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ON SRI MULYANI’S RESIGNATION TO JOIN THE WORLD BANK Chairman of the Constitutionsal Court) Mahfud MD: “I empathize with her; I would have done the same if I were her.”

John Prasetio, deputy chairman of the Indonesian Chamber of Commerce and Industry (Kadin): “This is a very positive thing, we Indonesians have to be proud and welcome this move. I think she will also continue to help develop our economy.”

Golkar Party Vice Chairman Priyo Budi Santoso: “It’s a win-win solution, it is also sort of an escape clause.”

Peter Fanning, the chairman of the International Business Chamber: “Her departure is a step backward. The business community will be disappointed, but there are many good people who can replace her.

American business consultant James Castle: “A pleasant surprise. Her commitment to reform would be missed. I think it’s great for her and good for Indonesia to have someone in that position.”

Sri “Iron Lady” Mulyani: Indonesia’s Brilliant Reformer The architect of ongoing and sweeping bureaucratic and financial reforms in recent years, Mulyani has earned a reputation as an “Iron Lady” for her strong resolve.

In announcing the appointment of Sri Mulyani Indrawati as Managing Director of the World Bank Group, World Bank President Robert B. Zoellick said that as Indonesia’s Minister of Finance since 2005, Ms. Indrawati has guided economic policy for one of the biggest states in the world, navigating successfully in

the midst of the global economic crisis, implementing key reforms, and earning the respect of her peers across the world. “She has been an outstanding Finance Minister with in-depth knowledge of both development issues and the role of the World Bank Group,” Zoellick said. “As a member of the Senior Team she will play a key role in helping to lead the Bank as we move to strengthen client support, implement our reform program, and anticipate future challenges.” Prior to her position as finance minister, Mulyani served as state minister and chair of the Indonesian National Development Planning Agency. During 20082009, she served as coordinating minister of economic affairs, and in 2002-2004 she was an executive director on the Board of the IMF. She has been on the faculty of the University of Indonesia and was a visiting professor at the Andrew Young School of Public Policy at Georgia State University. In accepting the appointment Mulyani said: “It is a great honour for me and also for my country to have this opportunity to contribute to the very important mission of the Bank in changing the world.” “Ms. Indrawati brings a unique set of skills and experience to the World Bank Group, from the vantage point of an advancing Middle-Income country that still faces significant challenges of poverty,” says Zoellick. “She has received global recognition for her success in combating corruption and strengthening good governance,” Zoellick noted. “She has been a leader in the developing world on climate change, and active in the international arena through the G-20, APEC, ASEAN and other groups.” Mulyani earned a Ph.D. in

THE ECONOMY

BUSINESS

PROPERTY

Drajat Panjawi: Corporate Affairs Director, Microsoft Indonesia

Sri Mulyani: Q1 economic growth estimated at 5.7%

Indonesia set for dramatic property boom next year

ndonesia is an important market in a global economy. Its projected GDP growth is 7% by 2011. It will soon join BRIC, and we are an enabler in accelerating economic growth.

Thanks to Indonesia`s positive economic stability which was supported by capital inflow, increase in foreign exchange, rupiah appreciation, strengthening of stocks index and positive investors` perception.

Garuda Indonesia’s debts fully paid off in 2016

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JAKARTA (TPP) – Finance Minister Sri Mulyani Indrawati’s sudden – and dramatic – move to assume a high ecehelon position at the World Bank lends prestige to Indonesia’s international standing. The architect of ongoing and sweeping bureaucratic and financial reforms in recent years, Mulyani has earned a reputation as an “Iron Lady” for her strong resolve. The score of reactions to her resignation underscores the remarkable impact she has had in recent years. She is credited for guiding the country through the global economic meltdown and helping forge its current push into the elite ranks of top-tier emerging economies. President Susilo Bambang Yudhoyono praised her, saying “we are losing one of our best ministers.” “Her position at the World Bank is strategic and honorable. I agree to Sri Mulyani’s request to be the World Bank’s managing director,” Yudhoyono added. “Sri Mulyani has worked hard to develop fiscal policies and conduct a number of reforms in her respective field”.

one of the commission deputy chairmen, Achsanul Qosasi from the Democratic Party. Numerous names such as Anggito Abimanyu, Agus Martowardoyo and Darmin Nasution have been touted as the possible successor of Mulyani. Anggito is the head of the fiscal policy at the Finance Ministry and has been appointed the deputy finance minister. Agus Martowardoyo is president director of Bank Mandiri, while Darmin is the acting Bank Indonesia governor and former tax office chief under Mulyani. Coordinating Minister for the Economy Hatta Rajasa is the acting finance minister before the president appoints a permanent replacement.

Legislators at the House of Representatives Commission XI on Finance and Banking say that her replacement must display the same commitment, integrity and capacity. “Her replacement must have both high integrity and guts. As the treasurer of the nation, the finance minister is the bastion that bridges the interests among the government, the people, businesspeople and investors,” says

Mulyani’s decision to move to Washington was carefully monitored by foreign investors, who are big buyers of Indonesian assets in the past 18 months, driving a surge in local stocks, bonds and the rupiah. They have been largely attracted by the pace of reform and liberalization in the region’s largest economy, and the prospect of a surge in demand for its resources including timber, palm oil and coal. Foreign investors have bought a net Rp 40 trillion ($4.4 billion) in government bonds this year, double the purchases all of last year, taking their net holdings to a record Rp 148 trillion, representing 24.6 percent of all outstanding government debt. Indonesia’s resilience throughout the 2008-2009 global financial crisis has shown that macroeconomic and fiscal policy is on a

INTERVIEW

firm footing thanks to the sound policies of technocrats including Mulyani and Vice President Boediono, the former central bank governor. Inflation remains tame and interest rates are at a record low of 6.5 percent. Economic growth was also expected to be 5.7 percent this year and as much as 6.3 percent in 2011, Mulyani said last month. Prospects for an investment grade rating are probably unchanged. Indonesia is expected to achieve an investment grade credit rating within the next three years. That would make the country in the same league with BRIC nations — the top emerging market investment destinations of Brazil, Russia, India and China. Prospects for that upgrade should not be affected by Mulyani’s move, although there may be concerns about the future of civil service and other reforms. With Mulyani in such a highprofile position, Indonesia could benefit further from rising international recognition of its potential, particularly as a G-20 member and a country that is widely expected to join the emerging market elite. Joachim von Amsberg, World Bank country manager for Indonesia, said that “reforms are embedded in government in the overall leadership of the country. I think they are no longer dependent on a single person. That’s why we are quite confident that I think Indonesia will continue to do well.”

The debts consisted of US$320 million owed to the London-based Export Credit Agency (ECA), US$131 million to Floating Rates Notes (FRN) of creditors in Singapore, and US$105 million to PT Pertamina and Angkasa Pura I and II.

Once the 1960 law is revised the international business community will see many multinational companies rewriting their relocation strategies with an eye on Indonesia.

Economics from the University of Illinois and a BA in Economics from the University of Indonesia. She has received numerous honors and awards, including Euromoney Magazine’s Global Finance Minister of the Year, and Emerging Markets’ Best Finance Minister in Asia. She has also been regularly on Forbes’ List of the 100 Most Powerful Women. In her new role Mulyani will supervise Latin America and Caribbean, Middle East and North Africa, and East Asia and the Pacific. She will also oversee the Information Systems Group.

The appointment follows an international search process. Mulyani will join the Bank on June 1, enabling a transition period with Juan Jose Daboub who completes his four year term as Managing Director on June 30. Economist Dradjad Wibowo from the coalition-aligned National Mandate Party (PAN) welcome the appointment, saying it was a great honor for Indonesia politically and economically. “I support Sri Mulyani to be the World Bank’s managing director,” Dradjad said, adding that there were many candidates that were capable of replacing her.

Meanwhile, Finance Ministry inspector general Hekinus Manao said the ministry remained determined to continue the reform process. Says Democratic Party lawmaker Didi Irawadi Syamsuddin: “We should all be proud of her.” Even the Golkar Party, which led the charge against her in the House, wished her well, with House Deputy Speaker Priyo Budi Santoso saying Golkar appreciated the move because it was a “prestigious position” that would allow her to pursue policies that would favor Indonesia.

Mari: Renegotiating ACFTA a Burden, Too Costly

rade Minister Mari Pangestu said the government had opted for “special talks” with China on the AseanChina Free Trade Agreement (ACFTA) as renegotiating the accord calls for payment of huge compensations and the involvement of other Asean member countries. Speaking at a meeting with the House Commission VI here late last month the minister said the government had made efforts to allay public worries that ACFTA would lead national industrial products becoming less competitive in domestic markets, including conducting special talks with the Chinese government. In a press statement, she also said that there were options of postponing the implementation of the ACFTA and renegotiating, particularly 228 tariff items on which Indonesia feared it would lose the competition with Chinese products. “The option taken is to hold special talks with the Chinese government because renegotiating the agreement will be costly, as Indonesia must then pay huge amounts of compensation and also involve other Asean member countries,” she said. The option of special talks was more comprehensive and not only limited to the question of 228 tarif items and as such is considered more bene-

ficial, she added. She went on to say that if the government chose renegotiations, the option must be done in line with articles in the ACFTA. According to Article 6 of the ACFTA Indonesia must increase the compensations value close to the modification value. The value of the 228 tariff items was expected to go up to US$1.2 billion upon renegotiation compared to only US$43 million if the option was not taken. The minister said the option would also require Indonesia to notify all parties with supplying interest, in this case all Asean members and China. “This may prompt other Asean members to also ask for compensations from Indonesia,” she said. She said the settlement of the option would also take time because each tariff item to be renegotiated had to be checked. “The option could also hurt the country`s image as it would demonstrate the country`s uncertainty, and this could affect other sectors such as investment,” she said. She added that by choosing special talks Indonesia would not be required to notify all parties with supplying interest so that it need not give compensations to other Asean member countries. “Its settlement will also be relatively short. Also, Indonesia will not have to pay compensations to China,” she said. She said the special talks option was more comprehensive with regard to increasing the competitiveness of the industries feared

to lose in the competition as a result of the ACFTA. She added the agreement was comprehensive because it was not only for boosting trade to become more balanced, but also mutually beneficial covering steps to increase competitiveness, investment, infrastructure development, credit facilities and other kinds of cooperation. On April 2, 2010 in Yogyakarta Minister Mari and her Chinese counterpart, Chen Deming, agreed among others to form a working group to analyze data and information of the two-way trade and recommended various steps with focus on products in the list of 228 tariff objects such as steel, textiles and textile products and shoes. The working group involves the ministries of economic affairs, trade, industry, finance, agriculture and manpower. It will also monitor trade balance and anticipate possible hikes of imports in the two countries. “The group will make recommendations and determine steps needed to respond them,” she said. She said her office would also set up a new directorate, Directorate General of Standardization and Consumer Protection, to monitor imported products especially with regard to their quality so that consumers would not be hurt. “The new directorate will support the implementation of standardization of national products to meet competition in the global market,” she said.

The President Post

A2 May 12, 2010

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Viewpoint A Cautionary Warning on the World Economic Recovery IMF expectations are at 3% growth in the US (with a relatively weaker growth in the real sector compared to the financial), 1% in the Euro zone, and 1.3% in the UK. It may seem too weak for a strong world economic recovery and could explain the reasons behind the beginnings of a strategic repositioning of the world economy. By Erwin Ramedhan

n light of the Greek bailout in the first week of May 2010 of Euro 110 billion or more for the next three years by the European Union and the International Monetary Fund, the Economist’s recent warning (“Curb your enthusiasm” April 22, 2010) now seems too moderate on the pessimistic side, although the British publication did warn of the “dangers both for sluggish Europe and bubbly emerging economies’. Southern Europe is in fact fast approaching a comatose economic condition with Greece leading the way towards economic stagnation and socio-political instability. The EU and IMF bill Greece has to pay for the bailout comes at the highest price. Prime Minister Giorgios Papandreou announced “great sacrifices (to) avoid bankruptcy” consisting of: reducing the budget deficit from 14% to 4% of Gross Domestic Product (Euro 245 billion). The contraction of the Greek economy is expected to reach 4% with drastic salary cuts for civil servants and pensioners, facilitations

for company retrenchments of their work force, increases in sales taxes (+ 10% for fuel, alcohol, and tobacco) and property taxes, reductions in public health care, and eventual privatization of utilities and public transport. The price Greece has to pay for the bailout is very steep and is the result of years and years of easy borrowing (and difficult repayment) on abundant money markets, grandiose projects (the Athens Olympics), corruption and tax evasion, as well as national statistics manipulations, with some help from Wall Street operators. But first and foremost the Greek bailout is now becoming as societal, financial, and economic experiment in how far a relatively developed Western country can go in imposing sacrifices to a population without creating a social and political upheaval or explosion. Briefly said: a “societal experiment” that has never been tried before… Strikes and demonstrations have multiplied in Greece in spite of the moderating influence of trade unions and their support for the PASOK social-democrat government.

This experiment pertains to all of the PIGS countries, an unflattering designation referring to Portugal, Italy, Greece, and Spain to which should be added Ireland and Iceland (seeking EU membership) so as to become PIIIGS. PIGS countries had easy financial times (borrow now pay later) and are at present facing economic hardships with the downgrading of Portugal’s and Spain’s debts by Standard and Poors. These two countries now have to pay surging interest rates to borrow money. To overcome their present plight they may have to impose similar sacrifices to Greece. Spain is in a particular predicament with unemployment figures at 20% and the bursting of the bubble in the housing sector. Estimates on the amount needed to overcome the Southern European crisis are at Euro 600 billion and, according to some observers, “now we are talking real money”. Perhaps it is the “real money” for saving the Euro currency and, in the final analysis, for preserving the European Union from economic disintegration through a cascade of sovereign debt defaults by governments. This may

explain Berlin’s change of mind, in light of Germany’s repeated refusals in bailing out the Greek economy previously.

And faster growth in the BRIC + I (Brazil, Russia, India, China + Indonesia) economies is facing the threat of inflation and bubbles.

But ultimately, what applies to the PIGS countries in societal and economic experimentation could also be true for the US and the United Kingdom where authorities also had to channel trillions of dollars of public funds to the financial and banking sector at the expense of government spending on infrastructure investments, economic stimulants for industrial companies, education, health care, employment creation. In the US in particular some states are practically in bankruptcy while the southern part of the country is facing the catastrophic disaster of the BP oil spill in the Gulf of Mexico after Hurricane Katrina. Hopes are therefore pinned on the “bubbly” economies or the countries least affected by the crisis - the so called emerging market economies. China’s economy is growing at double digit and India is expected to grow at 9%, while Brazil is projected at 7%. Russia may be lagging but Indo-

nesia, as a member of G20, is anticipating a growth rate at more than 6%. IMF expectations are at 3% growth in the US (with a relatively weaker growth in the real sector compared to the financial), 1% in the Euro zone, and 1.3% in the UK. It may seem too weak for a strong world economic recovery and could explain the reasons behind the beginnings of a strategic repositioning of the world economy. Making cheap money available to stimulate growth in Europe and America has mainly resulted in the flow of that money to emerging market economies. And faster growth in the BRIC + I (Brazil, Russia, India, China + Indonesia) economies is facing the threat of inflation and bubbles. The government of China has for example taken stern measures to stop the surge in property prices and speculation and thus prevent enormous amounts of bank credits from eventually becoming worthless loans. Moreover, China’s (past) single minded export strategy to America and European countries is now

diluted because of their weakened economies. The yuan could strengthen, the giant Chinese domestic might market grow, and exports could be reoriented more towards the markets of the emerging economies. India for her part is attempting to fight inflation by hiking interest rates, without too much success at present. During this latest crisis economists have been wondering whether the crisis was V,U,W, or L shaped. The answer in fact depends on where the question is asked. V or U shaped for many Asian countries, it seems to have a bad W configuration for the US and European countries. The worst is perhaps globally for the industries and their workers where the L shape of the crisis can be seen in the stagnant or rising unemployment figures. And, as conventional economic wisdom has it, employment only improves five years after a crisis is over. This is all the more true when money, and not production, makes money. The writer is lecturer at President University

The Chinese Restaurant at Hotel Mulia Senayan

Also try our other fine restaurants:

Pan Asian Restaurant

Italian Restaurant

Japanese Restaurant

International Restaurant

Jl. Asia Afrika, Senayan, Jakarta 10270, Indonesia Phone: (62-21) 5747777, Fax: (62-21) 5747888 Website: www.hotelmulia.com Indonesia Toll Free: 0800-1-0-MULIA (68542)

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May 12, 2010 A3

Interview An Hour with ABS

Ali Basyah Suryo CEO/Chief Editor The President Post

DRAJAT PANJAWI Corporate Affairs Director, Microsoft Indonesia What’s the main reason for Microsoft (MS) to invest in Indonesia? Indonesia is an important market in a global economy. Its projected GDP growth is 7% by 2011. It will soon join BRIC, and we are an enabler in accelerating economic growth. Meanwhile, 40 million Indonesians have access to computers, an encouraging figure for further growth in the future. Meanwhile, its 240 million population is one-third of APEC, another factor that says much about the country’s potential. The Indonesian business community is in a great position to prepare themselves for cloud computing. By the end of the calendar year cloud computing will be here. The business model will help our local partner to develop ecosystem in Indonesia. MS Citizenship plans to narrow the digital gap by transforming education, fostering innovation and enabling job opportunities. What is MS’s perception of the Indonesian market? How is MS committed to Indonesia;

can you elaborate on its investment plan in this country? Indonesia has a huge growth potential, as Internet access covers 38.8 million users, while broadband penetration is one million. There has been a broadband explosion: 700.000 growth in the past five quarters. Internet access with mobile phones represents the fastest growth, with mobile phone shipment reaching 30 million. MS Indonesia has been here for 15 years and employs 100 people directly. We work with more than 4,000 partners to help them become successful. According to IDC every one Indonesian Rupiah invested in an MS ecosystem will earn earn 23.5 Rupiah. MS ecosystem accounts for 31% of IT employment in the country. The IT industry is growing by another 120.000 jobs by 2013. On community development, what programmes have MS embarked on to help Indonesia? Anything on affordable PC programmes?

Everything MS brings to Indonesia is meant to help the country develop its potential and reach their goals through our business and citizenship initiatives. We also enable people to get jobs; there are now 120 Community Technology Centers (2.4 million farmers and migrant workers trained), WebsiteSpark for small medium businesses (140) and BizSpark Startup (100). Indonesia has 12,500 i-cafes, which is a primary source of internet access for communities. 70% of its users are in the 1524 age bracket. Primary usage are Facebook, email and chatting, though 48% of all PCs here are not yet Win7 ready. Within the realm of education, can you elaborate on your programmes for learning? Indonesia has 45 million students and 2.7 million teachers. 20% of its State Budget is allocated for education. There are now 5,600 universities, with a student to PC ratio of 1: 3,600. We need to narrow the digital gap quicker. We are transforming education by coming up with

“Partners in Learning” (PIL), which provides access to affordable software and skill trainings. PiL has reached more than 14 million students and 200.000 teachers in 20.000 schools in 30 provinces. We also foster innovation, as we have five Microsoft Innovation Centers (MICs) in five leading universities. In 2008 & 2009 Indonesian students won global awards at Imagine Cup by developing applications for environmental protection and for detecting malaria disease with mobile phone cameras. In addition, DreamSpark has 120.000 students. We are also engaged in biodiversity research with the Ministry of Research & Technology (RISTEK) and local governments such as Wakatobi Regency and Papua Province. Indonesia is a country comprising of hundreds of islands. How is MS reaching out to various communities, including rural ones, so that they are not left behind in today’s connected world?

MS sees technology as a bridge between communities, as Indonesia has 17,508 islands. Java island is the country’s economic powerhouse with 110 million people. We are engaged in nurturing Community Technology Skill programme in partnership with local NGOs specifically designed for rural communities. MS has 120 Community Technology Centers in 20 provinces, reaching 2.3 million farmers. As Indonesia is the second richest country in the world in terms of biodiversity, MS has started working with local governments and related ministries to support biodiversity research in Indonesia using MS Technology – High Performing Computer (HPC), MS pivot, photosynth, clouds and others.

in the community. We want to have a positive human impact in Indonesian citizens. As such, we need to have a strong partnership with the government, academia, businesses, and NGOs. Neutral Technology policy is an important foundation to establish a stronger and closer partnership as well as to foster innovation and fair competition in order for the ICT industry to grow in Indonesia and accelerate the country’s economic growth.

Indonesia is an important market in a global economy. Its projected GDP growth is 7% by 2011. It will soon join BRIC, and we are an enabler in accelerating economic growth.

Interoperability is a critical element to the success of this project. We want to make sure a collaboration among research communities in Indonesia is possible and well implemented in a mixed technology environment. In conclusion, let me say that MS cannot work alone to solve all of the problems

How Open is Open Source in the Office?

The President Post

By Alessandro Misiti - Executive Client Manager and Robert Ringdahl - Executive Partner (Gartner, Inc.)

Some government organizations have already implemented open-source solutions or are conducting opensource trials in an attempt to reduce licensing costs for end-user computing. But some of our Executive Programs members have reported that hidden costs and technical incompatibility issues with collaboration, mobility suites, as well as existing software, will generally not yet favor the adoption of open-source solutions.

ur discussions with government CIOs show that these executives are increasingly examining open-source solutions as a way to reduce licensing costs at the desktop and laptop levels. This follows the decision of several countries’ central governments to encourage more open-source utilization. However, many CIOs come to the conclusion that the promise of cost savings doesn’t yet justify a full rollout of opensource solutions. One local government organization moved its MS Office suite to open source a few years ago to reduce licensing costs and cope with a tighter IT budget. The CIO has reported that the organization is currently in the process of developing a more collaborative relationship with other local government agencies and businesses. But most of the technology tools that enable quicker, more integrated communication and collaboration (such as unified communications or team collaboration) do not fully support open-source formats. Therefore, the CIO is considering moving away from Open Office, unless the central government’s strong support for open-source solutions

drives an increased vendor commitment to developing full interoperability with communications and collaboration offerings. Another central government agency is testing Open Office on mobile devices to enable field workers to update and exchange documents anywhere, anytime, thus increasing their productivity and fostering greater collaboration with external parties. But early testing has not shown positive results, and the project is likely to be abandoned for now. According to the CIO, “Most of mobility solutions do not fully support open-source formats, and as a result, the inability to properly view and edit open-source documents via mobile devices may jeopardize our investment in a multiyear mobility strategy and undermine its promise to deliver business agility.” A third local government organization is planning to move a number of users to Open Office, following the national government’s renewed focus on open source. The users who have been selected across several departments are more likely to exchange documents with other government agencies or interact with citizens. From a pure licensingcost perspective, the open-source solution would be less expensive, but the CIO reports that the following factors have deterred the organization from moving ahead with the Open Office pilot: • Migration costs and training requirements. • Interoperability issues caused by the different versions of Office documents being exchanged and edited • Costs due to lack of interoperability such as higher help desk support on technical issues • User complaints due to difficulties in properly viewing/ reading/editing documents CIO CALL TO ACTION

Government CIOs who are considering a migration to open source for office productivity tools should do the following: • Carefully consider the big pic-

ture, and do not just focus on pure licensing cost savings. Factor in costs for migration, integration and testing, training, upgrades and maintenance, as well as user perception. • Do not consider open-source projects as isolated initiatives; put the open-source project into a broader perspective. When planning to leverage technologies that enable realtime communication and deliver greater employee productivity and collaboration with external parties, be aware that a wide range of open-source formats may not be supported by vendors’ solutions. • Thoroughly investigate and understand governments’ positions on open source and how committed they are to ensuring that vendors develop solutions that can be easily and effectively integrated with open source. • Understand all the situations in which the organization uses and shares documents, especially with other departments/ agencies and constituents. Account for mobile device access to ensure that Office Suite or file format changes do not break an existing process. • Continue to monitor the progress of open-source office productivity tool suites. Gartner estimates these will be more mature in two to three years. BOTTOM LINE

CIOs should not only focus their attention on licensing savings when running an opensource pilot but also take into account their collaboration and mobility strategies. Integration issues with collaboration and mobility suites, as well as existing software, are likely to be major hurdles to the success of the pilots. Business Impact The benefits of open-source solutions are often negated by the loss of productivity, increased costs of interoperability and the increased difficulty in linking to suppliers and customers.

