Insight Indonesia – Spring 2016 by Global Opportunity

SPRING 2016

PROMOTING BILATERAL TRADE & INVESTMENT BETWEEN THE UK & INDONESIA

FOREWORD

UK and Indonesia: A relationship of huge potential I am delighted that the first edition of our ASEAN Insight series is focused on Indonesia, just as final preparations are underway to welcome the President of Indonesia - Joko (Jokowi) Widodo to the UK. A key focus of the President’s trip will be increasing trade between the UK and Indonesia. The underlying purpose of the UK-ASEAN Business Council (UKABC) is to facilitate a step change in the level of trade between the UK and ASEAN’s dynamic economies. Working closely with the UK and ASEAN governments, the British Chambers of Commerce based in ASEAN and of course, successful UK exporters and investors in ASEAN, we have created a UK-ASEAN business network. The network helps UK companies explore the vast commercial opportunities in what is one of the most exciting, vibrant and fastest growing regions in the world. But why should a UK company even be considering Indonesia when there are more familiar markets closer to home? I hope that this publication will go some way to answering this question with information, views and experiences from a whole range of organisations. There can be no doubt about Indonesia’s potential with a population of 250m people, 60 per cent of whom are under the age of 30. This makes it the fourth most populous country in the world with the 16th largest economy – predicted to be the seventh largest by 2030. UK-Indonesia trade amounts to some £2-3bn a year but with plenty of room for growth. And finally, reflecting its young, digital population, Indonesia is the third largest market in the world for Twitter, the fourth largest for Facebook. But statistics do not do full justice to the significant rate of change and progress

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in this fascinating country. I have been travelling to the country for some 20 years and have seen its institutions strengthen with its democracy. I have been struck by the increased pace of change under President Jokowi’s administration and a real sense that ASEAN’s powerhouse is waking up. Winning business in Indonesia is not easy and you will have to invest time and effort. I recently heard from a UK SME that is currently doing business in Indonesia. It has not been plain sailing: 18 trips to Indonesia in two years, but the result is a clutch of government contracts and the company is growing its presence in the market. But they did not do it alone. They had help. And that help is vital to help smooth your entry into this market. Through the UKABC’s website (www.ukabc.org.uk) THERE CAN BE NO and events all across the UK we can direct you to the vast DOUBT ABOUT array of help that is available. INDONESIA’S The support ranges from POTENTIAL WITH A government organisations such POPULATION OF 250M as UK Trade & Investment, UK PEOPLE, 60 PER CENT Export Finance, the Intellectual OF WHOM ARE UNDER Property Office, through THE AGE OF 30.’ to business organisations including the British Chamber of Commerce in Indonesia and importantly, other UK companies that have won business and prepared to share their stories. Take a look at Indonesia for opportunities for your company.

Kevan Watts Chairman, UK-ASEAN Business Council

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Contents 03 UK AND INDONESIA: A RELATIONSHIP OF HUGE POTENTIAL

SPRING 2016

Kevan Watts, Chairman, UK-ASEAN Business Council SPRING 2016

PROMOTING BILATERAL TRADE & INVESTMENT BETWEEN THE UK & INDONESIA

Editor Sarah Cartledge sarah@inspirepublishing.co.uk Features Writer Jack Ball jack@inspirepublishing.co.uk Art Editor Nadia Nelson Creative Director Oscar Bowring oscar@inspirepublishing.co.uk Sales Director Karen Frieze karen@inspirepublishing.co.uk Managing Director Steve Gardner steve@inspirepublishing.co.uk Printed in the UK by The Magazine Printing Company, using only paper from FSC/PEFC suppliers. www.magprint.co.uk

06 LOOKING EAST: WHY WE SHOULD INVEST IN INDONESIA The Prime Minister’s Trade Envoy to Indonesia Richard Graham MP reveals why UK businesses should be putting the country high on their export lists

10 STEERING A COURSE FOR FUTURE INVESTMENTS Indonesia has the potential to become one of the top 10 economies in the world by 2035. But there is work to do, starting with developing its maritime industry and infrastructure with UK businesses as a natural partner, says Dr Rizal Sukma, Indonesian Ambassador to the UK

14 THE VIEW FROM INDONESIA Moazzam Malik, the British Ambassador to Indonesia, explains why the country has so much potential for UK businesses

18 UKABC NEWS Accessing ASEAN - through the UKABC online platform

20 BRITISH CHAMBERS OF COMMERCE IN INDONESIA

30 MINIMISING RISK IN A DEVELOPING MARKET With a booming population and growing consumer market, investment opportunities in Indonesia are changing fast, but be prepared to play the long game, says Phil Johnson, Managing Director of Compliance, Forensics and Intelligence Practice for Southeast Asia at Control Risks

34 BUILDING A GLOBAL FOOTBALL FAMILY Liverpool FC’s partnership with Indonesian airline Garuda is helping strengthen both brands across their key markets within the region

22 OPEN ECONOMY UK-ASEAN Business Council 12th Floor Millbank Tower 21-24 Millbank London SW1P 4QP United Kingdom Tel: +44 (0)20 7828 3431 Email: info@ukabc.org.uk

inspire* publishing Published by Inspire Publishing 23 Grafton Street London W1S 4EY United Kingdom Tel: 020 7824 1927

Spring 2016

With some 30 years’ experience in Indonesia with Jardine Matheson, UKABC Board member Anthony Nightingale highlights the opportunities for UK investment

26 HELPING UK COMPANIES COMPETE IN INDONESIA With extensive knowledge of emerging markets UK Export Finance continues to support UK trade with Indonesia, says Ali Sherwani, Regional Head, MENA, Central Asia & Asia in the International Business Development Division at UKEF

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ECONOMY

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EDITORIAL

Welcome to Insight Indonesia 34

BUILDING A GLOBAL FOOTBALL FAMILY

38 THE MARITIME SECTOR IN INDONESIA: A UK PERSPECTIVE With the largest economy in Southeast Asia, the IMF predicts that Indonesia can take its economic success to the next level by significantly increasing its investment in infrastructure over the next few years says Jonathan Moss, Partner and Head of Transport at law firm DWF

42 TIME FOR PARTNERSHIPS Higher education partnerships between Coventry University and Indonesian organisations are helping the next generation of Indonesians drive growth and compete globally, says Professor Mike Hardy at Coventry University

46 HEALTHCARE IN INDONESIA It’s a fascinating time for healthcare in Indonesia. But where do opportunities lie now and into the future? asks Richard Leach, Healthcare UK

48 PROTECTING PATIENTS Vernacare plays a leading role in preventing cross contamination and infection in hospitals around the world, says Group Marketing Director Emma Sheldon

It is my pleasure to welcome you to the UK-ASEAN Business Council’s (UKABC) Insight Indonesia publication, the first in a series of insight guides to the dynamic ASEAN region. We are delighted to bring you expert advice and views from a whole range of government and commercial organisations aimed at strengthening the UK-Indonesian trading relationship. Contained within Insight Indonesia are interviews from both the British and Indonesian Ambassadors who have key roles in promoting the economic relationship between the UK and Indonesia. We also hear from the Prime Minister’s Trade Envoy to Indonesia, Richard Graham MP, who talks about his unique experience in this fascinating market. We also focus on business support organisations such as the British Chamber of Commerce in Indonesia and its extensive business network and UK government support through UK Export Finance and Healthcare UK. UK companies that are already operating in Indonesia explain why they have invested in the region and offer advice on operating in this vast market. Success stories include reflections from Anthony Nightingale, Director at Jardine AS WITH ANY Matheson, with over 30 years’ experience EMERGING MARKET, in Indonesia; Control Risks, a global PERFORMING PROPER consultancy firm that specialises in DUE DILIGENCE helping organisations manage risk in AND ‘DOING YOUR complex markets; Coventry University HOMEWORK’ IS whose partnerships with Indonesian CRUCIAL TO SUCCESS.’ organisations are helping the next generation of Indonesians compete globally and Liverpool FC whose new partnership with Indonesia’s national airline Garuda exemplifies how UK and Indonesian businesses are continuing to work collaboratively. As with any emerging market, performing proper due diligence and ‘doing your homework’ is crucial to success. You need to customise your offering to suit the needs of the Indonesian market and understand the demographic, geographical and cultural trends that your products and offerings can effectively respond to. As such, I hope you find Insight Indonesia useful as you look towards this ASEAN giant.

52 SMARTER SHIPPING Smart shipping is the way forward for a maritime nation like Indonesia, says Malcolm Dowden at Bond Dickinson LLP

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Sarah Cartledge Editor, Insight Indonesia

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INTERVIEW

Looking east: Why the UK should invest in Indonesia The Prime Ministerâ&#x20AC;&#x2122;s Trade Envoy to Indonesia Richard Graham MP reveals why UK businesses should be putting the country high on their export lists

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RICHARD GRAHAM MP Richard is the MP for Gloucester and the Prime Minister’s Trade Envoy to Indonesia, Malaysia, the Philippines and the ASEAN Economic Community (AEC). Richard is the only member of the House of Commons to have lived and worked in Indonesia and to speak Bahasa Indonesia. He chairs the All Party Parliamentary Group for Indonesia and accompanied the Prime Minister to Indonesia last year. He has also acted as PPS to the Minister for Asia Hugo Swire. Before entering Parliament he worked in aviation, diplomacy and finance and has lived in Indonesia and the Philippines, as well as Hong Kong and China.

Richard Graham MP has been the Prime Minister’s Trade Envoy to Indonesia for three and a half years. In this interview he reveals why he thinks his role is so important, and why Indonesia is potentially a fantastic opportunity for UK business. How did your role as trade envoy to Indonesia come about? I was assistant manager of Cathay Pacific in Indonesia in the early 1980s. Cathay had offices spread over the country, and at weekends I flew around the country exploring islands, far away jungles, temples and ruins, and fell completely in love with the country, the people, the language, and everything else. When I came into parliament in 2010, I became chairman for the All Party Parliamentary Group for Indonesia, was PPS to the minister for Asia, and was involved in the state visit of the previous president Susilo Bambang Yudhoyono. Then, as the only Indonesian speaker in the House of Commons, I was the obvious candidate to be the first Prime Minister’s Trade Envoy for Indonesia in the initial batch of Trade Envoys that were appointed in 2012. What similarities are there between the UK and Indonesia? In many ways Indonesia is completely different to the UK, but in other ways it’s actually very similar. Many of the differences are obvious: Indonesia stretches from west to east, as far

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as from London to Moscow, while the UK is a fairly small country. The UK has a fairly mild climate while Indonesia has extremes, including volcanoes, huge acres of rainforest, the incredible, often clouded mountains of West Papua, the dragons of Komodo Island, and the Spice Islands. And yet at the same time, there are curious similarities. This is partly because we’ve had more of an involvement in Indonesia than anybody would realise – not least when Stanford Raffles was governing Indonesia as a result of the Napoleonic Wars for a few years. Raffles did a significant amount of work on the flora and fauna in Indonesia, as well as the creation of some infrastructure, some of which continues to the present day (including driving on the left-hand side). Doing business and living with Indonesians is incredibly easy for British people, and they’re natural business partners with us. In an archipelago of that size they rely much more on institutions and processes in order to get things done. The quality of the “my word is my bond” brand of business is very well-suited to both the UK and Indonesia. What is Indonesia’s economy and consumer base like? Indonesia is not necessarily one economy, but a series of economies linked together in an enormous nation. It has a 250m population of many ethnic origins speaking over 70 different languages. But it is glued together by a philosophy of what they call Pancasila; a philosophy of tolerance that feeds into their motto, Bhinneka Tunggal Ika or unity through diversity. This concept is absolutely essential to Indonesia’s continuing success as a peaceful, largely Muslim nation. In terms of opportunities, you have a very large middle class consumer base of around 60-70m who have the same consumer instincts and interests as those in Singapore or Malaysia. So the same brands appeal to them, from Tesco and Mothercare to Minis. There’s also an enormous demand for education, good English, and qualifications from the world’s leading universities. Why is the role of a Trade Envoy so important? Trade Envoys help create a continuity in relations with the state governments that the

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UK has identified as having huge business potential, but aren’t necessarily easy to trade with. For example, Indonesia has what is called a negative investment list. This list highlights various busineses and sectors that foreign businesses are prevented from investing in. As such, it is clearly important to know if your product is on that list because there’s no point spending time TRADE ENVOYS HELP and money investigating CREATE A CONTINUITY that market should your IN RELATIONS WITH activities be fordidden. STATE GOVERNMENTS Likewise, if you do have a THAT THE UK HAS product that the Indonesians IDENTIFIED AS HAVING would welcome, you need HUGE BUSINESS to know who to turn to for POTENTIAL.’ the right permissions, what the specific restrictions in different parts of the country are, and who the decision-makers are if you require government approvals. Trade Envoys play a useful role in opening doors and making sure that things happen.

