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Mari Pangestu: The Champion of Free Trade
Jakarta-born Mari obtained her Bachelor’s and Master’s degrees from the Australian National University, and her Doctorate in economics from the University of California at Davis, US, in 1986.
By Lukman Hakim
Indeed, Mari (54) has all what it takes to be where she is now: the first female ChineseIndonesian to hold a cabinet position in Indonesia, impeccable academic credentials and, perhaps more importantly, no linkage to the business world. JAKARTA (TPP) – When Susilo Bambang Yudhoyono was last year re-elected for a second term as president, at the top of the list of ministers he wanted to retained in his new cabinet was Mari Elka Pangestu—not surprisingly. Says Sofjan Wanandi, one of Indonesia’s premiere businessmen: “Mari Pangestu is the best and the most qualified person to lead the ministry of trade. “ “She is the leader of G-77 representing Asia, Africa and Latin America in negotiations with the WTO. Mari is also credited for making Indonesia better known overseas.” He added: “She has played and is expected to play an even greater role in making inroads to bolster trade with Japan, China, Asean and dan Australia. “ Indeed, Mari (54) has all what it takes to be where she is now: the first female Chinese-Indonesian to hold a cabinet position in Indonesia, impeccable academic credentials and, perhaps more importantly, no linkage to the business world. Jakarta-born Mari obtained her Bachelor’s and Master’s degrees from the Australian National University, and her Doctorate in economics from the University of California at Davis, US, in 1986. Prior to becoming Minister of Trade, she had been active in var-
ious trade forums such as PECC. As an economist, she is widely published in national and international media. She serves on the Board of External Editors of the Asian Journal of Business (University of Michigan) and the Bulletin of Indonesian Economic Studies (Australian National University). She is also the co-coordinator of the Task Force on Poverty and Development for the United Nations Millennium Project. Things are looking up or her and the nation’s economy as, for example, exports rose 43% in April after surging 47% in March, official data show. Meanwhile, Bank Indonesia predicts economic growth will accelerate to 6% this year from 4.6% in 2009. The government estimates gross domestic product (GDP) will expand 6%-6.5% in 2011. Indonesia’s economy grew at the fastest pace in more than a year last quarter as record-low interest rates boosted consumer spending and exports and investment recovered. GDP in Southeast Asia’s largest economy increased 5.7% in the three months to March 31 from a year earlier. “We are optimistic that the country can achieve or exceed export growth of 7%-8.5% this year, even as Europe’s debt crisis threatens demand for the region’s
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“Eastern Indonesia such as Papua could be an energy and food development hub, Java for manufacturing, and Sumatra for oil-chemical and minerals.” Hatta Rajasa Coordinating Minister for Economic Affairs
Rajasa declined to name the five special economic zones, only saying that they will be across the country, including eastern Indonesia.
On the country’s emerging creative industries It needs support from banking and non-banking institutions to flourish. The contribution of creative industries to Indonesia`s non-oil/gas exports reached Rp1149 trillion.” On the government’s “I Love Indonesia” campaign It is not a form of protectionism but a means to promote domestic consumption. On intellectual property rights (IPR) Indonesia remains committed to eradicating violations of IPR to pro-
tect the interests of investors engaged in the country’s creative industry. On US investment in Indonesia There’s still a lack of awareness in the US, a misperception that we have to address. We have to keep up the momentum to expand cooperation. On Morgan Stanley’s statement that Indonesia should be added to the list of BRIC nations If we can maintain our current growth rate and continue the policies that we are taking, we hope that we can grow 4.5% this year and be able to recover more next year to grow at around 5-6%. We are making sure that domestic
goods,” Mari said recently. “The increase in exports in the first four months of 2010 suggests the government’s target for the year can be met,” Mari added. “Our exports, which are 26% of the GDP, are not so exposed
“For sure they include areas in East Indonesia such as Papua,” he said. He explained that the country`s regional economic development is divided into economic corridors, within which are special economic zones (KEK), and within a KEK are a number of clusters. “So if we say Papua`s KEK, it includes clusters such as West Papua, Merauke and Biak. We will encourage them to become fast growing areas,” he said. He said 48 regions had previously applied to become special economic zones but they had all been turned down.
The five KEKs would boost productions based on, among other things, marine, oilpalm, agriculture, mineral, coal, petrochemical. “Eastern Indonesia such as Papua could be an energy and food development hub, Java for manufacturing, and Sumatra for oil-chemical and minerals,” the minister said.
The current five special economic zones do not include Batam, Bintan and Karimun.
The SEZ is a government-designated area in which companies enjoy various duty-free imports of raw materials and no taxation. Batam, Bintan and Karimun islands provide a one-stop investment program offering an integrated service for business permits, immigration issues and tax payments.
VIEWPOINT
THE ECONOMY
BUSINESS
AUTOMOTIVE
Indonesia, the region and the world
President Says No to Nuke Energy, New Budgeting System
Garuda Indonesia to Install IT Facilities in Aircraft in 2011
Automobile Industry Running in High Gear Despite Traffic Jams
Indonesia’s stategic vision is defined by its geo-political and geo-economic location in Asia and the Pacific, which determines its perennial imperative to keeping track of security trends in regional clusters. PAGE A2
Developing nuclear energy needs thorough considerations and proper locations.
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first four months of 2010, Deputy Trade Minister Mahendra Siregar said last month.
As Mari sees it...
Hatta: By 2014, RI to Have Five Fully-Developed Economic Zones JAKARTA (TPP) – The government expects Indonesia to have at least five fully-developed special economic zones (KEK) by 2014, a minister said. “Our priority is to have, by 2014, at least five (developed) special economic zones,” Coordinating Minister for Economic Affairs Hatta Rajasa said last month. The government is currently evaluating five special economic zones and has set their development strategies, main design, development framework.
IDR 20,000
The technology will allow passengers to communicate using the short text message service (SMS) and operate laptops on board aircraft.
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According to Gaikindo’s projections, car production in Indonesia will continue to soar through 2015
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consumers can maintain their purchasing power, including the lower income groups. On the US Senate’s decision to restrict tobacco products, including clove cigarettes We have voiced our objections. This has been quite a lengthy process, and it has, unfortunately, passed at the Senate level. We feel this is discriminating against cloves because menthol is not considered flavor. Cloves, only account for a small percentage of flavored cigarettes but are being discriminated, this is a matter of principle.
to the European market. But as about 12% of it go to Europe, less than the corresponding figure for China, you can have secondary effects. If China’s exports slow down, then so do their imports.” China buys about 10% of Indonesia’s exports and is the Southeast Asian nation’s third-largest overseas market. Indonesia’s non-oil and non-gas exports to China surged 76.7% from a year earlier to US$4 billion in the
President Susilo Bambang Yudhoyono and his economics ministers met Chinese President Hu Jintao on the sidelines of the Group of 20 meeting in Toronto last month, and discussed a plan to improve strategic economic and trade partnerships, alongside deepening defense cooperation and international affairs under the framework of the UN and the G-20 economies. The president said: “The two countries have a good relationship. China is an important partner and a good friend of Indonesia.” Xinhua news agency reported Hu said China attached much importance to boosting its strategic partnership with Indonesia. He specifically supported Chinese companies taking part in major infrastructure development projects in Indonesia. Indonesia’s US$514 billion economy needs over $200 billion in investment each year, the bulk of it to overhaul its ailing infrastructure. The government hopes 70% of infrastructure development in the next five years will be financed and carried out by the
private sector. Indonesian business leaders and government officials have hailed a commitment by China to invest more in Indonesia’s infrastructure, although some observers expressed concern that China might use the investment as an opportunity to increase its influence here to the detriment of local companies. The head of the land acquisition bureau at the Ministry of Public Works, Wijaya Seta, said Chinese companies were more productive and efficient than their Indonesian counterparts, which should enable infrastructure to be developed cheaply. “I think from this alone we can gain, seeing more infrastructure built with less money,” Wijaya said. “After the infrastructure has been completed, it will create multiplier effects,” he said. According to Mari, Chinese investment in Indonesia totaled US$265.5 million over the past four years, while two-way trade between China and Indonesia amounted to US$25.5 billion in 2009,up from US$12.5 billion in 2005. “Investment and trade between the two countriesw are expected to grow to US$50 billion by the end of 2014,” she said.
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Viewpoint Indonesia, the Region and the World Indonesia’s stategic vision is defined by its geo-political and geo-economic location in Asia and the Pacific, which determines its perennial imperative to keeping track of security trends in regional clusters.