Request the pleasure of your company at Business Dialogue

LEADERSHIP IN INDONESIA By:

Anies Baswedan, Ph.D Rector of Universitas Paramadina Will present: National Leadership

Prof. Dr. Komaruddin Hidayat Rector of UIN Jakarta 2006 - 2010 Will present: Spiritual Leadership

Robby Djohan CEO of PT CITRAINVESTA ADHIDANA Will present: Corporate Leadership

Tuesday, May 18th, 2010 7:30 - 10:00 AM (Registration at 7:00 AM) Breakfast followed by Dialogue Financial Club Jakarta Graha Niaga 27th Floor Jalan Jend. Sudirman Kav 58, Jakarta Dress code: Business Attire CONFIRMATION Kindly RSVP by Monday, May 17th, 2010, to: FINANCIAL CLUB JAKARTA Lita - Tel. (021) 2505090 0r email to: lita@financialcub.co.id & fcj@financialclub.co.id

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A4 May 12, 2010

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The World THE GLOBAL ECONOMY:

World Trade Expanding, Finally That world trade will move up from -12% last year to 9.5% this year should indeed be seen as a spectacular rise with a number of encouraging effects. By Atmono Suryo

END OF THE TUNNEL

fter the sharpest decline in more than 70 years, world trade is finally going up again. As a result of the financial crisis, world trade went down steeply (by 12%) last year in 2009, at a higher rate than predicted before. In addition to the area of finance, the drop of world trade had a devastating effects on Asia, including Indonesia. It was, therefore, quite an encouraging news for the world trading community when at the end of March the Geneva-based WTO came up with the news that “world trade is set to rebound in 2010 by growing at 9.5%” That world trade will move up from -12% last year to 9.5% this year should indeed be seen as a spectacular rise with a number of encouraging effects. • Firstly, the rise of world trade could help to beef up the global economy which is predicted to recover only at a subdued rate. As stated by WTO Director General Pascal Lamy “we see the light of the tunnel and trade promises to be an important part of the recovery” • Secondly, it would mean that global consumption and global

demand is out of the mud. Immense sums of funds amounting trillions of dollars were spent by the governments of many countries, developed and developing, to implement the stimulus programs as strongly supported by the G20 at their meeting in November 2008, attended also by Indonesia. • Thirdly, in this era of globalization and multilateral trade there will be the constant need for joint policies and joint actions. Apparently, no one country can act on its own, not even strongest economies as the US, the European Union or Japan. • Fourthly, now that global trade is coming up again, the biggest threat seems to be the question of protectionism. Protectionism can trigger trade wars, big or small, and would cripple world trade There are still different views and predictions about the problem of global recovery. There are still some risks which can derail global recovery. One of the risks concerns the downfall of world trade again. KEY ISSUES

There are a number of key issues which were referred by the

WTO that deserve our attention, especially on the side of those in Indonesia who are directly involved in the world trade sector: • The multilateral trading system has proven its value. WTO rules and principles are being observed by the world trade community, in particular members of WTO. The implementation of the multilateral goals can be done at the bilateral trade level • This system has kept markets open and has served as a platform from which trade can grow and the global economy improves. This open market system has been to the advantage of the Asian countries • Even when world trade tumbled deeply in 2009 there was the absence of a major increase in trade barriers • WTO warns that protectionism would derail global economic revival The developments suggest that the multilateral trading system with its strict rules and principles is there to stay. The absence of such system can be the beginning of all kind of trade wars. It is recognized, however, that the system has still its many faults and shortcomings. Further negotiations will be needed to remove these shortcomings, especially in areas affecting the interests of developing countries, such as agriculture, which is highly protected in advanced countries. The goal of this system is to create an open market multilateral trading system. This may not be to the liking of many conser-

vative politicians in Indonesia, as they are in principle against anything which can be regarded as part of liberalism. The question is whether the country can afford to be one the few countries that would detach themselves from global economic trends. The trend of open multilateral trade is basically accepted by the world trading society.

area, with global repercussions. Going all the way to Asia, including Indonesia, though it landed up more softly in that country. The main effect was the sudden drop in global demand and spending on various goods, especially consumer goods and consumer durables such as cars, as well as investment in goods and industrial machinery.

DISMAL 2009

G-20

In terms of global trade the year 2009 was not only dismal but in fact disastrous year. The decline of world exports and imports was much deeper than the decline in world GDP, which fell to –2.3% compared to –12.2% in 2009. The worst affected countries were in North America and Europe. Asia was also worse off with a decline of -11.1% for exports. Throughout the years 19652009 world trade fluctuated quite heavily but the decline in 2009 was the worst of all. It declined by – 7% in 1975, -2% in 1982 and -0.2% in 2001,and -12% in 2009. Trade in US$ terms dropped even further than in volume terms, caused in large part to falling prices of oil and other primarily commodities. This trend also happened to Indonesia; the country also experienced the boom and bust development of oil and primary commodities. To recall: the recession was triggered by the sub-prime mortgage crisis in the United States. What began in the US financial sector spread in an instant to the real economy, including trade

Much will depend on the G20 to reshape in the first place the international financial system and to improve the area of trade finance. Being a respected member of the G20 and a prominent country in ASEAN, Indonesia will be challenged to give its due share to find the right international solutions in those two important areas.

figure 1: Volume of World Merchandise Exports (1965-2009) 15

0 1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

2009

-5

-10

-15

Source: WTO Secretariat

figure 2: Developments of Exports 2007-2009 Exports Value

Annual percentage change

2009 World

2005-09

2007

2008

2009

12147

--23

1602

--21

1057

--18

4995

--23

4567

--23

3566

--18

China

1202

--16

Japan

581

--1

--26

India

155

--20

ASEAN 9

814

--18

North America United State

Europe European Union (27)

Asia

Source: WTO

The President Post

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May 12, 2010 A5

The Economy ECONOMIC UPDATES RI to increase power capacity to 15,000 MW Indonesia is able to increase its electricity capacity to 15,000 megawatts to support its economic growth target of seven percent in 2014 by developing new power generating plants, Chief Economic Minister Hatta Radjasa said here last month. He said the government had to build power generators to increase the capacity of its electricity and to boost its economic growth to seven percent before 2014 so that it would be able to increase the competitive edge of its Hatta Rajasa industrial products in the world market. Hatta said that if Indonesia was able to increase its power capacity to 15,000 MW this year, it would be able to avoid rotating its power cuts.

Another global sukuk to be issued in October The government will issue another global sukuk (sharia bonds) in October 2010 to meet part of financing target in the 2010 state budget. The bonds will be issued prior to the issuance of retail sukuk in the fourth quarter of 2010, Director General of Debt Management at the Finance Ministry Rahmat Waluyanto said here last month. The government issued global sukuk with a nominal value of US$650 million in April 2009 using an ijarah sale and lease back scheme, and was oversubscribed seven times.

RI, Japan sign three air agreements TheconsultativemeetingbetweenJapaneseandIndonesianairtransportation authorities last month produced three important deals covering liberalization of flight entry points, additional flight to Narita, Japan, and expansion of codesharing system. The agreement on the liberalization of entry points is the mutual liberalization of incoming flight entry points from partner countries. With regard to flight capacity, the two sides could increase it to a maximum of 75 flights per week, or double the current position. With regard to additional route to Narita, Indonesian airline companies may increase their flight routes to Narita from seven to 14 times a week.

Narita International Airport

RI`s forex reserves reach US$77 billion Indonesia’s foreign exchange reserves reached more than US$77 billion in the year ended April 29, acting Bank Indonesia (central bank) Governor Darmin Nasution said. He noted that rising capital inflows were responsible for the steady increase in the reserves. The increased capital inflows also had had an impact on the rupiah’s appreciation against the US dollar, he said. The central bank would make every possible effort to maintain the local unit at the level of Rp9,000 per dollar so it would be acceptable to all parties, he said.

Bali`s per capita income up 14.1 pct Bali`s per capita income averaged Rp16.21 million last year, an increased of 14.1 pct compared to the Rp14.20 million in 2008. “The per capita income is expected to increase to Rp22.5 million by 2013, almost double that in 2008,” publication and documentation chief of Bali`s public relations and protocol bureau I Ketut Teneng told Antara last month. Teneng also said that the seven main programs of the Bali provincial administration are focused on the interest and empowerment of the people in the sectors of education, health, agriculture, small industries, tourism, small and medium businesses, and cooperatives, in addition to conservation, regional cultural development, employment and increased infrastructure.

Building the Asean Economic Community With regard to the ASEAN Economic Community, ASEAN aims to transform itself during 2010-2015 into a single market and production base. This implies that within the ASEAN Economic Community (AEC) there will be free flow of Goods, free flow of Services, and free flow of Investment

Figure 1 show that ASEAN’s position (as a combined force) in the global economy is quite strong; it is the fifth largest economy in the world. This should give ASEAN a prominent place in the world community of nations. But there is the need for ASEAN to be more united in their actions and policies and to become a united and strong powerhouse.

By Atmono Suryo

TRADE

ASEAN ECONOMIC COMMUNITY

ithin fastmoving East Asia, there are key countries such as China, Japan, South Korea and also ASEAN (the association of ten South East Asian Countries). Geographically, India is a South Asian country, but it is often associated with East Asia initiatives. ASEAN, which was formed on 8 August 1967, is often rated as an association that moves too slowly. As critics would say, it is an association of “no action and talk only”. But others would then say that, considering the peculiar situation in South East Asia, ASEAN is moving on the right way, very cautiously but persistently. Throughout the last few decades the situation in Asia has changed considerably. ASEAN has no doubt played a prominent role and has contributed its share in close cooperation with the other key countries in the region. ASEAN is well respected and is on many occasions in the “driver’s seat” East Asia has by and large achieved political stability. There are no big issues in the area of security. Economic growth of Asia led by China has surpassed growth in other regions of the world. It is expected that Asia should now take the lead to expedite global recovery and boost economic growth. Having gone through the Asian Financial crisis of 19978/98 and the global recession of 2008/09, ASEAN should now be in a position to shift gears and be on the fast track, in particular to implement the goal to build an ASEAN Community by 2015 supported by three pillars: Political-Security Community, Economic Community and Socio-Cultural Community. ASEAN ECONOMIC COMMUNITY (AEC)v

With regard to the ASEAN Economic Community, ASEAN aims to transform itself during 2010-2015 into

a single market and production base. This implies that within the ASEAN Economic Community (AEC) there will be: • free flow of Goods • free flow of Services • free flow of Investment The ASEAN Economic Community will cover a very large population of more than half a billion people, creating a huge regional market. ASEAN’s human resources consist mostly of people younger of age with a fast growing middle-income group. The association has a considerable size of total GDP combined with good growth rates of 4.4% in 2008. ASEAN has the potentials to become a more dynamic and competitive regional growth center and one of the key pillars of the East Asian economy—this will be the challenge for ASEAN. Key points: • ASEAN has a population of 584 million (in 2008) and is third in the world after China and India with populations of over one billion people. After ASEAN comes EU (European Union) with 496 million. • ASEAN has a workforce of 285 million; they are relatively young, educated, multilingual and highly trainable. In addition, there is the increased mobility of well-trained professionals in the region. • With regard to GDP in billion US dollars, ASEAN ranks fourth in the global economy. This fact is not sufficiently appreciated by ASEAN countries themselves. EU has the largest economy, followed by the US, Japan, China and ASEAN. figure 1: ASEAN IN THE GLOBAL ECONOMY Billion US dollars EU27

18,142

USA

14,265

Japan

4,924

China

4,402

ASEAN

1,507

India

1,210

ANZ (Australia New Zealand)

1,139

ROK (Rep. of Korea)

947

Source: ASEAN Secretariat

ASEAN has concluded Free Trade AgreementS (FTAs) with China, Japan, and the Republic of Korea. It has signed the first region-to-region FTA with Australia and New-Zealand. A Free Trade Agreement in goods will soon be signed with India. According to the WTO, Indonesia belongs to the 30 largest trading countries in the world. It should be realized, however, especially by Indonesian traders, that in terms of trade Indonesia is now fourth in ASEAN after Singapore (14th in the WTO ranking with US$270 billion), followed by Malaysia (21th with US$157 billion) and Thailand (25th with US$!52 billion. It is clear that the Indonesian trading community has to do its utmost to catch up with the other ASEAN countries and be more competitive. FREE FLOW OF INVESTMENT

out the years ASEAN has gained strength not only in Asia but also in the global setting. Armed with its strong political clout ASEAN has shown that in many regional forums and undertakings it has been able to be in the driver’s seat. ASEAN’s strategic goal to create an ASEAN community with the ASEAN Economic Community as one of the three pillars (which places ASEAN as a single integrated market) will give the association a stronger economic position in Asia, along and almost on a par with China, Japan and India. This position should be well understood by the Indonesian community to prepare itself for the upcoming ASEAN Econom-

Total Population

583.7 million

Total Land Area

4.4 million sq. km.

Total Gross Domestic Product

US$ 1,506.2 billion

GDP Growth

4.4 per cent

Total Trade

US$ 1,710.4 billion

Total Exports

US$ 879.14 billion

Total Imports

US$ 831.23 billion

Intra-ASEAN Exports

US$ 242.5 billion

Intra-ASEAN Imports

US$ 215.6 billion

Intra-ASEAN Trade

26.8 per cent of ASEAN total trade

FDI Inflows

US$ 60.2 billion

Intra-ASEAN FDI Inflows

US$ 11.1 billion

Source: ASEAN Secretariat

The ASEAN Secretariat has the following to say about ASEAN’s natural resources: “ASEAN has one of the world’s richest biodiversity and natural resources in oil and gas reserves and minerals, among others. These provide abundant opportunities for resource-based industries. ASEAN Member States are among the world’s largest producers and exporters of rubber and rubber products, furniture and woodbased products, palm oil-based products, oleochemicals, tin, gems and precious stones, tropical fruits, rice, oil and natural gas”.

Source: ASEAN Trade Database

ASEAN’S POSITION IN THE WORLD ORDER

Slowly but surely through-

The writer is former ambassador to the EU.

figure 2: ASEAN BASIC INDICATORS

Between 1998 and 2007, FDI inflows into ASEAN experienced rapid growth as can be seen from the graph below. The largest flow comes from the European Union, followed by ASEAN, Japan and the US. Until 2008 China’s share was still small. ASEAN itself has thus become an important supplier of investment within ASEAN. This trend is already happening in Indonesia in various fields. FDI inflow to ASEAN by sectors indicates that services receive the largest share, followed by manufacturing and mining and quarrying (Figure 4). NATURAL RESOURCES

ic Community with its free flow of goods, services and investment. It is therefore of prime importance during the coming five years that all efforts be made to strengthen the domestic Indonesian economy. As of next year, 2011, Indonesia will again assume ASEAN’s chairmanship. It is generally expected that Indonesia will take firm leadership to strengthen ASEAN, internally as well as in its relations with the regional and international world, and put ASEAN on the map as one of the key economic regions in the global economy.

figure 3: ASEAN TRADE PERFORMANCE Value in billion US$ 1800

Total Trade: 1,710

1600 1400

Extra-ASEAN: 1,252

1200 1000 800 600

Intra-ASEAN: 458

400 200 0

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

figure 4: fdi flows to ASEAN, 2004-2008 US$ billion 80.0 69.5

70.0

60.2

60.0

55.0 39.6

50.0 40.0

35.3

30.0 20.0 10.0 Year

2004

2005

2006

2007

2008

Source: ASEAN Secretariat

ASAN’S MANDIRI JAYA MOTOR

A Role Model in Entrepreneurship at Jababeka With this conclusion, Asan finally made the right decision: withdrawing from his savings a handsome amount of Rp260 million to buy a Pinangsia Commercial unit, one of Jababeka’s bestselling properties.

When Asan and his wife Servi left Pontianak, West Kalimantan, for Java some years ago, what they were thinking about was simple: find the right location to start a new business on Indonesia’s most densely populated island. The family made the decision to leave their hometown after learning about the success story of their son who had four years earlier arrived in Cimandiri, Cikarang, Bekasi regency to start a new business. Asan and Servi initially stayed at their son’s new house while exploring every possibility for setting up a new venture. Asan roamed Jakarta and its vicinity to look for new business opportunities and eventually stopped by Kota Jababeka, a new township on the eastern outskirt of Jakarta. There, for the first time, Asan drew the conclusion that this must be the right place he had for months been looking for.

The new industrial site was adorning itself and Asan’s business instincts convinced him that very soon this would be one of the most soughtafter integrated townships he should not miss. He began to ask around and ob-

served the township for himself till he got the conviction that soon Jababeka would be inhabited by a lot of people and the presence of numerous multinational companies would turn this area into a “city of the future” that would be suitable for business and

decent living. With this conclusion, Asan finally made the right decision: withdrawing from his savings a handsome amount of Rp260 million to buy a Pinangsia Commercial unit, one of Jababeka’s bestselling properties. The shop that he bought did not appear to be a prospective place when he first stepped in. It was surrounded by swamps, and yet his imaginations convinced him that this would, somehow, be one of the busiest spots in the not-so-distant future. Despite the then condition of the site, Asan was fully convinced he had made the right choice. He paid it up through a one-year installment scheme and then on a new era of success. The first chapter of his success story began with the opening of Mandiri Jaya Motor, a workshop that has since its establishment become a point of attraction in Jababeka. The first floor of his shop was used

for spare parts; and it is also the site of his workshop where people can get their vehicles repaired. The couple and their three daughters have since then lived on the second floor. The garage opens every day at 8 a.m. and closes at 6 p.m.; sometimes even 9 pm when they have a lot of customers. Every day they repair at least 20 vehicles from among many that come to them. Not long after it was opened, the garage began to sell motorcycle accessories as well. Now they intend to expand the operation, thanks to rising demand. Earlier this year they were known to have made plans to start the expansion after the Chinese New year. Some years have passed since Asan started the business and he is now looking ahead with greater confidence that Jababeka will become a lot more popular due to the existence of so many multinational companies.

Like the growth of Jabebeka that has been so remarkable over the past few years, so does Asan’s vehicle repairs business which has brought him a handsome amount of profit. He used part of this to buy a 135 square meter plot of land in nearby Cikarang as an investment, believing that land prices will continue to soar so he will collect a handsome amount of profit when he sells it one day. As an example, the price of property as big as his—which was only Rp260 million a few years back—is now Rp350 million. But he does not intend to sell his property yet; in fact he wants to buy more, considering the strategic nature of Jababeka as both an industrial center and a nice living environment. The township has gained the reputation of being one of Indonesia’s cities of the future.

The President Post

A6 May 12, 2010

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The Economy Sri Mulyani emphasized that in Public-Private Partnerships both sides have to share and contribute in the cost side, risk management side also in the management of the infrastructure partnership itself.

In the Photo: Sri Mulyani, The Minister of Finance left, Armida Alisjahbana, Chairperson of Bappenas, and Purnomo Yusgiantoro, The Minister of Defense, as the distinguished speakers at Infrastructure Asia 2010 Conference “Breaking Down the Barriers to Public-Private Partnerships”

Photo: The President Post/Nandi Nanti

Minister Sri Mulyani:

Q1 Economic Growth Estimated at 5.7% She said that the conditions could be made thanks to Indonesia`s positive economic stability which was supported by capital inflow, increase in foreign exchange, rupiah appreciation, strengthening of stocks index and positive investors` perception.

inance Minister Sri Mulyani Indrawati told House Commission XI on financial affairs at a hearing here last month that Indonesia`s economic growth in the first quarter of this year is expected to reach 5.7 percent, or at least 5.5 percent based on the 2010 growth target. She said that in the revised budget, the growth ranges for the private consumption was set at between 3.6 and 4 percent and the government consumption at between 9.7 percent and 9.8 percent. The range of fixed gross capital investment (PMTB) was set at between 7.1 and 7.2 percent and that of exports, which are expected to sharply increase was estimated at between 21.7 percent and 21.9 percent. “The assumption for exports increased from 3.7 percent in the fourth quarter of 2009 and that of imports reached 1.6 percent,” the minister said. She said that the conditions could be made thanks to

Indonesia`s positive economic stability which was supported by capital inflow, increase in foreign exchange, rupiah appreciation, strengthening of stocks index and positive investors` perception. “This is also supported by the inflation rate which until March 2010 only reached 0.99 percent, or 3.34 percent year-on-year and stability of Bank Indonesia`s key rate at 6.5 percent,” the finance minister said. According to the minister, the improvement in the macro assumptions of the country`s economy is also thanks to the improvement of the global economies, which in various Asian, European and American countries were getting better than earlier expected. ADB: RI economy to grow 5.5% in 2010

Rising private consumption and investment will allow the Indonesian economy to grow by 5.5 percent in 2010 from 4.5 percent last year, according to the Asian Development Bank’s (ADB) an-

nual flagship economic publication. The global economic recession had only had a moderate impact on the Indonesian economy, ADB in its Asian Development Outlook 2010 (ADO 2010) released last month, said. “Economic activity is forecast to quicken this year and return to the pre-recession levels of 2011, based on increasing domestic demand and supportive macroeconomic policies,” ADB said in its press release. Despite the achievements, raising investment in infrastructure and generating enough jobs remain major challenges. Good harvests, an appreciating rupiah, and lower global food and fuel prices paved the way for inflation to abate to its lowest in almost a decade. Inflation decelerated from 12.1 percent year-on-year in September 2008 to 2.8 percent in December 2009, averaging 5.0 percent in 2009. The unemployment rate declined slightly from 8.1 percent in February 2009 to 7.9 percent in August 2009, but employment in the formal sector increased by just 0.8 percent, or 260,000 jobs in this period. Lower food inflation and government cash payments for poor households in early 2009 contributed to a decline in poverty incidence by about 1 percentage

National Meeting Recommends Bolstering Domestic Financing Hatta said efforts to increase domestic financing could be done by increasing efficiency in tax collection and sharpening the allocation of budget for subsidy or ministries based on “well targeted spending” principles.

he national meeting between the head of state, cabinet ministers, provincial governors and stakeholders has recommended strengthening domestic financing. “The target for 2014 is for the debt ratio to the GDP to drop to 24 percent and tax ratio to rise to 14.2 percent,” the coordinating minister for the economy, Hatta Radjasa, said here last month. When presenting an expose on recommendations of the working group on economic development before President Susilo Bambang Yudhoyono and other participants of the meeting at Tampaksiring Palace, Hatta said efforts to increase domestic financing could be done by increasing efficiency in tax collection and sharpening the allocation of budget for subsidy or ministries based on “well targeted spending” principles.

He said they could also be done by developing long-term financing through diversification of financing sources to include pension and insurance funds. They could also be done by “expanding financing instruments through bond issuance for certain projects such as infrastructure,” he said. He said optimalization could also be done by developing accredited non-banking financing institutions and supporting institutions in the regions such as credit insurance and credit information bureaus. The meeting closed by the head of state that day also recommended increasing efficiency in financing with regard to boosting domestic financing by empowering banks for agricultural and fishery sectors as well as for small and medium businesses and processing industries. He said efficiency in the banking system should also be improved so that it would be more responsive to signals of monetary policies from Bank Indonesia. Hatta said effectiveness in financing could be also improved by raising sovereign rating to an investment grade immediately by among others maintaining macro-stability, accelerating infrastructure development and maintaining budget credibility as well as by “immediately finishing the bill on financial system safety net.”

“The target for 2014 is for the debt ratio to the GDP to drop to 24 percent and tax ratio to rise to 14.2 percent,” Hatta Rajasa Coordinating Minister of Economic Affairs

With regard to social welfare development Hatta said recommendations covered three areas namely evaluation of pro-people programs, just development and efforts to achieve the MDGS goals for 2015. President Yudhoyono in his closing speech said the recommendations would be put in the presidential instructions to be signed soon for distribution to and implementation by all governors.

point to 14.1 percent in the 12 months to March 2009. Financial indicators strengthened as the year progressed. The rupiah appreciated against the US dollar by 18.2 percent in 2009, recovering from depreciation in late 2008. Capital inflows picked up, along with the economy, from March. Yields on government bonds fell significantly, stock prices climbed, and credit default swaps returned to levels seen before the crisis. Foreign direct investment is expected to rebound and domestic

investment will be encouraged by the quickening pace of economic activity, tax breaks, a better market for raising equity capital, and improved credit availability. In value terms, merchandise exports in January 2010 soared by 59 percent, and imports by 45 percent, from depressed levels in the prior-year month. For the full year, exports are forecast to rise by about 11 percent, based on the forecast increase in world trade and firm prices for commodity exports. Stronger domestic demand will propel imports by about 16 percent, ADB predicted.