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We can also put traders in touch with UK Export Finance (UKEF) who will be able to provide guarantees that will cover the uncertainties of payment in markets like Indonesia. Occasionally, we get brought in to help disputes after a business has been set up. These could include disputes over taxation rules, where there are uncertainties over offset (the amount of money that has to be invested in local communities as part of the permissions for giving you access to commodities such as oil and gas). What are some of the opportunities there for UK businesses? There are plenty of high-value opportunity projects in Indonesia, such as BP’s Tangguh 1 and 2 gas projects in the east of Indonesia. There are also many opportunities in the aviation sector with Indonesian aviation demands rising every year (the number of passengers travelling in recent years has grown almost as much as 20 per cent in one year). In the world of insurance, the UK plays a huge role in Indonesia through Prudential, which now has 280,000 agents in the country. Education is also an incredible export. Bright students from around the world are flocking to the UK, and we’re living up to our reputation as the second-most cosmopolitan educational provider. The UK is a place you come and study, not just because our schools and universities are really good or because you enjoy living in the UK and learning more about the language, but because you’re going to meet incredibly bright students from around the world. Culture is also an important part of our attraction. Adele is a fantastic British export, as are some of our great drama productions, such as War Horse. Sport is a large draw as well. Premier League football attracts a huge amount of revenue from supporters across Asia (Indonesia is Asia’s second-biggest source of revenue, after China). And our knowledge and expertise of running and exporting great sporting events is invaluable too. We’ve had an amazing run, from the Olympic and Commonwealth games to the Rugby World Cup with International Athletics next. Two weeks ago, I chaired a session in Jakarta over the 2018 Asian Games in Jakarta with a

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delegation of British companies who did great things with our own Olympics. We’re hoping to play a useful role in helping Indonesia make a great success of the Asian Games. What do you think will come out of the recent presidential visit? Looking at the wider picture, I see a strengthening of the relationship between our two nations. We’re both in the G20 with a lot of common interests. Indonesia is a democracy and they believe very strongly in the rule of law, so do we. They’re are also part of a network of nations (ASEAN) as is the UK (the EU). David Cameron visited Indonesia last year and President Widodo is coming on his first visit over in April. I believe he’s interested in how the UK can help him achieve some of his vision for a new contemporary Indonesia. I hope greater recognition in the importance of Indonesia as a market and a nation will come out of this visit. If we succeed in attracting a greater interest in UK organisations, including educational establishments, we can increase bilateral business and make the UK a country with abundant opportunities for our children and grandchildren. Why is your role so important to you personally? I feel very strongly about my role. A Trade Envoy’s role is voluntary, but it’s a huge privilege and one that I’ve enjoyed because I feel that Indonesia has given me so much help in building my career when I was younger. This is my chance to give something back. The important thing for me is to find winwin opportunities where we can use British experience, skill, and expertise to generate real improvements within Indonesia. If something can benefit both countries, then I will do my best to make this happen. The last point is an amusing one – I think I’m probably the only person who is promoting British expertise to the Jakarta-based Asian Games, who has actually represented Indonesia at a sport. I have played squash for Indonesia!

FURTHER INFORMATION www.richardgraham.org/trade-envoy-forindonesia/

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INTERVIEW

Steering a course for future investments Indonesia has the potential to become one of the top 10 economies in the world by 2035. But there is work to do, starting with developing its maritime industry and infrastructure with UK businesses as a natural partner, says Dr Rizal Sukma, Indonesian Ambassador to the UK

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s an ambassador to the UK I hope to explore the ways in which Indonesia and the UK can cooperate in promoting maritime corporations. The UK was a global maritime hub for such a long time, with a huge role in promoting trade throughout the East and West. In Indonesia we need to research and understand how we can preserve and manage the sea resources better. We also need to consider the importance of ports and port management, maritime safety and how we can work together to ensure the sea will always be governed by international law. Working with the UK will help our government to â&#x20AC;&#x2DC;re-forgeâ&#x20AC;&#x2122; the maritime identity and culture of Indonesia. One of our priorities is not only linking the big islands in Indonesia, but also the big islands with the smaller islands and then the smaller islands with themselves. Without this connectivity it would be very difficult to build a new centre of growth outside Java. In the long term our biggest challenges include the logistics of building new ports to link all of the islands; upgrading existing ports, and working with countries

INDONESIAN AMBASSADOR TO THE UK Dr Rizal Sukma was recently appointed Indonesian Ambassador to the UK. He knows the UK well, having lived here for five years while studying for his MA and PhD in International Relations at the London School of Economics and Political Science. His previous roles include Chairman of International Relations Division, Central Executive Board of Muhammadiyah, the second largest Islamic organisation in Indonesia with around 25m members. Dr. Sukma was Executive Director at the Center for Strategic and International Studies (CSIS) between 2006 and 2016.

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like the UK to increase ship maintenance. In the short-term we will focus on building what we call the sea toll; connecting ports on different islands. Then after that to establish more smaller cargo ships which can facilitate inter-island trade. Each island has its own competitive advantage and different resources. Sulawesi for example has a surplus of beef and rice and other commodities, whereas Java is short of these, so we need to work out how to get the surplus to other islands that are cut off by a lack of connectivity. The distances can be huge; there is a small channel between Java and Sumatra, but some islands are separated by vast areas of waters. RENEWABLE ENERGY Two areas the government is focusing on outside of Java are maritime infrastructure and electrical infrastructure. Two-thirds of the islands do not have well developed maritime infrastructure, and ports wonâ&#x20AC;&#x2122;t work unless you develop power lines and energy. So these areas really open up a wide range of opportunities for foreign investment. Our plan is to increase renewable energy from six per cent to around 23 per cent by 2025, and we are exploring the use of tidal power, biomass, geothermal and solar energies. Indonesia is still short of 35,000 watts of power for our own domestic needs, so the first priority is to reduce dependency on fossil fuels and oil and focus more on renewable energy. Two companies we are currently working with are Agrico, to introduce gas as an energy source, and Green Fuels from the UK, to process cooking oil into biofuels. CONSUMER GOODS Indonesia has a very promising market in luxury goods. Just over half of all Indonesians now live in cities and their income is growing, and with it a demand for consumer goods. We still have very few metropolitan areas, such as Jakarta, Surabaya and Medan, but the number of well-educated middle class people is growing and the potential market is huge. In this era of interdependence and globalisation it would be difficult to talk about one product where all the elements of that product are produced in one country. Itâ&#x20AC;&#x2122;s hard to be part of global and regional chains which is why President Widodo is moving

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forward in steps. We are first trying to focus on East Asia and become part of the regional production chain. I believe this is a positive move because it forces us to become more competitive; we need to become more efficient, open and market-orientated, and of course have much better quality products. BUREAUCRATIC REFORM Indonesia also needs to communicate better with other nations. The government has launched an economic package that includes bureaucratic reform which simplifies business procedures and makes it easier to do business in Indonesia. We are trying to cut unnecessary regulations both at provincial and district level. We also acknowledge that Indonesia is a very diverse country. Those who are familiar with the business climate in Java may face a different situation in the islands. While this

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diversity opens up a bigger range of business opportunities it can also complicate procedures, so we would urge foreign companies to work with local partners, and also bigger foreign companies who have been working in Indonesia for decades, to gain knowledge from their experience. For more than 40 years now, Indonesia has tried to TWO AREAS THE attract mostly building and GOVERNMENT IS manufacturing business in FOCUSING ON Java. We haven’t worked on OUTSIDE OF JAVA our maritime-based fishing or tourism industries which we ARE MARITIME believe have huge potential. INFRASTRUCTURE However the challenge for AND ELECTRICAL us is to first develop our INFRASTRUCTURE.’ infrastructure and energy

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outside of Java, and these are lessons we’ve learned from China, South Korea and Taiwan. The government must provide infrastructure and business will follow. Indonesia has 534 autonomous units called districts and the head of these districts come from different political parties, so coordination between the central government and autonomous governments at district level is going to be a challenge. We require not only a unity of purpose, which is simple – everybody wants to see Indonesia develop – but more importantly a way to reconcile differences in the priorities of the political parties. For example politicians in some areas want only to develop in tourism, and others in other areas want to develop the fishing industry, while the local people in that area want tourism. These are the sort of challenges we face. DEVELOPING TOURISM The tourism industry in Indonesia is still quite small, but as industrialisation takes place we have two things readily available now: the sun and the sea. Currently Bali is Indonesia’s main tourist destination, but the government would like to increase this to nine other destinations. Indonesia is one of the most welcoming nations in the world. Our land is at the intersection of four continents and two seas, and we’ve been at the hub of international trade since the 7th century. In terms of security the government has taken several steps to improve the police force and intelligence services, as well as improve our legal regulatory framework. We have very strong civil society organisations with memberships of 80m of the most moderate Muslim groups in the world, ensuring that Indonesia continues to remain a pluralistic and democratic nation based not on religion, but citizenship. I believe Indonesia’s economy is based on its true identity as a maritime nation. That’s where the current government wants us to go and that’s where I see Indonesia in 25 years. In that regard I consider countries like the UK, Japan and the Philippines as our natural maritime partners. We are the four maritime nations of the world. So if we want to achieve our vision of becoming one of the world’s top 10 economies by 2035, working with businesses in the UK is our natural course.

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INTERVIEW

The view from Indonesia

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Moazzam Malik, the British Ambassador to Indonesia, explains why the country has so much potential for UK businesses

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o learn more about the opportunities for UK businesses in Indonesia, we asked the UK Ambassador to Indonesia, Moazzam Malik the question: “Why should British companies be looking to Indonesia now?” His answer is very simple and compelling. British companies should be looking to Indonesia right now because it is a fast growing market with enormous potential. The archipelago has a booming market of 250m people, and an average of just under 6per cent growth over the past 10 years. And it looks set to continue growing: the forward predictions from international institutions indicate that the country will grow at 5 per cent plus over the next five years. Indonesia is also a market with a big middle class comprising around 45m people – a figure that’s expected to swell to 135m over the next 15 years.