I By Juwono Sudarsono
As the largest ASEAN memberstate in terms of geographical size ( more than 5 million sqkm), population (234 million) and economy (GDP $670 billion), Indonesia’s role is to emphasise collaborative rather than assertive leadership.
ndonesia is one of the world’s geo-political “regional pivotal states” along with Mexico, Egypt, Nigeria, Pakistan, Saudi Arabia, Turkey, South Africa, Brazil, Argentina, Canada and Australia, the latter seven being co-members of the G-20. In diplomatic forums Indonesia participates in the UN system, the Non-Aligned Movement (NAM), the Organization of Islamic Conference (OIC), the Association of Southeast Asian Nations (ASEAN), Asia Pacific Economic Cooperation (APEC), Asia Europe Meeting (ASEM), the East Asia Summit (EAS), and, since 2008, in the G-20. Indonesia’s stategic vision is defined by its geo-political and geoeconomic location in Asia and the Pacific, which determines its perennial imperative to keeping track of security trends in regional clusters comprising: • NorthEast Asia—Japan, China, South Korea incl. Taiwan (combined: GDP $13 trillion) • SouthEast Asia—the 10 member states of ASEAN, incl. PNG (combined GDP: $1,3 trillion • SouthWest Pacific—Australia, New Zealand, South Pacific (combined GDP: $ 1.2 trilllion) Together with the United States, Canada, Chile and Brazil, the Trans Pacific community constitute roughly 76% of world GDP. As the world’s largest economy
(GDP: $14,8 trillion), the United States military primacy in Asia and the Pacific has long defined the region’s security. Throughout the Cold War (1947-1990) and beyond (1990- present), the US Pacific Command (PACOM) held its role as “main security provider”. American military primacy (space-based communications, strategic nuclear, ballastic nuclear and conventional forces) provided its treaty allies, Japan, South Korea, Taiwan, to secure 80% of energy supplies from the Middle East within a stable Northeast Asia-Southeast AsiaIndian Ocean environment. It also enabled Japan, the Republic of Korea, Taiwan and eventually China to accumulate today’s combined GDP of almost US$13 trillion, whilst at the same time underwriting America’s trade and fiscal deficits. American strategic primacy secured both intra-regional and trans-regional economic growth. Japan, South Korea and China provided economic, trade and invesment commitments, leading ASEAN to become today a community of 10 nations with a combined GDP of $1,3 trillion. The security, trade and investment complementarities linking Northeast, Southeast Asia and the South Pacific were facilitated by the US’ critical role as “regional balancer” securing market-based trans-regional cooperation. Of the annual $167 trillion worldwide financial market transactions, more than 60% connect key financial hubs in the Asia Pacific region: Tokyo,
Shanghai, Singapore, Seoul and Sydney. The economic size and political prominence of Japan (GDP $5 trillion), China ($4.8 trillion) and India ($2,1 trillion) lead to graduated desire of the three Asian powers to enhance their strategic influence within each country’s “core area of interests” as well as beyond. In the
The real challenge for Indonesia is to coordinate and synchronise ASEAN’s public and private business leaders to harness a concerted vision based on each country’s distinct geo-political location relative to its geo-economic competitive strength. next 10-15 years ASEAN needs to continuously re-calibrate the deterrence capability of its conventional forces in ways that accomodate ASEAN’s imperative to “co-determine” the terms and conditions of Asia Pacific security in sustaining the rebalancing process among all major
powers, including Russia. Within the ASEAN Security Community (ASC), Indonesia strives to cooperate and maintain intra-ASEAN stability with its nine fellow member states in mainland and maritime Southeast Asia. The three pillars of the ASC (Political-Security, Economic and Social-Cultural) reinforce constructive engagement and maintain balanced “sovereign space” by accommodating the interests of extra-regional powers (US, Japan, China, India and Russia). Australia and New Zealand both play critical security supporting roles in sustaining this constant “rebalancing engagement” of the major powers in the Asia Pacifice region. As the largest ASEAN member-state in terms of geographical size ( more than 5 million sqkm), population (234 million) and economy (GDP $670 billion), Indonesia’s role is to emphasise collaborative rather than assertive leadership. Effective leadership within the ASC rests on Indonesia’s improved domestic political stability, equitable economic development and national security through the provision of good governance and social-economic justice at home. A secure ASEAN environment is in our strategic interest just as a stable Indonesia is in the interest of all our ASEAN partners. Aside from maintaining “sovereign space” with extra regional powers, Indonesia seeks to sustain “technological parity” among all resident as well as regional powers in order that mul-
tilateral cooperation, regional security and economic prosperity reinforce one another. The regional security architecure needs to secure 38% of the world’s 90% seaborne trade that passes through the straits of Southeast Asia, including the three sea lines of communications traversing the Indonesian archipelago. The real challenge for Indonesia is to coordinate and synchronise ASEAN’s public and private business leaders to harness a concerted vision based on each country’s distinct geo-political location relative to its geoeconomic competitive strength. Japan, South Korea, Taiwan and Singapore exemplify success in utilising “brain power” in order “to live off” the rest of the world precisely because they do not possess natural resources. Indonesia must deftly combine “soft”, “hard” and “smart” powers so that leadership groups in government, in the military, in private business and in civl society will be able to connect, cooperate and at the same time compete with one another as well as with the rest of the world. What will be the role of traditional “military power” compared to the growing importance of “non-military warfare” such as the “battle” over brainware, creativity, ideas and innovation? What is the optimum mix matching the ability to“deter and destruct” physical targets with the ability to “capture and secure” market share, financial assets and intellectual capital? Countries with sizeable numbers
of population and large territories must adopt comprehensive policy visions simultaneously linking the global, the regional, the national, the provincial and the local so that disputes over strategic resources can be resolved through rules-based multilateral mediation and peaceful negotiation. There is need for more skilled and educationally-trained civilian and military officials who are able to interface the planning of “military battles” over physical space with areas where “non-military battles” of ideas, of technological knowhow and of management skills become increasingly prominent in determining a nation’s ability to survive in a 24/7 competitive world. In all Asia Pacific countries the “war room”, the “board room” and the “classroom” must interface continuously. Only in this way can Indonesia’s future generation of civilian and military leaders, defense managers and diplomats ensure that the common responsibility within ASEAN to sustain multilateral cooperation, regional security and economic development will justly reward our shared vision of planning ahead in maintaining peace and prosperity throughout the Asia Pacific region. This article is a summary presentation on June 15, 2010, by the writer, who is a professor at the Jakarta-based University of Indonesia and former Defence Minister, to The Royal Institute of Defence Studies, London, at the Shangrila Hotel, Jakarta.
On Multiculturalism By Dr Walter G Tonetto
Indonesia immediately springs to mind as one of the most vibrant multicultural places on earth, ringed by lots of water, the biggest archipelago as well.
W
hen we try to comprehend what we mean by “multiculturalism”, Indonesia immediately springs to mind as one of the most vibrant multicultural places on earth, ringed by lots of water, the biggest archipelago as well. Why so? The Ethnologue Report, which appeared in print in 2009, authored by Paul Lewis, counts 726 languages in Indonesia, with a deaf population of two million people, suggesting that ‘culture’ is more than just speech, and encompasses those myriad nameless and silent forms of communion.
The key symbol of the cultural or mulicultural is an inherent diversity and acceptance of the other that is ultimately not even someone else’s but our very own, as we are continually bathed in multitudinous and infinite currents of life.
What of culture, then? Well, I cannot think of a more apt summation than that of Anthony Appiah’s, who said that “cultural purity is an oxymoron” [‘foolish’ or ‘incongruent’]. Appiah, it should be noted, is one of the most prominent cultural theorists today, with a Chair at Princeton University. Son of a politician and a jurist from Ghana and a British mother – and a grandfather who was Chancellor of the Exchequer –he is excellently positioned to comment on the glue that binds and defines cultures. Let’s think of the ‘glue’ here as honeyed stickiness rather than as some binding points of polarity or resistance.
Let’s probe this cosmopolitanism a little closer. Appiah is opposed, of course, to such simple Huntingtonean summary and reductionism; he uses the image of the Weltbürger (cosmopolitan) but he is also not comfortable with the naïve picture of a multiculti-relativism. In his elegant book, Appiah revisits the classical ideal of the Weltbürger and places it in the contemporary context, of a person who straddles traditions and boundaries and revels in the wonderfully regenerative waters of such creative exchange. This positions a cosmopolitan ethos in balance with universal values and a respect for the otherness of non-Western conceptions of the world.
We all know instinctively that we are multivalent agents, electro-magnetic organisms bathed in rivers of energy. Looking at the human brain alone, there are some 100 billion cells which are held together, or more properly said, loosely suspended, by subtle electrochemical currents.
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These currents are constantly in flux with no apparent stability or localizability. Think of the brain as a telephone network and take all the phones in the world and all the wires (I am counting 4 billion inhabitants of our Blue Planet). The number of connections and the trillions of messages per day would not equal the complexity or activity of a single human brain! That is a mammoth! Continuously bathing in this giant river of energy, we are literally connected to all the vibrations
in the universe (the brain in this mix is not a big computer, as the old metaphor has it, but rather a “cloud” of millions of small computers continuously at work. I cannot go into an exegesis of that idea here, but I think you get the picture. Although we shift, as we must, from neurobiology to anthropology or cultural studies, we keep the “cloud computing” metaphor of the human brain in mind, and the apprehension that at the sub-
atomic level everything in the universe is connected to what Dr Rupert Sheldrake calls the “morphic field”. Not just connected, but vitally, joyfully and vibrantly alive. We are thus constitutionally, as cellular beings, cosmopolitans (or cosmopolites). ‘Cosmopolitan’ means literally ‘citizen of the universe’, which is precisely what we are. Into this well-rounded, core perception of reality as it is, we cannot drive, try as we might, the square peg of Samuel Hun-
tington’s “clash of civilizations”, which was the skull-and-bones bunting of Huntington’s primary source of conflict in the postCold War world, hitched on the worm-eaten mast of Francis Fukuyama’s “The End of History and the Last Man”. The parrot of paradise (Psephotus pulcherrimus), whether perched on pirate Silver’s haggard shoulders, or as a metaphor in this ensemble, has flown the coop, and cannot be found, or heard to sing, in the Fukuyaman-Huntingtonean aviary!
How is this ‘balance’ attained, he asks? Through the act of ‘conversation’, a term that Appiah invests with philosophical dignity. It is for him the sole instrument which helps us gauge national, religious and cultural forms of differences and allows us to adapt.
Thus it is not consent (persetujuan) that is important for the Weltbürger, but a shared belief in the commonality of our humanity in a world of strangers. Appiah stresses that Hesperian or occidental philosophy has always been over-insistent on difference; his own African background, and life in Europe and the US show how such Weltbürgertum or cosmopolitanism can be lived out. Contemporary beliefs are occidentally premised, even if they have currency in eastern lands, to the effect that all cultures each live in their own different universes, and never shall the twain meet (as Rudyard Kipling had it). King Solomon’s harpist Barzilai knew from the song of birds that the universe (literally means ‘one song’) is perfect harmony, and when Solomon needed to have a respite from the rigours of statecraft, he sojourned to Barzilai’s small village and drew comfort from the mellifluent harp. I often wonder how many people in Indonesia really understand the meaning of “Bhinneka Tunggal Ika” (“Unity in Diversity”), which is at the heart of joy. Notwithstanding that our song is one — however many tweets or wings the metallic or fleshly bird may have — the notion that one story about the universe must be right and the rest wrong is sclerosis and death. ; thus the key symbol of the cultural or mulicultural is an inherent diversity and acceptance of the other that is ultimately not even someone else’s but our very own, as we are continually bathed in multitudinous and infinite currents of life. The writer can be contacted at tonetto@tonetto.org
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July 12, 2010 A3
Profile PRITA KEMAL GANI:
A Woman Entrepreneur with a Passion for Education By Jeannifer Filly Sumayku
With her strong passion for public relations, she opened a training school on that subject with only 30 students and classes held two or three times a week.