State Revenues to Increase Rp 2.8t this Year State revenues are projected to increase Rp2.8 trillion this year following changes in the macro economic assumptions in the state budget as agreed on by the government and the House of Representatives (DPR), a finance ministry official said. “The increase in state revenues will come from tax and excise receipts,” Head of the Fiscal Policy Board at the Finance Ministry Anggito Abimanyu said at a hearing with the House Commission XI at the parliament building here last month. At the meeting, the House Commission XI and the government agreed on the assumed economic growth target of 5.8 percent in the revised 2010 state budget. The figure represented a 0.3 percent rise compared to the previous forecast of 5.5 percent.

Indonesia was one of the few countries in Asia to register healthy growth last year amid the global financial crisis. Its economy grew 4.5 percent, the third highest among G20 countries after China and India. The government and the House also agreed to raise the target of the rupiah`s exchange rate to Rp9,300 from Rp10,000 per dollar and lower the inflation rate target to 5.3 percent from 6.00 percent previously. Anggito said the tax ratio was expected to reach the level of 11.8 percent with tax receipts projected to increase Rp1.7 trillion to Rp599.1 trillion from Rp597.4 trillion. He said customs and excise receipts were projected to increase Rp100 billion to Rp81.1 trillion from Rp81 trillion and income tax on oil and gas to go up Rp1.2 trillion to Rp55.8 trillion from Rp54.7 trillion.

Photo: The President Post/Nandi Nanti

The House Commission XI and the government agreed on the assumed economic growth target of 5.8 percent in the revised 2010 state budget.

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May 12, 2010 A7

Industry The Rise of Indonesia’s Manufacturing Industries Indonesian manufacturing industries, in contrast to the issue of “de-industrialization”, continues to grow at a fast pace. It could be expected that “Vision 2030” as launched by President SBY can be realized soon. By Cyrillus Harinowo Hadiwerdoyo

r. Johnson (not his real name) is not new in the packaging business. He started it many years back by compiling used carton boxes from scavengers and rearranged them into usable carton boxes for packaging. He had been in the business for many years until at one time he was able to build his own corrugated box company. The development of the plant was financed by an Indonesian bank. He did that day after day until his business instinct told him to move further upstream. Finally he seized the opportunity by acquiring a bankrupt paper company in Europe and brought the plant and machinery to Indonesia. That is certainly not an easy task. In fact, the number of containers needed to move the factory reached 100. That is certainly a logistical nightmare, but he managed to do it successfully. The plant was re-installed in Jakarta, re-painted and also supplemented with a brand new power plant and other critical equipments. Now he enjoys a “new” factory with a daily production of around 400 tons of carton papers. That is still somewhat below the full production capacity that he may reach within this year. Mr. Johnson was certainly able to read the signs of the times. He knew exactly that the demand for carton boxes has increased exponentially and will continue growing at a very fast rate. Therefore, serious dependency on the producers of carton boxes will put his company in a precarious situation. All the more so if the market for carton paper is a seller’s market. This perception was also felt by his colleagues. However, moving upstream is being in an entirely different business as he did with the corrugated box business. Aside from the technical knowledge factor, moving upstream also means a quantum leap in financial needs. With strong determination, not to mention “guts”, he finally overcame the myriad of problems that stood in the way of his success. The last hurdle that he succeeded to overcome was financial assistance. Luckily he could secure strong financial back up from one Indonesian private bank. He felt relieved—his dream finally came true. The story of Mr. Johnson reflects the trend that is currently happening. The rate of growth

of the Indonesian manufacturing industries, based on anecdotal evidence and not official statistics, is quite high. Unilever Indonesia is another success story. The Indonesian branch of Unilever Plc of the United Kingdom always enjoys double digit growth for many years. In fact, the first 70 years of its existence in Indonesia saw the company reached a sales value of US$1 billion for the first time. However, five years afterward, the company could add another US$1 billion in its sales value. The management has now raised the bar by increasing the target by doubling the sales in four years time. That is certainly not an easy task. In fact, the previous rate of growth has been second after Vietnam in the rank of Unilever global business. But as we all know, Vietnam started with a much lower base than Indonesia. In Rupiah terms, the sales value of Unilever Indonesia grew by 22.5 percent in 2008 and by 18.9 percent in 2009.

Indonesia also seems to be a regional production base for a certain number of electronic products. While fulfilling the high rate of growth of the domestic market, Indonesian exports of electronic products continued to climb back after a few months of interruption by the global crisis.

One of the interesting stories from Unilever Indonesia is the production of its skin care products such as Ponds, Vaseline and the Indonesian brand “Citra” (“Image”). The high rate of growth achieved on the sales of those products in Asia prompted the management at the London headquarters to build a factory in Asia to cater to the entire region. Having considered a long list of various Asian countries, including India and China, the management finally and seriously considered the strengths

and weaknesses of two countries, Thailand and Indonesia. Thailand is better in almost all categories, but Indonesia has a large market that cannot be ignored. The decision to put the factory in Indonesia was executed by acquiring an industrial land in Jababeka Industrial Park, east of Jakarta, in August 2007. The company was extremely fast in developing the factory. In fact, in March 2008 the factory already started operations. The new factory, which I visited recently, looks like the cosmetics department of an upscale department story: flashy and very clean. In its inaugural opening, it was said that the factory is the largest skin care factory in Asia. Currently, the skin care factory almost reaches its full capacity. Therefore, the company has decided to build a second factory this year, two years ahead of the initial plan. With the rate of growth of over 40 percent, the demand for the product will hit full production capacity very soon. Once the factory is completed, we can expect the title of the “largest skin care factory in Asia” to remain in Unilever Indonesia’s hands. Such a high growth certainly requires strong supplies back up. Packaging for the products is also something that should grow at the same rate with this product. Therefore, packaging companies such as owned by Mr. Johnson experienced high order time. Aside from Unilever Indonesia, other consumer goods companies also enjoy a very strong growth in the past few years. This reflects the dynamism of the “population based economy” that has been hinted by Goldman Sachs, Pricewaterhouse Coopers and others. But the rise of the Indonesian manufacturing industries is not limited to consumer products only. The automotive industry, for instance, also enjoys hefty growth in the past few years. In fact, in the first quarter of 2010, Indonesia enjoyed the largest sales of cars. Traditionally, Indonesia always ranked third in ASEAN car sales after Thailand and Malaysia. In fact, in 2009 Indonesia continued to remain third in ASEAN after Indonesian car sales dropped by almost 20 percent to 486.000 units. Meanwhile, Thailand and Malaysia enjoyed a much lower rate of decline in 2009. In 2010, however, our car sales in January, February and March continuously rank edabove the other two countries. In the motorcycle industry, sales have exceeded 6 million units in 2008. This production record may be exceeded in 2010 as the performance of the first quarter of 2010 has shown a rate of growth of 36 percent. The industry uses 97 percent local content, so that industries that produce parts and components also enjoy a similar growth rate. One interesting feature of the growth was the shift of consumers de-

Photo: www.unilever.co.id

UNILEVER SKIN CARE FACTORY: Currently, the factory in Jababeka Industrial Park almost reaches its full capacity. Therefore, the company has decided to build a second factory this year, two years ahead of the initial plan. With the rate of growth of over 40 percent, the demand for the product will hit full production capacity very soon.

mand from manual transmission motorcycles to automatic transmission. Introduced only a few years ago, the share of automatic motorcycles has reached over 40 percent of overall products. In fact, higher valued motorcycle, with a larger size such as Kawasaki Ninja, has penetrated the market successfully in the past few years. All these trends reflect the growing influence of the Indonesian middle class. Indonesia also seems to be a regional production base for a certain number of electronic products. While fulfilling the high rate of growth of the domestic market, Indonesian exports of electronic products continued to climb back after a few months of interruption by the global crisis. Polytron, an indigenous Indonesian electronic industry, experienced a high rate of growth in the past few years. In fact, they saw a pattern where higher value products received stronger demand relative to lower priced products. That certainly attests to the rise of the Indonesian middle class. The rise of the Indonesian population-based industries created demands for upstream industries. Pohang Steel of Korea (POSCO) developed a plan, in partnership with the Indonesian state-owned steel makers Krakatau Steel, to build factories that could multiply the current production of the Indonesian Krakatau Steel. The demand of steel for

Photo: The President Post/Nandi Nanti

THE GROWING AUTOMOTIVE INDUSTRY: As the nation’s economy improves significantly, so does its automotive industry, marked by a sharp rise in the sales of its products.

the automotive and motorcycles industries as well as various other products increased exponentially so that importing steel from other countries will create a certain kind of dependency. With car production capacity approaching 1 million units, the production of high quality steel will be able to meet such demands. The Indonesian packaging industry,

which uses plastic materials such as polyethylene and polypropylene, also feels the same way. Continuous rate of growth on such products will certainly increase the demand of PE and PP. Very soon the production capacity of petrochemical industries such as Chandra Asri has to be expanded. If not, other investors will certainly build such a factory.

Indonesian manufacturing industries, in contrast to the issue of “de-industrialization”, continues to grow at a fast pace. It could be expected that “Vision 2030” as launched by President SBY can be realized soon. The writer is an economist and a regular columnist in major periodicals.

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A8 May 12, 2010

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Education FROM ENROLLMENT TO EMPLOYMENT:

PU Internship Program Paves the Way for Job and Career Opportunities to Students President University is the first and only university in Indonesia that provides two semesters of internship and apprenticeship opportunities to its students. The internship is part of the academic curriculum and is “a must” requirement to obtain a degree at PU. By: MJ Arquisola

his year we see a boom in the number of students entering President University. From less than a few hundreds in the last four years, PU is now enjoying a steep climb in student population that signals a “boom year” for the academe, so that efforts must be strengthened and enhanced to keep the student numbers rising in the years to come. One can say that this achievement could be attributed to the competent handling of the marketing programs by the University’s able-bodied Marketing team supported by other important business units. Well, it is, and it cannot be doubted that without these men and women PU will not be seeing its star shine in the academic community. However there are other veritable reasons for this achievement. PU implements strategic flagship programs that attract prospective students and parents to start paying the University a second look in choosing the best school for their children. These flagship programs are fully conducted in English in a cross-cultural

environment by faculty members with overseas education and qualifications. These flagship programs have been a big draw to parents who are willing to shell out extra million Rupiahs just to ensure that their children are accepted in PU. Nevertheless, it is apparent that the internship and career development programs give the parents a “safety net” assurance that every Rupiah they invest would produce positive returns. So if you’re a parent, you would be very interested about a university that does not give you a run for your money, but one that ensures that your child obtains employment after they graduate, or better yet, start working even before they graduate. President University is the first and only university in Indonesia that provides two semesters of internship and apprenticeship opportunities to its students. The internship is part of the academic curriculum and is “a must” requirement to obtain a degree at PU. The aim of this program is simple: to expose students to realistic work environments in order for them to learn many skills and capabilities that will prepare

them when they enter the workforce after leaving school. To ensure that this goal is achieved for the students, the University established a specific structural unit called the INTERNSHIP AND CAREER CENTRE (ICC) that is tasked with planning, organizing, and controlling the implementation of this program. The ICC opens and builds relationships with partner organizations, industries, and enterprises to open potential job opportunities for PU students and graduates. As of this writing, there are about 500 organizations participating in this program, and many of them big names like the Jababeka Group of Companies, Mattel, Chevron, Conoco Philipps, Samsung, Kraft, Nestle, Bank Danamon, HSBC, Astra Honda, Unilever, Ernst and Young, Intercontinental Hotel, and many more from all industrial sectors like manufacturing, service, telecommunications, hotels, trading, securities, transportation, property, etc. To ensure better continuity of the internship relationship, PU has also drawn and signed 22 MOUs with IT companies like

Mobiz Technologies, PT Berca Hardayaperkasa, PT Asprinet, public accounting firms such as KAP Kosasih and Nurdiyaman, Bank Danamon, and even PT Sari Coffee, the manager of Starbucks Coffee chains in Indonesia. Students may also take their internships abroad and PU has established connections with some overseas organizations specifically for this purpose. Another strategic service that PU gives to its students is helping them find jobs three months before they graduate, and still continue to help them find jobs six months after they graduate. This service is FREE, and is provided by the ICC through its numerous programs like Job Fairs, Career Days, Campus Hiring, and company referral hiring system. To date, PU has a 93% absorption rate, meaning that except for those who have chosen to pursue postgraduate studies or become entrepreneurs, almost all PU alumni are employed. Many graduates work with big multinational companies and enjoy above standard salaries and benefits plus training and development opportunities. To a parent this is a very interesting program

that in itself results in positive ROI for every Rupiah spent with PU. Students enrolled in the internship program are given academic support services to ensure continuous good quality of internship. Rules and regulations have been established to ensure a structured handling of the program, and there are policies that protect interns health hazards at work, for example. Moreover, students are each assigned a mentor that actually conducts scheduled visitations on site to check on the students’ progress and how they fare with their superiors and co-workers at work. Aside from this, the ICC conducts regular evaluations with the companies to find out problems and issues with the interns and ways necessary to correct them. And before students go for internship, they take part in skills development seminars in order to ensure that they are ready and prepared when they start their internship. “I personally define internship as the combination of opportunity, creativity, and personality in which we can develop ourselves to become a better per-

son with potentially good career or business in the near future,” says Fransisca Komala, an alumni of PU. She is currently working with a large bank. Another student, Evan Pujonggo, a graduating student from IT, says that “Internship will provide us real working experience useful for our future. Thus, it should be related to our own major, because we can apply the theories we’ve learned in class on a real working environment.” Thus the internship and career development programs serve the dual purpose of not only skills and capability development but also create real job and career opportunities for students. These

are strategic programs, and as it brings many benefits to students, PU will continue to support these programs and give it the strategic attention and resources necessary to enhance the delivery of quality service to its students. In the next article, we will tell you why we have many repeat customers or companies who seek PU interns, and why they like them. It’s very valuable information, so stay tuned. MJ Arquisola MHRM is currently Head of the Academic Bureau and Manager of the Internship and Career Centre, PU. She also teaches in the Faculty of Economics.

IMPORTANT PLUG-IN TO ALL COMPANIES INTERESTED IN INTERNSHIP: PU Internship Cycle is now OPEN to all Faculties of Communications students who are about to do their internship from September 2010 – April 2011. The Engineering and Computing Faculties will open their internships in January – August 2011. If you are interested to join our internship program, please contact Mr. Ali Nurhasan, ICC Coordinator, Tel no: (021)89109762 ext.208 or email to: icc_pu@yahoo.com for more details and information.

Business BUSINESS BRIEFS

Japan’s electronic giant Panasonic Corp. plans to move its audio digital factory from China to Indonesia this

Telkom posts Rp11 trillion in profit State telecommunications operator PT Telkom last year posted a net profit of Rp11.33 trillion, up 6.7 percent from a year earlier. Income rose 6.4 percent to Rp64.60 trillion from Rp60.7 trillion, leading to a 6.7 percent rise in net profit, PT Telkom President Director Rinaldi Firmansyah said in a press statement last month. Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 5.6 percent to Rp36.6 trillion, he said.

Ad spending up 26% to US$1.4 bln in Q1 Advertisers in Indonesia spent Rp13.02 trillion (US$1.44 billion) in the first quarter of this year, up 26 per cent from the same period last year. The increase was partly caused by higher cost of advertising, Ika Jatmikasari, associate director of Nielsen Media Indonesia, said. Television advertisements recorded the highest increase of 31 per cent to Rp8 trillion, Jatmikasari said, noting that normally the highest growth was recorded in newspaper ads, which rose only 19 per cent to Rp4.6 trillion. She said telecommunications products dominated advertisements with spending at Rp1.302 trillion or an increase of 54 per cent year-on-year.

Two Russian airlines to fly to RI The Transport Ministry is set to licence two Russian airline companies to fly to Indonesia this year. The two Russian airlines, Transaero and Aeroflot, would serve direct flights linking the two countries starting at the end of this year, Air Transport Director Tri S Sunoko said in a press statement last month. Transaero so far flies the Russia-Denpasar charter route twice a week and now plans to operate scheduled flights, he said. Russia`s state-owned Aeroflot would fly from Moscow to Denpasar vice versa as of December 2010, he said.

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The debts of US$561 million in March 2010 consisted of US$320 million owed to the London-based Export Credit Agency (ECA), US$131 million to Floating Rates Notes (FRN) of creditors in Singapore, and US$105 million to PT Pertamina and Angkasa Pura I and II.

ational flag carrier PT Garuda Indonesia is set to pay in full its remaining debts of US$561 million by 2016. “The schedule and restructuring of the company`s debts have been approved by the creditors,” President Director of Garuda Indonesia Emirsyah Satar said after a non-deal roadshow in Hong Kong last month. He said the debts of US$561 million in March 2010 consisted of US$320 million owed to the London-based Export Credit Agency (ECA), US$131 million to Floating Rates Notes (FRN) of creditors in Singapore, and US$105 million to PT Pertamina and Angkasa Pura I and II. The schedule of debt repayment to ECA has been approved to be paid until 2016 with principal installments and interest of US$45 million per year. Payments of Garuda`s debts to Pertamina and Angkasa

Pura have started since 2009. Emirsyah said Garuda`s capacity to pay its debts to the creditors is due to improvements of its performance. “In 2009 Garuda`s net profits for the first time reached Rp1 trillion, which had encouraged the company`s management to continue increasing the value of the company,” he pointed out. However, he did not dare to set a projection of the company`s income and profit in 2010, saying only that Garuda this year allocated US$100 million in capital expenditures. The funds will be used for business expansion such as opening new routes, increasing services related to information technology and aircraft replacements. Garuda Indonesia to use 24 new aircraft selling 16 old ones

In a related development, Garuda will sell or return to lessors 16 old Boeing 737 aircraft of 300, 400 and 500 series in its bid to modernize its fleet. Emirsyah said 23 new Boeing 7373-800NG are due to arrive in the country from Boeing’s facto-

Four banks pledge Telkom Rp3.5 trillion State telecommunications operator PT Telekomunikasi Indonesia Tbk (Telkom) has obtained a standby loan commitment of Rp3 trillion to Rp3.5 trillion from four domestic banks. “A standby loan agreement will be signed in May 2010,” Telkom Finance Director Sudiro Asno said last month. He said 90 percent of the loans would come from three state banks and the rest from a private bank. The company posted a net profit of Rp2.78 trillion in the first quarter of 2010, a 12.9 percent increase compared to the same period last year.

Photo: www.airlinersgallery.wordpress.com

Garuda will increase the number of its planes to 116 by 2014, from the current 68 units with destinations to 36 cities.

ry in Seattle. Another new Airbus A330200 is to come from Toulouse, France. Currently Garuda has 72 aircraft, he said, adding that with 16 planes to go and 24 coming in the airline will have a fleet of 80 aircraft. Garuda has projected to reach a five-star service standard in 2012 by constantly improving its services and increasing the number of its aircraft. “Insya Allah (God willing) in the next two years we will reach a five-star rating,” Emirsyah said after signing a memorandum of understanding (MoU) on ticket-

ing with PT PLN in Jakarta last month. He said currently Garuda has won the status of a four-star Sky Track like Emirates. “There are only 26 airline companies in the world enjoying four-star status, and Garuda is the 27th. Even the Dutch airline KLM is on a three-star status,” he said. For that purpose, Emir added, Garuda will increase the number of its planes to 116 by 2014, from the current 68 units with destinations to 36 cities. “This year we also plan to open another 12 domestic and interna-

tional destinations,” he said. Garuda is currently also busy with building corporate market by signing an MoU with a number of state enterprises and big companies in Indonesia on ticketing. “We have so far signed MoUs with 28 state enterprises to develop the corporate market,” he added. Last year Garuda signed MoUs with 580 major companies in Indonesia with a total income of more than Rp580 billion. This year, Garuda has projected its earnings from sales to big companies at Rp2 trillion under similar cooperation schemes.

PT Timah Posts Rp 141.8 B Net Profit in Q1 The increase in net profit is due to improvement in the world average price of tin metal along with the recovery in consumer purchasing power.

Aeroflot, Russia’s state-owned airlines

Garuda Indonesia’s Debts Fully Paid Off in 2016

Panasonic to move audio digital factory to Indonesia

year. Labor costs in China are no longer competitive, says Rinaldi Sjarif, the vice president of Panasonic’s Indonesian unit, PT Panasonic Gobel Indonesia. The principal has decided to move its production operation from China to Indonesia as production costs are cheaper in the country, Rinaldi said.

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T Timah (Persero) Tbk reported last month its operating performance and unaudited financial statements ans that of its subsidiares for the period that ended on 31 March 2010. The report mentioned the company’s net profit of Rp 141.8 billion, which is an 882% increase over the same period in 2009 of Rp 14.4 billion. The basic earnings per share

also increased by Rp 3,- over the period of 2009 to Rp 28,- per share in the first quarter of current year. The increase in net profit is due to improvement in the world average price of tin metal along with the recovery in consumer purchasing power. The average price received by the company during the first quarter 2010 was US$16,970/ Mton, which is 51% higher than that of last year (US$11,221/ mton).

The highest price was 18,355/ Mton and the lowest was 14,950/ mton. Meanwhile, the average exchange rate was 20% lower than that of same period in last year, from Rp11,671 to Rp 9,475 per US Dollar. Operation Performance

Refined tin sales volume during the first quarter 2010 fell 11% from 11,014 Mton in the first quarter of 2009 to 9,770 Mton. Production of refined tin decreased from 10,462 Mton in the first quarter 2009 to 9,266 Mton in the first quarter 2010. Meanwhile, total tin-in-concentrate production during the first quarter of 2009 went up by 40%, from 5,288 ton Sn to 7,397

ton Sn. Factors affecting the increase in ore production is higher production of ore from inland mines, which was 5,241 ton or 93% higher than that of the production last year, which was 2,722 ton. Ore production from offshore mines during first quarter 2010 slightly decreased, from 2,566 ton Sn to 2,156 ton Sn. PT Timah also plans to increase its tin production to 50,000 tons this year through performance enhancement and increasing the number of suction boats for exploration. “In 2010 we expect our tin ore production to reach 45,000 to 50,000 tons, up from 35,000

tons last year,” company spokesman Wirtza Firdaus said here recently. He said the company now has eight suction boats and plans to build bigger ones to achieve the production target. Revenue from sales during first quarter 2010 is Rp 1,835.4 Billion or 16% higher over the same period in 2009 of Rp 1,587.5 billion. The amount comes from refined tin sales which is Rp 1,541.2 billion and the reminder is Rp 294.1 billion from non tin sales. Total asset in the first quarter 2010 is Rp 4,933.9 billion, a drop of 2% over last year’s total value of Rp 4,855.7 billion due mostly to a drop in inventories.

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Business IHSG’S NEW RECORD LEVEL: The Indonesian bourse composite index (IHSG) hit the 2.995,302 mark, several points behind the psychological level of 3.000, thanks to a buoyant Wall Street and positive sentiments on domestic shares.