THE WORLD’S 16TH LARGEST ECONOMY (AND GROWING) Indonesia is a much bigger economy than othes in the region, and one ambitious businesses can’t afford to overlook. Currently it’s the world’s 16th largest economy, and by 2030 it’s predicted to be between the 7th-9th largest. (To help spread the word, the British Chamber of Commerce and Embassy in Indonesia have been running a joint campaign under the hashtag #Indonesiamatters.) But for many British companies, it can be quite difficult to get to grips with an archipelago as sprawling and diverse as

BRITISH AMBASSADOR TO INDONESIA, ASEAN AND TIMOR-LESTE Moazzam Malik is British Ambassador to Indonesia, ASEAN and TimorLeste. He took up his post in October 2014. Prior to his appointment as Ambassador, Moazzam was Acting Director General in the UK Department for International Development. Before moving to Jakarta, Moazzam sat on the Advisory Board to the UK All Party Parliamentary Group on Conflict, was a member of the UN Secretary General’s Advisory Group on the Central Emergency Revolving Fund, served as an OECD DAC Peer Reviewer for Sweden, and a trustee of Goodweave UK, an NGO working to eradicate child labour from the South Asian rug industry.

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Indonesia. Where do you even begin to start? Certainly there are more obvious and easier opportunities elsewhere. But do they offer the same potential? Moazzam Malik believes not. He argues the future of Asia has three legs, not two: India, China and Indonesia. Indonesia may not have the scale of India and China, but it represents 40 per cent of the ASEAN region (which includes 633m people)1. It’s also much easier to do business in Indonesia than India. A DEMOCRATIC COUNTRY WITH A WARM WELCOME Indonesia is a democratic country that has successfully made the transition from dictatorship. It offers political and economic stability and a growing market. With some regulatory uncertainty it can be a challenging place to do business, but the political and economic stability, and the growth of the economy means there is a very large upside for businesses that are ready and committed to working with the regulatory issues. It’s also very open to British companies – the UK is Indonesia’s 5th largest investor – and Indonesians believe there is the potential for a lot more. The big energy players are already active there, as are the financial sector, including banking and insurance. Many UK high street retail brands are also established in the country, ranging from Mothercare and M&S to the Early Learning Centre. There’s enormous potential in Indonesia for

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SMEs and medium sized British companies. And there’s a good UKTI team in the country with a strong British Chamber of Commerce presence too. They’re on hand to support, advise and facilitate British businesses, guiding them through both market opportunities and the regulatory issues. Over the past year, they’ve had record attendances at their webinars, reflecting the increased interest in the country. LOOK BEYOND THE OBVIOUS Moazzam Malik’s advice for curious SMEs is to look beyond Jakarta as the obvious gateway to the country, and consider alternatives like Bandung, Surabaya and Yogyakarta in Java, Medan in Sumatra, Makassar in Eastern Indonesia, and Bali. These alternative INDONESIA IS A MUCH gateways have international flights and strong business BIGGER ECONOMY communities to work with. The THAN OTHES IN THE UK also has representatives REGION, AND ONE in Bandung and Surabaya, a AMBITIOUS BUSINESSES consulate in Bali and a British CAN’T AFFORD TO Council Office in Medan. OVERLOOK.’ Those businesses who do venture into Indonesia can usually expect a warm welcome. But it’s important to approach the country with the right mindset. As with India and China, you need to have a medium to long-term mindset rather than a shortterm one. You need to be ready to work with regulatory uncertainty, and you need to invest time upfront to get the right local partner. But if you do your homework, pick the right partner, come in with a long term commitment, then there are very solid returns to be made in a rapidly growing market. There are many opportunities in transport and infrastructure in particular. The aviation sector in Indonesia is growing rapidly – not surprising when you consider that Indonesia is a country made up of over 17,000 islands2. And these passengers will need more airports and aviation services, including security. Aerospace, transport, infrastructure, satellites, technology, renewable energy, education, the Asian Games in 2018 and healthcare are all future areas of promise.

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KEY FIGURES Indonesia is an archipelago of over 17,00 islands Market of 250m people (entire ASEAN market is 633m) l Indonesia has averaged 6 per cent yearly growth over the past 10 years l Indonesia makes up 40 per cent of the ASEAN combined economy l Very positive view of the UK: 70 per cent approval rating of the UK, similar to that of Canada l UK is Indonesia’s 5th largest investor l l

GROWTH PROJECTIONS: l Middle class expected to grow from 45m people at present to 130m by 2030 l Indonesia to grow from 16th largest economy to 7th largest globally by 2030 l Indonesia will grow at 5 per cent year on year in the coming period l Growth in the Aviation sector- IATA (International Air Transport Association) predicts Indonesia will become sixth largest air travel market by 2034

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A SAFE COUNTRY FOR BUSINESS AND LIFE Compared to most of Asia and the Middle East, Indonesia is a very safe environment to operate in. There was a security incident in January, but it was the first in many years, and the Indonesian response to it has been active and robust. Today, you need to be watchful everywhere – including Europe. So security issues shouldn’t be an impediment to doing business in Indonesia. It’s also a fun country to live in. It’s extremely diverse and interesting, and the food is excellent. There are enormous leisure opportunities, and the big cities are well developed, with every creature comfort you could want. The climate is warm, with temperatures normally in the mid 30s (as opposed to the mid 40s in some other parts of Asia). All-in-all, Indonesia has all the ingredients of a country with great potential – to do business in and live.

2014 data shows UKexports (goods and services) to China was £16.6bn and to ASEAN was £13.9bn but UK services exports to ASEAN (£3bn) was three times larger than that of China (£1bn) Source: Prosperity Section – British Embassy Jakarta 2 Growth number of air passengers: 11.98 per cent between 2011-2012; 11.57 per cent between 2012-2013; 6.67 per cent between 2013-2014 IATA estimates that in the next 20 years (2034), Indonesia will reach 183m passengers, a 130 per cent increase from 2012. Source: UKTI Jakarta 1

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UKABC NEWS

Accessing ASEAN – through the UKABC online platform The UKABC has created a digital starting point for UK companies looking at exporting to or investing in the vibrant ASEAN region. Our old website has served us well, but it has been swept away with our new content driven, user focused digital platform that provides insight,

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connections and support for UK companies. The UKABC’s online platform is the combination of all our strategic partners contributing insightful, relevant and timely content for users to access. Our carefully selected partners

as part of the UK-ASEAN Business Network can upload content directly onto the platform and have their own landing pages, much like a social media site. Users of the platform will be able to find huge amounts of information, make connections and be signposted to the vast array of support available for UK companies looking towards the ASEAN region. So what are you waiting for? Jump on-line at www.ukabc.org.uk, signup and start receiving dynamic content tailored for your business interests, giving you a digital portal to ASEAN’s tremendous opportunities.

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The British Chamber of Commerce in Indonesia

ndonesia’s economy, the largest in Southeast Asia, is regarded as one of the most consistently strong in the ASEAN region. In 2015, year on year GDP growth and domestic consumption stood at 4.8 per cent and 5.0 per cent respectively- an impressive feat by any commercial standard. As the world economy continues to realign towards the economic powerhouses of Asia, Indonesia has now changed from the 27th largest economy in 2000 to the 16th largest in the world today. However, the reason for its success does not mirror the regional model of economic growth. Whilst India and China owe much of their remarkable growth to manufacturing

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and exports, Indonesia owes much of its current economic strength to high levels of domestic consumption and productivity growth, aided in part by the demographic dividend of a youthful population. According to a 2012 McKinsey Global Institute report, it is estimated that 90m out of Indonesia’s 250m total population will be joining the ranks of the consumer class by 2030. By the same year it is also predicted the number of Indonesians shifting to urban areas will reach 71 per cent of the total population, with consumer trends and attitudes evolving to mirror these shifting demographic

dynamics. This process of urbanisation combined with a steep rise in household incomes will continue to fuel increased domestic spending on luxury or discretionary items. Consumer preferences for such items may even begin to mirror those of Indonesia’s wealthier neighbours like Singapore, Malaysia and India. COMMERCIAL OPTIMISM Consequently UK and European business remains positive about their future presence within Indonesia. The 2015 Joint European Business Confidence Index is a commercial research index sampling European business respondents from various industrial sectors operating in the Indonesian market including Infrastructure, Services and Energy. British Ambassador Moazzam Malik revealed encouraging signs for foreign investment and job generation during the unveiling of its results: “66 per cent of businesses expect to see revenues increase in 2016; 51 per cent of businesses expect to see profits increase; 46 per cent of firms hope to make major investments in Indonesia in the next two years raising prospects for the creation of new jobs. In fact, only 16 per cent of businesses have a negative outlook for 2016.” Renewed confidence spans further than the tourist island hotspot of Bali or the traditional commercial centre of Jakarta on the island of Java. “Of the 27 per cent of respondents who said they plan to invest further outside the Greater Jakarta area, 24 per cent and 30 per cent noted the key destinations of Sumatra and Sulawesi respectively.” For UK businesses looking to enter the Indonesian market and respond to this renewed optimism, the British Chamber of Commerce (BritCham) is designed to help companies who want to make that

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crucial first step into the country’s newer domestic markets like Sumatra or Sulawesi. BritCham is regarded as the UK’s leading independent business network with an aim to increase the range of practical, business to business support on the ground, particularly at the early stages when establishing a commercial presence is critical. Its support now includes 15 new British business centres across key markets, offering four new areas of core support. These include market insight from business experts representing the UK export network, business to business to matchmaking, building a market share through through satellite offices, joint ventures and local matchmaking support, and building a global regional share through regional introductions and worldwide business to business networks. Particularly useful for those unfamiliar with the region, BritCham also offers one approved and accredited overseas business network within each market. This reduces the hassle and concern for businesses that may struggle to find a trustworthy partner in-market. For some, the organisation’s range of platforms offers the most promise in terms of networking opportunities and business information in many different commercial sectors. Others see stronger brand-building to promote commercial integrity and reliability as the platforms’ greatest offering. Whatever the reasons for seeking BritCham support, uniting these offerings can greatly help those companies looking to hit the shelves of retail stores across the globe wherever the Chamber may have a presence. FURTHER INFORMATION

SUCCESS STORY ORIGINAL SOURCE Original Source is a UK luxury bath and shower brand. Its products are formulated from natural plant extracts with authentic fragrances born from a wide variety of natural sources. The brand’s parent company, PZ Cussons, represents some of the world’s most well known premium bath and shower products like Original Leather and St. Tropez. Given the rise of the consumer class within Indonesia, PZ Cussons MD Rob Spence is optimistic for the Original Source brand: “Indonesia is an attractive market. It has a large consumer base with a rapidly developing middle class that has increased purchasing power. Original Source is positioned as a premium brand, targeted at a smaller comparative group of consumers within Indonesia. These consumers generally have high disposable income and a lower consideration for price. As such, our average selling price for the Original Source brand in Indonesia is in line with our average selling price in the UK due to the unique brand offering and our chosen target premium market.” While price is a lesser consideration for the premium consumer market, popularity between the different variants of the Original Source brand naturally vary between the UK and Indonesia. The ‘Mint and Tea Tree’ variant, as part of Original Source’s shower gel range, has already proved popular in overseas markets. “This variant is the heritage and icon of our brand and so is generally

one of the top selling variants in all markets.” However it is important for the brand to ensure regional success by varying offerings catered to local preferences. Not sold in the UK, the ‘British Strawberry’ shower gel and body butter variant has been specifically developed for the Southeast Asian market. The product’s British origin is unmistakable with large Union Jacks comprising the majority the product’s design. “We believed the Union Jack would help to educate the consumers about the heritage and quality of the brand. This targeting marketing does seem to be working as this variant is now in our top five performers.” BritCham Indonesia’s support to Original Source throughout their entry into the Indonesian market has proved invaluable. “There are many pitfalls that inexperienced companies or persons can encounter which can hamper their sales and profit returns. However the network provided by BritCham gave Original Source the confidence to fully optimise our route into the Indonesian market,” Rob says. “We would not have had the success of the brand within Indonesia were it not for the BritCham membership and their network in-market. I would recommend BritCham members utilise these networks wherever possible to give a commercial ‘foot-up’ in the Indonesian marketplace.”

