructureinvestment accounts for 4%of GDP, lower than the idealminimum of 5%. In a writtenstatement she issued last

November, the Minister saidthat sustainable infrastruc-ture investment was neededto boost national competi-tiveness and she encouragedboth state and private effortsto realize the Master Plan forAcceleration and Expansionof Indonesian EconomicDevelopment (MP3EI).

“We definitely think themaster plan has set out avision to transform Indone-sia’s economy into one of thetop 10 by 2025,” says StefanKoeberle, the World Bank’s

Country Director for Indone-sia. “There have been ground-breaking structural changestaking place, setting the pacefor growth. However, thereare challenges; Indonesia canreach a much higher level ofgrowth if it addresses some ofthese fundamental challengesand most importantly providea platform for infrastructuredevelopment.”

He believes the MP3EI laysout a very strong role not onlyfor state-owned enterprisesbut also the private sector,

and that a focus on public-pri-vate partnerships (PPPs) is“definitely something thatneeds addressing.”

According to YastiSoepredjo Mokoagow, Chair-man of the House of Repre-sentatives Commission V, thepotential for private initiativesis across the board. “We donot think there is any particu-lar sector that has the leadingrole. We are hoping there willbe a lot of investors, investingequally, without single majorplayers,” she says.

Infrastructural investmentvital to master plan’s successPrivate initiatives and partnerships with the government are being sought to connect Indonesia’s islands to each other, and to the world of global enterprise

A few weeks ago Indonesia’sbudget airline Lion Air star-tled the aviation industry by fi-nalizing a $22.4 billion dealwith Boeing for 230 new 737s—the biggest-ever commercialorder the U.S. plane-maker hasever taken.

Almost simultaneously,Garuda Indonesia, Lion Air’sclosest rival, announced thatit is to acquire up to 18 Bom-

bardier CRJ1000 NextGen air-craft and plans to increase thesize of its fleet from 89 to 154aircraft by 2015.

Last year, Kuala Lumpur-based AirAsia placed an orderfor 300 Airbus A320neos andannounced plans to make Jakar-ta its regional headquarters.

Meanwhile, Indonesia’s over-crowded airports are beingturned into construction sites

and plans have been drawn upfor new ones, as they struggle tocope with an unprecedented in-crease in passenger numbers.

Expansion of airline fleets andairport capacity are not just a re-sponse to the increase demandfor air travel witnessed so far. Onthe horizon is ASEAN OpenSky, the liberalization of aviationby the member countries of theAssociation of Southeast Asian

Nations. Due to be imple-mented in 2015, this is expect-ed to lead to another big surgein international traffic.

For the airlines, ASEAN OpenSky will open up new opportu-nities in the regional aviationmarket – hence the orders foradditional aircraft. For the fiveinternational airports that willbe affected in Indonesia –Soekarno-Hatta (Jakarta), Ngu-rah Rai (Bali), Polonia/Kuala Na-mu (Medan), Sultan Hasanudin(Makassar), and Juanda(Surabaya) – the lifting of re-gional flying restrictions makesimprovements in capacity andquality essential.

“Of course we are verypleased, but the challenge is tobalance our capacity with the in-creased flow of air traffic andpassengers,” says Tommy Soe-tomo, President Director of stateairport management companyAngkasa Pura I, which operates13 airports in eastern Indone-sia. “Almost all our airports haveinsufficient capacity, so we arehaving to do a lot of building.”

He says the airports managedby PT Angkasa Pura I served 56million passengers last year – arise of almost 14%.

And it’s the same story atthe 12 airports in western In-donesia run by the other stateairport management compa-ny, PT Angkasa Pura II. Morethan 62 million people passedthrough facilities designed toaccommodate 30 million peo-ple. Busiest of all was Jakarta’sSoekarno-Hatta airport, nowthe twelfth biggest airport inthe world, where passengernumbers soared from 12 mil-lion in 2001 to nearly 50 mil-lion in 2011 – the fastestgrowth recorded in anyASEAN airport.

With the economy expand-ing, the increase in air travel isbeing fuelled by Indonesia’sburgeoning middleclass. And the signsare that demandwill continue torise with in-comes. At thesame time,Indonesia is

busy marketing itself as an in-ternational tourist destination.This year it is aiming to attracta record 8 million foreign vis-itors.

“Indonesia has a popula-tion of 240 million and in2010 only 10 million peopletraveled – because each ofthese people can be reckonedto have flown five times,” saysTengku Burhanuddin, Secre-tary General of the IndonesiaNational Air Carriers Asso-ciation (Inaca).

“Soon we are going to havean open sky policy, and thenthe international traffic willgrow. Asia is the fastest grow-ing region in the world. In-donesia’s economy, in particular,is really improving, and peo-ple’s income is increasing. Themain problem we have is the air-port infrastructure. We have to

raise the capacity, and we alsoneed more pilots.”

Growth in passenger num-bers, which amounted to dou-ble the global average last year,has sent the revenues of the air-lines skywards.

These are good times for theairport operators too. PTAngkasa Pura I saw its incometake off to around 3 trillion ru-piah ($331 million) last year, a23.3% rise, while its profit roseto 655 billion rupiah, up morethan 17% year-on-year.

PT Angkasa Pura II saw a12.25% rise in revenues to 3.48trillion, with profits expectedto exceed $1 trillion rupiah.

Last year, PT Angkasa PuraI signed a memorandum of co-operation with IT solutionscompany SITA to install thelatest Intelligent Airport tech-nology at all its airports. Usingreal-time information, thetechnology will provide pas-sengers with improved flightinformation displays and bet-ter check-in and baggage rec-onciliation facilities.

“The whole reason behindthe memorandum of coopera-tion with Angkasa Pura I wasto work with the airport au-thorities to bring the infra-structure in their 13 airportsup to world class standards,”says Damian Hickey, SITA’s re-gional Vice President.

“We have vast experience inwhat is considered industry-wide best practice, and theywere very keen to work withus and bring some of thoseworldwide best practices toIndonesia, to bring some of

these airports up to Sky-trax 5-star standards.”

Major challenge of soaring passenger numbersThe number of peoplepassing throughIndonesia’s airports hasbeen rising twice as fastas the global average,and with implementationof a regional open skiespolicy on the horizon therace is on to expandairline fleets and airports

“THE CHALLENGEIS TO BALANCEOUR CAPACITYWITH THEINCREASED FLOWOF AIR TRAFFICANDPASSENGERS.ALMOST ALL OURAIRPORTS HAVEINSUFFICIENTCAPACITY, SO WEARE HAVING TODO A LOT OFBUILDING.”

TOMMY SOETOMO, PresidentDirector of Angkasa Pura I

The new terminal at the International Airport of Semarang Central Java, to be completed in 2013

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Page 5: Indonesia Rise

Among the most commonsights on the crowded streetsof Jakarta are the distinctivesky-blue vehicles of the BlueBird taxi company.

The largest and most in-stantly recognizable taxi firmin the country, Blue Bird has anexcellent reputation amongboth Indonesians and foreignvisitors, and a plethora ofawards for the quality of theservice it provides.

Its uniformed taxi drivers areseen as trustworthy and welltrained, and they always oper-ate with a meter to guaranteethe fares charged are fair.

Indeed, such is Blue Bird’sgood name and reliability thatfraudsters pretend to be BlueBird drivers, picking up pas-sengers in blue vehicles verysimilar to the firm’s taxis.

Bayu Djokosoetono, BlueBird’s Commissioner, says ithas been a problem. He rec-ommends visitors book a cabthrough their hotel or online,use the firm’s credit voucherscheme, or, if flagging a taxidown in the street, check ithas a Blue Bird sunscreen be-fore getting in. Recently, cus-tomers have also been able tomake a reservation on theirsmart phones.

The high standards and re-liability Blue Bird expects fromits drivers comes from its ori-gins as a family firm.

From what was initially asmall car rental firm, the taxi

business was started by BayuDjokosoetono’s grandmother,Mutiara, in 1992. In those lessenlightened times, she had topersuade the authorities that awoman was capable of runningsuch a business. In the earlydays, when there were just 25cabs, the drivers would takemeals with the family.

Today, in the firm’s 40th an-niversary year, the now diver-sified, and still expanding, BlueBird Group has retained thesame values it started with.

“We try to create a sense ofbelonging amongst the em-ployees and the drivers,” saysBayu Djokosoetono. “An hon-est culture within the compa-ny itself means that all of thecompany stakeholders try tomaintain these values in theirown lives, and use this to bet-ter serve our customers.”

Blue Bird now has a fleet ofmore than 21,000 taxis andserves approximately 8.5 mil-lion passengers per month allover Indonesia. Its 24-hour callcenter receives up to 24,000calls a day.

Mr. Djokosoetono says that

for the regular taxi service, thepotential in Indonesia is stillhigh. In addition to Jakarta,Blue Bird taxis ply their tradein Bali, Bandung, Banten, Man-ado, Medan, Lombok, Se-marang, Surabaya, andYogyakarta. The service is be-ing extended to other parts ofIndonesia as their local

economies improve. “Once the economy reach-

es a certain level in a city, weenter the market there. Thereare many cities in Indonesiawhich are growing well eco-nomically, but they are notsupported by a good trans-portation service.”