Photo: The President Post/Nandi Nanti

Ten State-Owned Companies to Go Public in 2011

PT Indosat’s Profit Up 139.2% in Q1 State telecommunications operator PT Indosat Tbk. booked a net profit of Rp285.9 billion in the first quarter this year which was up Rp119.5 billion or 139.2 percent from the same period last year. “The growth is driven by improved parameters in company operations,” its president director, Harry Sasongko, said in a press statement received here by The President Post last month. In the first three months of this year the company earned Rp4.73 trillion, which was 2.5 percent higher than Rp4.616 trillion recorded before. Operating expenses rose 11.4 percent to Rp3.968 trillion from Rp3.56 trillion earlier. The company`s EBITDA (earning before interest, tax, depreciation and amortization) was recorded at Rp2.244 trillion, up 3.3 percent from Rp2.173 trillion. Its EBITDA`s margin was

recorded at 47.13 percent, up 0.3 points from 47.1 percent before. “We keep seeing continued improvements marked by company earnings growth and the increasing number of customers,” he said. In the first three months of this year the subsidiary of Qatar Telecom added 5.98 million more customer numbers. So, total numbers until the end of March 2010 are 39.1 millions, rising 17.6 percent from 33.3 numbers at the end of December 2009. Although seasonal dynamics usually hinders performance during the first quarter, this year`s first three months have been a good start for Indosat. “We keep working hard to assure more added value for customers and stakeholders,” he said. The company`s debt until the end of March 2010 reached Rp24.937 trillion up 8.6 percent from Rp22.970 recorded before.

Some of the companies once proposed for privatization are plantation companies PT Perkebunan Nusantara (PTPN) III, PTPN IV and PTPN VII and construction company PT Waskita Karya. The ministry of state enterprises will propose 10 state-owned companies to go public in 2011, Mustafa Abubakar has said. “We have made ready at least 10 companies for privatization through an initial public offering next year,” the state enterprise minister said at his office here last month. He said the process of privati-

zation would be further discussed by the team of the Privatization Committee. “Selection of companies to go public is still underway. However we are ready with 10 companies which will be prioritized for the privatization,” he said. He did not mention the names of the companies that will be listed at the Indonesia Stock Ex-

change, saying only that some of the companies are operating in the plantation and construction sectors. According to records, some of the companies once proposed for privatization are plantation companies PT Perkebunan Nusantara (PTPN) III, PTPN IV and PTPN VII and construction company PT Waskita Karya.

The plan had been discussed at the House of Representatives but due to poor market conditions as a result of a financial crisis in 2008 it had been postponed. Regarding Waskita Karya, the company still had yet to put its balance sheet in order and finish its restructuring. Other state-owned companies

once mentioned to go public are Perum Pegadaian (pawn service) and PT Pelindo II (port management). “The government has encouraged state-owned companies to go public with a view to making their management more transparent and promoting good corporate governance to increase their value,” Mustafa said.

In the first three months of this year the company earned Rp4.73 trillion, which was 2.5 percent higher than Rp4.616 trillion recorded before.

CHEVROLET CRUZE: New Model for Comfortable, Safe Driving Jeannifer Filly Sumayku

Chevrolet Cruze first appeared at the Paris Motor Show 2008 and was selected as one of the ten best cars worldwide (World Car of the Year 2010) by 59 international automotive journalists.

T General Motors Autoworld Indonesia (GMAI) has launched Chevrolet Cruze and begun its first sale in Indonesia as of midMarch this year. Entering the market as a compact sedan with a coupe-like proportion (notchback), the all-new Chevrolet Cruze is expected to lead in the Dsegment class by way of its futuristic exterior design and sporty, comfortable and relieved modern interior, complemented with an abundance of features and technologies. Chevrolet Cruze carries 1.8-liter engine DCVCP DOHC (Double Continuous Variable Cam Phaser) and is available in two variants, namely manual transmission 5-speed and automatic transmission GM Tiptronik 6-speed (the only one in its class). They are, respectively, priced at Rp 309 million and Rp 335 million (on the-road in Jakarta). “Chevrolet Cruze is more stable than other Chevrolet models in In-

donesia,” says Managing Director of GMAI Mukiat Sutikno. “After proving its superiority in the European and Asian markets—immediately after it was launched in the United States—Chevrolet Cruze will show its mettle in the medium sedan segment in the Indonesian market,” Mukiat added. Chevrolet Cruze first appeared at the Paris Motor Show 2008 and was selected as one of the ten best cars worldwide (World Car of the Year 2010) by 59 international automotive journalists. Besides the award, Chevrolet Cruze also achieved 5-star ratings in impact tests conducted by Euro NCAP (European New Car Assessment Program), CNCAP (China New Car Assessment Program), as well as in ANCAP (Australasian New Car Assessment Program). The technical development project of Cruze, which is coded J300, was started in 2006 under the control of GM’s European headquarters in Rüsselsheim, Germany.

As for the design work, the entire creative team collaborated in the facility of GM DAT (GM Daewoo Auto Technology) in Incheon, South Korea. Before reaching the point of design and the most perfect technique, GM designers and engineers created 221 prototypes for testing in Australia (Holden), Canada, China, South Korea (GM Daewoo), Sweden, United Kingdom, and the United States. Tests were carried out at regions of extreme low and high temperatures in order to achieve the best durability conclusions. The Cruze’s road test covered desert and snow-covered mountains, totaling 4 million miles or equal to 160 times of travel around the earth. The result: Chevrolet Cruze earned praise from not only consumers but also the international media. U.S. President Barack Obama even called the Chevrolet Cruze “The Car of the Future”, and once embellished the hood of a Chevrolet Cruze with his signature . The car’s overall dimension is

4,597mm by 1,788mm wide and 1,477mm high, while the axle reaches 2,685mm with the front wheel foot measuring 1,544mm and 1,558mm of rear wheel foot. The Cruze’s interior combines fashion values and function that characterize a new modern sedan for premium consumer needs. Besides offering spacious atmosphere with elements of a new design, the dual cockpit configuration of Chevrolet Cruze has an impressive concept of personalization, both for the driver and passenger. To achieve reliable performance, Chevrolet Cruze, which has garnered a Euro 3 specification (special for Indonesian market), is equipped with a new generation of engine, a 1.8-liter DOHC DCVCP. GM global products that use the Delta II platform is able to reach an energy level of 141 at 6200 rpm (revolutions per minute machine) and 176 torques at 3,800 rpm. Chevrolet Cruze’s fuel supply system of Multi Point Injection com-

bined with Double Continuously Variable Cam Phaser (DCVCP) is based on sophisticated technology that can combine accurately performance and fuel efficiency in various driving conditions. With this technology, Chevrolet Cruze is able to create spontaneous acceleration with low consumption of fuel. The results of fuel consumption test conducted by Indonesia GM team shows that Chevrolet Cruze consumes 1:14 (1 liter for 14 kilometers) in the city with normal traffic (not in a severe traffic jam) and 1:17 (for 1 liter for 17 kilometers) in a condition of constant velocity of 80 km per hour when speeding on the highway. Chevrolet Cruze also offers a standard safety featuring a key with immobilizer systems and alarm, brakes with the support of ABS (Anti-Lock Braking System), EBD (Electronic Braking Distribution) and BA (Brake Assist). These last three features suggest that Chevrolet Cruze will able to adjust to different road surfaces, both

In the photo:

Steve Carlisle - President Director GM ASEAN, Mukiat Sutikno- Managing Director PT GM AutoWorld Indonesia, Debora Amelia Santoso- Marketing & PR Director PT GM AutoWorld Indonesia

wet and sandy, optimally. In Indonesia Chevrolet Cruze is equipped with glass panes of bullet-resistance capacity combined with solar control windows. The Chevrolet Cruze that is marketed in Indonesia is available in five colors: Red Velvet, Light Gold, Poly Silver, Pewter Gray, and Carbon Flash Black.

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May 12, 2010 B3

Investment OPIC Signs New Investment Agreement with Indonesia

he ability of American companies to invest in Indonesia - the world`s fourth most-populous country - through the support of the Overseas Private Investment Corporation (OPIC) was improved last month by the conclusion of an agreement between the two countries. A US Embassy media release made available to The President Post said OPIC Acting President Lawrence Spinelli and Gita Wirjawan, Chairman of Indonesian Investment Coordinating Board, signed on April 13 the investment support agreement at a ceremony in Washington, D.C. attended by Indonesian Vice President Boediono. The new agreement updates a 1967 pact between the Unit-

ed States and Indonesia by adding OPIC products such as direct loans, coinsurance and reinsurance to the means of OPIC support which U.S. companies may use to invest in Indonesia. Noting the importance of developing a “mutually-advantageous economic relationship” between the two countries, the agreement affirms “a common desire to encourage economic activities in the Republic of Indonesia that promote the development of the economic resources” of Indonesia. “Indonesia offers a large and dynamic market for U.S. investment, which in turn will support Indonesia`s economic growth, a prospect that is only improved by the conclusion of today`s agreement,” said R. Spinelli.

“We look forward to working closely with both U.S. and Indonesian companies to facilitate new levels of investment in Indonesia,” he added. Spinelli noted that over its 39year history OPIC had committed more than $2.1 billion in financing and political risk insurance to 110 projects in Indonesia. Currently, OPIC is providing more than $94 million in support to six projects in Indonesia, in the energy, manufacturing and services sectors. OPIC was established as an agency of the U.S. government in 1971. It helps U.S. businesses invest overseas, fosters economic development in new and emerging

markets, complements the private sector in managing risks associated with foreign direct investment, and supports U.S. foreign policy. Because OPIC charges marketbased fees for its products, it operates on a self-sustaining basis at no net cost to taxpayers. OPIC`s political risk insurance and financing help U.S. businesses of all sizes invest in more than 150 emerging markets and developing nations worldwide. Over the agency`s 38-year history, OPIC has supported $188 billion worth of investments that have helped developing countries to generate over 830,000 hostcountry jobs. OPIC projects have also generated $72 billion in U.S. exports and supported more than 273,000 American jobs.

Dayaindo to Proceed with Rights Issue Plan Amid Legal Dispute

ayaindo Resources (KARK) plans to go ahead with its rights issue plan at the end of June despite facing a legal dispute. Dayaindo Corporate Secretary Dayaindo Endang Wijaya said the company will use the proceeds to finance its acquisition plans and to strengthen its working capital. Endang said Dayaindo will submit documents to the Capital Market and Financial Institution Supervisory Agency (Bapepam-LK) for effective statement for the rights issue in early May and use its 2009 financial statement. Dayaindo SVP Investor Relations Frederik Watimena said the company already has a standby buyer for the rights issue but that it was still optional. “The company will acquire a

coal and nickel mine land and infrastructure business in Central Kalimantan,” Frederick told journalists in Jakarta. Meanwhile, on the bankruptcy lawsuit filed by Alam Baru Mandiri (ABM) against the company, Frederick said it was wrongly addressed. ABM had accused Dayaindo of failure to meet its Rp3.17 billion debt obligation and thus filed for a bankruptcy suit against the company in the Central Jakarta District Court. “The (court) summon was wrongly addressed. The sale and purchase agreement involved Dayaindo’s subsidiary Risna Karya Wardhana Mandiri,” he said. Frederick stressed that Dayaindo did not have a contractual obligation to ABM. He said that Risna Karya Wardhana Mandiri (RKWM) requested for coal delivery from ABM and that

RKWM had made payment according to the agreement between both sides. He attributed the late payment from RKWM to ABM’s negligence for not sending invoice and other documents. Dayaindo received a court summon as defender in a bankruptcy suit on 28 April 2010. The case prompted the Indonesia Stock Exchange to suspend its shares from trading at the bourse. Meanwhile, ABM through its lawyer Indra Prasetya said that the sale and purchase agreement with Dayaindo was made in October 2009. He added that the company has evidence of a blank check payment from Dayaindo for the third shipping and that it read payment for coal. “We agreed on 80% advanced payment during bill of landing and that has been made in four

Ramayana Denies Tax Arrears Rumor Ramayana Lestari Sentosa Tbk (RALS) denied rumors which claimed that it still owed the government tax payment, saying that the claim was irresponsible and untrue. “The reports are untrue and a lie which were spread by irresponsible people,” RALS legal counsel Mucthar Luthfi in a press statement in Jakarta. Muchtar said Ramayana is a public company and that its financial statements are audited by a credible public accountant. He said that the retailer pays more than Rp250 billion in tax a year to the state. “Up until now, the company never has any tax payment arrears,” he defended. He elaborated that the 2004 tax case involved the company’s president commissioner Paulus

Tumewu, who was accused of not paying personal income tax payment of Rp7,994,617,750. However, Paulus has paid his Rp7,994,617,750 tax arrears plus fine which is four times the amount of the tax arrears, bringing the total amount to Rp31,978,471.000. As the result, the finance minister sent the attorney general letters dated 16 October and 31 October 2006 to ask for a halt on the legal process of Paulus’ case because he had paid his tax arrears plus fine. In a separate development, RALS has invested Rp85 billion to build a mall in Depok that can absorb up to 650 workers. Ramayana President Director Setiadi Surya said he is certain the new mall will not kill the tra-

ditional market business in Depok. “There is only one traditional market in Cinere and it is run by the private sector,” he said. Setiadi also announced the company’s plan to invest in Jayapura this year, which is aimed to support the government’s goal to boost independence of regional governments. “We will invest in Abepura, Jayapura this year because we want to expand across Indonesia and help the regional government to become more independent,” he explained. Ramayana is a publicly listed company with business lines in the department store, children’s entertainment center, and food court. The company has 105 outlets across Indonesia and employs up to 50,000 workers.

Cellsafe to Expand Biotech Activities Cellsafe International Group, a regional stem cell biotechnology company, is to expand its biotechnology business and research and development activities in Indonesia following a strategic partnership with PT Kimia Farma TBK (Kimia Farma). Cellsafe, through its subsidiary, PT Cellsafe International, last month signed a memorandum of understanding (MoU) with Kimia Farma, a leading in-

tegrated healthcare services companies in Indonesia. Cellsafe Executive Director Lau Kin Wai said the comprehensive partnership involved cobranding and co-marketing arrangements that would allow the group to harness the vast resources and in-depth market knowledge of Kimia Farma. Kimia Farma operates one of the largest network pharmacies

in Indonesia, with more than 400 outlets and owns more than 80 pharmacies in different hospitals. “Cellsafe has set up one of the largest stem cell cryogenic laboratories in Indonesia. With this partnership, we will be constructing a new state-of-art stem laboratory at a co-located facility with Kimia Farma Diagnostic,” he said after the MoU signing.

phases. The remaining 20% should be made once the certificate from Sucofindo is issued. We already obtained it, but we still haven’t received the payment. We have also tried to talk to them but Dayaindo continued to avoid it. This means it doesn’t have good will,” he elaborated.

BKPM Chief Sees Q1 Investment Growing at 10-15 pct Capital Investment Coordinating Board (BKPM) Chief Gita Wirjawan expressed optimism that investment in Indonesia will grow 10 percent to 15 percent in the first quarter of this year. After an expose at the Asia Pacific Ministerial Conference here last month, he said Indonesia`s economy was viewed positively by investors. The country`s economy, which grew 4.5 percent amid world economic meltdown in 2009, would be an added value for the country, he said. “Investors believe the the atmosphere in our country is conducive,” he said. He added he plans to an-

Gita Wirjawan, BKPM Chief

nounce investment results of the first quarter of this year next month.

Regarding the revised assumptions in the national budget, Gita said they were still on the right track. He said the fact that the assumed economic growth figure had been revised from 5.5 percent to 5.8 percent would not change the target of investment growth, especially with regard to gross fixed capital formation (PMTB). “We need PMTB to grow 7.8 percent to support 5.5 to 6.0 percent growth. So it is still on the right track,” he said. He said the PMTB must reach 10 percent to 11 percent in 2012 to be able to support the 2014 budget that is expected to reach Rp2,000 trillion.

BKPM Approves 20 Foreign Investment Projects in Batam The Capital Investment Coordinating Board (BKPM) has approved in the first quarter of this year 20 new foreign investment projects worth US$16.9 million in Batam, Riau Islands province. The projects come from Singapore, Malaysia, Taiwan, Australia, Norway, South Korea and the Netherlands, head of marketing and public relations of BP Batam, Rustam H

Hutapea, said last month. He said the number of approvals this year was higher than in the same period last year, which was recorded at 18. Meanwhile the value of investment projects approved this year rose 1.43 percent from US$16,649,493 in the same period last year. Their businesses include ship building/repair, restaurant, recre-

ation and trading. Other businesses include electronic component, machinery/ processing equipment/metal works, electricity control equipment, oil and gas mining supporting services, rubber goods, garments, housing, property development, business consultancy and management, loading and uploading services, metal processing and metal goods.

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Management What the Leader at the Top Wants to Know: How to Create a Winning Top Team

Lusi Lubis Managing Consultant Hay Group Jakarta

The leader at the top of an organization, typically the CEO or Presidents director, is challenged with many complex issues on a daily basis where increasingly complex information needs to be synthesized and critical decisions need to be made promptly . Leading a big organization is too complex to be done by one person. This is where a leadership team comes to play and can help the top leader with the critical functions to be performed. The leading of a team of leaders can be a difficult exercise for the leader at the top. Members of the top team have often strong personalities and their own ideas what needs to be done. This leaves the top team leader with a burning question: “How can I create a winning top team that is able to formulate and execute the right strategy, is able to achieve the organizations objectives and can collectively respond in a decisive and swift way to the challenges that the organization faces?”.

n this article Hay Group shares knowledge from rigorous research, interviews, observations and extensive top team coaching and top team intervention experiences. We will discuss six key issues that the top leader (in this article further referred to as CEO) needs to face when creating a top team and six conditions that can be put in place to increase the team’s capabilities which will enable their success. Issue 1: What kind of team do I want, if any?

There are many reasons why the CEO needs a top team: to help formulate and execute a strategy, to help reach company objectives, or to assist in quickly responding to market conditions. Our research shows that in essence there are four types of teams: • Information sharing (or alignment) team • Consultative team - advises the CEO on specific topics • Coordinating team -which deals with company wide issues, and focuses on execution of the company’s strategy • Decision-making team - which focuses on concerns of the whole organization Condition 1: You must have a real team In order to create an effective leadership team, the team must be bounded, stable and interdependent. Creating a bounded team means that it is clear who is, and who is not on the leadership team. An unbounded team is one in which each member has a different perception of who is on the team. It seems obvious that it must be clear who is on and who is not on the team. But in our research and team coaching experience we see that most often this is not clear at all. Often there are many different opinions who is really on the team and who is not. Many times we find that of let’s say 12 people in the room, answers can range from all 12 are team members to only 4 people form really the team. In addition, the team must be stable, meaning the members are kept in place for some length of time, without turnover; and the members must be interdependent and share accountability for a common purpose. An interesting observation is that when teams are large, this might be evidence that there is more than one team present trying to act as one. For example CEO’s often include members who are primarily concerned with daily operations as part of the more strategic decision making team. As a result neither the strategic agenda nor the operational one is adequately addressed. Issue 2: Do you know what the purpose of your team is?

Often CEO’s have a hard time explaining to their leadership team what its purpose is. Why is it so difficult? The purpose of the team may not be immediately apparent to the team, or to it’s leader. A leadership team’s purpose is not the same as the purpose of the organization, and it’s not just an exercise in execution. The CEO must find a way to express to the team what its unique value-added purpose is. They could, for example, be involved with the initial public offering, going international, acquiring another company, diversification, growing into an investment holding instead of an operating holding, or helping to bring new products to market. The mix of skill sets and competencies of the top team must be attuned to the unique value added purpose of the team. Condition 2: A compelling purpose Great leadership teams have

Ed Krancher Managing Consultant Hay Group Jakarta

three key components to their purpose: • The purpose is clear - they must be able to envision what the company looks like when they have reached their goal • The purpose is challenging it must be a stretch to achieve, but not impossible • The purpose is consequential it must have a vital impact on the company From our experience and research we see that most team members feel their work is very important and is challenging, but most are also unclear about the exact purpose of the team. Is it about providing a joint strategic direction is it on evading emerging crisis, is it on information sharing about individual functions, is it on ... what is it on? If your not clear on the purpose, how then to achieve the objectives of the team. Actually most often, if there is no clarity on the purpose of the team there will also be some unclarity on the objectives of the team. Also remember that a top team does not only have to deal with strategic issues. In fact, it’s quite common for top teams to deal with tactical issues that are critical to the organization. Just be sure to pick your (right) top team fights. Issue 3: Who should be on the top team?

Often the CEO ends up with the wrong people on the team? The first (wrong) assumption is that direct reports should be on the team. However we find that the best performing top teams consist of leaders who are there because they can contribute to the top team purpose, not because they are a direct report of the CEO. Secondly, some CEO’s feel the best choice for the top team are the star performers of the company. Although these shining stars may appear to be the

heated discussions about important issues to arrive at the right supported decision. These first three conditions make up the three essentials for any leadership team, and they are all inter-related: create a real team, make sure it has a compelling purpose, and make sure the right people are on the team (see the top part of the picture). If you as a top team leader can not do these three things to a reasonable degree, then it’s better to not have a team at all. Issue 4: Members thinK meetings are a waste of time

The fourth challenge a CEO faces in directing the top leadership team is when members think that meetings are a waste of time. This usually occurs when either the group is too large or the tasks members are asked to do as a team are trivial relative to their individual leadership roles. When planning an important meeting, the leader of the team should be sure the agenda is clear, the intended outcomes are clear, and members are prepared to discuss and make decisions. Nothing is more frustrating to leaders than spending hours, or even days in a meeting, only to emerge with few or no decisions having been made. Condition 4: Sound structure Creating a sound structure for teams is an enabler to success. Three ways to create a sound structure include: • Keep the team as small as possible; in the single digits • Ensure the agenda is meaningful and linked to the purpose of the team • Establish norms of conduct – members must understand what is always done, and what is not done during meetings and outside

Six Conditions for High Performing Teams at the Top(*)

Real Team

The Essentials

Right People

TEAM LEADERSHIP

Solid Structure

Condition 3: The right people The third essential condition is for the CEO to get the right people on the team, and get the “de-railers” off. It requires making tough decisions and having some hard conversations. The top team needs people who can take an enterprise perspective and be involved in all issues brought to the table, and not focus solely on their own area of responsibility. It also needs people who can work collaboratively and with integrity. How do you as a CEO know if there are de-railers on the team? Watch for team members who seem to have difficulty in seeing other people’s perspectives, undermine others, bring out the worst in other members of the team, and often lack integrity. However, you need to be cautious when labelling someone a de-railer. A person is not a de-railer simply because they have a differing opinion, or they create conflict in the team. Team members can often display conflict behaviour if the mission of the team is not clear or there are great challenges to be overcome; this does not mean they are de-railers. Never assume that a leadership team will operate smoothly and with little debate. In fact, it’s good for a leadership team to have confrontational, robust, passionate and

In our research and top team intervention experiences we found that these three qualities are important starting points for having an outstanding leadership team. Poor teams have less sound structures. When a poor team starts building on a clear meeting agenda and outcomes, are on the same page regarding the do’s and don’ts of the top team and the team is within the single digit size, within a couple of months real progress is noticeable to all team members. The CEO can ensure that meetings are an effective use of time by following a few simple steps: choose the agenda items, set the norms of preparation, and ask members to distribute materials in advance of the meeting. These simple steps will add to the effectiveness and efficiency of the meeting, will reduce the irritation level on the meeting process, will put more focus on the real issues at hand and even provides room for a relaxed atmosphere, creativity and some laughter. Also a good assistant to the top team can work wonders here.

Supportive Context

(*)HayGroup Global Research on Highly Effective Teams at the Top.

• Rewards alone do not create collaborative behaviour, but if used the wrong way, rewards can actually undermine the team's effectiveness. Rewards should not be used in a way that creates competition amongst team members. This fosters mistrust amongst team members. • Provide needed information, especially financial data in an accessible format. • Provide any consultation or training needed to build their expertise or knowledge base. • Provide administrative support, space, minimization of interruptions and the time needed to be effective. The challenge is to think about what obstacles the team has to

working effectively, both within a meeting context and outside the meetings, then to come up with solutions that help the team interact and work more effectively. You can for example start with meeting out of the office for the first few meetings to let everybody feel what it is like to work in a focused environment that fosters the needed teamwork. Issue 6: All the basics are in place but the team is still stuck?

When all previous discussed conditions are in place, and still there is little or no progress in team effectiveness, the team could be stuck. If this is the case it could be beneficial to bring in an external team coach who is skilled in working with executive leadership teams. At that point the team will not benefit from providing all the individual team members with a coach. More beneficial is to have the team coached as a whole to perform and behave as one team.