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INTERVIEW

Open economy With some 30 years’ experience in Indonesia with Jardine Matheson, UKABC Board member Anthony Nightingale highlights the opportunities for UK investment

ndonesia’s advanced economic development has not gone unnoticed by the international community. The country is increasingly recognised as a viable investment destination for those companies seeking new revenues from this comparatively untapped market, as the 15 years of recovery after the watershed 1997-98 Asian Financial Crisis is truly remarkable. Indonesia has the largest economy in Southeast Asia and the 16th largest economy in the world. According to a report by the McKinsey Global Institute, it could have the world’s 7th economy by 2030, overtaking the likes of Germany and the United Kingdom. Whilst China and India continue to dominate the conversation over foreign investment, Indonesia’s economic potential is one that the UK and others are looking to respond to. In Anthony Nightingale’s opinion ’Indonesia is keen to highlight how much it does welcome foreign involvement in areas like manufacturing, where most countries tend to be very open. It’s very much in Indonesia’s interest to open its economy and this will bring many benefits. It is the probably the most diverse country on earth in terms of geography, race, religion, culture and language. The unique nature of the country should not deter

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foreign investment but instead attract further commercial interest.’ CONNECTING THE DOTS With over 18,000 counted islands, Indonesia is by far the largest and most varied archipelago in the world. The island of Bali is internationally renowned for its beautiful beaches and vibrant nightlife, while the islands of Raja Ampat host some of the most beautiful diving locations in the world. However, there are many parts of the country that remain relatively unknown. Java is the main island of Indonesia, housing roughly 141m of Indonesia’s 250m inhabitants. “If one looks at the economy of Indonesia overall, clearly the most pressing need is to get excellent transport links into Java,” says Anthony. Given the country’s fractured geography, effective general transport and infrastructure is pivotal if Indonesia is to continue on its positive economic trajectory. Government policy is firmly behind infrastructure development with the question now being how they can effectively implement their plans. Historically, the government has acknowledged the importance of infrastructure development in ensuring a prosperous future for Indonesia. ‘For ten years the previous

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ANTHONY NIGHTINGALE Mr Anthony Nightingale joined the Jardine Matheson Group in 1969 and was appointed as a Director in 1994. He was Managing Director from 2006 until he retired from executive office in 2012. He is also a director of Dairy Farm, Hongkong Land, Jardine Cycle & Carriage, Jardine Strategic, Mandarin Oriental, Prudential, Schindler, Shui On Land and Vitasoy and a commissioner of Astra. He also holds a number of public appointments, including acting as a Hong Kong representative to the Asia Pacific Economic Cooperation Business Advisory Council and a director of the UK ASEAN Business Council. He is chairman of The Sailors Home and Missions to Seamen in Hong Kong.

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administration under former President Susilo Bambang Yudhoyono (SBY) had the development of infrastructure as a key objective. This view has been reiterated under the current administration led by President Joko Widodo who is also pushing further towards infrastructure development,” he notes. More specifically, the areas of infrastructure that Indonesia desperately requires are roads, bridges, airports and power generation. “Infrastructure development has the double benefit of in itself being a good contributor to GDP while it’s being created but also, after their completion, these projects help the rest of the economy to perform.” The national air carrier Garuda, alongside various smaller domestic airlines, comprises a generally good domestic air network across Indonesia. In terms of transporting industrial goods and freight between Indonesia’s smaller islands, the maritime industry is also extremely important. “Expensive logistics adds to the costs of goods,” says Anthony. “The prices in West Papua for example are significantly higher than those in Java because of transport costs. For the benefit of the people of West Papua, the government is trying to reduce this differential.” Inadequate infrastructure in more remote areas of the country is also opening up newer commercial opportunities. “The motorcycle market in Indonesia is the third biggest in the world after China and India,” says Anthony. “This field will remain strong for many years to come because it has an application, not just in the cities, but also in the rural communities where public transport links are often weak. If you don’t have a lot of money, the best way for you to move yourself and your family around is by motorbike.” ECONOMIC DIVERSIFICATION Moves towards transport and infrastructure improvements are part of wider changes in the dynamics of the Indonesian economy. “Both coal and palm oil are extremely important business activities and have been material contributors to Indonesia’s economic growth,” says Anthony. However the country has been significantly affected

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by the global downturn of the prices of these commodities. “The downward pressure on these industries also has a potential knockon effect on the workers in the plantations or coal mines if their jobs are cut or total wages reduced.” Personal consumption is a large element of Indonesian economy standing at roughly 66%. Consequently, areas where Indonesia could or would like to grow more employment are the services sector and of course manufacturing and infrastructure.’ Indonesia enjoys one major benefit, a very large domestic market of roughly 250m people with a significant majority of the population relatively young with a median age of 28. Whilst Asian economies to the north like Japan and Korea are struggling with low birth rates and ageing populations, the manufacturing industry in Indonesia can take advantage of this youthful domestic demographic. Other areas of potential interest for British companies include life insurance, financial services and healthcare. “Indonesia is an extremely large market and has excellent prospects for life insurance with people wishing to protect themselves in the event of healthcare expenses or untimely death, as well as save for the future. Like many countries in the world, there are a lot of opportunities in the healthcare sector- there is plenty of scope to develop this in both the public and private sector.” Growth and innovation within the digital market of Indonesia is also impressive. Improved connectivity between the country’s many islands will also aid an expansion of online retail, or ‘e-retail’. “The prospects for the digital and internet economy are going to expand exponentially and this will be developed through the increasing usage of mobile apps as well as IF ONE LOOKS AT a stronger development of THE ECONOMY OF e-retail in general. Whilst e-retail in Indonesia today INDONESIA OVERALL, is fairly underdeveloped, CLEARLY THE MOST particularly in comparison to PRESSING NEED IS China, this will change if one TO GET EXCELLENT takes a longer-term view.’ TRANSPORT LINKS In terms of mainstream retail INTO JAVA.’ opportunities in Indonesia,

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Passengers exiting Garuda Indonesia aircraft parked at Abdul Rachman Airport in Malang.This airport is among main hub to highland of East Java Indonesia

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growth remains impressive. ‘At the moment there’s a certain amount of pressure on business in terms of like for like sales growth because of the very fast expansion but the prospects for retail spending in general are good with opportunities for speciality stores also present.’ ENTERING THE MARKET As with any new market, careful preparation is crucial to ensuring success. Foreign companies cannot expect to use an identical commercial formula when entering the Indonesian market. “You must do careful homework about how big your target market is for any particular offering,” says Anthony. “Although a fair proportion of the Indonesian population do own their own homes, IKEA in Indonesia for example would not expect to reach the proportion of the population as it would in Sweden or Germany, but this does not stop it being a very interesting business opportunity. Foreign Investment Law does restrict foreign ownership in certain sectors though there has been some recent relaxation. Even where foreign companies can operate in Indonesia without the need for a joint

venture, expertise from local knowledge may prove invaluable. In Anthony’s view, “You must be able to attract the right kind of Indonesian talent into your management team. If you can do that and it is sanctioned through the law, 100% ownership is perfectly feasible. If you decide that the only way to attract suitable local talent is through a business partner the choice of the people you are going to do business with and those who you employ is critical. If you decide to go down the partner route, you must ensure both have compatible aims. This is even more important than usual in Indonesia where there are issues around legal certainty.” When conducting business with Indonesian clients or partners, face to face contact is always preferable. But this is not necessarily unique to the Indonesian market. “While I have many Indonesian friends who I now feel very comfortable dealing with over the phone, it is always better to conduct business in person during the initial contact phase,” says Anthony. Due diligence, proper legal and market knowledge are also critical. You must also be able to produce your goods and services at the right cost and quality with stringent due diligence procedures required for those people you decide to do business with. “You have got to have done the research to ensure there is demand and a market for your products and services. Sometimes you can test the water by trading your goods before you establish a commercial presence in the country.’ Anthony is optimistic for Indonesia’s future. “If you can do your research correctly and have made the right choices over who you are going to do business with, there are big opportunities present that will grow very substantially during the next 10-20 years.” Indonesia has made significant progress since the economic and political turmoil that encapsulated the country during the late 1990s. “While there are aspects of the system that could work better, the transition from autocracy to democracy has really been managed very well.” Given the current government’s desire to attract foreign investment, the impressive growth and infrastructure requirements of the country and the UK’s excellence in various fields, there has never been a better time to look towards this Southeast Asian giant.

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UK EXPORT FINANCE

Helping UK companies compete in Indonesia With extensive knowledge of emerging markets UK Export Finance continues to support UK trade with Indonesia, says Ali Sherwani, Regional Head, MENA, Central Asia & Asia in the International Business Development Division at UKEF

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K Export Finance (UKEF) is the UK’s export credit agency, whose aim is to ensure that no viable UK export should fail for want of finance or insurance. Last year, UK Prime Minister David Cameron visited Indonesia as part of a trade mission to Southeast Asia to boost UK trade. Whilst there, he announced that UK Export Finance would offer up to GB£1bn to support infrastructure development in Indonesia. The country’s fast-developing infrastructure creates a huge opportunity for UK businesses to help with consulting, construction and equipment supply. UKEF can help UK exporters win more contracts overseas by providing various forms of financial support, both to the exporter and to its overseas buyers.

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BOOSTING BRITISH TRADE UKEF offers a number of financial products, including lending money to foreign governments and organisations specifically for them to purchase British goods and/or services. Businesses qualifying for these loans must operate in the UK and, although we do not insist the whole contract comes from the UK, we can go down to a minimum 20 per cent UK content. We can then provide finance for up to 85 per cent of the contract value. This definition expands the number of companies eligible for the loans, including a large number of foreign organisations that have subsidiaries within the UK. UKEF assesses any potential overseas buyers just as a bank would, establishing whether they are eligible to borrow the large amounts of money that we can offer. This must be determined as the guarantor or direct lender for that amount of money. The money will be provided either from the banks, whose loan we would then guarantee, or from UKEF’s new product, the Direct Lending Facility. It is important to remember that UKEF is a government department and we complement rather than compete with the private sector. We aim to fill the gaps left by the private sector when banks or insurance companies are unable to take risks. We have a great track record of doing this. Our underwriters, economists and risk assessment staff have a vast amount of expertise on how emerging markets work.

ALI SHERWANI Ali Sherwani is the Regional Head, MENA, Central Asia & Asia in the International Business Development Division of UK Export Finance (the operating name of the Export Credits Guarantee Department (ECGD)), the UK’s official export credit agency. Ali’s role is to engage with UK exporters, project sponsors, overseas borrowers, banks and others to understand their requirements and to work with them so that they make effective use of UK Export Finance support. Ali has held various positions within UK Export Finance including treasury management, new products development, buyer credit policy and documentation, local currency financing, short and medium term underwriting, claims and marketing.