P
Photo: The President Post/Nandi Nanti
assion, Concept and Perseverance are three important factors that are needed to become an entrepreneur, according to Prita Kemal Gani, the recipient of Enterprise Asia’s 2009 Outstanding Entrepreneurship Award for Asia Pacific. With her strong passion for public relations, she opened a training school on that subject with only 30 students and classes held two or three times a week. Today, the small PR training school has been transformed into the most credible graduate school of communications, STIKOM London School of Public Relations (LSPR). She also has a huge passion for education related to her childhood dream of becoming a teacher. “My activities in managing LSPR allow me little time to teach. But my dream is to continue teaching when I retire later,” says Prita. Prita, whose father hails from Surakarta, Central Java, and mother from Padang, West Su-
matra, was born in Jakarta in 1961. She was raised mostly by her mother after her father’s death when she was five. She fell in love with PR when she realized that being a PR person is a great profession since she could meet ambassadors and famous and important people. In the past years PR has undergone very advanced developments. The media information era is growing very fast, requiring organizations to become more transparent and communicative with targeted communities. Therefore, the role of PR is very important, because every organization will have to package the information in presentable, accurate and timely ways. “The duty of a PR person is not just talking to the media or the public, but also designing an overall public relations strategy within an organization, including evaluating designed and implemented programs,” explains Prita. After graduating from Trisakti Hotel Management School in Jakarta, she continued her PR stud-
ies at the London City College of Management, Britain, and then earned a Master’s degree in business administration at the International Academy of Management and Economics in Manila, the Philippines. Later, she became the PR Director of Clark Hatch International Jakarta for three years, from 1989 to 1992. It was during this time that she met her future husband, Kemal Effendi Gani, who was then the editor of Swa magazine. To Prita, journalism goes hand in hand with PR and she found she had a lot in common with Kemal. Amid her activities as a professional businesswoman, this wife and mother of three still finds time for her family. Her background and experience enabled her to understand the concept in starting a PR education institution. She used her networking with Clark Hatch members, who are mostly expats, to become freelance teachers. The first three-hour classes were held at Wisma Metropolitan two or three times a week. Now LSPR has more than 5,000 students in four campuses. The Bachelor program of LSPR has five majors, namely Public Relations Studies, Mass Communication Studies, Marketing Studies, Advertising Studies, and Performing Arts Com-
munication Studies. The Master Program was opened in 2003 offering four majors: Corporate Communications, Marketing Communications, Journalism and Media Studies, and Mass Communications. The curriculum is 60% international referring to London Chamber of Commerce and Industry Examination Board, The City and Guilds of London Institute and University of Cambridge International Examination. Through March 2010, a total of 10.970 have graduated from LSPR. Last but not least is perseverance, as it is needed the most in facing problems. “I have proven that perseverance gives good results; when I lose my perseverance I start losing my grip,” said Prita. Like others, LSPR also experienced growing pains, facing difficult problems along the way. “During hard times, I pray, and I always ask God to lead me in everything I do,” she says. Prita always shares with the teachers and staff members problems related to LSPR. As a message to Indonesian women entrepreneur, Prita states: “Every woman must have dreams and goals and never be afraid to have any dream; the most important thing is to find the right way and to persevere in achieving those dreams.”
Today, the small PR training school has been transformed into the most credible graduate school of communications, STIKOM London School of Public Relations (LSPR).
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A4 July 12, 2010
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The Economy ECONOMIC UPDATES BI predicts forex reserves to reach US$81 billion “Bank Indonesia predicts the foreign exchange reserves would reach US$81 billion by the end of this year following continued improvement in the country`s economic growth,” says the central bank`s governor Darmin Nasution last month.
Darmin Nasution
Darmin said until May Indonesia`s foreign exchange reserves reached US$74 billion and is predicted to continue to rise following the country`s good economic fundamentals compared to those of other countries.
Bank credits up 18.6 pct in June Bank credits during June 2010 reached a total of Rp1,531.5 trillion which represented an increase of 18.68 percent or Rp241 trillion from the figure in the same month last year, said Director of Economic Research and Monetary Policy (DKM) of Bank Indonesia, Perry Warjiyo, here last month. He said loans extended in the period January-June 2010 (year-on-year) had increased by Rp101.3 trillion or grew 7.1 percent compared to the end of December 2009 when the figure was Rp1,437.930 trillion.
Trade Minister: RI may take advantage of ACFTA Minister of Trade Mari Elka Pangestu said Indonesia is currently in a very good condition to take advantage of the implementation of the ASEAN-China Free Trade Agreement (ACFTA). “I believe we will be able to make adjustments and maked gains,” she said during a discussion on entrepreneurship Mari Elka Pangestu and ACFTA in Jakarta last month. She said Indonesia`s imports from China had increased from 10 percent to 17 percent in the last five years, mostly capital goods and intermediate products. Indonesia, she added, also has a productive work force and creative workers in a big amount with a low movable level which is attractive to foreign investors.
Capital inflow reaches Rp2.36 trillion Deputy Finance Minister Anny Ratnawati said that net capital inflows into the capital market until June 2010 reached Rp2.36 trillion. She said that besides the capital inflow, capital outflow also occurred (net capital outflow) through the capital market, which until May 2010 had reached Rp1.65 trillion.
State income from excises reaches Rp26.36 trillion State income from excises up to May 31, 2010 reached a total of Rp26.36 trillion, or 46.01 percent of the target in the 2010 State Budget. The 2010 State Budget had set a target of an excise revenue amounting to Rp57.29 trillion. Compared to the excise tax revenue until May 19, 2010, there is an increase of Rp2.66 trillion. Realization of customs tax revenues until May 19, 2010 reached Rp23.70 trillion, or 41.38 percent of the target in the 2010 state budget.
President Says No to Nuke Energy, New Budgeting System Photo: www.presidenri.go.id
Developing nuclear energy needs thorough considerations and proper locations.
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resident Susilo Bambang Yu d h o y o n o said the government still had no plan at least in the next five years to develop nuclear energy as an alternative to fossil fuel to generate electricity. “Under the government`s basic energy policy, we are striving for mixed energy, namely the combination of fossil fuel and renewable energy, such as geothermal, wind, and solar energy,” he said at a meeting with journalists at the Cipanas presidential palace in West Java last month. “Developing nuclear energy needs thorough considerations and proper locations. I say nuclear power plants are neither banned nor tabooed but on the other hand we still have to resolve a lot of problems,” he said. No to new budgeting system President Yudhoyono also said there was no need to create a new mechanism for development budgeting as the government already had one. “If House of Representatives (DPR) members wish a certain project should be carried out in a region, they can propose it. So it is the idea that will be accommodated. It will be complicat-
President SBY at a meeting with journalists at the Cipanas presidential palace in West Java last month.
ed if a new system is used while the old one is still in place. Members of the Regional Representatives Council (DPD) can do the same,” he told newsmen. He made the statement in response to a question over the socalled aspiration funds proposal whereby funds would be allocated to DPR members to finance development projects in remote areas. He said the government was applying two systems with re-
gard to development budgeting, adding that the budget for sectoral development was prepared by ministers or government institutions while that for regional development was drawn up by the regions concerned. Budget planning was done through a number of processes to formulate a definitive plan for discussion by the government and the DPR in drawing up a definitive state budget, he said. Yudhoyono said the aspiration funds proposal would only dis-
rupt the existing budget making mechanism. Coordinating Minister for Economic Affairs Hatta Radjasa earlier said that if DPR members wish to emphasize the importance of channeling funds to remote areas, quick funds needed to be made available and for that there would be discussions in House Commissions and the House Budget Committee. “So it is not a problem for a DPR member to fight for funds
for remote areas in the commissions and the Budget Committee. It has worked so far. In the commissions DPR members can also see the problems more clearly,” he said. The Golkar Party recently proposed the allocation of “aspiration funds” amounting to Rp15 billion to each DPR member to be used for development projects in their respective electoral regions. The idea has drawn strong criticism from various quarters.
House, Govt Agree to Revise Oil, Gas Law But Yet to Discuss Inalum The House of Representatives (DPR) and the government have agreed to revise Law No. 22 / 2001 on Natural Oil and Gas because a number of clauses in the law are considered no longer relevant. Chairman of the House Commission VI for investment, trade and industry affairs Airlangga Hartarto said here last month that one of the clauses no longer relevant stipulates the obligation to supply 25 percent domestic needs with oil and gas.
“Hartarto said, “a special meeting of the special inquiry committee, committee members discussed the adjustment between supply and domestic demand which was seen as no longer relevant. Hartarto said that in the revision of Law 22/2001, priority would be given to national interest and the refund of cost recovery. The revision, he said, also concerned efforts to reinforce the Upstream and Down Stream Oil and Gas Regulating Agency (BP Migas and BPH Migas), as well
the involvement of the House in the approval of oil and gas work contracts, infrastructure availability and the fixing of oil and gas prices. House, govt yet to discuss Inalum The House and government have yet to discuss the continuation of its almost 30-year cooperation with Japan regarding PT Inalum which is to end in 2013, a legislator said. “In the near future we will summon the government to discuss it,” Satya W. Yudha of the
Golkar faction in the House said last month. Satya said the cooperation between the Indonesian government and Nippon Asahan Aluminium (NAA) of Japan should be discussed soon, as the first 30year cooperation would end in 2013. He said that there was a strong desire from the public and the regions that the cooperation with Japan be terminated. Last week, Industry Minister MS Hidayat said the government may offer two options to Japan. Firstly, Indonesia will take full
control after 2013, secondly the contract will be extended with some renewed business schemes siding more on Indonesia`s interest. He said that the government had basically decided to take over the Asahan-Inalum project in North Sumatra, an Indonesia-Japan joint venture. “The Japanese has made a business proposal for the extension of the project, and Indonesia will make a counter proposal because our wish is to take over, and the negotiating team will join the negotiations,” said Hidayat.