What gets in the way of a team's productivity? • The team lacks useful data • Rewards that undermine collaboration • Meetings logistics: Poor space, little time, allowed interruptions

Condition 6: Expert team coaching Three conditions that can be put into place when a team is stuck are: • Team coaching - as an entity • Use an external coach who is skilled in working with leadership teams • Place the same importance on leading the top team as you would in interacting with every other constituency

Condition 5: A supportive context Excellent CEO’s create a context that supports the team's productivity. There are four basic components to a supportive context:

The purpose for bringing in the coach must be clear to all top team members. The coach should not become a facilitator of meetings, but rather needs to focus on coaching the team. The coaching can have the characteristics

Issue 5: How come the team is not as productive as it could be?

The Enablers

Team Coaching

Time commitment in creating a cohesive team at the top is well worth the investment. best choice for top teams, they often have a mindset of looking out for their own division as individual performers, rather than having the company-wide vision that is necessary for contributing to a leadership team. Sometimes the CEO must make the hard call of removing or not allowing a top performer to the top team in favour of the greater good of the top team.

Compelling Direction

of relationship building, it can be a task-focused intervention or a combination of both. It is important to assess the team’s situation before choosing for a certain approach. When aiming for a task focused intervention the dynamics of interrelationships should not be forgotten. When aiming for relationship building the purpose and tasks of why the team was brought together should not be neglected. Flexibility on reacting to the team’s most immediate and prominent needs is key when going through the process of team coaching. Top leaders tend to pay a lot of attention to dealing with boards, shareholders, analysts, or key customers, but if one group suffers from a lack of the CEO’s attention, it is the leadership team. It's a matter of making the leadership team a priority. The way forward for teams that are stuck is to consider external team coaching, and for the leader at the top to place priority on leading the top team. These last three conditions are enablers that accelerate top team development, and avoid the team getting stuck. Having a sound structure, providing a supportive context, and engaging team coaching help leadership teams succeed (see the bottom part of the picture). Conclusion

Leadership teams are critical to an organization’s success. Time commitment in creating a cohesive team at the top is well worth the investment. The key success factors that the CEO needs to keep in mind are to have a real team, with clear boundaries, the right people, and a compelling direction. Good leaders enable their top teams to succeed by providing a supportive context with useful information, administrative support, and time for them to do their work. They also provide a sound structure, by keeping team membership relatively stable and establishing norms of conduct for how team members are to engage with each other inside meetings and out. And lastly, they bring in external team coaches when needed. About Hay Group Hay Group is a global consulting firm that works with leaders to turn strategies into reality. We develop talent, organise people to be more effective, and motivate them to perform at their best. With 86 offices in 47 countries, we work with over 7,000 clients across the world. Our clients are from the public and private sector, across every major industry, and represent diverse business challenges. Our focus is on making change happen and helping organisations realise their potential. Visit www.haygroup.com.

The key success factors that the CEO needs to keep in mind are to have a real team, with clear boundaries, the right people, and a compelling direction. Good leaders enable their top teams to succeed by providing a supportive context with useful information, administrative support, and time for them to do their work.

The President Post

www.thepresidentpost.com

May 12, 2010 B5

Leadership Can you do it? The Transition from Supervisor to Team Leader By Dr. Karan Singh MBA, DBA

“S

elf Managed Work Teams are not for the faint of Heart” – Fred Eintracht, a manager who pioneered Self Determined Work Teams (SDWTs) at Texas Instruments. Changing into a Team Leader is very difficult and not everyone makes it. At the very outset, the first big issue is role clarification; “don’t control”, “don’t direct people any more”, “Lead instead of Manage”, “Be a Coach instead of a Boss”, leave many a Leader confused about having a role at all. Then the typical transition problems from a tried and trusted system to something quite different. According to the author, there are 4 most common reasons for Supervisor Transition difficulty: 1. The change to SDWTs is often seen as a net loss of power or status. 2. The Team Leader role has not been well defined for most supervisors. 3. Some Supervisors are concerned that SDWTs could be a threat to their job.

4. In what may be called a double standard syndrome, many supervisors are expected to manage in a way that is very different from the way they are managed themselves. 1. Power and Status

People are unwilling to give up what they have all along come to value – Perquisites; as in the case of two senior level supervisors who had been asked to give up certain perquisites to create an egalitarian climate. One hesitated to forego his preferred parking space and another his spacious office – both symbols of success in the corporate world. Titles. “What am I going to tell my mother?” said the burly middle-level supervisor from Shell Canada during a training session in which he objected to giving up his title of Director; and perceiving the loss as a demotion. In preventing these normal desires from interfering with workplace effectiveness, some companies are holding sessions for families of former supervisors to reduce the anguish and scepticism. This would be even more difficult to manage when one considers ‘Culture’, and the ‘Power Dis-

tance’ variable within Culture. Creating SDWTs in companies within countries with high scores in Power Distance would pose a far greater challenge than in low Power Distance societies like the US, UK, Canada or Australia. ‘Power Distance’ as defined by Geert Hofstede is the degree of equality, or inequality, between people in the country’s society. A High Power Distance ranking indicates that inequalities of power and wealth have been allowed to grow within the society. These societies are more likely to follow a caste system that does not allow significant upward mobility of its citizens. A Low Power Distance ranking indicates the society de-emphasizes the differences between citizen’s power and wealth. In these societies equality and opportunity for everyone is stressed. 2. Well defined Role of Team Leader

The loss of power concerns are reduced when organizations create appropriate and clear Team Leader Roles and give them an understanding of Boundary Conditions.This also clears a misconception that SDWTs are a winlose game which the workers win.

In addition, the process of implementation of SDWTs when done in stages allows for education and preparation. Pamela Posey and Janice Klein in identifying the ‘job description’ of the Team Leader conclude that the following three attributes are consistently associated with the most successful leaders: • The ability to create strong mutual respect between the workers and the leader. • Assuring that the job gets done. • Providing leadership in getting problems solved. In addition Kimball Fisher, author of ‘Leading Self Directed Work Teams’ presents the essential contrast between a traditional supervisor and a Team Leader (Figure 1) 3. Job Security

Apart from Self-directed or

Self-managed ‘sounding’ like ‘no supervisors needed anymore’, there are ample examples that help reinforce this belief: • Dana corporation publicly announcing the reduction of management levels from 14 to 6 due to moving responsibilities down into the organization. • General Mills claiming that much of productivity improvements accrued due to the elimination of middle management. • Other companies like Monsanto and Tektronix having offered early retirement incentives to encourage downsizing, and then institute SDWTs 4. Double Standards

Seen as something “the top tells the middle to do with the bottom”, SDWTs could not be implemented successfully if there is lack of visible attitude and be-

haviour on the part of top management. The change from “manager” to “leader” is the most difficult as most have been rewarded, recognized and promoted for their controlling skills and not for their savvy in Delegation, Coaching or Facilitation. And giving up control for a human being is not that easy. Which reflects in the fact that it is harder for Team Leaders than Team Members to change

to SDWTs – as illustrated in the Figure 2. While the change from Supervisor to Team Leader is much like most ‘Change’; difficult to implement due to inertia and momentum. The good news is borne in the success of the various programs in companies like Kodak and Procter & Gamble, with the tremendous results that have accrued due the implementation of Self Directed Work Systems.

Dr. Karan Singh MBA, DBA, Organization Development Consultant, is presently Management Development Director at President University, and Managing Consultant of PT King & Singh Consulting. In his seventeenth year in Indonesia, Dr. Singh has wide experience, across a range of multinational companies, in areas like corporate training, market entry strategy, integrated marketing (external and internal marketing), communications, and human performance improvement.

figure 2: The Relative difficulty of changing to SDWT

figure 1: The essential contrast between a traditional supervisor and a Team Leader SUPERVISOR

TEAM LEADER

Plan, organize, direct and control

Ensure that resources are available for the team to produce on-time quality product and/or services

Meet cost, quality and delivery objectives

Develop team maturity – coach and counsel

Manage daily problems

Represent team in organization-wide activities

Coordinate activities and resources

Train and lead team in problem solving

Plan and implement improvements

Motivate team to achieve goals

Administer safety, housekeeping, and communications programmes

Assume responsibility for indirect tasks

Transition Difficulty

The change from “manager” to “leader” is the most difficult as most have been rewarded, recognized and promoted for their controlling skills and not for their savvy in Delegation, Coaching or Facilitation.

Supervisors & Managers

Non Managers

Time

The President Post

B6 May 12, 2010

Travel

All That Fauna Text and photos by Taufik Darusman

You would think visiting a theme park in Bali is the last thing vacationers would do, what with the limited time they have and the abundant tourism and cultural sites in store in the paradise island.

t the entrance to the Bali Safari & Marine Park, visitors are welcomed by a host of aquariums that houses an impressive and colorful collection of marine creatures you may never have seen before unless you’re an avid diver. But all that is nothing compared to the (at least) 400 amazing animals representing more than 80 species, including those that are rare and endangered, that also occupy the 40-hectare park. For starters, there are Sumatran elephants, Sumatran and Bengali white tigers and leopards. In addition, komodo dragons, hippos and cheetahs, not to mention all sorts of reptiles that are kept out of harm’s way.

And if that’s not enough to satiate your zoological taste, lions, zebras, alligators, bears and primates – all roaming in large, near-natural settings, including a monkey-inhabited rainforest, a tiger habitat and a savannahlike landscape with wild beasts – are at your disposal in the theme park. A few hours at the park is akin to experiencing an incredible adventure into a wildlife world, as a ‘safari journey’ offers visitors 40-minute close encounters with an array of fauna from the comforts of specially-designed busses passing through their habitat. Tourists with limited time on their hands may have to be coaxed into visiting the park, as Bali is not exactly a place you

go to marvel at the world of animals. But after a while being within the premises – green, cool and clean—you get the unmistakable feeling that you should stay longer than you had planned for. And, perhaps, even revisit the place before you leave Bali. The Bali Safari Park comes well recommended as it is a member of WAZA (The World Associations of Zoo and Aquariums), SEAZA (The South East Asians Zoo Associations), and CBSG (Conservations Breeding Specialist Group). It is operated by Taman Safari Indonesia, which is also behind the very successful 130-hectare Safari Theme Park in Bogor, West Java. Opened in October 2007, the Bali Safari Park was designed by an American architect whose field of expertise is in designing animal-friendly wildlife theme parks around the world. “The architect and his team took pains to develop a park that was as close as possible to the natural habitats of its animals and to ensure that the conservation of rare and endangered animals is managed well,” said the park’s guide . The venture currently employs over 250 people, that is expected to rise to about 400 as more animals need to be cared for and

The park offers a full range of amenities such as large restaurants, a 1200-seat theatre and exhibition area, “Amazon Water Cruise”, the Safari Lodge, an environmental education centre, fun zones, a water park, amusement rides and open recreational and picnic areas.

There are (at least) 400 amazing animals representing more than 80 species, including those that are rare and endangered, that also occupy the 40-hectare park.

many more visitors are expected to visit the site. The park offers a full range of amenities such as large restaurants, a 1200-seat theatre and exhibition area, “Amazon Water Cruise”, the Safari Lodge, an environmental education centre, fun zones, a water park, amusement rides and open recreational and picnic areas. Fun Zone was designed for children below ten years of age who wish to amuse themselves on a carousel, riding in a Climbing Car or trying the Go Go Bouncer. One spot that stands out is the African-inspired Tsavo Lion restaurant at the Mara River Safari Lodge. It also happens to be the place where lions make their home, observable from the glass wall encircling the eatery. And that is as close an encounter as you can get with wild beasts without risking your life. How to get there

The theme park is located near Lebih Beach in Gianyar, a few minutes from Sanur and less than 30 minutes from Bali’s capital city of Denpasar, at the Prof. Dr. Ida Bagus Mantra Km 19.8 highway.

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The President Post

www.thepresidentpost.com

May 12, 2010 B7

Health How Crash Diets Harm Your Health

Crash dieting doesn’t work and can be dangerous is a message that gets lost in the national clamor over rising rates of overweight and obesity.

inda Bacon, Ph.D, dreads swimsuit season, but not because she has anything against the beach. Instead, the California-based nutritionist fears what the season brings: scores of otherwise health-conscious citizens who subject themselves to deprivation diets (like the Master Cleanse) or intense exercise regimens, often in blazing hot weather, to look slimmer in revealing clothes. Many unwittingly end up harming their health -- and possibly even their hearts. “Early June and January are the two times of year people do crazy, desperate things to get thin fast,” says Bacon, a nutrition professor at the City College of San Francisco, California, and the author of “Health at Every Size: The Surprising Truth About Your Weight.” “They go on fasts, yo-yo diets, detox programs, and ‘cleanses’ without realizing that there are serious consequences to weight loss and nutrient restriction.” That crash dieting doesn’t work and can be dangerous is a message that gets lost in the national clamor over rising rates of overweight and obesity. Thinking of trying a lemonade fast or cabbage soup diet? Here’s what to keep in mind if fitting into your skinny jeans or your Speedo is high on your summer agenda. Crash diets may harm your heart

Cardiologist Isadore Rosenfeld, MD, a professor of clinical medicine at Weill Cornell Medical College, in New York City, and author of the forthcoming “Doctor of the Heart: A Life in Medicine,” opposes crash diets (less than 1,200 calories a day) and detox plans like the Master Cleanse. The Master Cleanse involves consuming a mixture of water, lemon juice, maple syrup, and cayenne pepper -- and nothing else -- for several days.

He says these very low-calorie regimens are based on the false theory that the body needs help eliminating waste. Research suggests rapid weight loss can slow your metabolism, leading to future weight gain, and deprive your body of essential nutrients. What’s more, crash diets can weaken your immune system and increase your risk of dehydration, heart palpitations, and cardiac stress. “A crash diet once won’t hurt your heart,” Dr. Rosenfeld says. “But crash dieting repeatedly increases the risk of heart attacks.” Bacon adds that long-term caloriecutting can eventually lead to heart muscle loss. “Yo-yo dieting can also damage your blood vessels. All that shrinking and growing causes micro tears that create a setup for atherosclerosis and other types of heart disease,” she says. Chip Stinchfield, a 55-yearold shop owner in New Canaan, Connecticut, has experienced the cardiac effects of dieting firsthand. On the advice of friends, he went on a Master Cleanse for days and exercised vigorously. Another time he ate nothing but cottage cheese, beets, and peanut butter. Both were “quick, easy fixes” that helped him drop up to 10 pounds fast. But both diets also gave him shortness of breath, heart palpitations, and “the feeling like I was going to have a heart attack.” Under pressure from his family, who thought his dieting might disable or kill him -- like many extreme dieters, Stinchfield kept his doctor in the dark about his radical habits -- he eventually went back to sensible eating. Beware of fad diets

Experts have known for decades that extended crash diets can be dangerous -- especially when the diets become a fad. In the late 1970s, an osteopath named Robert Linn published

Photo: www.theofficediet.com

“The Last Chance Diet,” a best seller that advocated a miraculous “liquid protein diet.” Following the lead of their favorite celebrities, millions of people bought quarts of Dr. Linn’s liquid formula and embraced the diet (or one of many copycat versions), averaging just 300 to 400 calories a day. The diet seemed to work wonders -- some people reported losing as many as 10 pounds a week on the formula. But then the news of sudden deaths began to trickle in. An investigation led by the Food and Drug Administration turned up nearly 60 deaths among liquid dieters. Although some of the deaths occurred in people with underlying diseases such as atherosclerosis (and therefore could have been coincidental), government researchers who examined otherwise healthy dieters who died of ventricular ar-

Healthy Food for Your Eyes

e’ve all heard that carrots play a huge role in overall eye health but what else can you eat to improve the health of your eyes and reduce the risk of disease? To keep your eyes in top shape, follow many of the same guidelines suggested for maintaining a healthy heart like keeping your blood pressure and cholesterol in check, reducing saturated fat from the diet, taking control of your weight, and increasing your antioxidant intake. Start now by eating nutritious and vitaminrich foods to reduce the risk eye disease, improve sight, and maintain good eye health.

10 healthy foods for picky eaters Kale

The carotenoids lutein and zeaxanthin found in green leafy vegetables like spinach, Swiss chard, collards, and kale help to improve vision and reduce the risk of age-related macular degeneration. The antioxidants in these foods act as natural sunglasses to defend the eyes from ultraviolet radiation as well as protect cells from being damaged. Berries

Among the top sources of antioxidants, berries play an important role in decreasing cancer risks, cardiovascular disease, and Alzheimer’s disease. Studies have also found the antioxidants in berries reduce the risk of macular degeneration, cataracts, and other eyes diseases. Choose fresh strawberries, blueberries, or raspberries for a sweet snack, simple

dessert, or salad topper. Carrots

Probably the best-known food for healthy eyes, carrots top the charts with disease-fighting vitamin A. Vitamin A helps to prevent night blindness and is essential for retinal health. It also reduces the risk of cataracts and macular degeneration. Like carrots, other orange foods such as sweet potatoes, mangos, cantaloupe, and apricots provide healthy doses of vitamin A. Milk

Milk is a good source of riboflavin and can help to reduce your risk of cataracts. It is also fortified with vitamin A, a leading performer among eye health vitamins. Choose low-fat milk over whole milk to keep the saturated fat low and prevent plaque buildup in the eyes’ blood vessels. Cheese, eggs, and liver are other good animal sources of vitamin A. Lean Beef

Lean beef is an excellent source of the mineral zinc that helps the body absorb antioxidants and fight disease. Studies have found a relationship between zinc intake and eye health, particularly retina health. Choose lean

cuts to reduce the overall saturated fat from your diet. Increase the zinc in your diet by choosing cheese, yogurt, pork, turkey, and fortified cereal. Salmon

Omega-3 fatty acids like the ones found in fatty fish play a key role in retina health and help reduce the risk of macular degeneration. Aim to eat at least two weekly servings of fatty fish such as salmon trout, mackerel, sardines, or herring. Wild salmon is also a rich source of niacin, which helps reduce the risk of cataracts. Almonds

Another antioxidant that’s critical in eye care is vitamin E from nuts, mangoes, broccoli and healthy oils like wheat germ, safflower, corn, and soybean. Vitamin E has been found to prevent and delay the growth of cataracts, so snack on almonds or cook your veggies in one of these goodfor-you oils to get a jump-start on healthy eyes. (CNN)

rhythmias found that the pattern of deaths suggested “the effects of protein-calorie malnutrition on the heart,” including atrophy of the heart muscle. Experts have since tried to pinpoint the dangers of crash diets (technically known as “very low calorie” diets). Shortages of potassium, magnesium, and copper have been suggested as possible causes of the arrhythmias seen in crash dieters, and studies have also found that the diets can cause a drop in blood pressure and sodium depletion. The true extent of the risk posed by crash diets is unclear, however. Much of the research has been conducted in obese people -- a population that can actually benefit from these extreme diets -- and in most studies the health of the participants is carefully monitored. Experts stress that very-lowcalorie diets should only be followed with a doctor’s supervision. But crash dieters are more likely to consult their friends than a doctor -- which can get them into trouble. Brooke Robertson, 23, learned these lessons the hard way. Last spring the Auckland, New Zealand, mom reportedly suffered a

minor heart attack after she lost 100 pounds on a diet of Red Bull and the occasional fistful of dry cereal. Despite the international publicity, Bacon doesn’t think desperate dieters will consider Robertson a cautionary tale. “There’s absolutely no benefit to fasting or detoxing,” she says. “Extreme diets are simply bad for you and they don’t work. But every year people engage in magical thinking.” How to lose weight— safely

If you’re overweight, slimming down is critical for your overall health. Even moderate weight loss can lower your risk of developing heart disease, diabetes, and some types of cancer. But it’s important to lose weight safely, which usually means slowly: Most experts recommend dropping just 1 to 2 pounds a week. And despite what some brand-name diets claim, the best way to do so is to exercise regularly and stick to a diet that limits saturated fat and sugars and emphasizes fruits and vegetables, lean meats and fish, and whole grains. “The key to losing weight is a combination of diet and exercise,” says Dr. Rosenfeld. “One alone will not do it.”

Reasons Why Carbs Help You Lose Weight

Carbs makes you thin for life

Carbs fill you up

Carbs curb your hunger

Carbs control blood sugar and diabetes

Carbs speed up metabolism

Carbs blast belly fat

Carbs keep you satisfied

Carbs make you feel good—about you! (Health.com)

(health.com)

Dengue Fever Dengue fever is characterized by the sudden onset of fever, (which can last up to 7 days) and is accompanied by intense headache, body aches, joint pains, loss of appetite, nausea, vomiting and the development of generalized skin rashes.

engue fever is a disease caused by the dengue virus, which can be transmitted, to humans by the bite of an infected Aedes mosquito. Mosquitoes are infected when they take a blood meal from a dengue-infected person. There is no human-to-human transmission of the disease. The incubation period of dengue fever normally ranges from between 3 to 14 days. That means from the moment you are bitten by an infected mosquito, you may start developing fever and symptoms 3 to 14 days later. Dengue fever is characterized by the sudden onset of fever, (which can last up to 7 days) and is accompanied by intense headache, body aches, joint pains, loss of appetite, nausea, vomiting and the development of generalized skin rashes. However dengue infection can occur in children without many symptoms other than persistent fever, lethargy and loss of appetite. Dengue virus can also cause

a more serious infection known as the dengue haemorrhagic fever. This presents similarly to dengue fever but is associated with more severe bleeding problems (e.g. gum bleeding, nose bleeding and bleeding into the skin and internal organs). There is no specific treatment for dengue or dengue haemorrhagic fever. Patients with mild symptoms may only require rest at home with daily blood test to check the platelet level. The following is a set of advice to help you and your family to manage dengue fever at home. This list is taken from the Ministry of Health of Singapore advisory for patients with dengue fever (please note that the list is not exhaustive and in the event of any uncertainty, the doctor should be consulted). 1. Ensure that you have adequate rest if you are suspected or diagnosed to have dengue fever. Drink enough water to prevent dehydration. 2. Protect yourself and your household members from mosquito bites, e.g. by using mosquito repellent or mosquito coils. 3. Dengue can make you prone to bleeding. Therefore, you should watch closely for any of the following signs: • gum bleeding after brushing your teeth • nose bleeds • easy bruising • sticky black stools

• vomiting of blood – this could be either fresh blood or altered blood which resembles coffeecoloured substances • increased menstrual bleeding 4. Seek immediate medical attention if you develop: • severe abdominal pain • sweating, with cold, clammy hands and feet 5. Avoid medication containing aspirin as it can increase your risk of bleeding. 6. Avoid anti-inflammatory drugs such as brufen or nurofen (ibuprofen), voltaren (diclofenac), synflex (naproxen) or ponstan (mefenamic acid) as they may cause gastric erosions or ulcers and subsequent bleeding and exacerbate any bleeding tendency that you may develop. 7. You need regular follow-up by your doctor until he/she informs you that you no longer require close monitoring. 8. If you feel unwell at any time, please go to a clinic or hospital immediately for further evaluation and management. If patients presents with severe nausea and vomiting, bleeding tendency or blood test showing very low platelet count as discussed above, they should be admitted. Supportive care with intravenous fluids and frequent blood tests to monitor for complications of the disease such as

very low platelet count and organ functions are carried out for hospitalized patients. In severe cases, blood transfusions may be required to support these patients. There is currently no vaccination available for dengue. Therefore prevention against contracting dengue fever comes through measures to prevent mosquito breeding around the house and to protect against mosquito bites. To protect against mosquito bites one can wear long-sleeved clothes, use mosquito coils and electric vapour mats, or use insect repellent over the exposed parts of the body. Adoption of good daily habits such as clearing blockages from the roof gutter, clearing leaves and stagnant water from drains, removing water from potted plants daily, avoiding the use of pot plates and changing the water in vases everyday will also help to eliminate the chances of mosquito breeding (picture adapted from www.dengue.gov.sg) For any medical-related enquiries, you may wish to contact Raffles International Office (Jakarta) at 62-21-57853979 or email enquiries_indonesia@raffleshospital.com. Article contributed by: Dr Chng Shih Kiat (Deputy Director, Raffles Medical Group)

The President Post

B8 May 12, 2010

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Living

Can age discrimination be hampering your job search? According to the survey results

My advice: Don’t look old! Your résumé, cover letter, networking approaches and personal presentation and how you perform in the interview all must

1. Advertise recent results

Employers report that the typical résumé gets a 15-second glance. Focus on the last 10 years. State the action you performed and the accomplishments you achieved. Stress money earned, costs eliminated or time saved. Productivity enhancements get attention, so make sure you note any you’ve made. Be a skillful editor; keep your résumé to no more than two pages. 2. Brighten up

Fight Age with Food There’s a fountain of youth waiting in your kitchen. You just don’t know it — yet.

he following foods are packed with disease-fighting antioxidants, hearthealthy fats, and anti-aging nutrients. Use these tools to create a rich and varied diet that will keep you looking younger and feeling great for years to come. The power of produce

Eating a diet rich in colorful fruits and vegetables can help protect against wrinkles, says Cheryl Forberg, a registered dietitian and author of “Positively Ageless.” That’s because they’re filled with vitamins and antioxidants, which have been shown in several studies to slow the natural signs of aging. Bell peppers, tomatoes and citrus fruits, she explains, deliver vitamin C. Avocado and kiwifruit contain vitamin E. Berries bring polyphenols, another kind of antioxidant, to the table. And leafy greens and bright-orange vegetables contain carotenoids, which are believed to enhance the immune system.