Last year Blue Bird opened

a branch in Palembang to sup-port the Southeast AsianGames. Further branches areopening in Bandung andSumatra.

Blue Bird also runs a luxurySilver Bird sedan service forthe well-heeled customer. “Weare not the only taxi servicehere in Indonesia offering a

premium or luxury service, butwe have established our posi-tion as the best and most reli-able luxury taxi providerthrough a partnership withMercedes Benz.”

Golden Bird provides lim-ousine and car rental, and BigBird chartered buses.

More than 40,000 people workin the Blue Bird Group, whosebusiness interests range fromtransportation and logistics, toproperty, manufacturing and ser-vices.

“Our ability to manage thathuge number of people is a tes-tament to our professionalism,”says Bayu Djokosoetono.

He says the logistics businessis one the group is particularlyfocused on expanding. “The po-tential for the logistics service isalso limitless because it is a grow-ing business. Indonesia is a re-source-based nation and we needto move our goods all aroundthe world. This takes good lo-gistics infrastructure.”

Blue Bird already operatesIron Bird Trucking and IronBird Transport, the officialagent for Japan’s SumitomoWarehouse company;OceanAir, a supply chain man-agement service; and Ritra Kon-nas, a warehouse and containerdepot. The group sees oppor-tunities for foreign partnerships,and serving as the Indonesianagent for multi-national logis-tics companies.

Looking ahead, Mr.Djokosoetono says one of theways to secure the company’sfuture is by an initial public of-fering (IPO).

“As the third generation, wehave to prove that we are ca-pable of running the familybusiness, not because we arethe owners, but because weare professionals in our ownright,” he says.

Our World Insert is produced by United World. USA TODAY did not participate in its preparation and is not responsible for its content

Distributed by USA TODAY Thursday, April 12th, 2012 9INDONESIA

Blue Bird spreads its wingsJust as New York has its yellow cabs so Jakarta and other Indonesian cities have their blue taxis. Indonesia’s best-known cab firm is part of a group with diversified interests

“WE TRY TO CREATE A SENSE OFBELONGING AMONGST THE EMPLOYEESAND THE DRIVERS. AN HONEST CULTUREWITHIN THE COMPANY ITSELF MEANSTHAT ALL OF THE COMPANYSTAKEHOLDERS TRY TO MAINTAIN THESEVALUES IN THEIR OWN LIVES, AND USETHIS TO BETTER SERVE OUR CUSTOMERS.”

BAYU DJOKOSOETONO, Commissioner of Blue Bird Group

The country’s flagship Nusan-tara Super Highway Project,known as Palapa Ring, is form-ing a nationwide fiber-optic net-work that will be the backboneof Indonesia’s information andcommunication technology(ICT) system. The project is ex-pected to significantly lower thecosts of telecoms and Internet ac-cess, as well as boost broadbandspeeds, by creating seven inter-connected rings or main islandgroups – namely the Sumatra, Ja-va, Kalimantan, Sulawesi,Maluku, Nusa Tenggara andPapua rings – that will strength-en inter-island and internation-al connectivity. Covering 33provinces and 460 districts, intotal the Palapa Ring comprises21,921 miles of undersea opticalfiber and 13,489 miles of under-ground fiber optics.

The brainchild of the Ministryof Communication and Infor-mation Technology (MCIT), thePalapa Ring is on track to be ful-

ly connected by 2014 and was ini-tially funded by telecom opera-tors, led by TelekomunikasiIndonesia (Telkom). “Over time,the operators gradually pulledout of the project. Only one is left,”says Freddy Tulung, DirectorGeneral of Information and Pub-lic Communication at MCIT.“The consortium was meant totake care of the financing. Un-fortunately, they have pulled out.Now, the government is set to fi-nance both the ICT fund andthe Palapa project.”

Other ICT initiatives from thegovernment include the DesaBerdering Program, which is es-tablishing basic telephony ser-vices, including voice and SMS,in each of the country’s 72,000villages. Also, the Pusat Infor-masi Masyarakat (PIM), or theCommunity Access Point (CAP),scheme aims to extend the reachof ICT within the country andinvolves setting up Internet com-munity centers by 2014.

“We are now moving towardsthe digital era. That is why weare also preparing for the con-vergence of the triple C’s: com-munications, computers, andcontent. This also includes theconvergence in ICT infra-structure, which coverstelecommunication, Internet,and broadcasting (where wehave educational entertain-ment),” says Mr. Tulung. “Tech-nology infrastructure meansnothing without the knowledgeof the software being devel-oped, and the impact of the reg-ulations that are being effected.The Palapa Ring demonstrateshow Indonesia is making hugestrides towards strengtheningits ICT infrastructure and im-proving the existing telecom-munication systems. Combinedwith our highly IT-orientedyouthful workforce and largemarket base, there are just somany opportunities for foreigninvestors to explore.”

Palapa Ring totransform ICTAdvancing Indonesia’s telecoms is central to the success of the government’s push todevelop soft infrastructure under its MP3EI master plan for economic development

Connectivity: IP Backbone Development 2011-2015“NUSANTARA SUPER HIGHWAY”

INDONESIA USAT pages 8-11.qxd 2/4/12 21:43 Página 3

Our World Insert is produced by United World. USA TODAY did not participate in its preparation and is not responsible for its content

Distributed by USA TODAYThursday, April 12th, 2012 INDONESIA8

On February 4, the Diadema,a giant container vessel ladenwith cargo, docked in In-donesia’s busiest harbor inNorth Jakarta.

The arrival of the Maersk Linemega-ship, carrying more than4,500 standard-size containers,marked a new stage of devel-opment for Tanjung Priok port,Indonesia’s biggest seaport.

It was the first time that theport, which handles 75% of thenation’s total container traffic,was able to accommodate a shipof such a size. Previously, onlyvessels of up to 3,000 twenty-foot equivalent unit containers(TEUs) could dock there.

Tanjung Priok port is abustling center for West Javaexports and transshipmentswith other islands in SoutheastAsia and the South Pacific. Ex-

port and import activity hassurged, container traffic hasbeen growing at an average an-nual rate of 26%, and last yearexceeded the port’s capacity of5 million TEUs.

February was also the monththat state-owned Pelindo II, theoperator of Tanjung Priok portand 11 other harbors, re-launched itself as IPC – In-donesian Port Corporation,adopting the motto ‘EnergizingTrade, Energizing Indonesia.’

IPC’s President DirectorRichard Joost Lino says the ar-rival of the Diadema – nowmaking a regular weekly call –demonstrates to the big inter-national shipping lines the con-fidence they can now have inIndonesia’s principal port. Hewants Tanjung Priok to becomea regional hub in the next three

years, and be internationally rec-ognized for its efficiency.

“We want to be a world-classport operator,” he says. “In thenear future, we expect to havean average increase of at leastone million TEUs of contain-ers per year – so by the end ofthis year, hopefully, we will reach6 million TEU containers,” hesays.

Making this possible will con-tinue to require, considerablecost and effort. In recent years,IPC has invested nearly $250million in upgrading TanjungPriok port, which now operates24-hours a day.

New container loading craneshave been installed, an 1,000-square meter plot of land in Ter-minal 3 has been converted intoan international container ter-minal, and a new $11.55 mil-lion information technologysystem is to be installed to easecongestion by monitoring ves-sel traffic online. The systemwill also be installed at Palem-bang, Pontianak, and Jambiports in 2013.

Mr. Lino says, “The systemenables ship operators to knowexactly when and in which ter-minal their ships will dock.They can plan their shippingproperly to maximize their re-sources, and logistics costs willbe dramatically reduced.”

Indonesia’s logistics costs areamong the highest in anySoutheast Asian country.

“As a state-owned enter-prise, IPC must help this coun-try to reduce logistics costs tomake the economy growfaster,” says Mr. Lino.

He argues that if the ports

can be made cheaper and moreefficient transportation ofgoods can be shifted from In-donesia’s congested roads tosea transportation.

“We need to have very ef-ficient and productive ports.If your port is efficient, youwill increase your ship ca-pacity. The ports are the gatesto Indonesia for the world,and vice versa.”

Based in Jakarta-based state-owned IPC runs 11 other In-donesian ports in addition toTanjung Priok. Since it beganits revitalization drive in 2008under Mr. Lino’s leadership,revenue has doubled and prof-its increased almost four-fold.

In 2011, the increase in car-

go traffic took the port opera-tor’s total revenues to 5.14 tril-lion rupiah ($570 million), anincrease of 41.46%, compared to2010. Net profit increased by33% in the same period, reach-ing 1.63 trillion rupiah.

This year, the company is tar-geting earnings of up to 6 tril-lion rupiah, and net profit of 1.7trillion rupiah. Six subsidiarycompanies are being establishedto further improve efficiency atthe ports and accelerate infra-structure development.

IPC increased its invest-ment in port facilities by 36%to 1.5 trillion rupiah in 2011.This year it expects invest 4.5trillion rupiah.