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FINANCE MINISTER:
First Semester Growth is Good Photo: www.matanews.com
Finance Minister Agus Martowardojo said the national economy was showing steady growth in the first semester this year, strengthening confidence the annual growth target of 6.1 to 6.4 percent will be achieved. “The picture looks good. So there is a shared view that we can grow between 6.1 and 6.4 percent. So what we have achieved so far is quite good,” he said after attending a plenary meeting of the House of Representatives here last month. He said as a member of the G-20 Group Indonesia needs to keep its economy sustainable, strong and balanced in which the ratio between debt and budget deficit must be kept at a sound level.
New Cargo Facility PT Angkasa Pura II, which manages Soekarno-Hatta Airport, plans to build a new special cargo terminal with a capacity of 300,000 tons per year at an area covering 70 hectares, making it an international air cargo airport.
Apart from that Indonesia also needs to build trust in connection with issues such as how to increase trade and investment, to meet the Millennium Development Goals and reduce subsidy in the energy sector.
“We could conduct it during the G-20 meeting, as Indonesia hopes G-20 countries will not limit inappropriately development of trade and investment,” he said.
Finance Minister Agus Martowardojo
“The picture looks good. So there is a shared view that we can grow between 6.1 and 6.4 percent. So what we have achieved so far is quite good.”
On the national budget, Agus said in terms of state revenue it grew by more than two percent over the same period last year but he admitted that state spending and expenditure had not been done maximally. “It terms of spending it is a bit worse compared with the same period last year. We are questioning why spending is slower this year than last year,” he said. “We will start identifying the problems. As the cabinet is still new, programs of budget use might change. The budget authorities have changed. Perhaps there have also been efforts to put ministries in order down to regional offices. We also think perhaps there will be new policies with regard to procurement or realization,” he said.
The President Post
www.thepresidentpost.com
July 12, 2010 A5
The Economy THE INDONESIAN ECONOMY:
Continuity Amidst Volatility By Atmono Suryo
Indonesia continued to consolidate its recovery from the global economic and financial crisis amidst a volatile environment.
F
Difficult Setting rom the outset it will be recognized that it would not be easy for any developing country to make steady progress in a volatile environment, externally as well as domestically. Apparently, this is what has happened with countries such as Indonesia, particularly during the last two years as a result of the global recession of 2008-09. The World Bank quarterly report of June 2010 on the Indonesian economy is entitled “Continuity amidst volatility”. It analyzes in depth the situation during the first quarter of 2010. It also confirms how the country continued to consolidate its recovery from the global economic and financial crisis amidst a volatile environment. As is well-known three countries have been mentioned as the prima donnas in overcoming the crisis, namely China, India and Indonesia, which were able to achieve positive growth in the sea of countries around the world suffering contractions in their economies, particularly advanced countries. In the case of Indonesia, the country was paralyzed as a result of the Asian financial crisis of 1997-98. Since then the country has been facing a most volatile in-
figure 2: The outlook remains for gradual trend in growth
figure 1: Important economic indicators Annual 2009
2009
2010
2011
1. Main economic indicators Total Consumption expenditure
2010
2011
Gross domestic product
(Annual per cent change)
4.5
5.9
6.2
Consumer price index
(Annual per cent change)
4.8
5.1
6.3
(USD bn)
12.5
6.1
5.1
6.2
5.1
5.5
Balance of payments
4.9
5.1
5.3
Budget balance
(Per cent of GDP)
-1.6
-1.0
-0.4
Government consumption
15.7
5.4
6.3
Major trading partner growth
(Annual per cent change)
-0.9
5.0
4.3
Gross fixed capital formation
3.3
9.6
8.3
Exports of goods and services
-9.7
14.9
11.1
Imports of goods and services
-15.0
17.4
11.7
Private consumption expenditure
Gross Domestic Product
4.5
5.9
6.2
Agriculture
4.3
2.2
4.3
Industry
3.5
4.3
5.4
Services
5.7
8.2
7.9
12.5
6.1
5.1
10.5
2.5
0.5
21.0
14.2
13.2
3.6
2.8
4.6
Consumer price index
4.8
5.1
6.3
Poverty basket index
5.8
6.8
7.2
GDP Deflator
8.5
9.4
12.2
Nominal GDP
13.4
15.9
19.2
10356
9218
9200
7.3
6.5
6.5
Indonesian crude price (USD/bl)
61.6
77.7
78.0
Major trading partner growth
-0.9
5.0
4.3
2. External indicators Balance of payments (USD bn) Current account balance (USD bn) Trade balance (USD bn) Financial account balance (USD bn) 3. Other economic measures
4. Economic assumptions Exchange rate (IDR/USD) Interest rate (SBI, 1 month)
Source: World Bank
ternal environment. The second blow came two years ago with the economic and financial crisis of 2008-09. Looking at the developments in the past it would not be wrong to assume that Indonesia has always been placed amidst many uncertainties and volatile developments. In fact, its economic and political environment has never been easy, even until today.
Consequently, the country continues to face a myriad of challenges. On the positive side it helps to develop the high degree of the country’s resilience which has kept the country constantly to be on the move. Maybe too slowly or erratically, especially in the political area, but the country is in a way moving quite solidly. This is being noticed clearly by
the world community. Indonesia’s position in the international community has been strengthened substantially. Indonesia should take advantage of its excellent position in the global political and economic arena. Entering The Year 2010 In entering the year 2010, Indonesia’s economy grew in the first quarter at a rate of 5.7%
Source: Ministry of Finance, BPS and other national statistical agencies via CEIC, Consensus Forecasts Inc., and World Nak
and is expected to continue to rise this year to 5.9% (higher than the government’s estimate) and around 6.2% in 2011 (Figure 1). The government’s goal is to achieve 7% growth in 2014. During the present crisis the engine of growth for most countries is the consumption factor (government and private consumption). Indonesia is presently blessed with private demand growth of more than 5%. Presently, the most obvious growth is in the motorcycle and motor vehicles area. Motor cycle sales were nearly 70% higher than a year earlier. The expectation is that it will continue to grow. This motor cycle boom is transforming the country’s economic pattern in both positive and negative ways. Another important trend in trade is that imports are now growing faster than exports, narrowing the trade and current account surpluses. There is the surge in imports for capital and intermediate inputs which are important for the growth of the economy. A trend to watch is whether the imports of consumer goods will also rise as is the case with imports from China. As is the case with China with the ASEAN-China Free Trade
Agreement, other free trade agreements will come into force. At the present time it is not clear yet what the Indonesian strategy is. For sure these important developments cannot be left to the market forces alone. With its enormous market potentials, there is the danger that Indonesia will become the dumping ground for foreign goods, including cheap consumer goods, as a result of the low competitive position of the country. This is also another area which falls in the category of “volatile sectors” which can endanger the country’s economic structure.
Indonesian economy (Figure 2). Notwithstanding the possible volatile developments in the international arena but also in the domestic playing field, Indonesia can count on the continuous gradual recovery in growth. Many Indonesian observers with a positive outlook even say in jest that presently Indonesia can count on “auto-pilot”—the economy will grow by itself without much ado. The economic fundamentals of the country are now more solid except in the areas of external finance and financial market which are still linked to global finance. According to informal data, in May alone the country suffered a capital outflow of about US$5.7 billion. With a commodity-oriented economy, an important factor to watch is the development of commodity prices which are dependent on volatile global commodity prices.
An important phenomenon to observe is that there has been improvement in investment since mid-2009, including the recovery in inflows of FDI (foreign direct investments). This is attributed to the improvements in the investment climate. Much work has still to be done, however, to attract foreign direct investments. Industrial growth is still very inadequate at the rate of 4.3% this year, which may increase to 5.4% in 2011. What is surprising is that services sector is the fastest growth sector.
The chances are that for the short term or perhaps for the medium term Indonesia can count on the continuity of growth. As predicted by the World Bank, Asian Development Bank and IMF, the Indonesian government aims to achieve a growth of 7% by 2014. It is uncertain, however, how the still volatile developments in the global economy could affect countries in Asia, including Indonesia. It is also still uncertain how internal political developments could become an additional hindrance to the economic growth and developments of Indonesia. The risks factors, therefore, continue to exist for an emerging country like Indonesia.
Short-Term Outlook The following graph presents the short-term outlook for the
The writer is a retired career diplomat and former ambassador to the EU.