Stay well hydrated

One of the more hidden signs of aging is a diminished sense of thirst, says Forberg. “That makes us more vulnerable to dehydration,” she explains. And loss of skin elasticity — a major contributor to fine lines — is a side effect of dehydration. Water is the obvious remedy, but green tea and skim milk also fit the bill. Or, “look beyond the glass,” she says. Broth-based soups, fruit smoothies made with unsweetened fruit juice or soy milk, and fruits and vegetables (which are naturally packed with fluid) serve to keep you well hydrated. Pump up your protein

Getting enough dietary protein can help offset the muscle loss that goes hand in hand with aging (to the tune of 3 to 8 percent per decade after age 30). Protein is also key to warding off fatigue, maintaining a steady blood-sugar level, and promoting cellular repair and growth. Forberg recommends getting 30 percent of your daily calories from healthy protein sources, such as lean meats, poultry, seafood, legumes, fat-free or low-fat dairy products, and traditional soy foods (not soy supplements). Go for grains

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Your professional reputation is really other people’s perception of you, your work strengths, image, passion and personality traits. Track down and network with old bosses, former employees and colleagues. They can outline what you are good at, build your confidence (often necessary after a firing or layoff) and be a terrific link in helping you meet potential hiring managers. 4. Be sharp for the interview

Your next boss can be younger -- maybe a lot younger -- than you. Know the challenges and trends in your field. Research not

Skills and certifications need to be up-to-date. Check job ads and see if you are lacking any skill today’s employers ask for when hiring people for your type of job. Computer skills are essential! If you are over 50, expect to get some questions and even a test on your computer ability. Many employers stated they do not accept what you tell them at face value -- they test you. So go to class, read books, use the tutorials and practice using these skills -- nothing will make you look older than not knowing how to attach a file to an e-mail. © CareerBuilder.com

Clothes reflect your attitude, achievement and personality but it is the art of styling that denotes actual meticulousness and the affinity to please.

CLOTHES DO MAKE THE MAN

Have a handful of nuts

Nuts contain heart-healthy monounsaturated fats and omega-3 fatty acids that can help boost longevity, says Edward L. Schneider, M.D., dean of the Davis School of Gerontology at the University of Southern California. They also contain those anti-aging antioxidants mentioned above. Have a 1-ounce serving daily (about 24 almonds or 14 walnut halves).

ashion may only be skin deep but every depth has a surface and it is this surface that speaks. Behavioral scientists tell us that it takes a stranger 30 seconds to size us up, creating that all-important first impression which if bad can take as much as five years to erase. In a competitive business environment the quotient is upped even further and your saving grace will often be the suit you wear.

Say yes to seafood

Eating fish rich in omega-3 fatty acids, such as salmon, sardines and mackerel, is important to your longevity and health because this kind of fat (also found in olive and canola oils) is associated with lower heart risks, says Schneider. (MSN)

Clothes reflect your attitude, achievement and personality but it is the art of styling that denotes actual meticulousness and the affinity to please. In as much as dressing sloppy equates to sloppy work, inappropriate attire is equally off-putting.

whole

Whole grains are also filled with anti-aging nutrients. As with produce, eating a variety is key in order to get the full spectrum of antioxidants, says Forberg. Wild and brown rices, bulgur, farro, millet, quinoa and oats are all good options. Whether you’re serving a simple side dish or preparing meatloaf or meatballs, don’t automatically reach for white rice or plain bread crumbs. Think whole grain, and you’ll be rewarded with better flavor, additional fiber and more anti-aging nutrients.

3. Network backward

5. If you don’t have it, get it

.net

of hiring managers, many employers reported that they believe that someone under 40: • Will work for a lower salary • May seem more eager • Shows more initiative • Has a “fire-in-their-belly” attitude • Has better computer skills • Seems more adaptable • Is less old-fashioned or stuck in their ways

only the company but what its competitors are doing. Take steps to modernize your vocabulary so that you can come across as current and flexible. Offer examples of recent accomplishments. Emphasize that you are a quick study and constant learner. Write out answers to potential questions.Rehearse your answers and keep them brief. Employers lose interest fast, so never talk more than 60 seconds when responding to a question.

ww.eastfi nancialg roup

ge discrimination. Ask any baby boomer who’s been job hunting for several months and he’ll likely tell you a personal horror story. Although the practice is illegal, many over-40 job hunters report that an employer was excited about them as a candidate -until they met in person, leaving the candidates with the sneaking suspicion that their age had everything to do with not getting hired.

Too many mature workers show up looking weather-worn, tired, defeated, desperate, just plain old and worn out. You must have an enthusiastic attitude that radiates energy to reassure an employer you are ready and able to do the job. Look vibrant and contemporary. A warm smile, a firm handshake and great eye contact are an absolute must. Dress in a fashionable suit in a flattering color and style. Fit is critical -- don’t wear anything dated, too tight or too loose. To take some years off your appearance, try a new hairstyle, dye your hair, switch to contemporary eyeglasses and get your teeth whitened. Men should be cleanshaven; women should go light on the makeup.

Photo: w

Your résumé, cover letter, networking approaches and personal presentation and how you perform in the interview all must show you have a lot to contribute.

“

Look Younger for Your Job Search

show you have a lot to contribute. I had one 69-year-old client, Mary, who came to see me for coaching on interviews and salary negotiations. Her hair was completely white, and her face showed the lines and wrinkles of age. Yet she was fascinating and vivacious and demonstrated exuberance for life. Her résumé was full of recent accomplishments. She went out to four interviews and got four job offers. Those four employers weren’t rejecting this 69-year-old woman, they were fighting over her. Mary had mastered the secrets to self-marketing and using her strengths and talents to prove to the employer she was an ideal candidate. That is exactly what you must do to get ahead in today’s tough economy. Here are some key strategies and resources to implement:

The importance in going professional however is not the degree of specifications but finding those that work for you based on your physique and personality.

PUBLISHED BY Yayasan President University CEO & EDITOR IN CHIEF Ali Basyah Suryo CONTRIBUTORS Atmono Suryo Cyrillus Harinowo Hadiwerdoyo Taufik Darusman Thomas W. Shreve Jeannifer Filly Sumayku Eka Putri

EDITORIAL & CIRCULATION DEPARTMENT Eka Galliano LAYOUT & DESIGN Mohamad Akmal SALES & MARKETING Detia PHOTOGRAPHER Nandi Nanti

How does one avoid either scenario? Invest in the right suit, dress for the occasion and heed the sartorial mantra: color, cut, fit and style. In terms of color, the darker the suit, the higher the perceived authority of the person wearing the ensemble. The essentials remain navy, black, grey and beige but each tone carries an associated meaning. Navy is the building block of any business wardrobe with darker shades perfect for speeches and presentations. It is the universal color for negotiation and authority hence the preferred choice for multi-tasking attorneys and bankers worldwide. Charcoal or grey conveys security – perfect

for shareholder meetings, business mergers and accountants in general. Executives however be aware: the darker the grey, the higher the associated pay. Beige and black are occasion wear – the former for business casual and the latter for formal events solely. Once you have the essentials locked down, spruce up your wardrobe with pinstripes, checks and plaids and always remember your skin tone when choosing an apt shade. For those residing in Asia, the ubiquity of tailors eliminates the need for buying off-the-peg. Going custommade or bespoke solves all your cut and fit queries for a personal cutter can assist in the choosing and crafting of a garment that is specifically yours in the making. Most professional cutters for example suggest the avoidance of lightweight fabrics for the tall and lanky and heavyweight wools that box in those that are broader. Pay attention to specificities that make or break a suit such as the length of jacket sleeves, collars, lapels and the overall fall of the jacket. Hariom’s Tailor, a 70-year old sartorial legacy, suggests that your suit collar should typically hug the back of your neck without buckling and only a precise half-inch of your shirt collar should be on display. Lapels similarly should lie flat to your chest. It is these finer details endow your suit, and ulti-

mately you, with connotations of neatness and sleekness. The technical jargon ups its ante in terms of styling and a professional tailor can help your iron out quirky details and finishes to create a piece of sartorial art. These styling details or bonus points often include lapel style and width, button placement, patterns and other personalizations of the highest caliber that make even the dullest of grays pop with personality. The importance in going professional however is not the degree of specifications but finding those that work for you based on your physique and personality. Added benefits such as door-to-door delivery, pristine finishing and the ability to work around your schedule are available at Hariom’s Tailor. For more tailoring tips & tricks visit Hariom’s at their Pasar Workshop or schedule an appointment at your home or office with a Hariom’s image consultant, Mr. Gautam via telephone at (021) 3844 179 or (021) 3811 947. The writer is the business development manager at Hariom’s Tailor & Textile. He may be contacted at amrit.v@ hariomstailor.com or visit the Hariom’s website at www. harioms.com.

SECTION

The President Post

Property

Display until June 12, 2010 /// N0. 12 Published by President University www.thepresidentpost.com

Indonesia Set for Dramatic Property Boom Next Year Once the 1960 law is revised the international business community will see many multinational companies rewriting their relocation strategies with an eye on Indonesia. By Alci Tamesa

ndonesia’s property industry will experience an unprecedented boom when a revised property ownership law goes into effect some time next year. This is because the incentive will come at a time the country enjoys better political stability and improved investment climate. Chairman of the Investment Coordinating Board Gita Wirjawan has said that the government is finalizing the revision which is expected to be completed during the third quarter of this year. Wirjawan, who made the announcement during a visit to Singapore, also says that the government remains committed to further improving the investment climate through such a policy change. “I am very optimistic that once we take the right steps we will see at least a 15 percent increase in foreign direct investment, up from last year’s total of US$14 billion,” he says. This announcement has been greeted with enthusiasm by international corporations and investors at large. Investors are waiting for the Indonesian government to extend to 90 years the period of licensing for foreign ownership of In-

donesian property which would represent a dramatic improvement from provisions of the 1960 Agrarian Law that gave only 25 years to use domestic property. Property market analysts say not only will revision of the law bolster domestic property industry; it will be a big draw to foreign real sector investors as it takes place at a time Indonesia enjoys one of its golden periods of political and economic stability. Market analysts say that once the law is revised this year, by next year Indonesia will have experienced a full property boom as a bigger inflow of industrial relocations and domestic real sector expansion resulting from the policy incentive will drive market demand. Finance Minister Sri Mulyani’s appointment as the World Bank’s Managing Director will surely give an additional ballast to investor confidence as many multinational companies realize that the World Bank’s trust in Indonesia’s best financial and monetary expert shows that she has laid the right foundation to sustain her country’s financial stability. Another trigger that will boost domestic property industry is the upcoming international gathering of property magnates, financiers, and experts in the resort is-

land of Bali. The May 24-28 World Congress of International Real Estate Federation (FIABCI) will present top industry speakers from throughout the globe. The speakers are government officials, business people, executives of property, architecture, the banking industry, and tourism sector from the US, Europe, Australia, China and host country Indonesia. The Indonesian minister for public housing, Suharso Manoarfa, will also address the international forum. He is scheduled to discuss the Balinese concept of harmony known as Tri Hita Karana—which calls for harmony between human beings and God, among human beings, and between human beings and the environment. Market analysts had actually hoped that he would make use of the Bali forum to highlight relaxation of the property ownership law, as the timing is right to draw international attention. But latest reports say the government needs more time to finalize the plan. The banking sector, meanwhile, is hoping to see a 45 percent surge in mortgage growth this year, an indication that so much of the country’s money will be channeled into property sector amidst a shortage of supply. This also means that investing

in the property rector will continue to be attractive for many years to come because in fact Indonesia’s mortgage to GDP ratio is only 2 percent compared to 80 percent in the United States that was to blame for its mortgage crisis last year. As of this month, according to independent analysts, Indonesia is Southeast Asia’s most attractive property market as in big cities like Jakarta the highest price of property is Rp25 million (US$2,775) per square meter compared to about $27,000 in Singapore. This is why industry analysts are saying that once the 1960 law is revised the international business community will see many multinational companies rewriting their relocation strategies with an eye on Indonesia. Compared to China, Indonesia has lower entry barriers, its property prices are cheaper, the banking sector is more stable in terms of liquidity and stability, investor confidence is rising fast and political stability and predictability are now much better. Market analysts say just like Hongkongers flocking to Main-

land China’s property sector, they expect many companies from Singapore, South Korea, Japan, Australia, Europe, and the Americas to purchase more property in Indonesia as of later this year. The government’s seriousness in combating corruption and streamlining arduous bureaucracy is another draw to foreign real sector investors and property buyers. Analysts say that in spite of the anticipated boom, property

Photo: www.napthens.co.uk

prices will only soar by around 30 percent because there will be a prudent balance between supply and demand. Theoretically, this is because the banking sector which handles transactions has by now learned the art of survival through repeated crises of the past. see full story on page C2

The President Post

C2 May 12, 2010

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Property

Photo: Jababeka

Industry actors say that unlike in the United States, where property crash was triggered by a tragic imbalance between mortgage value and the GDP (unsettled transactions including bad debts were worth more than half of GDP), Indonesia will not have that experience because its mortgage to GDP ratio as of early this month was only two percent. This is also the reason why property is not yet the driving force of the domestic economy. Hiramsyah Thaib, president director of property developer PT Bakrieland Development, says that even without relaxation of the land and building title rules, the property sector would still soar next year, thanks to domestic expansion and rising domestic demand. This is apparently triggered by industrial expansions, low inflation rate, a steady growth in bank loans for the property sector, and a steady growth in the size of the middle and upper classes of society. These factors, plus a rapid growth in consumption, will cause the economy to grow by 6-7 percent as of this year. Market analysts say that relaxation of foreign property ownership rules will benefit the highend of the property market

initially. This segment accounts for less than 10 percent of the domestic market and because prices of property are still low, Indonesians prefer stand-alone houses. But after the issuance of the new incentive, which will drive prices up, people will become more interested in high-rise apartments which will be sold at more competitive prices. Thaib says in Singapore not many people can afford to buy houses. So the Indonesian relaxation will affect Singapore’s midto-high sector where some of the buyers of stand-alone houses as well as high-rise apartments will come from. Industry analysts expect the Indonesian economy to absorb an additional $6 billion in foreign direct investments over the next year following the relaxation incentive. This was the situation Malaysia experienced after relaxing its foreign property ownership rules some years ago.

for further reduction of the mortgage rate. The Bakrieland executive, for instance, expects the current mortgage rate of 9 percent fixed for two years to drop to 8.5 percent or 8 percent, because in 2008 when the Bank Indonesia benchmark rate was higher than it is today, mortgage rates stabilized at 8.8 percent. This apparently is the reason why Bakrie is optimistically expanding with a new complex of integrated office space called Rasuna Epicentrum, whose groundbreaking will commence in June 2010 to coincide with the operation of prestigious Bakrie Tower, the best seller in Jakarta’s Central Business District. Office space in this particular tower is nearly sold out. A marketing official says that under 12th floor space is no longer available as multinational companies, especially from the mining industry, have taken over every single corner.

Jababeka is another key player in Indonesia’s property industry, having developed an integrated city of its own on the eastern outskirt of Jakarta with more than 1,500 multinational corporations in it, and is making over its integrated resort of Tanjung Lesung on the western tip of Java island.

In other words, relaxation of the property sector will bring a multiplier effect across the entire economy because property ownership accounts for a significant portion of the fixed industrial cost. In a related development, banking analysts say there is still room

Ironically, as Indonesia prepares to welcome its golden period in property market next year, the overall situation in Asia is still a source of concern. Many countries in Asia are still feeling the brunt of repeated crises which has since 2008 seen a slowdown, ranging from a decrease of 24

percent for Japan to a decline of 77 percent in Australia. In January 2009 as the market malaise continued, Real Capital Analytics (RCA) tracked only US$4.1 billion of transactions based on deals priced at US$10 million and above. The total represents a 36 percent decline from

December 2008 and an 81 percent drop off from January 2008, when an active market registered transaction volume of US$21.4 billion, news reports say. In January 2009, the lion’s share of commercial real estate (CRE) transactions occurred in China (roughly US$2.2 billion) and Japan (US$1.1 billion). One of the larger recently completed deals was Singapore-based ARA Asset Management’s acquisition of the newly completed 51-story Nanjing International Finance Center, an office-retail property located in Nanjing, a key industrial base in Eastern China. The investment manager acquired the property for approximately US$234 million on behalf of its ARA Asia Dragon Fund, the report adds. Therefore, next year’s property boom in Indonesia is likely to force investment strategists across Asia to rewrite their relocation and expansion plans, industry analysts say. The good news about Indonesian property sector is that local investors have always been able to create business opportunities even in times of crisis. And today we have seen them making tremendous progress. To mention but a few key play-

Conventions in Bali and Singapore to Identify Property Challenges, Opportunities On 24-28 May 2010, property magnates, business executives, financiers, and government decision makers from Europe, the US, China, Australia, and Indonesia will gather in the Indonesian resort island of Bali for the World Congress of International Real Estate Federation (FIABCI) to listen to some of the world’s most credible industry actors. By Diana Sasmita

nternational property companies will have the opportunity to attend two prestigious conferences to be held in Bali and Singapore in May and June this year. These events will highlight challenges and opportunities in the industry as speakers are selected from the world’s most successful institutional property players in the Asia-Pacific region. On 24-28 May 2010, property magnates, business executives, financiers, and government decision makers from Europe, the US, China, Australia, and Indonesia will gather in the Indonesian resort island of Bali for the World Congress of International Real Estate Federation (FIABCI) to listen to some of the world’s most credible industry actors. Lippo Group’s Chairman James Riyadi will discuss financial aspect of the industry, Bakrieland Development’s CEO Hiramsyah Taib will share the success stories of his group while property baron Ciputra is expected to discuss survival and recovery strategy, news reports say. Meanwhile, the Indonesian minister for public housing, Suharso Manoarfa, will highlight the event with Tri Hita Karana—a Balinese philosophy of maintaining harmony between human beings and God, among fellow human beings, and between human beings and the environment.

He was originally expected to announce a revision of property ownership law during the Bali conference, but latest reports say the government needs more time to finalize it. Chairman of Investment Coordinating Board Gita Wirjawan has said that the government is racing against time to revise the 1960 law on ownership of property and that the revision is expected to be completed in the third quarter of this year. Investors are hoping that the government will extend to 90 years the period for foreigners to own property in Indonesia, in an ordinance that is being prepared by the office of the coordinating Minister for the Economy and the State Secretariat. Speakers from abroad include John Rabie, owner of Rabie Property Group from South Africa; Toby Bath, managing director of Hellmuth, Obata & Kassabaum (HOK) Asia Pacific; Brian White, the founder and chairman of Raywhite Group, a leading network of global brokers and property investment; Ken Yeang, an architect and ecology expert with 40 years of experience and is the chairman of Liewelys Davies Yang, a prominent architect consultancy firm headquartered in London. A month after the Bali conference, Asia-Pacific and European property players will gather in Raffles City Convention Centre, Singapore for Asia’s largest event called Real Estate Investment

World (REIW) Asia 2010. The June 21-23 summit will showcase strategies, products, personalities and companies that comprise the Asian real estate investment management marketplace. The Asian real estate sector is teeming with opportunities but is also fraught with risks, business analysts say. But probably more than any other asset classes, the dynamics in different geographies are very different. Global investors need access not only to market intelligence and due diligence capabilities but also the ability to see how real estate in different countries provides yield and capital growth potential in wide and varying degrees. That’s why the event is considered as a golden opportunity for real estate developers and

Market analysts say that the Bali conference itself will boost the prospects of Indonesia’s property market because it attests to the country’s political stability and economic growth which are prerequisites to investor confidence.

strategic planners to tap. With over 600 delegates expected in attendance, the convention will continue its global relevance as Asia’s largest and most established industry gathering for developers, property funds and institutional investors, the organizers say. They explain that REIW Asia 2010 will enable participants to: • Network with over 600 industry executives including investors, asset managers and deal makers; • Gain a thorough understanding of the latest trends, development and investment opportunities; • Meet and engage the most innovative property funds and developers in the industry; • Understand the current priorities and expectations of institutional investors within the Asian real estate space; • Contribute views and expertise to shape the future direction of the industry; • Raise the profile of participants’ property, fund or advisory services amongst prospective investors, partners and peers; and • Meet professional advisors who can help participants grow their global ambitions. Companies wanting to send their representatives to this event should contact Lydia Goh at lydia.goh@terrapinn.com or dial +65 6322 2716. Market analysts say that the Bali conference itself will boost the prospects of Indonesia’s property market because it attests to the country’s political stability and economic growth which are prerequisites to investor confidence. Meanwhile, given that Indonesia’s property prices are far more competitive than such prices in neighboring countries such as Singapore and Malaysia, analysts expect to see a review of Singapore’s property buyers’ orienta-

tion because many Singaporean investors are already eyeing property ownership opportunities in Indonesia. In Jakarta, for instance, the highest price of property per square meter is Rp25 million whereas in Singapore it is about 10 times higher. Also, the Singapore dollar is stronger than the Indonesian rupiah, so it is easier for buyers in Singapore to buy Indonesian property than the other way round. When the government begins to implement a new property ownership reform next year, the Indonesian market will become even more attractive as foreigners may then own property for 90 years, compared to 25 years as mandated by a 1960 law. This will apply to strata title property and for the time being it is not likely to expand to ownership of non-strata property. Yopy Rusli, director of PT Lippo Karawaci Tbk, has said that so long as there is legal certainty, the investment climate will remain attractive to foreign investors. So there is nothing wrong with the plan to widen the corridor for foreign investors to play a role in Indonesia’s property development. In a related development this month, real sector analysts say that given Indonesia’s current structure of foreign investment, it is much better for foreign capital to enter the country through the property sector than see it parked in the capital market in the form of hot money. Like in any country, direct investment in Indonesia’s property sector shall benefit the nation directly in terms of creation of direct employment opportunities as well as investment guarantee. This may have also been part of the reason the government has finally bowed to private sector’s pressure for relaxing the ownership rules.

ers in the industry, PT Arthaloka Indonesia is teaming up with PT Hutama Karya to develop a Rp2.7 trillion project on Jalan Jenderal Sudirman Central Jakarta that will commence in July. Bumi Serpong Damai (BSD) is expanding very fast. Of the 6,000 hectares of land under its control, it has developed 1,400 hectares, filling the area with residential, office, business, recreational and other kinds of property. This second phase of development will be completed in 2013 after which period it will develop property on a further thousand hectares of land. Similar projects are being build by PT Cowell Development Tbk which owns the Melati Mas complex; PT Goldland Realty which developed Alam Sutera residence in Serpong, Tangerang; and PT Duta Graha Indah Tbk, which is building the Rp 800 billion Dharmawangsa Tower II to be completed in mid-2011. Jababeka is another key player in Indonesia’s property industry, having developed an integrated city of its own on the eastern outskirts of Jakarta with more than 1,500 multinational corporations in it, and is making over its integrated resort of Tanjung Lesung on the western tip of Java island.