A substantial amount of that

will go towards construction ofNorth Jakarta’s New PriokContainer Terminal, neededto relieve the mounting pres-sure on Tanjung Priok port.Phase I will be completed bythe end of the first quarter of2014, and the rest of the pro-ject in 2017 at a cost of ap-proximately $2 billion.

Work will also start this yearon the development of SorongContainer Port in West Papua.The port should become op-erational by 2014.

Significant investment is al-so being made in staff train-ing. “We have invested $50million to prepare our bestpeople to be world-class man-agers,” says Mr. Lino.

Ports investmentboosts capacityand efficiency The operator of Indonesia’s biggest port has changed its name and adopted themotto ‘Energizing Trade, Energizing Indonesia.’ The Independent Port Corporation(IPC) is spending huge sums to make Indonesia a regional hub for seaborne trade

“WE NEED TO HAVE VERY EFFICIENT AND PRODUCTIVE PORTS...THE PORTS ARE THE GATES TO INDONESIA FOR THE WORLD,AND VICE VERSA.”

RICHARD JOOST LINO, President Director of the Indonesia Port Corporation

Since 2008, IPC’s profits have increased almost four-fold

INDONESIA USAT pages 8-11.qxd 2/4/12 21:40 Página 2

Page 6: Indonesia Rise

Our World Insert is produced by United World. USA TODAY did not participate in its preparation and is not responsible for its content

Distributed by USA TODAY Thursday, April 12th, 2012 11INDONESIA

Indonesia has some of the rich-est deposits of coal, gold andcopper in the world. High inthe mountains of Papuaprovince, in the eastern part ofthe country, is the world’slargest gold mine and second-largest copper mine, but inSumatra, in the south, there isa resource of greater economicvalue – coal.

Mining accounts for morethan 10% of Indonesia’s GDP,and the sector is growing fast.In its 2012 first quarter reporton the industry, British Mon-itor International (BMI) saysit expects the industry’s valueto reach $147 billion in realterms by 2015 – almost dou-ble that of 2010.

Coal mining is fuelling thisrapid pace of growth. BMIforecasts coal production willreach 816 million tons by 2015,an annual average growth of17.8% from 2010 levels.

Indonesia is already theworld’s leading exporter of coalfor power stations, with muchof what it produces going tofeed the voracious demand forenergy in the rapidly expand-ing economies of China andIndia. Last year, India over-took Japan as Indonesia’sbiggest customer for coal, anddemand from China is ex-pected to double over the nextfive years. Other countriesseeking to source their coalfrom Indonesia include Kenya,Bangladesh and Pakistan.

As production is ramped upand new mines are opened inresponse to accelerating de-mand, there is a need forgreater investment to sustainthe sector’s expansion. Thegovernment expects mininginvestment to reach $6 billionthis year, and has brought innew mining regulations to im-prove certainty for investors.

In January, President Susi-lo Bambang Yudhoyono or-dered a review of all miningpermits issued by local gov-ernments in a bid to enhancetransparency and account-ability in the sector.

Satya Yudha, a member ofCommission VII, which over-sees energy and mines at In-donesia’s House ofRepresentatives, says many per-mits have been issued morethan once by the different headsof regions, especially after newgovernors have been elected.

“There is a lot of flexibilityby the local governments, andthis makes the mining sectora bit messy compared to oiland gas. But if we have com-mon goals between local andcentral governments and agood integration among theministries we will have a pos-itive outcome,” he says.

Last month, the governmentgave a clear indication that In-donesia intends to retain moreof the profits from mining byrebalancing investment in thesector more towards domes-tic investors. A surprise changein the rules, announced inMarch, will limit foreign own-ership of mines to just 49%.

The Energy Ministry has al-so demanded a 4% increase inthe amount of coal suppliedfor domestic consumption to82 million tons. Indonesia ex-ports most of its natural gas,and so needs coal to drive itsown power stations.

And in a further move toboost revenue from mining,the government wants to seecoal and minerals processedinto added-value products be-fore export, and plans to banshipments of raw coal mater-ial by 2014.

Bob Kamandanu, Chairmanof the Indonesian Coal Min-

ing Association, says: “We havebeen exploiting oil, gas, andcoal and minerals such as nick-el, iron ore, copper and gold.We cannot continue this wayfor too long, because Indone-sia has to transform itself in-to a human capital economy.

“I am not proud of Indonesiabeing the number one coal ex-porter,” he adds. “We would liketo see Indonesia using its owncoal. Indonesia needs energy,fuel and strength to take off, andmining is part of the backboneof Indonesia right now.”

He says more exploration isneeded and greater use oftechnology. Indonesia has oneof the largest reserves of coalbed methane in the world – apotential 453 trillion cubic feet,which is more than double thecountry’s natural gas reserves.

“We have mostly low rankcoal. We have to employ coal

conversion technology inwhich this coal becomesmethanol, a cleaner fuel.Everybody has been talkingabout this technology butnothing has been done yet.This will ensure the energy ef-ficiency of Indonesia.”

Syahrir AB, Executive Di-rector of the Indonesian Min-ing Association, says greaterinvestment is needed in ex-ploration so the country’s min-eral wealth can be more fullyexploited. “I have already askedthe central government whywe don’t explore our potentialin gold, bauxite and copper. Ifthere is no exploration, thereis no exploitation.”

Mr. Kamandanu also hasstrong views on mining stan-dards and CSR initiatives, whichhe believes are best led by thelargest mining companies, whichcontrol 80% of the industry.

“The small operators do notdesign mining well... They seeblack coal and they rush anddig, the walls collapse and thenthey leave.”

For CSR to be truly effec-tive, co-ordination is needed.“There are about 200 or 300companies at the moment andeach company has CSR mon-ey. If we put them altogether,that is billions of dollars. Weneed a nationwide program.For example, in Kalimantan,the number of people who aregraduating from elementaryschool is two million, and byenforcing the CSR, they cango to high school and then goto university. We need theseprograms nationwide. Wecould have a mining fund totransform Indonesia’s humanresources. We do not mind be-ing charged more if it is goingto transform things.”

Mining sector aims to increaseprofits – and share the benefitsIndonesia sits on a wealth of buried treasure – a wide range of mineral and energy resources that the world needs – and activity is gaining pace as the mining sector strives to meet demand at home and abroad

Indonesia boasts more than 12.8 trillion cubic meters of CBM - the equivalent of over 80 billion barrels of oil

Bob Kamandanu (right), Chairman of theIndonesian Coal Mining Association

“WE HAVE BEENEXPLOITING OIL, GAS,AND COAL ANDMINERALS SUCH ASNICKEL, IRON ORE,COPPER AND GOLD.WE CANNOTCONTINUE THIS WAYFOR TOO LONG,BECAUSE INDONESIAHAS TO TRANSFORMITSELF INTO AHUMAN CAPITALECONOMY.”

BOB KAMANDANU, Chairman of theIndonesian Coal Mining Association

Indonesia is the world’s sec-ond largest exporter of coaland LNG and has the world’slargest geothermal resources,as well as an estimated 453trillion cubic feet of coal bedmethane (CBM) – which hasa lower exploration risk andsignificantly lower per wellactivity than oil or gas. Ener-gy experts predict that CBMhas the potential to create anew, global energy frontier,especially following recenttrends in the five coal-min-ing states of the northeastUnited States by ExxonMo-bil,BP and Total, trends whichlook set to propel CBM ex-ploration into the limelight.

Veteran gas consultantRichard Fuller, who hasworked in Indonesia for 30years, says: “CBM has the po-tential to give Indonesia theopportunity of becoming theregion's lowest energy-costeconomy.”(Straits Times, In-donesia).

CBM development differssubstantially from that of con-ventional gas, often requiringthousands of shallow wellsand a major de-wateringprocess. But these same char-acteristics dictate high em-ployment and the strongeconomic growth: the Mar-cellus Basin development isnow creating 15,000 jobs ayear. Studies have shown thatthere is as much as 5.1 tril-lion cubic meters of CBM intwo large basins in East andSouth Kalimantan – areaswhere Ephindo are alreadymassively invested.

Despite the fact that only 10to 15% is thought recoverable,this amounts to 566 billioncubic meters in convention-al reserves, and makes theoverall gas resource about thesame size as the MarcellusBasin, a trillion-dollar shale

gas deposit hailed as one ofAmerica's richest energyfinds. With another 7.1 trillioncubic meters of CBM poten-tial in southern Sumatra,where pipelines already sup-ply conventional gas to Sin-gapore and Jakarta, Indonesiaboasts more than 12.8 trillioncubic meters of CBM – theequivalent of over 80 billionbarrels of oil.

“The figures are impressive.But we still have to prove thatCBM is commercial and raiseawareness of the fact thatCBM is completely differentto conventional gas. The mar-ket needs to adjust...you aretalking about 10 to 20 timesmore of a footprint than con-ventional gas players. Butthere is no doubt that there ishuge potential,” explains Sam-my Hamzah, President Di-rector, Ephindo Energy.