The President Post
A6 July 12, 2010
www.thepresidentpost.com
The World GLOBAL ECONOMIC PROSPECTS:
Cloud Over Europe’s Debt Crisis By Atmono Suryo
T
CLOUDS IN THE SKY owards the end of 2009, the world community, including Asia, expected that the global economy would be out of the woods and come out of the dark tunnel and be on the road to recovery. It also hoped global recession would recede in many parts of the world, especially in Asia, with China and India in the lead. The expectations for an upturn were quite strong. The world has been warned, however, that the recovery could be a subdued recovery and risks would remain, that world demand would continue to be weak, and unemployment would remain and inflation rising. Now that we are in the middle of 2010, somewhere in the west, namely in Europe, the alarm bell is beginning to ring again. In its latest assessment, the World Bank has called for world attention that clouds are gathering in the financial sky on account of Europe’s debt crisis triggered by Greece’s fiscal position. These events show that serious challenges have remained, as admitted by the recent G20 Toronto meeting: the world’s financial system needs repair and reform. We must be reminded again that the world financial system is the freest of all systems and that it is still strongly defended by ad-
figure 1: THE GLOBAL OUTLOOK
figure 2: International capital flows to developing countries
2008
2009
2010
2011
2012
2005
2006
2007
2008
2009
Real GDP growth
1.7
-2.1
3.3
3.3
3.6
Net private and official inflows
501.8
659.8
1222.8
780.5
523.5
High income OECD Countries Euro Area Japan United States Non-OECD countries
0.4 0.3 0.4 -1.2 0.4 3.0
-3.3 -3.4 -4.1 -5.2 -2.4 -1.7
2.3 2.2 0.7 2.5 3.3 4.2
2.4 2.3 1.3 2.1 2.9 4.2
2.6 2.6 1.8 2.2 3.0 4.5
Net private inflows (equity+debt)
573.3
732.1
1223.7
752.4
Net equity inflows Net FDI inflows Net portfolio equity inflows
349.9 281.1 68.8
469.0 363.2 105.8
663.8 528.4 135.4
536.5 593.6 -57.1
As a percent of GDP (%)
2005
2006
2007
Developing Countries East Asia and Pacific China Indonesia Thailand South Asia India Pakistan Bangladesh Latin America and Caribbean Brazil Mexico Argentina
5.7 8.5 9.6 6.0 2.5 4.9 5.1 2.0 6.2 4.1 5.1 1.8 7.0
1.7 7.1 8.7 4.6 -2.3 6.3 6.8 3.7 5.7 -2.3 -0.2 -6.5 -1.2
6.1 8.7 9.5 5.6 6.2 7.3 8.0 3.0 5.5 4.5 6.4 4.3 4.8
5.9 7.8 8.5 6.2 4.0 7.8 8.5 4.0 5.8 4.1 4.5 4.0 3.4
6.1 8.1 8.7 6.0 5.0 7.5 8.0 4.5 6.1 4.2 4.1 4.2 4.4
Net private and official inflows
5.03
5.59
8.45
Net private inflows (equity+debt)
5.74
6.21
Net FDI inflows Net portfolio equity inflows Private creditors
2.82 0.69 1.5
3.08 0.90 1.6
World Trade Volume (GNFS)
3.2
-11.8
11.2
6.7
7.3
Commodity Prices (USD terms) Non-oil commodities
0.0
-21.6
16.8
-4.0
-5.4
Oil Price (US$ per barrel) Oil price (percent change)
97.0 36.4
61.8 -36.3
78.1 26.4
74..6 -4.5
73.9 -0.9
Manufactures
5.9
-4.9
0.0
-3.7
0.0
Source: World Bank
vanced countries. It is increasingly recognized, however, that the liberalization of international finance has gone too far. The world trade system, which aims at a multilateral free trade system, has become a complex system with its many WTO regulations and standards. Europe’s Debt Crisis Market nervousness happened in Europe as a result of the debt positions of several high income countries as of May 2010. An aid package of nearly $1 trillion
was needed from the European Union and the IMF to cope with the European debt crisis. As can be seen from afar the Euro financial situation seems to be a complex one. The contagion effect would in the first place affect the other soft countries such as Portugal and Spain. So far the contagion effect has been limited although there has been a sharp decline in stock markets worldwide, affecting also Asia, including Indonesia. The European Central Bank warned that the debt crisis could
2010
2011
2012
454.0
589.5
670.2
770.8
445.9 358.3 87.5
497.5 438.0 59.5
564.2 501.0 63.2
652.8 575.0 77.8
2008
2009
2010
2011
2012
4.51
3.09
8.46
4.35
2.68
3.02
3.05
3.15
3.65 0.94 3.9
3.43 -0.33 1.4
2.12 0.52 0.5
2.24 0.30 0.5
2.28 0.29 0.5
2.35 0.32 0.5
Source: World Bank
subject the region’s banks to some rounds of losses. Not only European countries but also many countries around the world have taken various measures to cope with the situation, among others and In particular, by introducing fiscal measures and by cutting spending. 2010 GLOBAL PROSPECTS A World Bank June 10 press release notes that the global economic recovery continues to advance. But Europe’s debt crisis has created new hurdles on the road to sustainable medium terms growth. It is predicted that global GDP will increase from minus – 2.1% in 2009 to 3.1% in 2010, 3.3% in 2011 and expand to 3.6% in 2012 (Figure 1).
will be out of the negative growth (-3.3%) by achieving growth of 2.3% this year. A most significant development is the growth of developing countries, which is predicted to move from 1.7% growth to 6.1%. This is a most amazing new development in the global economy. It is not only East Asia which is moving ahead with China, Indonesia and Thailand as frontrunners and South Asia with India and Bangladesh in the lead, but also Latin America (Brazil, Mexico and Argentina) and Sub-Saharan Africa (Nigeria, Kenya and South Africa) at the forefront The developing countries’ growth is responsible for the bulk of global growth. This trend is expected to continue in the years and decades to come.
DEVELOPING COUNTRIES Current statistics show that high income countries (OECD)
For many developing countries ODA (official development assistance) is very important to
stimulate economic growth. Aid flows, however, have come down considerably. There is some suggestion that aid flows have come down as much as 20% to 25% in the current crisis. It could take about a decade for the flows to recover. Private capital inflows have also declined, from $1223 billion to $454 billion in 2009. It is projected to recover slowly and reach $771 billion by 2012 (Figure 2). G20 SUMMIT IN TORONTO The G20 summit attention was mostly focused on global economic issues, especially in the area of banking and finance such as: • Laying the foundation for strong, sustainable and balanced growth. • Building a more resilient financial system through sector reform which would rest on four pillars.
• To cope with international financial institutions and development. In addition, the Toronto Summit dealt with the launching of the Global Agriculture and Food Program; an issue which is set to become more intense. It should be realized that the global economy has suffered the sharpest decline of trade in more than 70 years. G20 highlights that it is necessary to keep markets open and to fight protectionism. There is the need for the World Bank and other Multilateral Development Banks to step up their capacity to support trade facilitation. Shaken by the European debt crisis, one of the key decisions made at Toronto was to cut deficits in most industrialized nations in half by 2013. It is remarkable to note that much attention is being given by the G20 on other issues aside from finance, among others the problem of combating corruption. After Washington, London, Pittsburgh and Toronto, the next G2O summit will be held in an Asian country; namely Seoul, South Korea, on November 1112, 2010. The writer is retired career diplomat and former ambassador to the EU.
The President Post
www.thepresidentpost.com
July 12, 2010 A7
Focus The Encouraging Prospects of Indonesian Exports By Cyrillus HarinowoHadiwerdoyo
The electronics industry in Indonesia has been experiencing bumper crops in the past few years. Their sales have been growing at a rapid rate, even at a time when the world economy is mired in crisis.
T
he name Polytron may not be as well known as Sony, Samsung or Lucky Goldstar in the global electronics arena. However, the Indonesian indigenous electronics brand has been able to post exports proceeds of millions of dollars in the past few years. In fact, the company aims to increase the exports share from 10% to 15% of its entire sales in the next few years. The electronics industry in Indonesia has been experiencing bumper crops in the past few years. Their sales have been growing at a rapid rate, even at a time when the world economy is mired in crisis. Japanese brands like Sony, Sharp or Panasonic have become household names for many years. But Indonesians are increasingly adapting to Korean names such as Samsung and Lucky Goldstar. In fact, in the past few years these two Korean companies have been expanding their operations in Indonesia several times to meet the growing demand of electronic products. Not only that—these companies have also been producing electronic appliances for the export market. Thus, Indonesia has been used as a springboard for their global expansion and forms part of their
global production network. With this kind of competitive environment, it is indeed surprising to see more and more Indonesian companies with the capacity to build their markets in foreign countries. For companies like Polytron, exports proceeds of million of dollars are certainly a good beginning. Their growth rate is very high in the domestic market. Therefore, an ambition to increase their exports share to 15% of their entire sales requires a strong determination. Based on their previous performance, the Kudus, Central Java-based electronics company soon will be able to realize their goal. All electronics exports, both from foreign-based manufacturers as well as from indigenous Indonesian companies, have showed a hefty increase in the past few years. Although in the past the Ministry of Trade focused their attention on labor intensive manufactured products such as textiles, garment and footwear, exports of electronics have actually overtaken that position. Total exports of electronic products in 2008 reached over US$13 billion. At the same time total exports of textile, garments and yarns amounted to around US$10 billion, while exports of footwear only reached
Electronics are not the only manufactured products that Indonesia exports. Indonesia has also become part of the regional production network of the automotive industry. Cars like Toyota Kijang, Daihatsu Terios, Suzuki APV and Swift manufactured in Indonesia can now be easily found in the United Arab Emirates and ASEAN countries.
around US$2 billion. In the first two months of 2009, their performance was somewhat affected by the global crisis. Monthly exports in 2008 averaged around US$1.100 million, but in January and February 2009 their monthly exports dipped to below US$1 billion. However, in March and onwards, monthly exports recovered so that total electronic exports in 2009 were not significantly different than in 2008.
billion. With the present expansion of some firms, we can expect that total exports of electronics will continue to rise in the coming years. This rise of Indonesian exports is just an example of the broad-based progress we have made in the past few years. This illustration also shows that Indonesian exports are not limited to commodities but also manufactured products, which are growing at a rapid rate.