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Our aim is to help increase UK’s exports, not to make a profit. Our financial support for businesses and banks comes with the full faith and credit of the UK government. Although we do charge a risk premium, this is to ensure we operate at no net cost to the taxpayer over time as opposed to paying shareholders. FINANCIAL PRODUCTS As well as supporting loans for infrastructure projects, UKEF has a number of other financial products, including some created after the 2008 financial crisis which were not previously available. When a British manufacturer pitches to an organisation abroad, the

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OUR FINANCIAL SUPPORT FOR BUSINESSES AND BANKS COMES WITH THE FULL FAITH AND CREDIT OF THE UK GOVERNMENT.’

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foreign company may be interested but unwilling to pay the advanced payment because they do not know the British company well enough. They require a bond to ensure they are not in danger of losing this advacnce payment, which would usually be provided by a bank. However since the financial crisis, banks have been less likely to provide these and the criteria for obtaining such have tightened. This is where UKEF can help by working alongside the banks to take 80 per cent of the risk. We can also help with bid and performance bonds. There are a number of other products that UKEF offers including our working capital product, where we provide finance for UK companies to complete the job on a day-to-day basis. Our credit insurance product also aims to neutralise the risk of not being paid by the buyer. For example if a foreign buyer goes bankrupt or there are economic problems in the other country, we can still pay out. As a government organisation these products are just some of the advantages that UKEF can provide. We are able to take a longer term perspective than banks. For example in the 1980s many emerging countries had cash flow problems. Whereas a commercial bank would write the loan off as a loss, we were able to reschedule their debt so we could recover the money further down the line. Working with UKTI is also very important to us. Our networks cannot match the number of advisors that they have worldwide and they are able to spread our message of support to a wider audience. UKEF’s new proactive capacity has brought great success so far, as it is in the unique position of being able to create finance for the UK export market and stimulate the UK economy. With the assistance of UKTI and our embassy network around the world we can ensure that UK businesses can continue to be involved in large projects, including those within Indonesia. The GB£1bn we have offered to support infrastructure development projects signals our ambition and our confidence in the continuing success of the UK export market. FURTHER INFORMATION www.gov.uk/uk-export-finance

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SPRING 2015 ISSUE 1

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CONTROL RISKS

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With a booming population and growing consumer market, investment opportunities in Indonesia are changing fast, but be prepared to play the long game, says Phil Johnson, Managing Director of Compliance, Forensics and Intelligence Practice for Southeast Asia at Control Risks

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PHIL JOHNSON Phil Johnson is Managing Director of Control Risks’ Compliance, Forensics and Intelligence practice for Southeast Asia. Based in Singapore, he is responsible for the delivery of investigative, commercial intelligence, compliance consulting, strategic advisory and crisis-related assignments undertaken in the ASEAN region. Phil has been based in Asia for almost ten years, during which he has accumulated extensive experience providing investment support to clients in ASEAN (due diligence and market entry analysis) and in managing complex corporate problems, including financial fraud, crisis events, partner disputes, corruption issues, regulatory investigations and restructuring.

ndonesia is one of the most attractive yet challenging investment destinations in Southeast Asia. A vast archipelago of 17,000 islands extending 3,200 miles east to west, Indonesia is the world’s fourth most populous nation with over 240m people clustered on islands like Java, which is home to 60 per cent of the country’s population. Understanding the challenges involved in investing in such a huge country is at the heart of what independent global risk consultancy Control Risks does. Headquartered in London, Control Risks has 36 offices worldwide with its Jakarta office opening in 1998. Control Risks helps some of the most influential organisations in the world understand and manage political, integrity and security risks relating to operating in hostile environements. Phil Johnson is Managing Director of the company’s Southeast Asia Compliance, Forensics and Intelligence department, based in Singapore. “I’ve been in Singapore now for ten years. During this period the economy of Indonesia and the investment opportunities in the country have changed. Control Risks is still involved in the oil, gas and commodities sectors, but in terms of the number of deals we’re involved in, they’re now in the minority,” says Phil, citing the drop in oil prices and collapsing demand from China as reasons for the fall in investment within this sector.

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Another risk factor is the country’s historical reputation among foreign investors. “When extracting resources, we tend to find that they’re much more contested,” says Phil. “So from a foreign investor’s perspective, significant investments in commodities, gas and other natural resources can be quite problematic, and the reputation of Indonesia to investors has been tarnished by a number of high profile disputes involving oil & gas and mining companies, some of them British.” CONSUMER STORY While Indonesia may not be high on the investment destination priority list for British companies, interest from US, Japanese and Asian investors is growing. “Indonesia’s growth narrative is really built around the consumer market. This covers everything from real estate, property development, banking, financial services, consumer goods, luxury goods, vehicle financing, manufacturing, these types of things,” says Phil. “What you’re seeing more and more of a requirement for foreign companies who are investing in Indonesia to have more local content. I understand that several prominent global brands are exploring developing greenfield manufacturing bases in Indonesia because there’s a need to meet the country’s local content requirements in order to sell products domestically and to tap the vast consumer market. “Indonesia is a huge booming population with very positive demographics. In the next 30 years should some of the 240m population move into the middle class, the purchasing power of the middle class will continue to grow. So there are a lot of consumer stories in Indonesia and this is really where we draw all of our work. Another interesting change is that in the last three years we’re doing more work in the e-commerce and digital spaces,” explains Phil. “Indonesia’s interesting because it’s now got its own national start-up tech community. It’s had a number of very successful tech businesses that have been launched domestically in Indonesia, and on the other hand you’ve got companies like Uber and other tech companies that are trying to get enter the Indonesian market because of this consumer success story.

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“Social media in Indonesia is huge. It has the fifth highest number of Twitter users in the world, while Jakarta alone has not far off 12 million Facebook subscribers, just behind Bangkok in terms of the world’s biggest Facebook cities.” he says. “In 20 or 30 years there will be explosions of large, urban centres, not just Jakarta but other cities in Indonesia. So they need infrastructure, they need planning and they need development.” IDENTIFYING RISK Control Risks supports its clients by providing strategic consultancy and analysis of potential markets, as well as identifying and managing political and security risk. “Corruption’s an endemic issue in Indonesia but it’s not dissimilar to a lot of emerging markets and the Government and civil society have tried to take steps to solve corruption in the country,” says Phil. “The KPK anti-corruption authority is independent and has had a number of successes in cracking down on high-profile abusers. It’s perhaps better than other similar emerging markets. While there are still problems related to corruption, I wouldn’t let that put me off when conducting business in Indonesia.” Security is another area where Phil believes that perceptions of risk are sometimes overstated.“There have been bombings in Jakarta but the good story in Indonesia is that they have managed to keep a handle on Islamic extremism and real security threats in the country. It’s the largest Muslim country in the world but the vast majority are moderate in terms of their outlook. As with any Muslim or non-Muslim country, there are pockets of religious extremism. But what they’ve been very good at doing is creating a secular society that incorporates a democracy which is quite representative of the different groupings in the country.” The political system in Indonesia is as diverse as the country itself. There are over 500 units of local governments, and President Joko ‘Jokowi’ Widodo’s party controls only about one third of them. However with four successful elections in 20 years, Phil believes the country’s democratic process has come a long way since its 50-year military dictatorship. “If you compare Indonesia to other so-called democratic countries in Southeast Asia like

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IF CLIENTS WANT TO INVEST IN A SECTOR THAT REQUIRES LOCAL PARTNERS, WE CAN HELP THEM UNDERSTAND THE LAY OF THE LANDS IN TERMS OF WHO THE PARTNERS ARE.’

Thailand, Malaysia or the Philippines, there are concerns about how the democratic process works. But ultimately there’s not a huge amount of criticism about elections in Indonesia,” says Phil. LOCAL PARTNERS As well as identifying risk, Control Risks consultants guide clients through the complex jungle of pinpointing where they would like to invest and how to obtain support on the ground. “If clients want to invest in a sector that requires local partners, we can help them

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understand the lay of the lands in terms of who the partners are,” says Phil. “We also identify the main stakeholders in government who are relevant for them in terms of achieving their investment goals. For example, if a client wants to build a green field manufacturing plant outside Jakarta to make cans for canned drinks, you need to get licenses from the Ministry of Trade and the Ministry of Investment, you need to register your company, you need your manpower to get your employment sorted and so on. So we help the client understand all of these requirements, identifying the key actors in

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government who are strategically relevant for their commercial hopes or whom in government, at a practical level, they need to engage with to get their investments moving. “Following that, if our clients are looking at a specific partner, we would then help them with their partner evaluation, how they align culturally with what our client is trying to achieve and whether they have a good or bad track record of investments with foreign partners. Once the capital is committed, we may look at areas to enhance the governance or resilience within the client’s investment. We might help our clients to better understand the sources and extent of corruption likely to face their business, or mitigate the resultant risk through capacity building. This could include the development of policies and procedures that are specific to the local environment, training for frontline staff, and advice on how to interact with the authorities.” REAL ESTATE BOOM Phil travels from Singapore to Indonesia regularly and says there is a diverse expat community in Jakarta who enjoy a vibrant social life. “One of the main benefits of the commodities boom in Indonesia is that the profits were pumped into real estate in Jakarta,” says Phil. “During the ten years that I’ve visited the capital, the whole landscape of the city has changed, with impressive apartment complexes, shopping malls, bars and restaurants built. Jakarta isn’t known as a tourist centre for tourists but they’re trying to improve this. Any country is made up of its people, and the Indonesian people are generally extremely welcoming and very entrepreneurial.” Giving advice for British businesses thinking about investing in Indonesia, Phil says; “It depends on your commercial appetite. If you’re looking at making a success out of investing in Indonesia, and you have a five to seven year commercial mindset, you need to start thinking now. It’s not a market where you can simply stick money on the table and immediately expect to have a functioning business. It’s a really long game and you need to be ahead of the curve.” FURTHER INFORMATION www.controlrisks.com

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LIVERPOOL FC

Building a global football family Liverpool FC’s partnership with Indonesian airline Garuda is helping strengthen both brands across their key markets within the region

iverpool Football Club has a long standing relationship with Southeast Asia. From taking the Club directly to the fans on a number of pre-season tours to welcoming recent partners such as Thailandbased Chaokah as the Club’s official coconut water, the region has always held a special place in the heart of Liverpool FC. The unswerving support from its huge fan base across the region has gone a long way to cement this part of the world into the very make-up of the Club. The unique way in which its fans show their love for the Club is an experience anyone who has visited the region

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will understand – pure dedication to a football team in a city in the north of England over 7,000 miles away. With social media numbers for the region tipping 9.7m and official supporters clubs made up of over 18,500 fans, it’s clear why brands in this part of the world choose Liverpool FC as their conduit to growth. Since 2012, airline Garuda Indonesia has been a partner of Liverpool FC, progressing from official airline partner to spending the last two years as the Club’s first official training kit partner. A relationship which in its first year alone saw Garuda’s branding on first team

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Ian Rush and Gary McAllister of LFC with David Tan, Business Development Manager, Leeâ&#x20AC;&#x2122;s Travel

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training kit, reaching over 500m consumers in 212 markets with a media value of almost £23m - a market rate of £66m to purchase the same exposure. Campaign Asia’s Top 1000 Brands 2014 study which aggregates data from an online survey developed by Campaign Asia-Pacific with global information and insights provider Nielsen, saw Garuda Indonesia jump 420 places during the first year of its training kit partnership. Only five airlines saw brand enhancement over the 12-month period and of that five Garuda Indonesia experienced the greatest uplift. Billy Hogan, Chief Commercial Officer, Liverpool FC said: “Garuda Indonesia is our first ever Training Kit partner and we were delighted and very proud they had chosen to partner with the Club in this way, enabling them to grow their reach in new markets and building on their global partnership with the club.” The launch of the training kit in Indonesia in 2013 saw the initial burst of sales up over 200% on the previous year with unprecedented media reach to underpin the entire project, a trend of success that has continued throughout Garuda’s term as training kit partner.