A pilot to power model inSangatta, has helped Ephindocommercialize some reserves.“Sangatta is currently shortof 6 to 7 MW. They are burn-ing diesel to produce elec-tricity. We are helping thecommunity to get electricityand are helping ourselves byshowing the world the po-tential of CBM.”

He is bullish about Ephin-do’s prospects: “You are look-ing at a company that is going

to be a major player in theCBM industry in Indonesia.Gas is the future of the coun-try. People worry about do-mestic market obligationsand pricing, but if you look atgas sales deals in the last 12months, you are looking atan average of between $6 and$7. Now PLN is talking aboutbuying gas at $9 plus. If youcompare it to the U.S., youcould not even sell it for $3.It is a very good market.”

His confidence is based onwell thought-out strategy:“The basins we have chosenrepresent almost 70% of theIndonesian CBM resources.East Kalimantan and SouthSumatra have very good gasinfrastructure because con-ventional gas has been pro-duced there for over 40 years.It is simply a matter of find-ing the gas then making itflow. The market and infra-structure are there. Five ofour six blocks are very closeto the second biggest LNGplant in the world. It has eighttrains and three of them areidle at the moment, waitingfor gas to come in. You arelooking at an idle LNG plantin your backyard! What morecould you want?”

He continues: “Indonesiais a very attractive place tobe, especially in the currentglobal economic situation.Our investors are my top pri-ority. If we are able to estab-lish a substantial enoughportfolio that will allow us toproduce 50 to 100 million cu-bic feet in five years, thatwould be good. But the mostimportant thing for me is re-turns for my shareholders”.

He believes the future ofthe region is bright: “I am afirm believer in enterprise.Times are changing and weare excited about it.”

Energy from yourown backyardCBM – coal bed methane – is a highly promising new frontier in natural gasdevelopment. The entry of multi-national oil companies looks set to boost its economicprospects further – and visionary Indonesian outfit Ephindo is also keen to play its part

“IT IS SIMPLY A MATTEROF FINDING THE GASTHEN MAKING IT FLOW.THE MARKET ANDINFRASTRUCTURE ARETHERE.”

MR. SAMMY HAMZAH, President Directorof Ephindo Energy

INDONESIA USAT pages 8-11.qxd 3/4/12 11:16 Página 5

India’s leading private sectorpower producer, Tata Power, isinvesting $125 million in a240MW geothermal projectin northern Sumatra.

OTP Geothermal Power, ajoint venture between TataPower and Australia’s OriginEnergy is developing the con-cession for the project at SorikMarapi. Indonesia’s Supracohas a minor holding in the con-sortium, which has been car-rying out a detailed explorationprogram since last year.

Construction is due to beginlater this year and the first unitis expected to come into op-eration towards the end of2015. Two more units will fol-low early in 2016.

Mumbai-based Tata Poweraims to achieve at least 25% ofits generation portfoliothrough renewable sources ofenergy by 2017.

“People really need to un-derstand geothermal and thehuge benefits it has for In-donesia,” says John Wheble,OTP Geothermal Power’s for-mer President Director.

“It is not influenced by in-ternational oil, gas or coalprices, and has both econom-ic and environmental advan-tages. It is better for the countryto use geothermal energy,which cannot be exported,rather than other fuel sources

that will bring export earnings.”He says that up until now

there has simply not been thereward and recognition forthose interested in taking thegeothermal exploration andexploitation developmentrisks. “In the past, there havenot been enough governmentincentives and regulatory sup-port for the private sector tofeel comfortable spending mil-lions of dollars on the explo-ration and development.”

According to Mr. Wheble,Tata Power and Origin havethe combined strength to be-come a world leader in geot-hermal energy. And they havenot entered the Indonesianmarket for a single project.

“It’s an enormous cost tosupport a team in Indonesiafor just one project,” he says.“The returns these days aren’tgreat compared to the sheerrisk involved with geothermalexploration, and so you needmore projects.”

The consortium will identi-fy 1,000MW and try to securethe projects it believes to bebeneficial to Indonesia and toshareholders, he adds.

Bret Mattes, President Di-rector of Tata Indonesia, saysthe recently established Al-liance of Low Carbon Busi-nesses in Indonesia (Albi)wants to see legislation to forcethe energy sector alone to re-duce carbon emissions byabout 300 million tons. “Imag-ine if all that coal was beingsold outside the country, ratherthan being consumed locally

where it is subsidized and tax-payers are paying for it,” he says.

“According to Albi, we coulddeliver about 170 million tonsof carbon emission reductionswithout any additional costs,just by allowing geothermal andhydroelectric to compete withcoal on an even playing field.”

Almost half of Indonesia’sgeothermal potential is locat-ed where the demand for en-ergy is at its greatest, on Javaand Bali, Indonesia’s most pop-ulous islands.

Bali’s only geothermal pow-

er plant project is managed byBali Energy, which first becameinvolved in trying to generate ge-othermal energy on the holidayresort island as far back as 1994.

The project, which has con-firmed reserves in excess of175MW, was re-launched in2004 after being suspended in1997 by the government dur-ing the regional financial cri-sis, but is still waiting to go intocommercial operation.

Bali Energy has three pro-duction size test wells, a jointoperation contract with In-

donesia’s national oil compa-ny, Pertamina, an energy salescontract with PLN, a govern-ment guarantee letter fromthe Ministry of Finance and anenvironmental and social im-pact study signed by theGov-ernor of Bali.

Ira Francis Hatta, the com-pany’s President Director, says:“Bali has always had a shortageof energy mainly because of itsdependency on tourism relat-ed businesses. It was a no-brain-er for Pertamina and PLN torecognize the need for indige-nous power. Last year PLN sub-sidized energy to the island of

Bali in excess of $130 million!”He also says Bali Energy has

first-class partners and hasbeen having discussions withtwo equipment suppliers,Toshiba and General Electric(GE). Using GE binary tech-nology could enable Bali En-ergy to produce 10MW fromits current wells.

“It will have a tremendousimpact,” says Mr. Hatta. “I thinkit will probably be their firstbinary system implementationoutside of Italy. We are smalland committed, and GE is bigand committed. The key wordis committed.”

Distributed by USA TODAYThursday, April 12th, 2012 INDONESIA10

Located on the Pacific Ring ofFire, Indonesia has more ac-tive volcanoes than any oth-er country. They are mostvisible sign that the countryhas the world’s largest geot-hermal reserves – enoughheat generated and stored inthe earth to produce 29,000megawatts of electricity

To put that in proportion,29,000MW is the equivalentof 12 billion barrels of oil. Ex-isting global geothermal pow-er generating capacityamounts to approximately11,000 MW.

Currently, only a tiny frac-tion – less than 5% – of thiscost effective, reliable, sus-tainable, environmentallyfriendly and renewable sourceof energy is being exploited.

However, that’s changingfast. A pledge by PresidentSusilo Bambang Yudhoyonolast year that he would in-crease subsidies for clean en-ergy has prompted what hasbeen described as biggest ge-othermal spending spree inAsia and the largest outside ofthe United States. Analystssay the investment boomcould reach $30 billion.

Former U.S. Vice-PresidentAl Gore has called Indonesia

the first potential “geother-mal superpower.”

World-class companiessuch as U.S. oil majorChevron, India’s Tata Groupand Sumitomo of Japan arealready involved. The nationalenergy companies are step-ping up their geothermal ac-tivities too.

State power firm PLN saysit wants to boost its use ofgeothermal energy sourcesto 7%, and is launching threenew geothermal power plantsthis year.

Pertamina Geothermal En-ergy (PGE), a subsidiary of thenational oil and gas company,has been spending millions ofdollars developing geother-mal power plants in West Ja-va, Sumatra and Sulawesi, andalso expects to bring threemore plants online this year.Pertamina also has a joint op-eration contract with Bali En-ergy, which is set to generategeothermal energy on the hol-iday resort island.

Recently State-Owned En-terprises Minister DahlanIskan announced that PGE isto become a joint subsidiaryof Pertamina and PLN, thestate electricity company tofacilitate government plans

to build 44 new geothermalplants to more than triple ca-pacity to 4,000 MW by 2014.Discussions are, however, stillat an early stage.

Geothermal energy is non-exportable, but as an alterna-tive to fossil fuels it couldreduce the amount Indone-sia spends on importing en-ergy and make a significantcontribution to PresidentSusilo Bambang Yudhoyono’spledge to cut carbon emis-sions by 26% by 2020, whilealso contributing to boostingIndonesia’s electrification rateabove 80% by 2014.

At present, Indonesia’s ge-othermal power plants havethe capacity to generate just1,341MW – only 4.6% of thetotal potential. The govern-ment aims to increase geot-hermal capacity to 4,000MWby 2014-15 and to 9,500MWby 2025, when it would accountfor approximately 33% of In-donesia’s electricity demand.

One of the problems thathas held back developmentup to now has been that manygeothermal reserves are lo-cated in protected forests –though this now appears tohave been overcome. A mem-orandum of understanding

(MOU) recently signed by theMinistry of Energy and Min-eral Resources and the Min-istry of Forestry removeslicensing problems for the ex-ploration of geothermal en-

ergy in 28 locations in forestconservation areas, and is like-ly to become a guideline for fu-ture geothermal projects.