This encouraging performance continued in the first four months of 2010. Exports of electronics from January to April 2010 already reached almost US$5 billion. If this performance continues, we can expect total exports in 2010 to reach around US$15
Electronics are not the only manufactured products that Indonesia exports. Indonesia has also become part of the regional production network of the automotive industry. Cars like Toyota Kijang, Daihatsu Terios, Suzuki APV and Swift manufactured in
The Jababeka
BIKE ZONE PT Jababeka Tbk is committed to participate in efforts to reduce CO2 emissions in order to reduce the impact on Global Warming by building a bike zone in Jababeka City. Global Warming has become a real problem that we all must be aware of. In short, Global Warming can be interpreted as an increase in the earth’s temperature partly due to the rise of CO2 emissions into the earth’s atmosphere caused by human activities. PT Jababeka Tbk is committed to participate in efforts to reduce CO2 emissions in order to reduce the impact on Global Warming by building a bike zone in Jababeka City. The Jababeka Bike Zone is expected to help reduce CO2 emissions from motor vehicles and to create cleaner and healthier air for Jababeka citizens. The existence of the Jababeka Bike Zone is the answer to trends in, and the collective awareness of, societies in cities seeking a healthy environment. Beside useful as a sports facility, Bike Zone is very helpful for residents and employees who live and conduct their activities at Jababeka (B2S - bike to school and B2W - bike to work). Bicycle users in this zone can enjoy the tree-lined area as it is specially designated for them. The Jababeka Bike Zone was built in several phases. Phase 1 was inaugurated on April 25, 2010, by the Head of the Department of Tourism, Culture, Youth and Sports of Bekasi, Edi Rochyadi, accompanied by Director of Jababeka Hyanto Wihadhi. In Phase 1 Jababeka built 10 kilometers of a route that con-
nects the Education Park with the golf area, the Veranda Town House, the business area Pecenongan Square, the Botanical Garden, the Tropikana Residence and the Simprug Garden Residence. A plan is in place for Bike Zone Phase 2 to be constructed facing Jababeka’s industrial area. The Bike Zone Jababeka Development is completing facilities of which some are already available in Jababeka City such as: • Commercial facilities: The Capitol Business Park, Jababeka Central Business District, Pusat Niaga Sunter, Electronics & Spare parts Center, Resto Plaza, Food Court • Education facilities: President University, President Senior High School (Boarding School), President Junior High School, Academy of Machin-
ery Engineering & Industrial (ATMI), Al Azhar, BPK Penabur, Informatics-Communication Training Center • Housing Facilities: Villa-type houses, Metropark Condominium, and The Veranda Golf View Town House • Entertainment and other facilities: Jababeka Golf & Country Club, D’Warrior’s Outbound, President Executive Club, Hotel Grand Zury, Plaza JB, Metro Hotel and health service centers such as international hospitals, clinics and a pharmacy • Infrastructure facilities with international standards: water treatment plant, waste water treatment plant, the central power plant (Bekasi Power), Dry Port, and other public infrastructure
Indonesia can now be easily found in the United Arab Emirates and ASEAN countries. In fact, Indonesia has also become an exporter of significant car components. According to the Indonesian Car Manufacturers Association, Indonesian cars have been exported in the form of CBU (Completely Built Up), CKD (Completely Knocked Down) or in the form of components. In fact, exports of components more than double the total exports of CBU and CKD cars combined. In 2008, statistics showed the value of exports of vehicles stood at US$4.4 billion, more than four times the figures of 2004, or an average growth of more than 60% annually. In 2009, howev-
er, the figure dropped to less than US$4 billion. Nevertheless, in the first four months of this year we saw a recovery of these exports. In total vehicle exports in January to April 2010 reached around US$1.5 billion. If this performance can be sustained, we can expect the value of the vehicle exports to reach almost US$5 billion in 2010, exceeding previous records. In a broader picture, Indonesian exports have been able to recover from last year’s dip. From an annual export of around US$137 billion in 2008, Indonesian exports declined to just US$116 billion last year. However, people always look at the big picture. Looking into more details, ap-
parently the second half of 2009 saw a kind of recovery. In fact, in the last quarter of 2009, Indonesian exports have posted a positive growth. This performance continued in the first five months of 2010. Up to May of this year, total cumulative exports reached more than US$60 billion. Therefore we can easily predict that our exports in 2010 may reach over US$140 billion, surpassing our previous record in 2008. Looking ahead, we can see a strong indication of the resilience of our exports sector. While time may not be on their side, especially with the dim prospects in Europe this year, we can already observe the strong determination of our business people in expanding the markets of their products abroad. One prominent businessman recently shared with me his experience with his companies in the overseas market. Having penetrated China and India for many years, his companies are now actively expanding to Africa. He said many Indonesian companies are doing the same thing. In fact, they do not only trade but also invest overseas. Indonesia has done well in the past few years—the domestic economy has been growing significantly. At the same time, our business people have also expanded their business overseas at a rapid rate. We hope this encouraging development will continue in the coming years so that more Indonesian brands may soon be seen in other countries. The writer is an economist and a columnist for national news media
The President Post
A8 July 12, 2010
www.thepresidentpost.com
Education Education Budget Up to Rp330 Trillion Before End of SBY’s Term By Alci Tamesa
I
ndonesia has seen its national budget allocation for education increased markedly during the term of President Susilo Bambang Yudhoyono (SBY). This year’s allocation is Rp221.47 trillion or 20% of the national budget. But here’s a bigger news: before the end of SBY’s term, the government will have increased the education budget to Rp330 trillion, according to Minister of Education Prof. Muhammad Nuh. The minister made the announcement during a recent hearing with Commission X of the House of Representatives (DPR). This in itself is an indication that President SBY’s government is very serious about raising people’s welfare through education and training. Not long after he had made the announcement, came the news that a year after SBY concludes his second term of office in 2014, the budget allocation for education will soar to Rp350 trillion— an indication that by then education will have become, perhaps, the most important sector to be developed in order to upgrade the quality of Indonesia’s human resources. So, education observes say, perhaps one of SBY’s most substantial contributions for Indonesia’s academic society is the new tradition to make education sector the recipient of the largest allocation of state budget. This had in fact started in 2009, when for the first time in the nation’s history the allocation for education was raised to 20% of the annual state budget. But the euphoria over budget increase quickly evaporated when it was learned that well over 60$ of this year’s budget allocation for education would go for routine expenditure. This could be unavoidable if indeed the theory is that teachers’ salaries must be increased because they have for a long time been known as lowpaid workers. This year, for example, unless there is a change in budget policy orientation, a great portion of the 2014 budget will be used up for routine spending again and this spending pattern will continue at a time when the real need is quality instead of quantity-oriented education. This is apparently the reason why Minister Nuh remains com-
mitted to retaining such fixed costs as BOS—the operational expenses for elementary and junior high schools—despite his well publicized commitment to streamlining spending in order to curb irregularities. This is considered a crucial issue by corruption watchdogs because one thing that has been forgotten for many years is the need to promote budget efficiency within the education ministry. Likewise, budget efficiency campaigns need to be conducted in other government departments as well. Only in that way can we know how much of the national budget has been well spent and whether budget increase can really contribute to quality improvement and promotion of educational equity. But many critics believe that increasing the budget allocation for education is not a guarantee that the quality of education will automatically improve. The problem of education in Indonesia is so complex that one or two terms of office would be insufficient for a minister of even a president to provide a comprehensive remedy. For instance, even as the minister is upbeat about budget hike, his vice minister is cautious about school dropouts that are systematically increasing in number. Vice Minister for Education Prof. Fasli Jalal was recently quoted as recalling an announcement by the World Vision that every year at least one million children aged 7-15 are forced to drop out due to many reasons. One common reason is their families’ inability to support them financially. Another common reason is that junior high schools are too far away from elementary schools so students have difficulty continuing after completing their elementary education. In many parts of the country—except on the island of Java—schools are commonly located very far from students’ homes while transportation is a big problem. Still another reason cited by Prof Fasli is that in most rural areas, students of that age category (7-15 years old) are obliged to help their parents earn money in whatever way possible, so those who are comfortable with such early jobs are not encouraged to pursue higher education. The vice minister explains that on average, some 4% of school-
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aged children across Indonesia still have no access to education. The children are not to blame; the government’s inability to reach all of them is the culprit. To overcome this, however, the Ministry of National Education (MONE) is intensifying efforts to provide greater access to education while gradually raising the quality of teachers through National Teachers’ Certification Program. Another effort that has been launched is to encourage centralization of educational institutions in the sense that elementary, junior, and senior high schools are relocated in the same premises so students will no longer complain about distance. Currently the school participation index—commonly referred to in Indonesia as APK—for elementary school children is 115%, but for junior high school is 70% and on senior high school level, the index is only 60%. At the university level, the index is more discouraging—only 18%, meaning that the majority of population expected to attend university still cannot do so. It also means that most university-age youths are not pursuing higher education. This is the reason why only around 4.5 million of the country’s total population of 240 million are registered on Indonesian campuses.
education is mainly limited to preparing students to get a job. Holistic education, consequently, is abandoned. Not surprisingly schools do not produce graduates with strong personality and integrity, observers say.
Minister of Education Prof. Muhamad Nuh
Another big issue that must be solved is the question of quality disparity. Given the fact that Indonesia is a huge archipelago and only certain major islands are well developed economically, good teachers are concentrated in big cities where they can earn good salaries. As a result, schools in big cities are of much higher quality than those in remote parts of the country. Education quality disparity is an issue that cannot be solved by MONE alone. Solution for this needs an integrated approach from many government ministries especially the ones in charge of the economy and people’s welfare. Now, given the fact that the government has to spend for other sectors as well, the right thing to do is to encourage private schools to take part of the burden. This calls for equal treatment in many ways to the extent
that private schools will no longer see discrimination in policy execution. In recent years, especially during President SBY’s term, many private schools have begun to see change including higher frequency of visits to private universities by high ranking officials as well as their support for private educational institutions’ cooperation initiatives with provincial governments. One most recent such example is the cooperation between the government of Papua and Pelita Harapan Educational Foundation for the establishment of Sekolah Papua Harapan, as was recently reported by an education and university life magazine called CampusAsia. In order to provide students with greater access to education in a more sophisticated way, First Lady Mrs. Ani Yudhoyono is championing a nation-wide campaign called “Smart Indonesia.”