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DIGITAL PLATFORM In 2015 when ‘the Reds’ toured Thailand, Australia and Malaysia Garuda Indonesia asked supporters to share their excitement by tagging their Instagram and Twitter photos with the hashtag #MyFirstLFCGame for a chance to win signed items and match tickets. The campaign hashtag received over 59.24m total impressions with 95.12% of those impressions within Garuda’s key markets, as well as ambient in-stadia Garuda branding reaching over 150,000 fans. Garuda Indonesia’s #MyFirstLFCGame e-campaign won best us of Social Media at the Sports Industry Awards Asia and was recently nominated in the Digital Activation category of the UK Sponsorship Awards, testament to a fan-led campaign which addressed Garuda’s objectives of significant brand exposure in key markets. Borne out of the authenticity and simplicity of the fan experience of football, the campaign was able to capture the excitement and ritual of a matchday and harness it to create an impactful and far-reaching campaign. More tactically, Garuda utilised its partnership with Liverpool FC to launch its

Above: Garuda Indonesia’s #MyFirst LFCGame campaign won best us of Social Media at the Sports Industry Awards Asia Right: Jordan Henderson of Liverpool FC

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inaugural flight from Jakarta to London. Driving awareness of the airline’s twitter feed, as well as highlighting the connectivity between the two regions was key and both LFC and Garuda used a mixture of social media competitions and appearances from Club ambassadors, Ian

Rush and Robbie Fowler to gain the required leverage to achieve their objectives. The campaign increased Garuda Indonesia’s UK twitter following by over 1000%, driving awareness of the route, but also increasing the airline’s ability to engage directly with consumers. A similar model was used for Garuda’s most recent flightpath launch – Heathrow to Jakarta saw Ian Rush and Gary McAllister help guests check-in for the flight as well as take part in a penalty shoot-out and Facebook Live Q&A. A strong social media campaign which saw almost 1.5m views on Snapchat and over 200,000 direct views of the Facebook Q&A. But it’s not just Garuda Indonesia feeling the impact of Liverpool FC’s strong links to Indonesia. Club partner, consumer electronics and furniture retailer, Courts has used its eight-year long partnership primarily in its main markets of Malaysia and Singapore up to now. The development of five new stores in Indonesia in the past 18 months has enabled the retailer to look differently at their relationship with the Club, admitting their growing regional presence opens up more opportunities for their customers to have a Liverpool FC and Courts experience. “We want our partners to use their relationship with us to enable them to address their business objectives, whether it be achieving a specific tactical requirement or looking at the broader picture. But there should also be opportunity in the relationship, reaching out to a new market on the strength of our awareness there is just one way of making the relationship work hard for them,” says Mr. Hogan. As Liverpool FC’s popularity continues to grow in Southeast Asia, it’s easy to understand the benefits of developing a strong and long lasting relationship with the Club for brands in this part of the world. Whether it’s to enjoy the awareness generated by the Club’s eight social media feeds in this region or to form an alliance with a brand that has strong values at its core, being part of the world’s greatest footballing family feels like home, wherever you are in the world. FURTHER INFORMATION www.liverpoolfc.com

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DWF

The maritime sector in Indonesia: A UK perspective With the largest economy in Southeast Asia, the IMF predicts that Indonesia can take its economic success to the next level by significantly increasing its investment in infrastructure over the next few years, says Jonathan Moss, Partner and Head of Transport at law firm DWF 38

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JONATHAN MOSS Jonathan Moss is a partner and Head of Transport at DWF. He acts for charterers, ship owners, international traders and their insurers and reinsurers. Jonathan handles major dry shipping claims and high profile, international disputes for clients who include charterers, cargo owners and their underwriters. Jonathan has acted in one of the largest ever maritime arbitrations as well as represented parties in litigation arising from major catastrophic incidents including the Piper Alpha disaster, the Probo Koala pollution incident, the grounding of the MSC Napoli and a series of explosions in oil facilities in Malaysia. Other work includes drafting policy wordings, storage agreements, holding certificates,commercial agreements including marine cargo surveying services and product inspection agencies.

With additional research by Carl Grunewald, trainee solicitor DWF

Ceremony of Anniversary Indonesian Eastern Navy a.k.a Koarmatim at Kodikal, Tanjung Perak. January 11, 2014 in Surabaya, Indonesia

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nfrastructure development is one of Indonesia’s top priorities, particularly in the maritime sector. In the 2016 State Budget the government designated IDR 313.5 trillion (tn) (approximately £16.5bn) to be spent on infrastructure. Soon after coming to power in October 2014, President Joko Widodo called on the nation to “work as hard as possible to turn Indonesia into a maritime nation”. This may come as no surprise given that Indonesia is comprised of 17,508 islands, of which an estimated 6,000 are inhabited, housing over 100 commercial seaports. The World Bank’s quality of port infrastructure index, measured on business executives’ perception of their country’s port facilities, ranks Indonesia at 4.0 out of 7 for 2011-2015. Scores range from 1 to 7, with 1 being extremely underdeveloped, and 7 being “considered efficient by international standards”. In contrast, the United Kingdom’s ranking between 2011 and 2015 is ranked 5.6 out of 7. During David Cameron’s visit to Indonesia in July last year he pledged to share Britain’s maritime industry expertise with Indonesia, as well as Britain’s knowledge of utilizing publicprivate partnerships (PPP) to support

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OPPORTUNITIES FOR UK BUSINESSES In a recent interview with Asia House, Indonesian Ambassador to the UK, Dr Rizal Sukma made it clear that maritime cooperation between Indonesia and the UK was at the top of Indonesia’s agenda. “We want to build ports and increase our capacity in port management. It’s also about ship building, ship repairing, maritime safety, fishing, and security cooperation between the UK and Indonesia such as coastguards and defence cooperation.” The UK Trade and Investment website is currently inviting companies to register their interest in port modernisation and development projects, as well as the construction of allied ports and allied facilities. This is part of the “High Value Opportunities” programme which “identifies large scale overseas projects offering the most value to UK Plc and aims to provide an intensive level of support to help UK businesses win contracts in and around these opportunities”. UK companies have proven track records in assisting with infrastructure development in Indonesia’s maritime sector, notably in the Tanjung Priok port expansion in Jakarta. According to the website Global Business Guide Indonesia, an area that is particularly lacking in external investment is that of cold storage facilities and specialised logistics for fisheries. British companies with technology and experience in maritime logistics and fish and aquaculture farming can take this opportunity to invest in these markets. Companies that choose to invest in Indonesia will be in good company, with BP, Shell, Unilever, Rio Tinto, and GlaxoSmithKline all firmly established there. FACILITATING TRADE Indonesia’s Law of 2008 on Shipping has set the foundations for reform of the port sector. Though the Act has implemented the cabotage principle which restricts national trade and transport to being provided by

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Indonesian infrastructure development. During his visit David Cameron also pledged £1bn of credit finance for infrastructure projects in Indonesia, and it was announced that Indonesia and the UK would develop a microsatellite to develop Indonesian fisheries.

Indonesian Navy troops on patrol in Bali, as a US Naval ship docks in the Balinese port of Benoa

Indonesian vessels with Indonesian crew, it has removed the previous monopoly of the four state owned Indonesian Port Cooperations (Pelindo 1-4) and has separated port operators from regulators. This opens the door to both national and foreign investment, increasing trade, investment and greater competition. In September last year, Joko Widodo’s administration announced a series of policy packages meant to cut red tape and lower business costs. These included cutting taxes for companies, easing import and export restrictions, and abolishing conflicting regulations.

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PIRACY – A CAUSE FOR CONCERN? Southeast Asia, in particular Indonesia, has seen a rise in piracy. However, this type of piracy does not tend to be violent, consisting more of petty theft than of seizing vessels or taking hostages. According to the International Maritime Bureau’s (IMB) Annual Piracy Report of 2015, pirates normally attack vessels during the night, and when spotted and the alarm sounded, they usually escape without confronting the crew unlike the more violent pirate attacks which have been experienced in recent years in the Gulf of Aden. Lloyds of London, the UK based Insurance Market offers

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a range of policies to Indonesian companies designed to indemnify Insured charterers and ship owners for acts of piracy. In their 2015 Report, The IMB also noted that continued cooperation between the IMB and the Indonesian Marine Police has resulted in a reduced number of piracy UK COMPANIES related incidents. HAVE PROVEN TRACK Indonesia can also benefit RECORDS IN ASSISTING from the UK’s knowledge and WITH INFRASTRUCTURE experience to help quash DEVELOPMENT IN piracy. Amongst its counterINDONESIA’S MARITIME piracy measures, the UK SECTOR.’ government contributes to Combined Task Force 151 which has been successful in its aims of disrupting piracy and armed robbery at sea and protecting maritime commerce. The Royal Navy run the UK Maritime Trade Operations Office, based in Dubai, which is a 24 hour service serving as the primary point of contact for merchant vessels in the event of a pirate attack. As reported in the Jakarta Post, the Indonesia Navy’s Western Fleet (Armabar) has recently announced plans to launch a piracy prevention system. Armabar’s commander Rear Admiral Achmad Taufiqoerrachman said that many of the thieves are younger people who are unaware of the crimes they are committing. With increased deregulation, the prospect of lower company taxes and the vast number of opportunities available, British companies continue to invest in and develop Indonesia’s maritime sector. The growing collaboration between UK Marine Insurers and Indonesian shipping companies and, thanks to the Indonesian Government’s Scholarship fund, an increasing amount of Indonesian students enrolled in UK companies, are just two examples of how Indonesia and the UK are building a future together. Such initiatives further strengthen economic ties between Indonesia and the UK, who enjoy a close relationship with shared common interests. FURTHER INFORMATION www.dwf.co.uk

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INTERVIEW

Time for partnerships Higher education partnerships between Coventry University and Indonesian organisations are helping the next generation of Indonesians drive growth and compete globally, says Professor Mike Hardy at Coventry University

t is very hard to disagree with President Joko Widodo (known by all as Jokowi’) when he asserts that Indonesia is now at a critical point in its development. The country is in “… an era of competition,” where “…good quality, on-time delivery and competitive prices are all important,” he says. Whilst Indonesia is still troubled by political infighting, a falling currency, a rise in protective trade regimes and the usual uncertainties of change and reform, there is today a lesser sense of crisis compared to that of the past. Some observers may say that this is a critical

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era of change and reform in Indonesia, heralding a future of competitive success and economic progress. More than at any time in its history, the country will be tested for its enterprise, and the capability and capacity of its human capital as well as the strength of its commercial and physical infrastructure. Consequently, it is now an excellent time to explore opportunities and build partnerships in the country, particularly within the field of higher education. With an average growth rate of five per cent between 2000 and 2015, Indonesia is more