Investment will also be en-couraged now that the gov-ernment has agreed toprovide expanded guaranteesto geothermal developers,covering risks during the ex-ploration and constructionphases. The financial, regu-latory and technical chal-lenges will be addressed at theWorld Geothermal EnergySummit 2012, which is to beheld in Jakarta in July.

Widjajono Partowidagdo,Vice-Minister of Energy andMineral Resources, says ge-othermal energy could offerbig advantages to Indonesia.“If the price is right and theforestry issues can be re-solved, geothermal will behugely beneficial.”

He hopes the MOU willspeed things up. “If the min-istries work together, every-thing can be sorted out. Itdepends on our will and if wewant to improve or not. Thepotential is there, but we needto move in the right direction.The contractors do not needthe money – but they need aguarantee from the govern-ment that they are going tomake a profit.”

Poernomo Abadi, chairmanof Indonesia Geothermal As-

sociation, says 25% of In-donesia’s energy could comefrom renewable energysources – including solar andwind, as well as coal bedmethane and biofuels. “Wehave geothermal resources inabundance, spread through-out the country. It is impor-tant that we as a nation tapinto this.”

He says the IGA is workingwith the government to re-move the barriers that inhib-it investors coming toIndonesia in order to devel-op geothermal activities. “Alltechnology and knowledgefrom the U.S. and other coun-tries is welcome in Indonesia,”he adds.

Satya Yudha, a member ofthe House of Representatives’Commission VII on energy,mining, technology and theenvironment, says achievingthe 26% carbon emissions re-duction will be “quite a bigjob”, but using renewable re-sources will help.

“If you look at the forestrysector, we still have defor-estation problems and illegallogging, and that is somethingthat we need to fix first. If wecan fulfill our energy needswith renewable energy, andoptimize clean-burning fuellike gas, this complies withthe country ’s ambition toachieve a 26% cut.”

Generated and stored in the earth, geothermal energy is cheap, reliable, sustainable, environmentally friendly and renewable – and Indonesia has more of it thanany other country. Now steps are being taken to make use of it

“WE STILL HAVEDEFORESTATIONPROBLEMS ANDILLEGAL LOGGING,AND THAT ISSOMETHING THATWE NEED TO FIXFIRST.”

SATYA YUDHA, Spokesperson forCommission VII

“WE HAVEGEOTHERMALRESOURCES INABUNDANCE. IT ISIMPORTANT THATWE AS A NATIONTAP INTO THIS.”

POERNOMO ABADI, Chairman ofIndonesia Geothermal Association

“IF THE PRICE ISRIGHT AND THEFORESTRY ISSUESCAN BE RESOLVED,GEOTHERMAL WILLBE HUGELYBENEFICIAL.”

WIDJAJONO PARTOWIDAGDO, Vice-Minister of Energy and Mineral Resources

Indonesia’s geothermal potential includes the ability to produce 29,000 megawatts of electricity

Private companies bigand small are turningIndonesia’s potential forgeothermal energy intoa reality

Our World Insert is produced by United World. USA TODAY did not participate in its preparation and is not responsible for its content

“IT IS BETTER FOR THE COUNTRY TO USEGEOTHERMAL ENERGY, WHICH CANNOT BEEXPORTED, RATHER THAN OTHER FUEL SOURCESTHAT WILL BRING EXPORT EARNINGS.”

JOHN WHEBLE, former President Director of OTP Geothermal Power

“THE TIDE IS FINALLYCHANGING ANDPEOPLE ARE TAKINGTHE PROJECTSERIOUSLY. WE CANMOVE AT AMOMENT’SNOTICE.”

IRA FRANCIS HATTA, PresidentDirector of Bali Energy

Geothermal energy can reduceemissions and power economy

Switching to a cleaner power source

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Page 7: Indonesia Rise

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Distributed by USA TODAY Thursday, April 12th, 2012 13INDONESIA

Apple Coal, a wholly ownedsubsidiary of Apple Com-modities Ltd., Hong Kong, hasinterests in coal mining, coalmine development, and coaltrading, in the Indonesianprovinces of Southeast Suma-tra and East Kalimantan.

Its focus and strength lies,primarily, in the growing Asianenergy markets. Through acombination of its assetstrength and its close bonds –made through strategic andmutually beneficial local part-nerships – it has experiencedsteady growth since its estab-lishment in 2009.

Nischal Jain, President Com-missioner of Apple Coal, hasbeen pleasantly surprised bythe short-term gains made bythe company in addition towhat he sees as its long-termpotential: “Apple Commodi-ties (Hong Kong) is also in-volved in agricultural products

and textiles, as well as fo-cusing on natural

resources such ascoal. We plan toexpand ourportfolio here in

Indonesia, too.We are al-

ready looking into bauxite andmanganese markets in thecoming years. But right now itis just iron ore and coal for us.”

However, he is keen to stressthat mining will not be the pri-mary focus, ongoing: “PT Ap-ple Coal is a subsidiary of AppleCommodities Ltd., which ownsconcessions all over Indone-sia. Apple Coal is a tradingcompany; we have been trad-ing a lot of coal over the pastthree years and we will con-tinue to do so, but as I havestated, Apple Coal is not just amining company, nor are wethinking about staying as justa mining company.”

Over the next four years thecompany's aim is to become a10 million metric ton per an-num (mtpa) operation. In pos-session of several minesthroughout Indonesia with anarea totaling over 58,000hectares, Mr. Jain is cautious-ly optimistic that they will be-come a publicly tradedcompany, sooner rather thanlater. And that bright futurelooks quite attainable judgingby the current growth rate.

Apple is also looking at in-vesting over $350 million

in the mining andinfra-

structure sector in over thenext three to five years. Mr.Jain continues: “On the humanresources side, we employ over100 people in Indonesia, wehave only nine ex-pats. Man-power is available in Indone-sia and the expertise is here.We know how the systemworks here... we plan to employclose to 350 people in the medi-um term. Long-term plans in-clude giving the land back tosociety through public parksand hospitals and schools forthe local villages where we willbe mining. We plan to replantthe forests as well and go evenbeyond what the regulationsstipulate. We are an environ-mentally responsible compa-ny.”

There are villages sur-rounding many of the sites inIndonesia and as they are lo-cated in remote areas, theyaren't quite fecund in socialresources. Mr. Jain explainsApple's position regarding thissituation: “We plan to dowhatever we can for thosecommunities. Even now, Ap-ple Coal supports many chil-dren and elderly people'sinitiatives in East Kalimantan.We provide for their educa-tion, their medicines, cleansanitation, and clothing.” Andon a happier note, “We also try

to get involved in cele-brating traditional fes-

tivals with theseisolated people.”

At present,I n d o n e s i agets most ofits invest-ment in themining sec-

tor, however itneeds more in-vestment inenergy and

mine mouth power plants.Despite the fact that Indone-sia has so many resources,particularly gas, oil and coal,there are still critical elec-tricity issues. There is notenough power. As Mr. Jain ex-plains, “Jakarta is completelydifferent to other areas of In-donesia. Sometimes even the

major airports in Indonesiaexperience blackouts. That iswhy we need investment inthe energy sector.

Over the latter part of thelast decade business lawshave changed, or been re-formed, in Indonesia. Theserevisions have made it morestraightforward for foreign

companies to come and in-vest in the burgeoning econ-omy. It may take time andeffort for the energy deficit tobe tackled in Indonesia, butin the meantime there ismuch opportunity for foreigninvestors as this country'sgrowth prospects continueto improve.

A fruitfulinvestmentThe new and rapidly developing Apple Coal company (Indonesia) has proven to be arobust presence in the region, distinguished by its unfaltering commitment to thesupport and development of the domestic economy – and being a much welcomedboon to the prosperity of the native Indonesian workforce

“LONG-TERM PLANS INCLUDE GIVING THE LAND BACK TOSOCIETY THROUGH PUBLIC PARKS AND HOSPITALS ANDSCHOOLS FOR THE LOCAL VILLAGES WHERE WE WILL BEMINING. WE PLAN TO REPLANT THE FORESTS AS WELL ANDGO EVEN BEYOND WHAT THE REGULATIONS STIPULATE. WEARE AN ENVIRONMENTALLY RESPONSIBLE COMPANY.”

NISCHAL JAIN, President Commissioner of Apple Coal

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Distributed by USA TODAYThursday, April 12th, 2012 INDONESIA12

Coal still has a viable futureAdaro Energy is tipped to be one of the world’s top three thermal coal exporters by 2015, while its principal backer – the impressivelyresourced Saratoga Capital – is assisting the move towards gas, hydro and other energies

Adaro Energy is Indonesia's sec-ond largest thermal coal pro-ducer, the biggest domesticsupplier, and, arguably, the re-gion’s most fully integrated coalmining company. It operates thelargest single coal mine in In-donesia, is a significant suppli-er to the global seaborne thermalcoal market, and is the only In-donesian coal company ex-porting coal on a regular basisto the U.S.