Real Issues This being the case, perhaps one cannot easily conclude whether or not the increases in education budget are sufficient. The real issue at the moment, according to education observers, is not just about raising salaries and improving facilities. The real issue is actually a lack of comprehensive strategy for raising the quality of Indonesia’s human resources through education and training. In the first Instance, there must be a good strategy to determine the ratio of general and vocational education up to secondary or senior high school level. The government is working to alter the current ratio to 70% vocational education and 30% general education on the senior high level. If this works well, only those in the 30% group will seek university education whereas those in the 70% category will be prepared to either enter the job market quickly or become job-creators themselves. So until here, the focus of
PUBLISHED BY PT Sarana Pratama Pengembangan 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 Rais PHOTOGRAPHER Nandi Nanti
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Under this program, the government sends out a lot of “educational cars, educational motorcycles and educational boats” to enable students to get reading material on the spot. In this way, the First Lady hopes that students who cannot obtain proper books and learning facilities may get them free of charge from those modes of transportation. She made the announcement when addressing the general assembly of the Forum of Asia Pacific Parliamentarians for Education (FASPPED) in Jakarta recently. The aim is to promote equal opportunity and better access to education especially for chuldren from “less fortunate” families. With all these endeavors going on, more and more people are now saying that SBY deserves being called a “pro-education president”, a terminology introduced
by presidential spokesman Dr. Dino Patti Djalal. All the optimism apart, one may ask whether the emphasis on education that has been set in motion by SBY will remain on the government’s agenda when the president leaves offices in October 2014. Indonesia still does not have a truly consistent long-term strategy for education, though on paper it does. So, perhaps one of the policy priorities MONE needs to put in motion during SBY’s term of office is to draft a long-term strategic plan that will be implemented for decades to come. The President himself has repeatedly said that the strength of every nation is made by its scholars and education sector is the breeding ground of such scholars. This is apparently the reason why he has put so much emphasis on the need to upgrade the quality of education across the country.
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BUSINESS BRIEFS
Garuda Indonesia to Install IT Facilities in Aircraft in 2011
Mandala starts daily flights to Singapore Budget carrier Mandala Air took its maiden flight to Singapore last month, marking the start of daily flights between Jakarta Singapore, and three flights via Balikpapan, East Kalimantan each week. Mandala uses the 180-seat Airbus A 320 for the first flight which head of Corporate Communication Trisia Megawati says facilitates business and leisure travel between the two countries. The formerly military business unit was sold to Cardig International in 2006 as the government was unable to buy the airline from the military. Indigo Partners bought almost half of the company later in the same year. It flies mostly in western Indonesia islands of Sumatra Java, and Kalimantan.
Bakrie, Google to develop data service PT Bakrie Connectivity (B-Con) signed a memorandum of understanding with Google International to develop data service in Indonesia. The signing was done here last month by B-Con president director Erik Meijer and Google International`s director for Asia Pacific development Emmanuel Sauquet. “Through the cooperation our data service would be directly integrated with various Google products,” Meijer said. Sauquet was optimistic his company could develop cooperation with B-Con to produce a unique and innovative distribution service. “With that the Indonesian community could easily reach web browser Google Chrome and other Google products,” he said. Saququet said AHA customers could easily access Google Chorme`s newest version that combines speed and power with ease and intelligence which is the trademark of Google.
BCA nets 8.7 million saving accounts PT Bank Central Asia (BCA) succeeded in recording 8.7 million saving accounts from depositors through its `Tahapan` saving scheme with funds amounting to Rp108 trillion in the first quarter of 2010, a BCA executive said. “The amount of funds collected increased if compared with that recorded in the same period a year earlier,” BCA`s head for funds and service development Ina Suwandi said. She said that the `Tahapan` scheme was one of the BCA products intended to provide easiness and convenience for customers. Over 130 million transactions were made in the first quarter of 2010 where the automatic teller machine (ATM) service constituted the most popular transaction means used by customers. BCA has over 6,700 ATM booths in various strategic locations, she said.
The technology will allow passengers to communicate using the short text message service (SMS) and operate laptops on board aircraft.
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aruda Indonesia confirmed last month that it would equip its aircraft with inflight information technology facilities in 2011 to improve its service to passengers. “We will do it next year. Passengers can then communicate through an internet service and also send short text messages,” its president director, Emirsyah Satar, said after signing a memorandum of understanding on T-Cash ticket payment with Telkomsel here last month. He said all new Garuda planes would be equipped with mobile technology and later all Garuda planes will also be given the capability. He said the technology will allow passengers to communicate using the short text message service (SMS) and operate laptops on board aircraft. “The technology has been developed abroad and does not disrupt the air navigation system. It will not include phone calls,” he said. Regarding the regulation put in Law Number 1 of 2009 that bans passengers from using telecommunication facilities while aboard a plane, Emirsyah said he would discuss the matter with the government. On the cooperation with Telkomsel he said that it would make it easier for would-be passengers to buy tickets or make Garuda seat reservations by phone.
Gudang Garam to pay dividends of Rp1.25 trillion PT Gudang Garam Tbk, Indonesia`s largest publicly-listed cigarette maker, has decided to allocate Rp1.25 trillion of its last year`s net profit as dividends. The dividends, equal with Rp650 per share, would be paid to shareholders put on the company`s list of shareholders until May 20, 2010, PT Gudang Garam President Director Susilo Wonowidjojo said after a general shareholders meeting here last month. In 2009, Gudang Garam booked a net profit of Rp3.4 trillion, a 83.8% surge compared with the year before. The meeting also appointed Juni Setiawati Wonowidjojo chief of the board of commissioners with Yudiono Muktiwidjojo, Frank Willem van Gelder, and Lucas Mulia Suhardja as members. Meanwhile, the board of directors consists of Susilo Wonowidjojo as president director, and Heru Budiman, Edijanto, Herry Susianto, Buana Susilo, and Fajar Semeru as directors.
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“Telkomsel customers totalling 86 millions will benefit from the cooperation,” he said. Telkomsel president director Sarwoto Atmosutarno said he would exploit TCash facility to make it easier for Te l k o m sel customers to buy Garuda tickets. T-Cash is one of the facilities Telkomsel is developing along with mobile payment and mobile advertising, he said. Regarding the House of Representatives` (DPR) wish for reduction in the hajj flight cost, Emirsyah said Garuda would accept whatever the government and the DPR would decide. He said although it might reduce the company`s margin, service to hajj passengers would not decline. “We will give the best possible service to them. What is important is the flight is smooth and Garuda does not lose,” he said. He said the hajj flight cost was determined by the world fuel price. “If the contract with the religious affairs ministry has been signed and at the time the hajj pilgrimage season begins, the fuel price rises, that will be our risk,” he said.
All new Garuda planes would be equipped with mobile technology and later all Garuda planes will also be given the capability.
Swiss Bel Hotel Opens in Ambon Ambon Mayor Jopi Papilaja has welcomed the operation of Swiss Bel Hotel in the city, saying it would lift the image of Maluku`s provincial capital. “The presence of Swiss Bel managed by an interantional hotel network will boost the image of Ambon as a modern city worth visiting,” he said at a ceremony marking the official opening of the hotel dubbed “Pearl of Ambon” here last month. He admitted the investor had initially hesitated to build the hotel in the city in 2005 but after
Photo: www.swiss-belhotel.com
being persuaded by the local government and promised special facilities, they finally agreed to carry out the project. “I once even reminded them to finish it quickly so that it could be launched before I complete my tenure,” he said. He said the presence for the first time of a five-star hotel increased the number of star-rated hotels in the region following the Aston Natsepa a year ago. “Swiss Bel and Aston will improve the image of Ambon as a secure place and worth visiting by both domestic and foreign tour-
ists,” he said. The presence of the hotels demonstrated the seriousness of investors to boost development of the city after being ravaged by social conflict in 1999. Papilaja expressed appreciation to the management of the Swess Bel Hotel that had helped promote Ambon and Maluku through the hotel`s network. He hoped it would attract more investors to invest in the region. “We are ready to provide facilities for investors willing to invest in Ambon in the field of hotel business or others,” he said.
Ground Breaking at Simprug Garden, Jababeka City Simprug Garden Residence was built to fulfill the needs of Jababeka communities and its surroundings for safe and comfortable housing, with firstclass facilities at affordable prices. PT Jababeka Tbk is a company that built the first private-owned industrial estate in Indonesia in 1989. Currently, the industry area which was originally only 560 ha has been developed into Jababeka City with an area of 5600 ha. There are 1500 local and multinational companies from 30 countries in Jababeka City. As an integrated autonomous city, Jababeka City is equipped with com-
plete and modern infrastructure, including water treatment plant, waste water treatment plant, central power plant (Bekasi Power), dry port and other public infrastructure. Jababeka was designed in such a way as to combine an industrial area, housing, education facilities and entertainment venues. The entire infrastructure was built in a harmonious manner and adheres to an environ-
mental friendly concept. So, it is much more appropriate to call Jababeka City an “Integrated Modern City”. Currently, Jababeka City is developing a new housing cluster called Simprug Garden Residence. The ground-breaking occasion was held on May 19, 2010 at the site and was attended by Jababeka citizens and the management of PT Jababeka
Tbk, one of who m was Sutedja Darmono, and Dadi Suprapto from PT CMC, a sub-developer. The event was enlivened by Chinese traditional dance Barongsai, a painting on shirt competition and the performance of young artist. Simprug Garden Residence was built to fulfill the needs of Jababeka communities and its surroundings for safe and comfortable housing,
with first-class facilities at affordable prices. The Residence is equipped with a green park, 24 hour security with CCTV cameras and a beautiful and comfortable environment for families. Simprug Garden Residence is very strategically located at the center of Jababeka City, which is not far from the Education area where there are schools such as BPK Penabur, Al Azhar, the President University and others. It also takes only minutes to reach the Harapan Keluarga, the Medirossa and the Mitra Keluarga hospitals. Jababeka City also offers various shopping and business areas such as Plaza JB, Carrefour Express, and Plaza Roxy that could meet all the needs of Jababeka citizens. Just minutes away from Simprug Garden Residence are the Jababeka Golf & Country Club, where residents can enjoy golf with colleagues and families. Also available is D’Warriors
Outbond where citizens can conduct outbound activities. Simprug Garden Residence has direct access to the toll booth KM 34.8 that will be built soon. So, the value of investment in Simprug Garden Residence is expected to increase in just over five years. The development of Jababeka itself is very fast, thanks to support provided by the public and all employees of the Jababeka Group. Various projects with attractive investment prospects have been launched, such as Indonesia Movieland, Medical City, Culinary Center, Sunter Niaga Mas, Automotive Centre, Sentra Niaga Square and many other projects. It can be said that houses in Jababeka City carry a higher value than in other areas because they come with various facilities of international standard.