Apart from rapid growth of apartments and condominiums, another trend worth mentioning is expansion of retail business property such as shopping malls, which have in recent years increased markedly both in number and size. Indonesian society’s total exposure to globalization has brought in new lifestyles that bolster the growth of retail market, especially for consumer goods, electronics, jewelry, garments, footwear, and various kinds of beauty product. This on-going trend has boosted the growth of retail market which requires faster physical expansion in terms of provision of more shopping malls. Consequently, as the Indonesian middle class grows in size, the bigger the demand will be for retail market property. This trend will continue well into the future as the economy improves further in tandem with further increase in income per capita and people’s purchasing ability. In conclusion, industry analysts say, all these developments will elevate Indonesia to a higher plateau of being one of Asia’s most attractive markets for property investors and buyers.

Jackie Chan’s Purchase of Indonesian Property a Good Boost for Industry By Diana Sasmita

A recent purchase of three units of Lippo Centennia Suites in Singapore by Hong Kong superstar Jackie Chan is a good sign that products of Indonesian property companies are performing well in the regional market. Jackie Chan and his close friend Emil Chau, who is also a famous singer and composer, bought the exclusive suites recently for a handsome price of more than US$10 million, news reports say. The good news is not that the kungfu star has bought the apartment but that he and Chau eventually opted for the Lippo suites after spending months searching for what they considered to be the best such property all over Singapore. Lippo Group’s 36-storey Centennia Suites is situated at the former site of Kim Seng Plaza, in front of Great World City, facing the Singapore River. Construction works on the building started only two months ago and the project is expected to be completed in 2013. Jackie Chan was among the buyers to have secured their purchases in advance. As of this month 97 percent of the space has been sold. Jackie bought two, three and four bedroom suites while his friend Emil—who played with Jackie in the film “Mr. Nice Guy” and “Gorgeous”— bought one unit with three bedrooms. Market analysts predict that the price of the suites per square foot is around Sin$2,100. In 2007 Jackie Chan purchased Sin$11 million property on the former site of Jinriksha Station on Singapore’s Neil Road. In 2009 another kungfu star Jet Lie bought the $19.8 million bungalow in Binjai Rise, Singapore, according to The

Photo: www.tvgasm.com

Business Times. In Jakarta this month, property market observers said they expected the upcoming FIABCI conference in Bali to draw more international attention given that the forum will be attended by well over 600 business practitioners from the USA, Europe, and the Asia-Pacific region. Along with influential property magnates from various countries, Lippo Group’s chairman James Riyadi is scheduled to address the forum focusing on financial matters, opportunities, and challenges confronting the industry. As of early May it was not clear whether world-class movie stars such as Jackie Chan will be among the participants, but for sure the forum will be congested by real estate practitioners, government decision makers, and other stakeholders. But just as Jackie Chan’s purchase of the Indonesian business groups’ apartment in Singapore boosted the island republic’s fame as a good destination for international property hunters, the upcoming world property congress in Bali will bolster Indonesia’s reputation as a stable destination for property investment. The government is preparing to relax the law on property ownership, allowing up to 90 years for foreigners to own real estate in Indonesia, probably as of next year. That will surely increase Indonesia’s investment charm, market analysts say.

The President Post

C4 May 12, 2010

www.thepresidentpost.com

Property Indonesia’s Property Business Practitioners Can Obtain International Certification FIABCI University’s collaboration with Indonesian higher learning institutions will enable Indonesians to obtain an international diploma without having to leave the country. By Diana Sasmita

roperty industrialists are preparing to establish an international real estate certification mechanism in cooperation with Paris-based FIABCI University in an effort to enable local business practitioners to play a bigger role in the global market. Initial steps have been taken to commence real estate business classes on May 26 when international property leaders convene for their 61st conference on the tourist island of Bali. FIABCI is the International Real Estate Federation represent-

ed in more than 60 countries. The FIABCI University intends to open classes in Indonesia in cooperation with such institutions as University Tarumanagara in Jakarta and Petra University in Surabaya. The aim of this university is to provide up-to-date information on global property—especially real estate—trends including changes in customers’ need pattern and other relat ed issues. Over the past three decades, the FIABCI University has helped industry players understand the changing market and equip them with necessary skills on the entire production and marketing chain of the industry. Apart from providing information and training, FIABCI also helps participants build industrial network given its own extensive global network. Ignesjz Kemalawarta, MBA, chairman of the future FIABCI University Indonesia, says that this institution will contribute positively to further development of Indonesia’s property industry. The curriculum for this university will be a mixture of the one implemented in Paris and local content which will be tailored according to he need of the students or participants. Kemalawarta is reportedly

planning to make use of the Bali congress of FIABCI on May 2428 to announce the start of FIABCI University’s collaboration with Indonesian universities. During the congress, FIABCI University will open courses with the theme of “National and International Real Estate Skills, with International Buyers, Users, and Investors”. Another theme with local content to be discussed is “Investment opportunities in Indonesian real estate amidst challenges and changes.” Local real estate developers and industry players can utilize this course to prepare for a new era that will begin next year when the government relaxes property ownership law to allow for 90 years of ownership by foreigners. FIABCI University’s collaboration with Indonesian higher learning institutions will enable Indonesians to obtain an international diploma without having to leave the country. But, if they wish to broaden their horizon further, they may travel to Singapore, Germany, the USA, or France to attend FIABCI classes at prestigious universities in those countries. Graduates will receive either FIABCI International Real Estate Consultant Designation

(FIREC) or FIABCI Diploma International Real Estate (Dipl. FIABCI) titles. The university also opens two study programs in real estate for property practitioners and outsiders. Students who have completed 40 hours of courses will be asked to submit academic report on their respective businesses apart from the requirement to attend at least two conferences on regional and international levels. Meanwhile, Dipl. FIABCI is a title obtained through cooperation with partner universities. Students are required to complete at least 10 study programs on property business before graduating. The programs include Introduction to International Real Estate Business, Business Networking, Negotiations, Marketing, Financing, Foreign Currencies, Business Ethics, Technology, Building Intelligence, International Trade Zones, and International Steering Committee. FIABCI, the International Real Estate Federation is a nonprofit organization under the auspices of the United Nations and is a federation of 120 professional real estate associations comprising around 1.5 million professionals and 3,300 business practitioners.

A New National Distribution Center at Jababeka President Director of AAM, Erwin Tenggono, explained that the launching of NDC was meant to strengthen its position amidst tough competition in the context of AFTA. By Jeannifer Filly Sumayku

T Anugrah Argon Medica (AAM) recently inaugurated its National Distribution Center (NDC) to increase capacity and improve distribution of medicines across Indonesia. President Director of AAM, Erwin Tenggono, explained that the launching of NDC was meant to strengthen its position amidst tough competition in the context of AFTA. AAM is a key player in Indonesia’s pharmaceutical industry and also distributes medical equipment across the country. “We do this to meet international standards of best practices, “he said. The company was founded in 1980 as a distributor and a trader. In 1996 it repositioned itself as a national-level distributor. PT AAM has since 2009 implemented the standards of Good Distribution Practices (GDP) version of the World Health Organization (WHO) Technical Series No. 937, 2006 in an effort to create Total Drug

Quality Management. GDP is part of the function of quality assurance measures to ensure that products are consistently stored, shipped, and handled according to the conditions stated in product specifications. GDP is also needed to ensure that there is no “mix-up, contamination and cross contamination” along the routes of drug distribution. GDP is very important to support the standards of Good Manufacturing Practices (GMP) that aims to guarantee the quality of each drug product produced by the pharmaceutical industry. A reliable distribution system in accordance with the requirements of GDP and GMP is imperative, so that the stability and effectiveness of drugs remain secure for patients when it passes the test of Quality Assurance at the factory (according to GMP-Good Manufacturing Practices). PT AAM obtained the WHO GDP Certification Technical Series No. 937, 2006 from PT SGS Indonesia through a feasibility certification audit conducted on Dec. 2-4, 2008. The company has also obtained ISO 9001:2008 certificates as proof that it has implemented properly the quality management system.

NDC PT AAM uses Warehouse Management System – an integrated system complete with wireless barcode scanner to record stock to batch level. With this system inbound storage-outbound process can be monitored well. PT AAM is equipped with Enterprise Resource Planning (ERP) system, Integrated Supply Chain Solution, and Customer Relation Management procedures. For products that are related to life-saving, AAM has a mechanism to serve customers round the clock. The Inauguration was highlighted by the signing of an inscription made by Lucky Slamet, who represented the Head of the National Agency of Food and Drugs Control. PT AAM is located at Jababeka II, Cikarang, West Java. Jababeka Industrial Estate, which was established 21 years ago, is now inhabited by 1,500 multinational companies from 30 countries. There are nine hospitals and clinics that provide treatment facilities to more than one million inhabitants, 600,000 employees, 50,000 families and 10,000 students.

The President Post

www.thepresidentpost.com

May 12, 2010 C5

Real Estate Indonesian Real Estate Market Remains Attractive amid Negative Regional Signals The climate in Indonesia is much more encouraging as indicated by the good performance of property stocks on the capital market as well as by rising domestic demand that results from a steady increase in the size of the middle-class segment of society. By Alci Tamesa

nlike what’s happening around the region, Indonesia’s real estate market is going its own direction with analysts expecting a boom as of next year, thanks to an increased inflow of foreign capital and rapid expansion of the middle class segment of society that boosts property sales. Over the past 12 months, real estate prices and rentals in the Asia-Pacific region have seen significant declines but the sentiment in Asia has remained positive because of the resilience of Chinese economy following the communist government’s introduction of a series of fiscal and monetary stimulus. China has since been leading the Asian property market boom over the past few years with 2009 being the peak of its real estate success. This signal sent good sentiment across Asia with transaction volumes rebounding and prices going up again to benefit real estate developers. According to PriceWater-

houseCoopers, many large investment institutions in the region have been able to recapitalize via the capital markets (especially in Australia and Singapore), allowing them to pay down debt. This causes the region’s business sentiment to remain “generally sanguine,” it says. PWC is of the opinion that in spite of this, conditions remain extremely tight because “historically, real estate investment in Asia has been financed overwhelmingly by bank lending, and in the aftermath of the crash, banks are reluctant to provide funding to all but their best (and usually largest) clients.” Based on investment prospect ratings, the top five markets in 2010 are Shanghai, Hong Kong, Beijing, Seoul, and Singapore. Chinese cities dominate the rankings this year—a reflection of a remarkable resurgence in Chinese commercial real estate as the government-mandated liquidity boom lifts markets across the country. Another city that has moved

significantly is Sydney, which has become a popular destination for foreign funds seeking shelter in Australia’s mature property markets and commodity-based economy, PWC says. The climate in Indonesia is much more encouraging as indicated by the good performance of property stocks on the capital market as well as by rising domestic demand that results from a steady increase in the size of the middle-class segment of society. A PriceWaterhouseCoopers report obtained by The President Post says that government-sponsored liquidity has helped keep Asian interest rates low while liquidity is returning via the capital markets. Meanwhile, even though bank credit remains scarce, reluctance to lend is gradually easing. Nevertheless, the banking sector in Indonesia expects to a 45 percent increase in lending, an indication that banks will now amplify their role as “true agents of development”. Meanwhile, according to Mar-

ketBeat Economic Summary released recently by Cushman & Wakefield, all general economic indicators showed an improvement trend over the first quarter 2010. Indonesia’s GDP continued to show positive growth at an estimated YoY growth of between 5.0% and 5.5%. Rupiah was strengthening against US$, and the stock market also showed more favorable activity. At the end of March 2010, the Composite Index closed at 2,610, a significant increase from the 2,443 in December 2009. Due to these positive developments, leasing inquiries and transactions have shown more favorable activities during the first quarter 2010, compared to that in the previous quarters. The MarketBeat reports saw banking and mining sectors as the two most aggressive sectors for office inquiries and transactions during the reviewed quarter. The ‘return’ of the banking sectors to the market gave a strong indication that the con-

fidence and optimism on Indonesia’s economic growth on and business activities have improved and will continue this year. Another positive sign is the higher demand for office space that is expected to occur in the next quarters. The banking and financial sectors are projected to be the largest demand generator for Jakarta offices, mostly for relocation and expansion reasons. Similar trend to the rental office, inquiry and transaction activities for strata title office space within strata title buildings were also more favorable over the first quarter 2010, the report says. The asking price for the higher quality strata title space was quoted in the market at between US$1,900 and US$2,300 per sq.m, whilst lower quality space was offered at around Rp.13 million per sq.m. The macroeconomic stability is also the reason for an increase during the 1st quarter of 2010 both in terms of cumulative real estate sales rate and pre-sales rate. The cumulative sales rate of ex-

isting condominiums was recorded at 94.1%, a slight increase of 0.1% from the previous quarter’s figure and remains the same as the last year’s figure. The pre-sales rate was recorded at 60.83%, also an increased by of 0.5% from the last quarter’s figure 60.35% and 3.8% from the last year’s figure, 57.46%. The upper-middle segment condominiums continued to record the highest pre-sales rate of 65.4%.

property for 90 years, instead of 25 years stipulated by the 1960 Agrarian law that is still in force. “The issue to revise regulation of foreign ownership on properties has been discussed and urged for clarity this year. If the revise regulation is issued and government allows foreign nationals to buy houses and condominiums, it will potentially boost condominium sales,” the report says. Knowledgeable sources say the government had actually planned to reveal a revision of the property law prior to the FIABCI conference in Bali this month, but the plan was postponed because of a sudden change in the position of Finance Minister Sri Mulyani—who will occupy her new chair in the USA as the World Bank’s Managing Director. Nevertheless, Chairman of Investment Coordinating Board (BKPM), Gita Wirjawan, has said tat he expects the revision to be announced toward the end of this year. That incentive is expected to be the prelude to Indonesia’s biggest property boom next year.

During the review quarter MarketBeat saw the increment of the pre-sales rate of Upper segment projects, from 58.9% in the previous quarter to 65.1%. The recent low interest rate has positive impact on demand as investment motivated buyers started to consider investing in condominiums, the MarketBeat report says. Real estate practitioners say that even with the current property law, the growth has been so encouraging, how much more when the government revises the law to allow foreigners to own

JABABEKA’S PROPERTY INDEX January - May 2010

KOTA JABABEKA RESIDENTIAL ESTATE:

No.

A New Concept of Living for Professionals To many professionals, residing in Kota Jababeka means being only minutes away from their work areas. By Jeannifer Filly Sumayku

ndonesia’s real estate sector is expected to expand further through 2014 with leading developers continuing to introduce new concepts to attract the market. For instance, Kota Jababeka Residential Estate, which was established in the heart of the green city of Jababeka, provides all facilities and comfort that professionals need in a decent living environment. To many professionals, residing in Kota Jababeka means being only minutes away from their work areas. Some 30,000 medium to upmarket housing units are marvelously laid out across the 1,400 hectare stretch of the residential estate. Comprising various types of residential clusters, the variety of housing units cater to all social strata and suit the taste of everyone, from the simple and practical to the grand and exquisite, market analysts say. For families looking for exclusively simple and modern homes perfect for nurturing their children, Tropicana Garden and Simprug Garden is a good choice, as it is surrounded by green and peaceful Botanic Gardens. Nearby facilities include playgrounds, jogging tracks, and shopping centers. It is located near Jababeka’s Education Park where you can find top schools like President University, BPK Penabur and Al Azhar. A health care hub, Medical City, and entertainment center, the Indonesia Movieland, are also in the premises. The Metropark Condominium is located in the heart of the Jababeka CBD area. It is built with minimalist design and is completed with exclusive facilities, including a swimming pool, a fitness center, and restaurants. The contemporary residence is

perfectly suited for young professionals or expatriates, market analysts say. Even better than the simple leisure activities and safe surroundings that Kota Jababeka residential estate provides is the sense of community it offers to its residents. Individuals and families are assured of quality facilities and services, which provides for a well-rounded lifestyle. The Veranda Golf Townhouse captures the essence of a balanced and high-end life style. The Veranda is designed as comfortable and classy residences which appreciate quality and a lifestyle that blends with nature. The superbly planned and designed golf townhouses are located within a green belt overlooking the luxuriant fairways and greens of the Jababeka Golf and Country Club. The golf-view residence combines relaxation, comfort, and leisure. Jogging track, fitness facilities and swimming pools are also provided for those who want a healthy and balanced lifestyle. The Veranda is also equipped with a roof-deck, specifically designed for enjoying the beauty of the sunset or barbecues with family and business associates. Benefits of the Veranda Golf Town House

• Backyards are directly connected with the Jababeka Golf field, allowing houses to have a beautiful view and a comfortable home atmosphere. • 24-hour security: Access to the entrance and exit is just one way. Thus, other than owners of the house and guests, no one can enter the premises. • The “no-fence” concept allows residents to feel the benefit of a more spacious living environment. • Waste management is directly handled by Jababeka. • Completely free from floods.

SEGMENTS

SIZE - M2 Building

PRICES

Land

RESIDENTIAL

The Veranda Town House

Veranda Deluxe

294

166

Rp. 2,008,000,000

Veranda Corner

306

288

Rp. 2,689,600,000

Simprug Garden

Green Pine

112

Rp. 517,000,000

Yellow Pine

139

Rp. 585,000,000

Golden Pine

136

Rp. 800,800,000

Orchid

Orchid Deret

120

Rp. 266,500,000

Orchid Corner

225

Rp. 382,600,000

Orchid Corner

206

Orchid Corner (Limited)

189

Tropikana Garden

Zelosa - Standard

114

119

Rp. 854,500,000

Axela Standard

159

160

Rp. 1,069,000,000

Axela Standard Plus

159

188

Ortiz - Standard

188

300

Axela - Corner (Land Plot)

228

Zelosa - Corner (Land Plot)

262

Rp. 766,700,000

Ortiz - Corner (Land Plot)

349

Rp. 1,021,500,000

Metropark Condominium Tower A

Deluxe , 2nd fl

27/1 Bdr

Rp. 218,950,000

Deluxe ,3rd fl

27/1 Bdr

Rp. 218,950,000

Deluxe, 5th fl

27/1 Bdr

Rp. 224,500,000

Deluxe , 7th fl

27/1 Bdr

Rp. 257,500,000

Premium, 7th fl

54/2 Bdr

Metropark Condominium Tower B

Deluxe , 2nd fl (view Metro Blvd.)

27/1 Bdr

Rp. 218,950,000

Deluxe, 3rd fl (view Metro Blvd)

27/1 Bdr

Rp. 218,950,000

Deluxe , 5th fl (view JCBD)

27/1 Bdr

Rp. 224,500,000

Premium, 6th fl (view JCBD)

54/2 Bdr

Rp. 462,600,000

Deluxe, 6th fl (view swim. pool)

27/1 Bdr

Rp. 261,900,000

Deluxe , 7th fl (view swim. pool)

27/1 Bdr

Rp. 261,900,000

Pavilion-Exclusive Boarding Houses

Grande-Corner

COMMERCIAL

Rp. 364,800,000 Rp. 424,600,000

Rp. 1,143,200,000

Rp. 1,595,500,000 Rp. 667,200,000

Rp. 463,050,000

221

216

Rp. 1,287,000,000

Hollywood Plaza

Design of the Veranda Golf Town House

• The concept of a minimalist modern design with a touch of exclusivity and high tech on finishing materials. • The building façade is designed with a modern and high-tech touch with contemporary design that is eye-catching. • Directory placed at the crossing areas for ease of circulation; booth design directory will be integrated with the overall interior design corridor. • Ceiling materials combine gypsum, acoustic tiles and metal ceiling grids and perforated metal shades with a modern and high technology nuance. • The finishing of corridor floor applies a combination of granite material/local marble and homogeneous tiles. • Backyard areas are directly connected to the field Jababeka Golf.

Specifications of The Veranda Golf Town House Foundation

Straus pile and stone

Commercial B - Module SFB

552

Rp. 3,838,500,000

Commercial B - Module SFB

682

552

Rp. 4,147,000,000

Commercial A - Module Studio

1,229

967

Pavilion Niaga

Block A3

100

Block A2

Ruko Sunter Niaga Mas

Rp. 7,209,500,000

Rp. 575,000,000

100

Rp. 575,000,000

Corner

165

71.5

Rp. 1,025,000,000

Standard

120

Rp. 750,000,000

Standard

120

Standard

120

Rp. 700,000,000

Wall

Plastered bricks

Finishing

Mowilex Paint or equivalent with Weather-shield Exterior

Ruko Sentra Niaga Square

Standard 1 (4 x 11), 2nd fl

Rp. 508,000,000

Roman Ceramics

Standard 2 (5 x 10), 3rd fl

150

Rp.715/727 Million

Corner (6 x 10) , 3rd fl

180

Rp. 891,000,000

Standard 1(4 x 11) , 2nd fl

Rp. 495,000,000

Standard 2 (5 x 10) , 3rd fl

150

Rp.715/727 Million

Corner (6x10) , 3rd fl

180

Floor Roof

Concrete Clay roof tiles

Frame/Sills

Exterior and Interior uses Samarinda Camphor Oven

Doors

Main Door uses Solid Door Engineering Panel while others use Double Teakwood

Windows Ceilings

Exterior and interior use aluminum Gypsum for the main room and Kalsiboard for service room

Carport

Reinforced Concrete Plates

Sanitation

Toto or equivalent

Water

PAM Jababeka

Electricity

3500 VA (Cikarang Listrindo or Jababeka)

INDUSTRIAL

Rp. 755,000,000

Rp. 891,000,000

SIZE - M2

Land

Factory

Office

Grand Standard Factory Building

2000-3500

830

115

start from Rp.4Bn

New 3-IN-1 Factory Building

576-1260

304

124

start from Rp.1,8Bn

Comercial Office Building

500

356

Rp. 1,700,000,000

Standard Office Building

425

160

Rp. 1,200,000,000

Land Plot

min 5000m2, $80

SALES and MARKETING OFFICE Jababeka Center, Plaza JB Jl Niaga Raya Kav 1-4 Kota Jababeka, Cikarang Baru Bekasi, West Java, Indonesia Ph. (+62 21) 893 4350 Fax. (+62 21) 893 4331 / 4038

Notes: The Above Prices are not Included: Tax 10%; PPAT; BPHTB fee; KPR/Notarial Fee and can be changed without prior notice

The President Post

C6 May 12, 2010

www.thepresidentpost.com

Infrastructure Bandung Offers US$95 million Project to Overcome Garbage Problem ROSY ECONOMIC GROWTH FIGURE: Workers are seen busy finishing the construction of a highrise building in Jakarta, as the IMF again revised Indonesia’s economic growth figure from 5,5% to 6%.