Established in 2004 as a lim-ited liability company under thename PT Padang Karunia, itchanged its name to PT AdaroEnergy Tbk in 2008 in prepa-ration for becoming a publiccompany. Adaro and its sub-sidiaries currently deal in coalmining and trade, coal infra-structure and logistics, and min-ing contractor services. Inaddition to impressive coal re-serves and a unique, environ-mentally friendly product,Adaro boasts numerous highquality assets which underpinits operations – for instance,the 46-mile haul road connect-ing the mine to the crushing fa-cility in Kelanis, and the terminalin Pulau Laut.

As its President Director BoyThohir explains: “We are notjust involved in coal mining,we fastidiously look after oursupply chain. If you compareAdaro to other mining com-panies in Indonesia you’ll seethat our business model isunique. This is what will en-able us to be a reliable energysupplier domestically and glob-ally. But we do not just want toproduce the coal and export it.We want to contribute more.”

He elaborates: “Adaro is nowbuilding a power plant for ourown use and for our people andwe recently won a tender tobuild the biggest power plantin Southeast Asia (2 x 1,000MWin central Java). There will be alot of demand for electricity, andwith Adaro getting involved inpower, and Saratoga behind us,we can contribute more to the

country. The power sector hasa multiplier effect on industry,education, everything in fact.”

Adaro leads the way in CSRprograms: “We cannot increaseour production if we cannotmanage our surroundings. Thatis why I spend most of my timedealing with CSR and the de-velopment of the local area. Ifwe can better develop sur-rounding communities, thenthose communities will pro-tect Adaro because they willfeel that Adaro belongs tothem.”

The company is also interna-tionally recognized as an envi-ronmentally-friendly coal miningextractor; its Envirocoal is con-sidered as one of the lowest sul-fur content coals available.

“One of our consumers isChina Light Power (CLP) inHong Kong where the strictestof emissions standards apply.Adaro showed them the ben-efits of using Envirocoal andnow supply over 50% of CLP’scoal requirements, revealed thecompany boss, continuing,“Back in 1992, everyone was

thinking about the heat valueof coal. The power utilities werenot concerned about the envi-ronment. Our team was vi-sionary in introducingEnvirocoal back then. Obvi-ously, if you compare coal toother energies like gas or ge-othermal, coal is not as good.However, if you compare ourproduct to other coal specifi-cations, you’ll see how we cancontribute a little to the worldby reducing or replacing notso clean coal products.”

Mr. Thohir is confident

about Adaro’s ability to attractoverseas investment too, “Ourtrack record speaks for itself.BHP Billiton – one of thebiggest mining companies inthe world – recently choseAdaro as their partner in In-donesia. One of the key suc-cess factors for investors is tofind reputable local partners,and, in that context, we havedone our homework. We knowIndonesia better than anyoneelse, and one of our strengthsis our ability to communicateand manage local issues.”

Mr. Edwin Soeryadjaya, Pres-ident Commissioner of Sarato-ga Capital concurs. Voted Ernst& Young Entrepreneur of theYear in 2010, he says, “We try todo a lot of value added work forthe benefit of the country.” Hisbusiness ethos – inherited fromhis father, one of Indonesia’smost respected business lead-ers, is to ‘give back’ continuously.

Saratoga’s investments rangefrom telecommunications (theWorld Bank sanctioned AriaWest Project, a $1 billion jointventure with AT&T) broad-band provision, Alaskan fishprocessing, and more.

Mr. Soeryadjaya too is con-fident about the long-term fu-ture of the Adaro-Saratogafusion: “One of the reasons thatdemand for our coal has in-creased is due to the Great EastJapan earthquake and the sub-sequent tsunami. However, inthe foreseeable future, as theneed for electricity increases,demand for coal will also in-crease. The availability of coalis limited therefore the pricewill remain high. Adaro will belooking to increase its reservesand Saratoga will help them ex-plore alternative sources. Sotogether we will continueto thrive, as will thecommunities weare involvedwith.”

“WE DO NOT JUST WANT TO PRODUCE THECOAL AND EXPORT IT. WE WANT TOCONTRIBUTE MORE”

BOY THOHIR, President Director of PT Adaro Energy Tbk

“AS THE NEED FOR ELECTRICITY INCREASES,DEMAND FOR COAL WILL ALSO INCREASE.THE AVAILABILITY OF COAL IS LIMITEDTHEREFORE THE PRICE WILL REMAIN HIGH.”

EDWIN SOERYADJAYA, President Commissioner of Saratoga Capital

Indonesia’s coal production will reach380 million tons in 2012, most of itdestined for export; about 80 milliontons are used domestically

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Page 8: Indonesia Rise

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Distributed by USA TODAY Thursday, April 12th, 2012 15INDONESIA

“The Islam in Indonesia ismore tolerant because it wasdeveloped through tradition,culture, and personal relationsand not through a dogmaticapproach,” explains DjokoSuyanto, Coordinating Minis-ter for Political, Legal and Se-curity Affairs.

“The schools of thought inIndonesia have always beentolerant. The arrival of more in-tolerant, violent and radicalschools of thought has onlybeen over the past 20 years.

These schools have started totake advantage of the envi-ronment of openness and free-dom in Indonesia.

“The mainstream Muslimshere, however, at the grassrootslevel, the intellectual level andat the leader level are very mod-erate, and there has been a re-action against this radical andintolerant so-called Islam.”

Indonesia has been a casestudy in how democracy andIslam can prove compatible,and to a certain extent this can

be attributed to Muham-madiyah, an Islamic organiza-tion founded 100 years ago byKH Ahmad Dahlan.

Muhammadiyah, whichmeans followers of Muham-mad, was a revolutionarymovement in Dutch-con-trolled Indonesia as it adopt-ed contemporary Westerneducational methods and com-bined them with Islamic teach-ings for the organization’sschools. It also employed mod-ern management styles and fo-

cused on social developmentprojects such as building hos-pitals, orphanages and otherinstitutions for the needy.

It was back in the first quar-ter of the 20th century thatDahlan first introduced theconcept of democracy and evencreated an election system forMuhammadiyah leadership.

Today, Muhammadiyah isthe second largest Islamic or-ganization and while it is sole-ly dedicated to social andeducational activities in In-

donesia, such is its fairness andopenness that it has facilitat-ed national discourse by per-mitting its members to joindifferent political parties.

Fourteen years after the es-tablishment of Muham-madiyah, the Nahdlatul Ulama(NU) was created as a tradi-tionalist Sunni Islam group.NU also holds tolerance as amain tenet for its members andfor Indonesia.

“NU has declared since 1936,nine years before our declara-

tion of independence, that In-donesia is not a Muslim statebut a ‘salam’ (peace) state,” saysDr. Sajid Akil Seraj, NU Chair-man. “Our philosophy in NUis to teach Islam in a moder-ate and tolerant way.”

NU, much like Muham-madiyah, has contributed toIndonesia’s role as a peacefuland freedom-loving country,as well as acting as a charita-ble body, helping to fundschools and hospitals, andcombating poverty.

well-distributed growth

KALIMANTANThanks to Kalimantan’s abundant resources and unique geographicfeatures, the MP3EI has designated this economic corridor as a ‘Cen-ter for Production and Processing of National Mining and EnergyReserves.’ Already, oil & gas and mining contribute around half ofthe total GRDP; nevertheless, a decline in annual total productionof the oil & gas sector means there is increasing pressure on other

sectors to continue driving economic development. These other sectors include coal, palmoil, steel, bauxite and timber.

With its ever-growing demand for oil, Indonesia has grown increasingly dependent onimports. The Master Plan proposes to counter this trend by promoting exploration of newoil and gas fields, especially in the Kalimantan Economic Corridor, an area known to havelarge reserves. The region is, however, an important producer of liquefied natural gas (LNG),contributing 37% to Indonesia’s overall production.

Greater investment is required for exploring further hydrocarbon fields as they pose moredifficult conditions (ie deep sea exploration). The MP3EI addresses simplifying regulations;designing more production sharing contracts to make investing in Kalimantan’s oil and gasindustry more attractive; accelerating the use of Enhanced Oil Recovery technology; andproviding technical support to reduce exploration costs.

Another source of energy, coal is a powerful economic driver for the region, with someof the largest deposits of this rock located in Kalimantan. Infrastructure improvements out-lined in the Master Plan are expected to raise coal production more than sixfold, and plansfor coal conversion activities – such as coal gasification and liquefied coal production – shouldcreate more jobs, increase revenues and reduce imports.

Palm oil is another powerful generator of revenues for the region, with oil palm planta-tions occupying 53% of the total plantation area in Kalimantan. Due to environmental con-sideration, further expansion is limited. Consequently, the region’s growers must increaseproduction yields of existing plantations, a task they will be aided in with government poli-cies outlined in the MP3EI.

With 84% of Indonesia’s primary iron ore reserves and important reserves of bauxite, Kali-mantan’s mining sector also plays a strategic role in the region’s economic development. Forthe next few years, investment will focus on developing processing industries so as to cre-ate on one hand, a self-sufficient steel industry capable of meeting domestic needs and, onthe other, an added value chain of bauxite-alumina-aluminum downstream production.