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PROFESSOR MIKE HARDY Professor Hardy is a founding Director of the Centre for Trust, Peace, and Social Relations at Coventry University1, launched in 2014. Between 2004 and 2008 Mike lived and worked in Indonesia as British Council Director, engaging in work in education, the arts, citizenship and intercultural dialogue. He returned to the academic world in 2011 to a new Chair in intercultural relations at Coventry University and continues to contribute to conferences, global discussions and applied research in cultural relations, intercultural dialogue, multiculturalism and diversity. Mike is active with UNESCO and the UN Alliance of Civilizations, he is lead advisor to the World Forum for Intercultural Dialogue in Baku and directs the RISING Global Peace Forum at Coventry. Professor Hardy has been twice honoured, awarded the OBE in 2001 for his peace-building work in the Middle East, and appointed a Companion of Honour of St Michael and St George (CMG) in the Queen’s Birthday Honours June 2010 for his work internationally in Intercultural Dialogue. Mike is a trustee of Three Faiths Forum in the UK, a board director of the US based 501c3 International Leadership Association, a Life Fellow of the UK Royal Society of the Arts. The Centre for Trust, Peace and Social Relations is a multi-disciplinary team of over 50 researchers and experts whose work spans from global issues such as integrated peacebuilding and trust, to the specifics of the role of tension monitoring in communities and the impact of faith differences for social cohesion. The work focuses almost entirely on relationships through issues and contexts such as conflict resolution and reconciliation, social identity, inequality and mobility, wealth and poverty, integration and pluralism, prejudice and discrimination, intergroup conflict and cooperation, the problem of civil rights and the politics of equality. Central to its work is an understanding of the role of trust.

likely to cope with the current low commodity prices and a general slow down in global trade. However, with rising purchasing power in the region creating opportunities to intensify exports, it will be Indonesia’s neighbours who will compete energetically to meet any rise in demand. To succeed, Indonesians know that they will have to now compete on policy and merit. The country must be entrepreneurial, realise, and mobilise its many resources. Most observers recognise some of the quick policy wins of President Jokowi’s presidency. Fifteen months into his term, there have been notable

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successes including the cutting of fuel subsidies and a reduction of debilitating red tape and bureaucratic processes in order to facilitate further inward trade and investment. The administration is also looking to reduce levels of absolute poverty, although there is still some way to go in reducing significant impediments to economic growth like insufficient infrastructure quality or bureaucratic inefficiencies. The President’s strong start has been dented a little by slower than expected economic growth and a general sense among Indonesians that more had been promised than

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could actually be delivered. People will either continue to be disappointed or begin to realise that the anticipated economic transformation– of new high value manufacturing and services to replace the commodity-sourced growth of the past- is a longer term project that requires significant changes to a way of working and, more importantly, to the way of Indonesian thinking. The administration’s intention to run the country with technocrats as opposed to the ‘old guard’ of bureaucrats will need to be replicated in the commercial sphere. And there will also be a need for a continued focus on much-needed infrastructure spending in the country. Consequently, for a progressive, modern and global-thinking institution like Coventry University, contemporary Indonesia presents both educational and commercial opportunities. With the President’s project requiring a longer time frame, much of its success will rest on the ability of the next generation of qualified professionals, engineers and managers who can match the human capital already available in competitor nations. As such, young Indonesians and their families will look increasingly to education, social mobility, their future aspirations and employment prospects as life-drivers. The expectation for manufactured exports to sustain growth correlates to a greater need for first class business services, accounting and legal skills in addition to the financial sector that is already present in much of the country. 2016 has seen the UK‘s Chartered Institute of Management Accountants (CIMA) establish its first office in Jakarta with membership now totalling over 1500. Although this growth has come relatively late to a large market like Indonesia, it is TO SUCCEED, indicative of the expertise INDONESIANS KNOW required to drive critical THAT THEY WILL HAVE decision making and ensure a TO NOW COMPETE ON continued strong commercial POLICY AND MERIT.’ performance that secures Indonesia’s overall economic development. Coventry University’s ambitious plans for partnership

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with Indonesia’s emerging longer-term project reflects both the needs and aspirations of Indonesia and the distinctive strengths of the University. We will work to combine supporting qualifications and dual degrees with Indonesian Universities in specialities like business and finance, IT and engineering, and the performing arts. We will also be promoting joint research on critical economic and social issues as well as university-business links in areas of Coventry’s strengths. Receiving the Queen’s Award for Enterprise in International Trade 2015, Coventry University has a significant track record of working with a wide range of public and private sector partners - supporting innovation and productivity, managing business risk, and delivering direct economic benefits. Recognised at the local, national and international level as an enterprising and innovative organisation, Coventry University is looking to build on its excellent reputation with a number of new and exciting commercial initiatives. One key example is the existing relationship with the Unipart Manufacturing Group in the UK. This collaboration was forged around the development of the “Faculty on the Factory

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Floor” concept1. Building upon the success of these large-scale strategic business activities, the University is working to develop more major initiatives with key partners, particularly overseas. With the support of the British Chamber of Commerce (BritCham) Indonesia, UKTI, the British Council and its offices in Jakarta, Coventry University is now developing a number of new and exciting links with a number of SMEs and larger corporate organisations within Indonesia. Links with the automotive, aerospace, and marine sectors are proving particularly promising.2 Joint courses and industry partnerships are just some of the benefits stemming from the President’s vision for contemporary Indonesia. With maritime security another core area of his agenda, Coventry University is forming partnerships in response to the administration’s concern for human security related to its vast maritime territory. This vast territory spans almost 6m sq. km, much of which is teeming with fish. This vast area is difficult to monitor, especially with a limited number of patrol boats. Across Indonesia, authorities catch hundreds of foreign fishing boats in the country’s waters every year. Coventry’s University’s partner, the Ministry of

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‘The Hub’ at Coventry University a centre of student life

Maritime Affairs and Fisheries of Indonesia has estimated that illegal fishing costs the country over $3bn annually, based upon the value of fish lost to illegal fishers. This figure does not include factors like lost tax revenue, let alone the damage to the ecosystem. Coventry’s Centre for Trust, Peace and Social Relations (CTPSR) has a world leading research interest in maritime security with partners in Indonesia readily available to support joint research in this area. For example, research into human trafficking in the fisheries sector within Indonesia has begun to reveal troubling new details about the numbers of workers who have died at sea. The research, which will be completed later this year, is undertaken in collaboration with expert staff from the Indonesian Ministry of Fisheries and Marine Resources (KKP), the University of Indonesia (UI) and Coventry University researchers. A recent two day workshop, the third in the past year organised by Coventry University’s CTPSR and International Organisation of Migration with Indonesia’s new coast guard (Bakamla), the National Defence University, the national IUU Task Force, and the National Police, emphasised the need for regional cooperation to address maritime security issues. The partnership has finalised a range of new maritime security training initiatives to support President Jokowi’s vision of establishing the sprawling archipelagic nation of Indonesia as a “global maritime axis”. In light of these successes transnational partnerships in education and research and collaborations on core social and economic issues will continue to remain critical as Indonesia enters the next phase of its socioeconomic development.

The Institute for Advanced Manufacturing & Engineering (http://www.coventry.ac.uk/ame/) aims to develop “industry-ready” engineering graduates, research and develop new manufacturing technologies and products, and support the overall economic growth of the sector. 2 For more information on Coventry University’s ambitious plans to 2021 - see http://creatingbetterfutures.coventry.ac. uk. For more details on our early-stage enterprise activities in Indonesia, please contact the Enterprise & innovation Team on +44-2476-158258, or on e&i@coventry.ac.uk 1

FURTHER INFORMATION www.coventry.ac.uk

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HEALTHCARE UK

Healthcare in Indonesia It’s a fascinating time for healthcare in Indonesia. But where do opportunities lie now and into the future? asks Richard Leach, Healthcare UK

lection campaigns in emerging countries have a common rhythm to them. Candidates paint a vision of better education, better security and better healthcare, all creating more jobs which often justifies wider taxation. However, once the ballots are cast it’s rarer to see anything other than cosmetic changes. This has not been the case in Indonesia. President Widodo has been particularly bold. Building on his earlier policies as Governor of Jakarta, he promised a country-wide introduction of a universal care system by 2019 for the country’s 250m people who speak 700 different languages and live on more than 6,000 islands. So how is this working? What are the problems and, frankly, how can UK businesses benefit from the gaps in the Indonesian healthcare market? In 2012, Indonesia’s healthcare spending was only 3 per cent of GDP standing at $24.6bn. This represented only $150 per person per year (compared to $3500 in the UK) with 30 per cent of the population having no healthcare cover. Four years on and two years into President Widodo’s administration, the newly-created Healthcare and Social Security Agency BPJS Kesehatan administers a state-run, heavily subsidised, insurance scheme with compulsory contributions from employers and employees. But it faces a difficult task. Currently a little over a third of the population are registered in the scheme but it is continuing to grow towards its 2019 target of universality. Simultaneously, in an echo to the creation of the NHS 67 years ago, the

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government has been shocked by the pent-up demand for healthcare services and the BPJS had to return for more government money this year and last, citing high demand and increasing costs. Healthcare UK is now expecting healthcare expenditure to exceed $60.6bn by 2018, possibly pushing 7 per cent of GDP. We expect the number of hospitals to grow by over 1,000 from around 2,247 (1562 public, 685 private) in 2013 to over 3,500 by 2020, largely funded by the diversified conglomerates that dominate Indonesia’s business landscape who are seeking both to capture medical fees from the growing middle classes and attract future BPJS funds. The President is continuing to drive through his ‘Healthy Indonesia’ policy as a cornerstone of his agenda. His poll ratings have survived diverting funding from highly popular state fuel subsidies to help fund healthcare. But even he hasn’t risked taxing tobacco in a country where 70 per cent of men smoke. At present Indonesia’s healthcare capacity lags well behind regional and international averages and healthcare systems do not have enough capacity to meet the needs of the people who will be enfranchised by 2019. For the President much depends on making this system work. Within this environment the UK has much to share with Indonesia - we have operated a universal healthcare system for 67 years (it was assessed as the best in the world by a recent Commonwealth Fund survey of 15 countries including the US). Over that time our NHS and private sector companies have gathered a wide range of clinical and nonclinical expertise which is particularly aimed at delivering world-class healthcare within tight financial constraints. SO WHAT NEEDS TO BE DONE? Firstly there are nowhere near enough professionals in the healthcare system to service its needs. Indonesia already has fewer doctors and nurses per head than comparable regional economies but licencing rules are highly bureaucratic, reflecting past fears that competition from its neighbours would push Indonesian doctors out of their jobs. Universal care will mean more doctors and nurses are required, pointing to a rapid growth in training and education. Until the

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aforementioned rules change, such training will need to be largely internal. Nurses are generally trained by hospitals but most medical students fund their own education, and several of the big conglomerates such as Siloam and Mitra Keluarga are increasing the number of training places available and investigating ways to use distance learning to maximise their limited teaching facilities. The boom in hospital construction has been most evident in Java with 60 per cent of new hospitals established in Central and West Java – where British companies are most active. Britain is potentially well placed to benefit in supplying architectural services and hospital design (particularly to improve efficiency and safety) and there will be ongoing demand for facilities management skills and providers. Indonesian companies are also open to UK suppliers of hospital hardware. At the moment hospital administrators tend to be clinical staff working part time, but there is growing realisation that professional administrators with overseas experience or qualifications provided by overseas trainers might introduce valuable new thinking. NEEDS IN THE MARKET Along with infrastructure there is strong demand for more sophisticated and advanced medical devices and surgical equipment, especially amongst the private hospitals where the capability and quality of equipment still figures strongly in advertising. Per capita expenditure on medical devices is low compared with the West and there is currently limited indigenous medical device manufacturing capability, with Indonesia importing 95 per cent of its medical devices. We therefore believe there is significant potential for companies of all sizes to enter and expand in an underdeveloped market. Pharmaceutical capabilities are also in demand with pressure to increase the country’s ability to manufacture generic drugs. Of key importance is future legislation which may ban the sale of all products including medicines that are not fully halal (at the moment medicines containing haram ingredients are permitted if they are necessary for the life of the person that takes it). This will create an entirely new market, although the need to test and licence analogues to existing products is likely to be very complicated and expensive.