Photo: The President Post?Nandi Nanti

Jakarta Lures Investors to US$4.3 billion Projects The projects include the construction of toll roads in various Jakarta areas.

akarta, The President Post – The Jakarta administration is offering seven projects worth a total of US$4.3 billion from projects that are deemed priority under the public private partnership (PPP) scheme. The projects include the construction of toll roads in various Jakarta areas. “The National Development Planning Body (Bappenas) serves only as facilitators and we will continue to support regional governments in their efforts to boost their economies,” Chairman of the Asia Pacific Ministerial Conference (APMC) 2010 who is also Bappenas Government-Private Sector Cooperation Development Director Bastary Pandji Indra told journalists at a press conference on the sidelines of the Asia Pacific Ministerial Conference (APMC) and Infrastructure Asia 2010 in Jakarta last month. He attributed the fact that infrastructure projects are considered potential to the regional government’s strong determination to run the projects this year. However, Bappenas urges the regional government to complete various processes and documents to achieve the projects’ targets. He added that the regional

government must meet necessary conditions, including feasibility studies, land clearance, permits and others, to speed up the implementation of the projects. “Basically, we see that the regional government is very ambitious about running the projects, but in this case we only serve as facilitator,” Bastary stressed. He went on to say that the conditions of each priority projects vary on, for examples, the documents needed for tender, performance guarantee and political guarantee, and land clearance issue. “Basically, if the land issue is still not clear, the project cannot be offered as a ready-to-offerproject. The tender schedule can only meet the target if the land issue is settled,” he explained. Bastary elaborated that the seven projects are the KemayoranKampung Melayu Toll Road of 9.65 km long worth US$695.36 million, Sunter-Rawa BuayaBatu Ceper Toll Road (22,92 km) US$976.07 million, Ulujami-Tanah Abang Toll Road (8.27 km) US$425.53 million, Pasar Minggu-Casablanca Toll Road (9.56 km) US$571.99 million, Sunter-Pulo Gebang-Tambelang Toll Road (25.73 km) US$737.80 million, Duri Pulo-Kampung

Melayu Toll Road (11.38 km) US$596.01 million, and Tanjung Priok Access Toll Road (16.67 km) US$390 million with total value reaching US$4,392.76 million. The PPP Book 2010 data below show that West Java is offering five toll road projects, and three waste-base electricity projects worth up to US$2,270.55 million. Meanwhile, North Sumatra is offering two toll road projects worth US$604.82 million, East Java one toll road project and one water supply project worth a total of US$456.96 million, Lampung one toll road project and one water supply project worth US$310.68 million, Bali one toll road project and one water supply project worth US$192.38 million, and South Sumatra one toll road project worth US$105.29 million. The total investment value for the 27 priority projects is US$8,333.44 million. Serious response

On projects offered by the Jakarta administration, the chairman of the Indonesian Chamber of Commerce and Industry Singapore Committee, Iwan Dermawan Hanafi, called on the Jakarta administration to have clear rulings that provide investors with investment security. The security, he added, is related to land issues because they

27 Priority infrastructure projects in PPP Book 2010 No.

Name of Projects

Value estimation (in US$ million)

Information

Kemayoran-Kampung Melayu Toll Road

695.36

Length 9.65 km

Sunter-Rawa Buaya-Batu Ceper Toll Road

976.07

Length 22.92 km

Ulujami-Tanah Abang Toll Road

425.53

Length 8.27 km

Pasar Minggu-Casablanca Toll Road

571.99

Length 9.56 km

Sunter-Pulo Gebang-Tambelang Toll Road

737.80

Length 25.73 km

Duri Pulo-Kampung Melayu Toll Road

596.01

Length 11.38 km

Tanjung Priok Access Toll Road

390.00

Length 16.67 km

Sukabumi-Ciranjang Toll Road

185.58

Length 28.00 km

Ciranjang-Padalarang Toll Road

324.75

Length 33.00 km

10.

Pasir Koja-Soreang Toll Road

102.15

Length 15.00 km

11.

Cileunyi-Sumedang-Dawuan Toll Road

510.20

Lenght 58.50 km

12.

Terusan Pasteur-Ujung Berung-Cileunyi-Gedebage Toll Road

691.70

Length 11.38 km

13.

DKI Jakarta-Bekasi-Karawang Water Supply

189.30

14.

West Cikarang & Cibitung Bekasi Regency Water Supply

29.70

15.

Bandung Regency Water Supply

17.17

16.

Solid Waste Final Disposal & Treatment Facility-Greater Bandung Area

80.00

17.

Solid Waste Final Disposal & Treatment Facility-Bogor & Depok Area

40.00

18.

Solid Waste Management Improvement Bandung Municipal

100.00

19.

Medan-Binjai Toll Road

129.30

Length 15.80 km

20.

Medan-Kualanamu-Tebing Tinggi Toll Road

475.52

Length 60.00 km

21.

Pandaan-Malang Toll Road

252.76

Length 37.62 km

22.

Umbulan Water Supply-East Java

204.20

23.

Tegineneng-Babatan Toll Road

272.68

Length 50.00 km

24.

Bandar Lampung Municipal Water Supply

38.00

25.

Serangan-Tanjung Benoa Toll Road

148.88

Length 7.50 km

26.

Klungkung Regency (Tukad Unda) Water Supply

43.50

27.

Palembang-Indralaya Toll Road

105.29

Length 22.00 km

Total Source: PPP Book Bappenas, 2010

8,333.44

remain a serious problem that needs to be tackled immediately by the Jakarta administration. Land issues not only occur in Jakarta but also in other parts of the country. “The situation is different compared to China and other countries in Asia Pacific, which guarantee every investor land clearance,” he explained. He added that the land issue is very sensitive to both investors and the public and that productive measures and socialization of the projects among local residents must be taken, including informing them the negative and positive aspects of the projects for the local residents. “This is to make the public understand the multiplier effects that the projects can bring to them. If necessary, involve the residents in the land clearance process and project development to create a synergy between the regional government and the public to ensure the target of the projects can be achieved,” he elaborated.

Jakarta, The President Post – Bandung is a densely populated small city that produces a huge volume of garbage that gives the city administration a major headache. Bandung City Administration Secretary Edi Siswandi said that Bandung residents produce about 1,850 tons of garbage per day, exceeding the capacity of the city’s garbage processing facilities. To overcome the problem, the city administration wishes to collaborate with the private sector on garbage processing. Speaking at a press conference last month on the sidelines of the Infrastructure Summitn 2010, Edi said the city administration is offering investors a Rp850 billion

or US$95 million project to process the city’s garbage. The investor that wins the project will process 1,000 tons of garbage per day while the remaining 850 tons will be managed through the 3R approach. “For the remaining 850 tons, we will use the 3R approach, which combines Reduce, Reuse, and Recycle mechanism,” Edi explained. He added that the city administration will provide investors with a garbage supply of 1,000 tons per day, permit, and a building permit to set up a facility, and assurance that the state electricity company PLN will buy the energy produced from the garbage. The Bandung city administration is hopeful that PLN and the Carbon Development Mecha-

nism (CDM) will buy the project so that it can slash expenses it has to spend to run the project. He further explained that without cooperation from CDM and PLN, the city administration has to pay a gate fee of Rp350,000 per ton daily. But with cooperation from the two, it only has to pay Rp100,000 – 170,000 per ton daily. To bolster investor confidence, tight international standards must be applied, he said. The Bandung city administration is offering three types of garbage processing capacities, namely 500 tons, 700 tons, and 1,000 tons per day. He said that if successful, the project can be applied in other major cities in Indonesia to overcome their garbage problems.

Broadband Use Set to Boost the Economy Jakarta, The President Post – The government prioritizes not only infrastructure of the transportation and energy sectors in its public-private partnership (PPP) program but also the technology sector. The use of internet is now common in Indonesia and people can access it both from their computers and cell phones. To accelerate social infrastructure development, a seminar on information and communication technology (ICT) was held last month during the Infrastructure Asia 2010 summit. A coalition of PPP to promote the use of broadband in Asia has been established. Asian leaders believe that broadband is a key development factor that can boost the economic stability of a country, especially developing countries. However, the invitation to invest on broadband remains low in the PPP program, al-

though it is believed that it plays a significant role in the transformation of the economy. “The broadband policy is coming from the director of ITB and UI together with the Habibie Center and my organization (Meaningful Broadband Working Group). We are formulating together a plan that would support Minister Hatta’s plan for economic reform by accelerating broadband and also to make sure that broadband is meaningful to the majority population of Indonesia,” explained Prof. Craig Warren Smith in a press conference held after the seminar. National Telecommunications Commission (NTC) Chairman Prof. Prasit Prapinmongkolkarn agrees on the importance to have easy broadband access. “PublicPrivate Partnerships (PPPs) are not just for infrastructure alone. Our event produces new data that make clear that Asian nations urgently need to find a financial formula for entire broadband ecosystems that move markets towards the needs of the

poor,” he explained. The promotion of broadband use is not only important for the economy but also in creating parity among countries. Easier internet access will reduce the likelihood a country to lag behind on information of what is happening both domestically and overseas. It can also help to compete globally, especially Indonesia. ICT Chief for UNESCAP Atsuka Okuda said many countries have not fully enjoyed broadband access. “Though cell phones are sweeping the continent, broadband is not,” he said during the ICT seminar. The presence of fiber optics to support the wider use of broadband is already a good start to boost infrastructure from the social aspect. However, not everyone has felt the benefit. Hopefully through the PPP program, everyone, especially in Indonesia, can access information easily both on domestic and foreign issues to boost the economy.

The President Post

www.thepresidentpost.com

May 12, 2010 C7

Pictorial Events Bright Light from Borobudur

hen US astronaut Neil Armstrong went to the moon in 1969, he is said to have noticed a very bright light on earth, which he called Light of Peace. He traced the source of the light and it turned out to have come from Asia, Indonesia to be precise, or, to be even more precise, from Central Java’s Borobudur, the world’s largest temple. Later, when he visited Indonesia, he presented moon rocks to then President Soeharto. The Borobudur phenomenon continues to live on, according to Marselino Sumarsono, a filmmaker who madea documentary on Borobudur Temple. He revealed that the light emanating from Borobudur, as seen by US astronaut Neil Amstrong, is extraordinary and has been written in numerous reports that have captivated many and attracted tourists from foreign countries to visit the site. Many world leaders have visited

the temple, among them Prince Charles in November 2008. Among the many stories surrounding Borobudur is that which relates to the birth, in 1868, of a spiritual figure called Raden Gunung, who later managed to gain many followers and developed a teaching called PranShoe. The history of Borobudur, as told through short tales about the temple, have beckoned tourists to visit the place, which is a source of enjoyment due to its magical architecture and its peaceful aura. The warmth one feels in the area around the temple is perhaps engendered by the harmonization of Islam, Christianity, Hindu, Buddha and Faith, as they continue to coexist and perhaps even caused Borobudur to produce light that could be observed from the moon.

MARINE TOURISM POTENTIAL: The commander of the Indonesian Navy’s base Lantamal III, First Admiral Iskandar Sitompul (center) together with members of Kingdom Scuba Diving and fishermen at the Beach Club in Tanjung Lesung Resort planted 1000 mangrove trees on Earth Day. The President Post/Nandi Nanti

As told by Mr S.D. Darmono to Nandi Nanti of The President Post.

Infrastructure Asia 2010 Conference

The CEO Reference TV Program

The Infrastructure Asia Conference & Exhibition (14-17 April 2010) was held in conjunction with the APMC PPP 2010 and enables the widest community of government leaders, private sector developers, investors, bankers, technology & service suppliers and planners, to network directly with senior decision makers and procurement officials from over 53 governments responsible for the future of Asia’s infrastructure.

Dr. Bayu Prawira Hie, Juwono Sudarsono, S.D. Darmono

Breakfast Dialogue with Ivailo Izvorski, Lead Economist, East Asia Region The World Bank at The Financial Club Jakarta Gita Wirjawan, BKPM Chief (Middle) as the speaker on The Potential Role of PPP Center in Indonesia Infrastructure Development Industry seminar

The Financial Club Jakarta organized the monthly Breakfast Dialogue series on Friday, April 9, 2010 by inviting Ivailo Izvorski as its speaker. Ivailo Izvorski presents his speech entitled “East Asia: Emerging Stronger From The Crisis” Present at the breakfast were prominent businessmen and professionals, among others, Giuseppe Nicolosi, M.T. Rajah, Amrit Vijay Vaswani, Theodoor Bakker, Mila, Priyo Soemarno, Atmono Suryo

From left to right: Herry Bakti S. Gumay (Director General of Air Transportation Republic of Indonesia), Emirsyah Satar (President & CEO of Garuda Indonesia), and Oxana Balayan (Managing Partner and Head of Corporate Finance Moscow Lovells) as the speakers on Air Transport seminar.

KADIN - Western Europe Committee KADIN - Western Europe Committee organized a luncheon with MEDEF International (France) at the Financial Club Jakarta on the 8th of April 2010 Present at the luncheon, Mr. Philippe Louis-Dreyfus, Adi Tahir, Maxi Gunawan, Edwin Suryadjaya, Sandiaga Uno, Emirsyah Satar, and delegates of French businessmen

Fasli Djalal (Vice Minister of Education Republic of Indonesia) as the speaker on Healthcare & Education seminar.

The President Post

C8 May 12, 2010

www.thepresidentpost.com

Markets SEMEN GRESIK (SMGR)

Ready to Absorb Significant Demand Growth in the Future

Expanding projects to capture demand growth

t present SMGR is developing two new plants which are located in Tuban, East Java and Tonasa, South Sulawesi with total annual capacity of 5 million tons. The company is also developing one power plant which is located in Tonasa with capacity of 2 x 35 MW. Total investment needed for constructing those projects is US$708 million. The detail is US$594 million for constructing two new plants and US$114 million for the power plant. SMGR plans to complete the new plant in Java in 2012 while the new plant in Tonasa is targeted to be completed in 2011. The investment average per ton for the new plant is US$119. On the other hand, SMGR plans to complete the power plant construction in 2011 with investment value of US$1.63 million per MW. Until January 2010 the progress of constructing new plant in Java and power plant are on track, while the progress of constructing new plant in Tonasa is 3.55%, relatively lower than the previous plan of 4.33%. The main reason is the engineering process. We can conclude that the actual progress is not different significantly compared to the previous plan. Most of the budgeted capital expenditure (capex) will be spent in 2010F and 2011F in the amount of US$264 million and US$230 million correspondingly for new power plants construction. It will be the same for power plant that the company will spend US$24 million and US$66 million in 2010F and 2011F respectively for the power plant. Totally SMGR will spend capex of US$402 million and US$383 million correspondingly in 2010F and 2011F. The capex will be also used for de-bottlenecking project, maintenance, human capital master plan, etc. The existence of the two new plants are needed by the com-

INVESTMENT HIGHLIGHTS Strong cash position to support major expansions

JCI - SMGR

Current Price

: Rp 7700/shr

52 Wk high (01/20/10)

: Rp 8200/shr

3000

52 Wk low (03/25/09)

: Rp 3625shr

2500

Extending the implementation of debottlenecking project

YTD %-change

: 1.99%

2000

Loan commitment from national banking syndication

Share Outstanding

: 5931.520mio shrs

1500

Market capitalization

: Rp 45672.70bio

1000

Floating rate

: 0.24%

1 year total return

: 109.81%

On-track new cement plants and power plant construction Alternative fuel usage to increase efficiency pany, due to its optimal capacity utilization. SMGR needs additional significant production capacity in order to capture domestic growth demand in the future. SMGR has already obtained syndicated loan commitment which is led by Bank Mandiri (Persero) in the amount of Rp3 trillion for building plants in Tonasa. Presently the company still relies on its operating cash flow to develop the projects. SMGR will withdraw the loan based on investment needed due to the cash flow efficiency. After the projects completed, SMGR will maintain its position as the market leader in national cement industry with projected total annual capacity of 24 million tons in 2012. Efficiency in 2010

Efficiency improvement is an alternative solution to increase company’s performance, other than increasing revenues. One way to increase efficiency is using alternative energy such as rice husk and bagasse. The usage of alternative fuel will improve non-renewable energy efficiency as well as consume friendly environmental energy. For 2010F Semen Gresik as the holding company plans to use alternative fuel by 5%, while Semen Padang (SP) and Semen Tonasa (ST) plan to use the fuel by 1% for each plant. Beside the alternative fuel, SMGR also plans to use waste heat recovery. The implementation will be on SP. In 2010 SP plans to conduct stages of design/ engineering, procurement, and

construction. The trial and commissioning is targeted in 2012F. SP cooperates with Nedo from Japan to implement the technology. The biggest part of the capex will be charged on Nedo. SP will spend capex of approximately Rp76 billion, while Nedo Rp150 billion. The benefit for Nedo is, the Japanese company will get carbon credit from the process. In our view, SMGR will have much benefit if using alternative fuel and implementing waste heat recovery. The cost of alternative fuel is much lower than coal as well as waste heat recovery. SP will use the heat from processing as a new energy for another processing. On the other hand, SP will spend much less capex than its counterpart, Nedo. Potential future demand from infrastructure projects

Indonesia has a plan to improve its infrastructure, mainly in tollroads. The plan is strongly needed to accelerate the country’s economic growth. Based on National Development Planning Agency (Bappenas), total value of infrastructure projects from 2010 - 2014 is estimated to be amounted of US$34.1 billion, with value for toll road projects of US$15.2 billion. The projects consist of available projects offer with length of 135 km, priority projects of 342 km and potential projects of 857 km. The potential demand from infrastructure projects, mainly are tollroads, which will give

much room for the company to grow. SMGR is also benefited by its wide location of cement plants throughout Indonesia, since the country will need much cement for constructing infrastructure. Other than tollroads, SMGR will also have potential growth from developing power plants, water resources, railways and transportation.

-0

Jan

09 r-09 r-09 y-09 n-09 n-09 l-09 -09 t-09 t-09 v-09 c-09 n-10 r-10 Ju Aug Oc Oc No De Ja Ma Ju Ma Ap Ma Ju

SMGR Equity

2007A

2008A

2009F

2010F

Sales (Rp bn)

8.728

9.601

12.210

15.965

18.913

Gross profit (Rp bn)

3.328

4.001

5.355

7.184

8.511

Operating profit (Rp bn)

1.779

2.397

3.387

4.863

5.771

Net income (Rp bn)

1.296

1.775

2.524

3.686

4.175

EPS (Rp)

2.184

299

426

621

704

Equity (Rp bn)

5.500

6.627

8.070

10.375

12.562

-1.576

-2.712

-3.626

-4.913

-6.552

7.496

8.515

10.603

13.030

15.459

19,5

14,9

10,7

7,4

7,1

1.092,1

149,7

215,2

310,7

351,9

1,4

2,0

2,8

4,1

4,6

927,4

1.117,6

1.360,8

1.749,5

2.118,4

PER (x)

3,5

25,4

17,8

12,2

10,8

PBV (x)

8,2

6,8

5,6

4,3

3,6

PEG (x)

0,1

0,7

0,4

0,1

0,3

Gross margin (%)

38,1

41,7

43,9

45,0

Operating margin (%)

20,4

25,0

27,7

30,5

Net margin (%)

14,8

18,5

20,7

23,1

22,1

ROE (%)

23,6

26,8

31,3

35,5

33,2

ROA (%)

17,3

20,8

23,8

28,3

27,0

net cash

Net debt (Rp bn) Total asset (Rp bn) EV/EBITDA Dividend/share (Rp)

The outlook of SMGR’s performance is positive. Since the company’s capacity utilization is almost at full level, SMGR is constructing two new plants in Tuban and Tonasa. When domestic cement demand grows significantly, SMGR will be ready to supply its products. The company has strong market penetration in almost all areas in Indonesia.

JCI Index

2006A

Valuation and recommendation

Profitability is the company’s main objective for its stakeholders. SMGR always finds ways to increase the margin by improving its efficiency. In order to increase its production due to its optimal capacity utilization, the company is constructing two new plants. In the mean time while the construction is progressing, SMGR conducts de-bottlenecking project to increase its produc- tions. This is conducted through technical engineering. As a state owned company, SMGR always pays dividend with a high dividend payout ratio with an average around 40% - 50%. It is very attractive in re-

500

9000 8000 7000 6000 5000 4000 3000 2000 1000 0

Dividend yield (%) Book value/share (Rp)

Net debt to equity (x)

lation with its increasing performance from one year to another. SMGR is traded at the cheapest valuation, compared to its peers, which are Indocement (INTP) and Holcim Indonesia (SMCB). We have a target price for SMGR of Rp9,000 per share by using DCF method, WACC of 16,1% with market risk premium of 20%.

PER

PBV

2009

2010

2009

2010

SMGR

12,4

10,9

4,4

3,6

INTP

19,4

16,5

5,0

4,0

SMCB

17,5

17,0

4,7

3,7

Average

16,4

14,8

4,7

3,8

Source: BNIS estimate

SEMEN GRESIK Income Statement Projection 2006A - 2010F

Excellent 9M09 performance SEMEN GRESIK Rp billion

9M09

Sales

9M08

chg

10.404

8.798

18,3%

Gross profit

4.757

3.784

25,7%

Operating profit

3.059

2.396

27,7%

Net profit

2.408

1.791

Gross margin

45,7%

43,0%

Operating margin

29,4%

27,2%

Net margin

23,1%

34,5%

20,4%

Semen Gresik Group: Domestic Sales Volume 9M09 (ton) 9M09 Semen Gresik

6.034.987

9M08 6.192.795

Chg -2,5%

Semen Padang

3.728.016

3.842.768

-3,0%

Semen Tonasa

2.634.580

2.334.250

12,9%

Total

12.397.583

12.369.813

0,2%

Source: Indonesia Cement Association

In 9M09 SMGR recorded significant growth in sales by 18.3% yoy to Rp10.4 trillion. The increasing sales volume was mainly contributed by subsidiary, ST. Gross profit rose by 25.7% yoy to Rp4.8 trillion, accompanied by increasing gross margin. The operating expenses increased by 22.4% yoy to Rp1.7 trillion, mainly because the increase of selling expenses. Part of the selling expenses which is delivery and loading expenses rose by 27.6% yoy to Rp630.9 billion. Although the operating expenses rose significantly, the company’ operating profit jumped by 27.7% yoy to Rp3.1 trillion. Other income also surged significantly by 63.8% yoy to Rp256.6 billion. The main contributor was a significant increase in interest income by 75.2% yoy to Rp256.8 billion, although the foreign exchange loss increased to Rp9.4 billion in 9M09 compared to Rp0.3 billion in 9M08. On the bottom line, the net profit rose by 34.5% yoy to Rp2.4 trillion in 9M09.

Semen Gresik Group: Domestic Sales Volume 2005 - 2009 (ton) 2009

2008

2007

2006

2005

CAGR

8.520.548

8.351.054

7.399.554

7.894.480

7.903.635

1,9%

Semen Padang

5.007.975

5.124.201

4.836.439

4.357.435

3.876.732

6,6%

Semen Tonasa

3.617.358

3.179.986

2.938.240

2.684.599

2.496.165

9,7%

17.145.881

16.655.241

15.174.233

14.936.514

14.276.532

4,7%

Source: Indonesia Cement Association

2006A

2007A

2008A

2009F

2010F

Revenue

8.728

9.601

12.210

15.965

18.913

Cost of revenue

(5.400)

(5.600)

(6.855)

(8.781)

(10.402)

Gross profit

3.328

4.001

5.355

7.184

8.511

Operating expenses

(1.548)

(1.604)

(1.967)

(2.322)

(2.739)

Operating profit

1.779

2.397

3.387

4.863

5.771

Other income (expenses)

163

202

421

216

Net profit

1.296

1.775

2.524

3.686

4.175

Rp billion

2006A

2007A

2008A

2009F

2010F

Cash

1.744

2.822

3.747

5.053

6.717

Current asset

4.153

5.268

7.083

9.290

11.477

Fixed asset

3.163

3.102

3.309

3.500

3.700

Total Asset

7.496

8.515

10.603

13.030

15.459

Liabilities

1.915

1.796

2.429

2.576

2.817

Current liabilities

1.460

1.446

2.092

2.036

2.117

Non-current liabilities

455

350

337

540

700

Equity

5.500

6.627

8.070

10.375

12.562

Minority interests

104

Total Liablities and Equity

7.496

8.515

10.603

13.030

15.459

2006A

2007A

2008A

2009F

2010F

Receipts from customers

8.821

9.602

11.851

15.167

18.157

Payment to suppliers

(5.548)

(5.634)

(7.133)

(8.781)

(10.402)

Payment to employees

(917)

(1.217)

(1.392)

(2.089)

(2.055)

Cash from operating activites

2.356

2.751

3.325

4.297

5.700

Interest income received

124

138

224

450

250

Payment of corporate income tax

(661)

(786)

(873)

(1.268)

(1.437)

Net cash flows provided by operating activities

1.594

2.075

2.628

3.404

4.433

Acquisition of fixed assets

(190)

(323)

(562)

(850)

(1.000)

Net cash flows used in investing activities

(306)

(285)

(528)

(753)

(955)

Repayment of bank loans

(197)

(104)

(53)

(50)

(75)

Payment of dividends

(263)

(648)

(888)

(1.262)

(1.709)

Net cahs flows used in financing activities

(893)

(711)

(1.176)

(1.344)

(1.815)

Net increase in cash and cash equivalents

395

1.079

924

1.306

1.664

Cash and cash equivalents at the beginning of the year

1.349

1.744

2.822

3.747

5.053

Cash and cash equivalents at the end of the year

1.744

2.822

3.747

5.053

6.717

Balance Sheet Projection 2006A - 2010F

Cash Flow Statement Projection 2006A - 2010F Rp billion Cash flows from operating activities

Cash flows from investing activities

Cash flows from financing activities

Semen Gresik

Total

Rp billion

Source: Company data and BNI Securities Estimate