Lastly, timber offers huge potential for Kalimantan as it is home to vast forested areas.Nevertheless, the forestry sector also contains non-timber potential such as fruits, rattan,bamboo, silk and agar.

PAPUAThe developmenttheme for thePapua-KepulauanMaluku (PKM)Economic Corri-dor, ‘Center for

Development of Food, Fisheries, Energy, andNational Mining,’ will focus on five economicactivities: food agriculture, copper, nickel,oil & gas, and fisheries. With the lowest population density of allsix corridors and a flat and fertile terrain,PKM is an ideal center for food and ener-gy reserves. Here, a unique developmentprogram, dubbed Merauke Integrated Foodand Energy Estate (MIFEE), is underway ona 1.2 million hectare area. MIFEE consistsof large-scale cultivation of crops by adopt-ing the concept of agriculture as an indus-trial system based on science andtechnology, capital, and modern organiza-tion and management. Ten clusters of Agri-cultural Production Centers (called KSPPs)will focus on different activities rangingfrom food crops, horticulture, animal hus-bandry, plantation, and aquaculture. Thepriority activities in MIFEE are sugar andsugar cane production and palm oil. In-donesia’s Master Plan outlines regulationsand policies intended to gradually developfood estate land, educate the local com-munity on the implementation and bene-fits of the MIFEE program, develop thenecessary physical infrastructure to furtherMIFEE’s success, and to establish R&D foragricultural technology.Another of PKM’s strengths can be foundin copper and nickel. Papua alone is hometo 45% of national copper reserves, whilenickel is mainly found in Maluku. In 2014,Timika (Papua) is to become the site of In-donesia’s third copper smelter, which shouldsend production into surplus, thus creat-ing sufficient copper to meet domestic de-mands and for export. Thanks to theMP3EI’s strategy to simplify rules and reg-ulations, the PKM corridor will not only fo-cus on higher added value activities fornickel, it will also attract more investmentsin nickel mining and exploration. As for hydrocarbons, PKM boasts large re-serves of oil and gas. The Master Plan aimsto optimize production by balancing thecapacity of exports and imports, providinga healthy investment climate, fine-tune leg-islation and licensing, and encouraging theachievement of oil lifting. The MP3EI alsodictates the establishment of an Oil Infor-mation Center and an Oil and Gas R&DCenter at Sorong, West Papua.The last of the economic activities, fish-eries, holds interesting potential, especial-ly in the Maluku Islands, where aquacultureoffers tremendous development opportu-nities as the resources are not yet optimal-ly exploited. Further infrastructure, namelyin terms of fishing ports, marketing andpower generation, envisioned by the Mas-ter Plan should help boost the industry.

become one of the 10 major world economies by the year 2025. Six growth centers and eight primary focus programs have been identified

JAVAHome to the nation’s capital and 135 million people, Java has bet-ter economic and social conditions in comparison with the other cor-ridors. Under the theme ‘driver for national industry and servicesprovision,’ Java’s potential to progress in its value chain from manufac-turing-based economy to a service-based one will be developed, while pay-ing special attention to water and environmental conservation.

The main economic activities to be promoted under the MP3EI are food & beverage, textile, transportationequipment, shipping, ICT and defense equipment.

Among the manufacturing industries, food & beverage employs the highest number of people, and productionaccounts for more than 22% of total manufacturing production in the corridor. The sector overall will receive an added

boost once import duties on raw materials are reduced, tariffs on end-products raised, and the cost of packaging ma-terials lowered.

Another big employer and source of foreign exchange, the textile industry is the only non-oil manufacturing exportindustry with a positive net export. However, as Indonesia imports 90% of raw cotton materials, a domestic cotton grow-ing industry could integrate the upstream sector with an emerging garment design industry in Jakarta.

Java is a big industrial player, contributing 80% to Indonesia’s equipment and machinery sector. Of this, the trans-portation equipment segment is the largest contributor. While the MP3EI envisions a rise in both domestic car salesand exports of vehicles, it sets strategies for developing new and existing seaport car terminals, raising the level of hu-man resources to attract more original equipment manufacturers (OEMs), and participating in the global arena withharmonization of automotive industry standards, among others.

As an enormous archipelago nation with extensive territorial waters, Indonesia requires a strong shipping in-dustry for both transport and defense. Nevertheless, the country ranks 18th globally as a ship builder. In terms

of general defense, Java is mandated to further develop the defense equipment industries to reduce depen-dence on imports and raise the local content, all while encouraging further economic activity.

Finally, ICT development has been highlighted as a vehicle to improve Indonesia’s competitivenessand create a knowledge-based economy. By 2015, Indonesia is set to have a National Broadband

Network (NBN), based on the Telkom Super Highway network and the other network op-erators that currently exist. Specific targets for 2014 are reaching a broadband connec-

tion of 8% of households and 30% of population. For the ICT sector to truly develop,the MP3EI stresses the importance of harmonizing policies and government

programs to create a conducive atmosphere, expanding the use of ICTapplications in various major economic activities, and build-

ing domestic applications and digital content in-dustries, among others.

Center for Development of Food, Fisheries, Energy, and National Mining

Driver for national industry and services provision

Center for Production and Processing of National Mining and Energy Reserves

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Distributed by USA TODAYThursday, April 12th, 2012 INDONESIA14

One of the biggest democraticcountries on earth, Indonesiaranks as the largest predomi-nantly Muslim nation in theworld. Its sheer size dictates thatdiversity rules – not only in termsof geography but also in culture– and thanks to its foundationsof tolerance and peace, Indone-sia embraces the pluralism andactually uses it to create andstrengthen a sense of unitythroughout its 17,500 islands.

Indonesia is noteworthy forits tolerant brand of Islam, as

Minister Of Home Affairs Dr.Gamawan Fauzi, explains:“There may be other interpre-tations of Islam in other coun-tries, however I was taught bymy parents when I was a childthat Islam is a religion whichis very friendly and peaceful.”

Indeed, Dr. Fauzi sees noconflict between his religiousviews and professional prac-tice as a democratic politician.“I seek advice from prominentreligious leaders as to how Ishould react as a Muslim and

also as a minister. The princi-ples of Islam support democ-ratic views.”

Officially, the governmentrecognizes six religions (Islam,Protestantism, Roman Catholi-cism, Hinduism, Buddhismand Confucianism) and thereare 20 more local religions, al-though more than 85% of In-donesians are Muslim. Whatmany people do not know,however, is that Indonesia’s lineof Islam differs from that ofmany other Muslim countries.

Finding unity in diversity With more than 17,000 islands, 580 different languages and dialects, and some26 religions, Indonesia has held itself together phenomenally well since itsindependence from the Netherlands in 1949. And, in light of the uprisings in theMuslim world last year, Indonesia can be considered a role model for thepeaceful co-existence of Islam with other religions

MP3EI: A coherent plan for

SUMATRAThe Sumatra Economic Corridoris being heralded by the MasterPlan as Indonesia’s “center for pro-duction and processing of natur-al resources and the nation’s energyreserves”. Its strategic location can

also potentially propel it to become “the front line of the na-tional economy into the European, African, South Asian,East Asian and Australian markets”.

However, in order to realize the MP3EI’s targets, Sumatramust address various issues – namely in terms of infra-structure, finance and human resource development – in or-der to boost its core strengths of palm oil, rubber, coal, steeland shipping.

Alex Noerdin, Governor of South Sumatra, sums this upwhen describing his region’s dilemma: “Our province is oneof the richest in Indonesia, but only in terms of potential.”

Sumatra is home to some 70% of Indonesia’s oil palm plan-tation area and 65% of natural rubber production, yet pro-ductivity here – and nationwide in general – is far below theproductivity of its neighbors and competitors. This has beenblamed on low seed quality, non-optimal land utilization, andinadequate use of fertilizers (two problems linked with smallholders and their limited budgets) as well as long transporttimes. With approximately 42% of oil palm land and 80% ofrubber tree plantations in the hands of small holders, it is clearthat these hurdles must be addressed if Sumatra is to boostits production.

The MP3EI envisions increasing research to produce su-perior quality seedlings, the establishment of research cen-ters, and the provision of financial assistance, training andeducation for small holders, in addition to improving regu-lations and incentives for the development of downstreamindustries. The Plan also tackles infrastructure challenges,such as developing port and power capacities, onshore lo-gistics networks and access to ports.

Sumatra’s coal industry will also benefit from updated andexpanded infrastructure. Half of Indonesia’s exports of steamcoal come from Sumatra, yet production remains low asmost coal reserves are found in the middle of the island, farfrom seaports and railways.

In line with the region’s infrastructure program is theMP3EI’s strategy to grow the shipbuilding industry and con-struct the Sunde Straits Bridge to connect Sumatra with Ja-va. And in line with these objectives lies the plan to developSumatra’s steel industry, thanks to its possession of 8% of thecountry’s laterite iron ore reserves.

BALIThe Bali-Nusa Tenggara Economic Corridor is home to In-donesia’s most famous and popular province. It is only logicalthen that the region’s theme is the ‘Gateway for tourism industryand national food support.’ Tourism is the obvious strength, yetagriculture is closely linked in the corridor’s strategy to maintain agreen, all-organic economy.