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RICHARD LEACH Richard Leach is Assistant Director for Latin America, ASEAN and Military Medicine, Healthcare UK. He joined the Ministry of Defence in 1987 with an honours degree in Physics from the University of Manchester. He has worked in a number of roles before becoming Assistant Director for South and Central America and the Caribbean in April 2008. Since 2013 he has worked for UK Trade and Investment’s Healthcare UK as geographical lead for South America, South East Asia, Kuwait and Military Medicine.

With a population spread over such a wide area, technologies that permit patients to be monitored outside of the clinical environment are particularly attractive. In particular the decision to move a patient from a remote location to a specialist care centre will be a costly one and the new health service cannot afford to get the decision wrong. “Reach back” from some very rustic environments to clinical experts will be essential. Finally the BPJS tell us that a key target for them is to monitor where their money is going and to fully understand where it has best effect. They admire the UK for its regulatory framework which puts patient safety at its centre. In any rapidly growing system cost effectiveness and not losing sight of the core objectives are paramount and we hope to work Government to Government with Indonesia to support them in the future. Healthcare UK hopes that this will give us a deeper understanding of the issues inherent in their system and how we might be placed to help.

Healthcare UK is a joint initiative by the Department of Health, NHS England and UK Trade & Investment. It promotes commercial partnerships between UK and overseas healthcare organisations and works with the NHS to strengthen its capacity to operate and succeed internationally. FURTHER INFORMATION www.gov.uk/government/organisations/ healthcare-uk

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VERNACARE

Protecting patients Vernacare plays a leading role in preventing cross contamination and infection in hospitals around the world, says Group Marketing Director Emma Sheldon 48

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EMMA SHELDON Emma Sheldon is Group Marketing Director for UK medical products manufacturer Vernacare - responsible for leading marketing and market access activities across 48 countries and six continents. She has led the implementation of a new international expansion strategy, resulting in significant export growth and opening up new markets in southern Asia, the Middle East and across Europe.

nti-microbial resistance has become a global health focus over the past decade, hospitals worldwide are sourcing products that help reduce cross infection. UK manufacturing company Vernacare has created an innovative single use system that is used in 96 per cent of NHS hospitals in the UK and is used in healthcare facilities globally. Based in Greater Manchester and focused on introducing toileting products into healthcare facilities around the world, Vernacare is the only company to manufacture a complete single use human waste disposal system, including the Vortex disposal unit and full range of fibre moulded single use products. “Vernacare offers an alternative to reusable systems where plastic or stainless steel bedpans are re-used and washed, either by hand, or in bedpan washers. Our system, being single use, means that patients use their fibre-moulded container once, and it is safely and easily disposed of in our environmentally-friendly Vortex machines,” says Group Marketing Director Emma Sheldon. “This means that the risk of crosscontamination is eliminated, as products that have not been adequately decontaminated do

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not remain in circulation and are not used between patients. “Vernacare developed a single use solution that helps prevent infection and is a cost and time saving environmentally friendly solution for healthcare facilities.” Vernacare produces 150m fibre-moulded products each year and successfully sells its products to 48 markets globally, with particular success in Canada, Australia, Singapore and Europe . “UKTI has been a fantastic partner in helping us to research and enter new marketsparticularly Asia Pacific,” says Emma. “Vernacare is growing its market presence in Southeast Asia and is currently working alongside our distribution partners in Singapore, Malaysia and Honk Kong as well as Japan. Singapore in particular is the most mature market for Vernacare in Asia, with a 16 per cent successful conversion rate within the first year of market entry. It was additionally the first successful international market conversion based on our new international market strategy, a focused and systematic approach, targeting key markets with insight and integrated support to ensure that we maintain the highest standards as export volumes increase.” Vernacare additionally supported the UK government in its response to the Ebola crisis, sending products to Sierra Leone to support with the set up of field hospitals. Since Ebola is spread via bodily fluids, handling the faeces, urine or vomit of infected patients presents a risk. Vernacare’s single-use products can be disposed of more safely after use to protect both patients and healthcare workers. Its Vernagel product, which solidifies liquid to ensure there are no spills, was another key product that was used VERNACARE’S SINGLEalongside Vernacare’s range USE PRODUCTS CAN of products to reduce the risk BE DISPOSED OF of contamination. “We work alongside opinion MORE SAFELY AFTER leaders in the fields of USE TO PROTECT infection prevention, BOTH PATIENTS microbiology, engineering and AND HEALTHCARE nursing to share the benefits WORKERS.’ of the system with new

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customers,” she adds. “Much of what we do is about education, showing how the system can make a big difference to the productivity of the hospital, whilst reducing the risk of cross contamination. Infection prevention practices are paramount for countries such as Indonesia; appropriate facilities with support for optimal infection control is needed in hospitals to prevent cross infection in healthcare facilities. At Vernacare we are continually innovating to add to our diverse product range. The company was accredited the Queens Award for innovation for its unique detergent-proof single use washbowl. Vernacare has recently

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launched a female urinal, the Vernafem, which is improving the dignity of patients, as well as disposable bed pan supports, jugs, general purpose bowls and vomit bowls. All products are created in collaboration with key opinion leaders and healthcare professionals to ensure our products continue to be the gold standard for human waste management globally.” FURTHER INFORMATION Email: info@vernacare.com Twitter @VernacareOffice www.vernacare.com

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BOND DICKINSON LLP

Smarter shipping Smart shipping is the way forward for a maritime nation like Indonesia, says Malcolm Dowden at Bond Dickinson LLP

or many media commentators the â&#x20AC;&#x153;Internet of Thingsâ&#x20AC;? (IoT) means the appearance of a new wave of domestic appliances, including connected fridges, smart meters or self-driving cars. Concerns about personal privacy, data security and the risk of hacking tend to loom large in such coverage. However, the IoT is already effecting major changes in business. Transport, shipping and logistics lead the way. The IoT allows major and relatively low-cost improvements in: l Real time tracking of shipments l Route optimisation

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Warehouse capacity optimisation Predictive asset maintenance The IoT has redrawn the competitive landscape. Real time data from shipping containers might include GPS positioning, allowing parties to monitor the location and progress of shipments, together with detailed information about conditions within a shipping container. That data becomes actionable through sophisticated analytics or predictive analytics systems. Analytics allow businesses to identify key patterns within a flow of data, allowing major efficiency gains in areas such l l

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MALCOLM DOWDEN Malcolm Dowden is a UK based solicitor, and Legal Director at Bond Dickinson LLP. He is co-author with Law2020 Director Michael Twomey of Inspire Publishing’s new publication ‘The Rise of the IoT: Business, Law and the Internet of Things’. Malcolm frequently works in Southeast Asia, India and the GCC region. He has advised governments, regulators and commercial clients on electronic communications, eGovernment, data law and smart contracts.

or standards. Any such decisions must be consistent – or at least compatible – at every point in a supply chain. They must also be workable in every part of the world where the business operates. That is where governments and regulators become an important part of the picture.

as dynamic or “just in time” procurement. Real-time monitoring of assets also allows rapid response to current repair needs and an increasingly rich predictive understanding of likely planned maintenance requirements. As ports, distribution hubs and transport networks adopt IoT technology, those who lag behind risk losing out in the increasingly intensive global competition for business. IoT is, of course, an issue for private sector business. It requires investment decisions to be made, and those decisions in turn require a commitment to particular technologies

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IOT, LAW AND REGULATION At root, the IoT simply involves equipping an object with a range of sensors to gather data concerning its state – for example its location or temperature – and then transmitting that data to make it available for analysis. Data is transmitted on a “machine to machine” (M2M) basis. From there, it is possible to implement a system that automatically generates and governs commercial activities, such as the creation of a “smart contract” or the release of payments. The technology required for IoT is relatively basic. In the United Kingdom, for example, many IoT developers are using raspberry pi modules to create IoT applications, attracted by the simplicity and extremely low power requirements of a stripped-down computer module initially designed to teach coding. Key issues for IoT developers include the need for extremely long battery life, resilience under a wide range of conditions (particularly for objects such as shipping containers) and an ability to transmit data on any available frequency. The IoT can be described in simple terms. Its operation is not so simple. It works only where it is possible to gather and transmit data without running into legal or regulatory constraints. For shipping, that

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Spring 2016

requires maritime infrastructure that works lawfully wherever a business operates. IoT is in many ways fundamentally different from telephony or other existing forms of electronic communications. Each “connected” object must be uniquely identifiable, and able to gather and transmit data. Data bursts tend to be relatively small, but they can have a disproportionate effect on the efficiency of cellular networks. Also, unlike, cellular networks, the IoT’s value and revenue potential does not reside in the connection itself. The connection is simply a means to an end – data transfer to the point where analytics can be applied. Consequently, IoT developers have no interest in acquiring licences to use closely-regulated frequencies. There is no credible place for spectrum auctions of the type used to allocate spectrum to mobile operators. In fact, wherever possible, IoT devices tend to use unlicensed frequencies, and many are set dynamically to latch onto the nearest available frequency. REGULATORY RESPONSES Governments or regulators might respond by simply freeing parts of the spectrum from licensing requirements. However, that risks provoking strenuous opposition from the holders of existing licences – many of which have been expensively acquired through auction processes. Licence-holders concerns tend to converge on the question of interference which might degrade the services available to subscribers. With IoT connections predicted to increase to more than 50 billion by 2020, the risk of interference becomes more acute with each new connection. Regulatory responses vary from country to country. In the United Kingdom, for example, the sectoral regulator Ofcom has considered implementation of a dynamic database to include a “kill switch”, designed to switch off IoT devices that stray into frequencies likely to cause interference with licensed spectrum. Significant technical issues with the proposed database mean that, for the moment, Ofcom has elected instead to identify “guard bands” – frequencies that cannot be used so that there is a buffer between licensed and unlicensed spectrum. That approach allows Ofcom to facilitate the development of IoT devices

Spring 2016

INSIGHT INDONESIA

in particular parts of the spectrum, including “white space” frequencies freed up by the switch from analogue to digital television. Progress in other parts of the world has been slower, leaving unresolved legal and regulatory issues as a potential barrier to the consistent development of IoT services. Examples include the telecommunications laws in many countries within the GCC region of the Middle East, where the concept of unlicensed spectrum has yet to be adopted. In some of those countries – for example Bahrain – the current legal position is that, unless specifically exempted, equipment and personnel required for a WORKING WITH telecommunications service THE UK WE CAN operating within the Kingdom must be physically present CONTRIBUTE TO THE in the Kingdom. Elsewhere EFFORTS OF INDONESIA in the region any internetTO REFORGE OUR related services must be MARITIME IDENTITY.’ provided through licensed operators. In each case the relationship between existing laws, written for earlier stages of development, and the IoT must be considered. The IoT is developing at speed, and has already transformed the competitive landscape. Any government seeking to protect its own economy as a competitive force must therefore be prepared to undertake a root-and-branch review and reform of its legal and regulatory regimes. As the Indonesia Ambassador in London, Dr Rizal Sukma says: “The maritime sector is an important intersection or interface of interest between Indonesia and the UK. One aspect that we ignored for a long time in Indonesia is how to build maritime awareness and rebuild the maritime culture. Working with the UK we can contribute to the efforts of Indonesia to reforge our maritime identity.” It may well be that smart shipping is the first step in this process.

FURTHER INFORMATION www.riseoftheiot.com