Combined, Bali and Nusa Tenggara have 15% of national hotel capacity and account for 21% of na-tional hotel income. Bali alone received nearly 40% of foreign tourist visits in 2010. The Master Plan

highlights that there is still much unrealized tourism potential, especially in terms of average tourist spend-ing per day and average length of stays, which are both low in comparison with Thailand and the Mal-dives. To turn these trends around, the government will improve security, refine its marketing tactics, promotethe development of tourist destinations “beyond Bali” with a focus on services and facilities, and improvehuman resources development.

In addition, the two provinces can be marketed as a major tourist destination for MICE (meetings, in-centives, conventions and exhibitions), cruises and yachts. “We have to improve the quality of the tourismindustry,” explains Made Pastika, Governor of Bali. “We do not want to increase the quantity of tourists,but rather the quality.”

The MP3EI points out the need to increase capacity and services at airports, develop road and railinfrastructure, raise harbors and marinas to international standards, and move towards more renew-able energies and cleaner fuels.

In the area of food support, Bali-Nusa Tenggara will focus on fisheries and animal husbandry,two of its present strengths.

Currently, fisheries contribute 13.2% to the food agricultural sector, yet they are not oper-ating at full potential. The MP3EI aims to boost the production of fishery products and

raise the production of high value-added processed products, while also improving in-frastructure and building water treatment plants to support aquaculture and ma-

rine product processing.In the area of animal husbandry, beef cattle afford the most potentialfor development in the region, while staying within the ‘green’ con-

cept envisioned. Beyond meat, leather and milk, for exam-ple, cow urine can be used as organic fertilizer and

cow faeces, as natural manure and for bio-gas energy.

The Master Plan for Acceleration and Expansion on Indonesia’s Economic Development (MP3EI) has been created to enable the country to

SULAWESILying directly in the center of Indonesia, the Sulawesi Economic Corridoris poised to be the center for production and processing of national agri-culture, plantation, fisheries, oil & gas, and mining.

While agriculture (rice, corn, cocoa, soybean and cassava) is the largestcontributor to the region’s Gross Regional Domestic Product (GRDP) andabsorbs about half the total workforce, the sector is hindered by a lack of

adequate economic and social infrastructure, such as roads, electricity, water and healthcare.On a national scale, Sulawesi is the third largest food producer in Indonesia; nevertheless, pro-

ductivity is lower compared to other regions owing to low fertilizer use, a limited access to modernagricultural equipment, and an inadequate irrigation network.

The MP3EI for Sulawesi targets the optimization of land use, the creation of new rice paddy fields,and the rehabilitation and conservation of agricultural land. The plan also addresses financing forfarmers, the creation of quality storage to reduce potential loss of quantity and value of post-har-vest products, and improving access roads and irrigation facilities. In addition, a downstream sec-tor will be developed to add value to Sulawesi’s commodities. As Dr. Syahrul Yasin Limpo, Governorof South Sulawesi, says, “We expect that our agriculture sector can become more agro-industry inthe future.”

Within Southeast Asia, Indonesia is the largest producer of fishery products, and Sulawesi is thebiggest producer nationally. The industry is a powerful contributor to the corridor’s economicgrowth yet certain challenges, namely overfishing, have raised red flags in its continued expansion.The Master Plan aims to develop aquaculture as well as increase added-value products and activi-ties for seaweed processing.

Another one of Sulawesi’s strengths lies in nickel: it boasts the most advanced nickel productionin a country that ranks fourth among global nickel producers. Where the national government wouldlike to see more growth, however, is in the downstream industry, especially nickel product refining.

The last economic anchor of the MP3EI for Sulawesi is oil and gas. Although reserves of thesefossil fuels are considered to be low, they have not been properly identified and explored. Moreover,as Indonesia’s overall oil reserves continue to decline, Sulawesi could help prolong their lifeline.

Center for production and processing of national agriculture, plantations, fisheries, oil & gas, and mining

Center for production and processing of natural resources and the nation’s energy reserves Gateway for tourism industry and national food support

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Page 9: Indonesia Rise

Our World Insert is produced by United World. USA TODAY did not participate in its preparation and is not responsible for its content

Distributed by USA TODAYThursday, April 12th, 2012 INDONESIA16

When it was decided to holdthe 2011 biannual SoutheastAsian Games, the secondlargest global multi-sportsevent after the Olympics, inIndonesia, the obvious choicefor the host city would havebeen the national capital,Jakarta.

In fact, however, for 12 daysin November the eyes of mil-lions were on Palembang, thecapital of South Sumatra,which staged both the spec-tacular opening and closingceremonies – complete withfireworks, hi-tech special ef-fects, and thousands ofdancers and singers – in itsGelora Bumi Sriwijaya Stadi-um, and also provided venuesfor 296 of the 562 events.

Dubbed the biggest SEAGames ever, the event in-volved 5,000 athletes andsports coaches from 11 coun-tries competing in 42 sports.

The worldwide attentionfocused on Palembang as themain host city was a person-al triumph for Alex Noerdin,Governor of South Sumatra.Only two cities other thannational capitals have everhosted the Games before.

“We fought to get the SEAGames,” says the Governor.“We competed with Jakarta,West Java and Central Java.We created the Sports Cityin just 10 months from aswampy area comprising 320hectares, without asking formoney from the central gov-ernment. We obtained fund-ing from the private sector.

“We convinced Jakarta thatwe could host this interna-tional event on behalf of theRepublic of Indonesia. Nowthe world can see that wehave the spirit and powerfulmotivation to be number onein Indonesia.”

Alex Noerdin has beenGovernor of the provincesince 2008. “We have done alot in just four years,” he says.“We provide free educationfrom elementary level and wealso provide free medicalcare. We have three priori-ties: education, health, andjob creation for everyone. Butto achieve our goals we haveto make the world believe in

the province of South Suma-tra and to invest in produc-tive sectors here, which willcreate more jobs.”

South Sumatra has a lotgoing for it. The province hasabundant natural resources.Its agriculture-based econo-my has played a key role inIndonesia becoming theworld’s main palm oil pro-ducer, and it is the secondlargest producer of raw rub-ber. Almost 50% of Indone-sia’s coal resources are to befound there.

“Our province is one of therichest in Indonesia, but on-ly in terms of potential,” theGovernor says. “We need in-vestment from outside.”

He aims to attract invest-ments in the minerals/oreprocessing industry, agro-businesses, biotechnology in-dustries, and oil and gasrefineries.

“We have a lot of coal andgas. We also have oil, coal bedmethane, and 28% of theworld’s potential in geother-mal. There is a special eco-nomic zone where we do coalgasification. We make tiresin a factory and we exportthem to China. We are de-veloping the downstreamcrude palm oil (CPO) indus-try. We can create jobs forour people with these indus-tries.”

He emphasizes theprovince’s strategic location.“We are only 400 kilometersfrom Singapore, the gatewayto Asia. In three or four years’time we will create almost300,000 jobs for our people.I am very sure that we will beleading in every sector.”

There are plans to makeTanjung Api-Api, about 80kilometers north of Palem-bang, a special economic

zone housing several indus-tries and a seaport.

The Governor is particu-larly keen to get U.S. investorsto invest in infrastructure. “Iam inviting investors to cometo South Sumatra to developa double track railway andtransport for coal. We haveworked with American com-panies for years,” he says.“Now we are inviting moreto come over to South Suma-tra. They can also contributein the education and healthsectors.”

When Scot Marciel, theU.S. ambassador, visitedSouth Sumatra in Februaryhe declared himself very im-

pressed by the economicgrowth and investment po-tential in the province. Thepurpose of the visit was topromote cooperation and ex-change initiatives in educa-tion and learn aboutinvestment opportunities forU.S. companies.

There is already significantpresence by U.S. companiesin South Sumatra, most no-tably ConocoPhillips, whichoperates a block of six oilfields and six natural gasfields, and Cargill, which hasmore than 36,000 hectares ofsustainable oil palm planta-tion in the province.

Hosting international and

national events is proving aneffective way to put SouthSumatra on the investmentmap. Investment in theprovince last year reachedRp11.5 trillion ($1.29 billion)from the original target ofRp9 trillion.

According to a spokesmanfor the South Sumatra Re-gional Investment Permit andPromotion Body, the targetfor this year is Rp13.5 trillionin investment.

Meanwhile, Governor AlexNoerdin is looking furtherahead. He wants the centralgovernment to back his dri-ve for Palembang to host the2019 Asian Games.

“OUR PROVINCEIS ONE OF THERICHEST ININDONESIA, BUTONLY IN TERMSOF POTENTIAL. WENEEDINVESTMENTFROM OUTSIDE.”

ALEX NOERDIN, Governor of South Sumatra

The province of South Sumatra is rich in natural resources but it needs investors to help it make use of them to create jobs and increase the prosperity of the people

SEA Games showcase SouthSumatra’s investment potential

5,000 athletes and sports coaches from 11 countries competed in the biggest ever SEA Games, held in South Sumatra last year

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