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Business KS to Control 45% Stake in JV with POSCO K
Industry players are projecting national steel demand to grow by 10% up until the end of the year to 8.8 million tons from 8 million tons per year.
rakatau Steel is set to hold a 45% stake in a joint venture company with Pohang Iron & Steel Corporation (POSCO) with 55% to be controlled by the South Korean company. State Enterprises Minister Mustafa Abubakar said Krakatau Steel was initially only going to hold a 30% stake but both companies later agreed to change the shareownership composition. Both companies plan to build
a steel plant with 2.7 million tons of production capacity per annum, which is expected to finish in three years. The construction of the project will start at the end of July 2010 with an investment of between US$500 million and US$1 billion. The two companies also agreed to set the price of land at US$7274 per square meter. Meanwhile, Krakatau Steel reported it has sold 600,000 tons
of steel in the first quarter of the year. Krakatau Steel Marketing Director Irvan K Hakim said sales were sluggish last year due to the global economic crisis. “This year is expected to be higher than last year, or almost the same as in 2007,” he said.
He added that the company sets a monthly production target of 200,000 tons and that the 600,000 tons sale in the first
three months is in line with the company’s target. Prices of steel in the first quarter of 2010 has improved compared to the same period a year earlier. Irvan attributed the price hike to an increase in prices of raw materials, not demand. Industry players are projecting national steel demand to grow by 10% up until the end of the year to 8.8 million tons from 8 million tons per year, with the price to rise by more than twofolds.
Jababeka Becomes a Fully Integrated Enterprise
Rukun Raharja to Acquire Three Energy Firms for Rp 650 billion Rukun Raharja’s (RAJA) management is planning to acquire three energy companies for Rp 650 billion after securing approval from shareholders. The move is part of the company’s strategy to diversify its businesses in the oil and gas sector from upstream to downstream to tap the growing domestic market. The company has yet to decide on the financing scheme. RAJA will acquire a majority stake in the three companies, 99.98% in Triguna Internusa Pratama, 99.98% in Panji Raya Alamindo and 99.99% in Capital Turbines Indonesia. Panji Raya through its subsidiary Energasindo Heksa Karya (EHK) focuses on trade and distribution of natural gas in West Java and Jambi and supplies up
to 50 MMSCF/D (million standard cubic feet per day) gas to state electricity company PLN and other companies. Panji Raya also has another subsidiary called Suryandra Nusa Bakti (SNB) that tackles transportation and LPG distribution in the Great Jakarta area, West Java and Medan. Triguna Internusa focuses its business on gas infrastructure procurement of piping network for gas distributions in West Java and gas compression equipment for PLN’s power plants with gas flow capacity of 35 MMSCF/D. Capital Turbines is a power mechanical contractor. In 2008, the company built a steam power plant with 2x22 MW capacity in Bintan Island. CTI plans to build more power plants with a total capacity of 150 MW in the next three years.
Photo: The President Post/Nandi Nanti
On June 11, PT Jababeka Tbk held its Annual General Meeting of Shareholders (AGMS) at the JW Marriott Hotel in Jakarta. The AGMS reached the required quorum and proceeded smoothly. Due to the global economic crisis, Jababeka’s revenue decreased 15% to Rp 390 billion in 2009, mainly as a result of a decline in real estate sales. A major milestone was reached when Jababeka’s wholly owned subsidiary Bekasi Power commenced operations of its first gas turbine in November 2009, contributing Rp 23 billion in revenue as an emergency sale and purchase agreement was signed with PLN. Jababeka booked a net income of Rp 16 billion in 2009, a vast improvement from the Rp 62 billion loss in 2008. The AGMS was followed by the annual Public Expose, where Jababeka elaborated on its key projects and financial performance. CAPEX requirements for Jababeka’s key projects such as Dry Port, Power Plant, Indonesia Movieland and Medical City, is
estimated at Rp 450 billion In the first quarter of 2010, Jababeka booked a total revenue of Rp 158.5 billion, a 103% increase compared to Q1 2009. Sales derived from real estate products (land and land with buildings) increased more than 100% to become Rp 59.5 billion, while land area sold over the same period more than tripled. Revenue is projected to increase from approximately Rp 400 billion in 2009 to Rp 1.5 trillion in 2-3 years. At the same time, recurring revenue is estimated to increase from 57% in 2009 to reach more than 75%, making Jababeka a more stable company. Given the positive economic growth, increased investment and consumer purchasing power, management is optimistic that Jababeka can take on business opportunities of its existing projects and improve its performance in 2010 and succeeding years. With the new Power Plant and Dry Port projects and their large revenue contributions, Jababeka is gradually transforming into a fully integrated enterprise.
Dayaindo Raises Rights Issue Price to Rp105 per Share Dayaindo Resources International (KARK) revised its rights issue price from initially Rp100 per share to Rp105 per share to reap Rp1.984 trillion in proceeds. KARK is planning to issue 18,904,390,313 in new shares through non pre-emptive rights mechanism. The company has set the rights issue ratio at 2:21, which means that every existing shareholders are entitled to execute 21 new shares.
Left-Right: Anton Budidjaja (Commissioner), Bacelius Ruru (President Commissioner), Setyono Djuandi Darmono (President Director), Budianto Liman (Vice President Director), Setiasa Kusuma (Director), Hyanto Wihadhi (Director)
BNBR, S. Korean and Chinese Investors to Develop Infrastructure Projects Bakrie & Brothers Tbk (BNBR) has invited strategic investors from South Korea and China to cooperate on three projects, namely gas piping, highway construction and power plants. BNBR President Director Bobby Gafur S. Umar said the company has developed strategic partnerships with two investors from South Korea and China. BNBR has agreed to work on the power plants project with the South Korean investor and other projects with the Chinese investor. “We control a majority stake in the projects,” he said after the company’s annual meeting of shareholders last month, adding
that the total amount of investment for the highway, gas piping and power plant projects is estimated at US$300-500 million. The company is also ready to roll out US$200-300 million funds for both existing and new investment portfolios. “Investment may come in the form of company acquisition through co-invesment scheme for around US$200-300 million,” he explained, adding that three companies have stated their readiness to collaborate through coinvestment scheme but declined to disclose the names of the companies. BNBR is also planning to
up its stake in Bumi Resources (BUMI) to 23-25% in the second half of 2010, from the current 19.5%. Umar also said the company is still studying the financing possibility for the plan, including increasing its shares through secondary market or acquiring them from other shareholders. BNBR also unveiled its plan to develop its subsidiary, Bakrie Energy. The company has already brought profits to the company since it was first established earlier this year, he said. “It already reaped profits from selling fuel to plantation and mining companies in the first quar-
ter. We are expecting Rp100-150 billion in net profit from Bakrie Energy,” he said. During the shareholders meeting, the company also changed its management lineup. BNBR previously adopted two types of management called Board of Directors (BOD) and Board of Management (BOM) but decided to dissolve the BOM to prevent dupication. Top executives Nalinkant A. Rathod, Ari Saptari Hudaya and Dileep Srivastava are now no longer with the company. The following is the new BOD
lineup: • President Director: Bobby Gafur S. Umar • Director: Eddy Soeparno • Director: Dody Taufiq Wijaya • Director: Siddharta Moersjid • Director: R.A. Sri Dharmayanti Board of Commissioners lineup is unchanged: • President Commissioner: Irwan Sjarkawi • Independent Commissioner: Mohamad Iksan • Commissioner: Nugroho I Purbowinoto • Commissioner: Armansyah Yamin
The company will use the proceeds to acquire 70% shares in Anugerah Tompira Nikel (ATN) for Rp350 billion, and will set aside Rp600 billion in development funds for ATN. It also plans to acquire a 80% stake in Belang Belang Coal Ter-
minal (BBC) for Rp100 billion and will allocate Rp510.955 billion for its development. KARK said it will use the remaining Rp420.815 billion proceeds for working capital. Manhattan Asset Management Indonesia (MAMI), KARK’s controlling shareholder, is committed to buy 4,291,741,094 in KARK’s new shares for Rp105 per share or totaling Rp450.632 billion. Chungrim Co Ltd, the standby buyer in the rights issue, is ready to absorb 14,612,649,219 in new shares for Rp105 per share and has readied Rp1.534 trillion funds for the purpose. Chungrim will become the new controlling shareholder if MAMI fails to absorb the remaining shares.
MNC Set to Issue US$300-400 million Bonds Media Citra Nusantara (MNC) plans to issue US$300-400 million bonds in the final quarter of this year. The company has appointed Morgan Stanley and Standard Chartered as underwriters for the bond issuance. MNC President Director Hary Tanoesoedibjo said the company will issue global bonds and is confident that the market will absorb the bonds despite the ongoing European debt crisis. “It is (the European debt cri-
sis) starting to subside and is getting normal. We remain upbeat about the market condition,” he told reporters during a press conference. Hary said the company will use the proceeds for refinancing its US$143 million global bond which will mature in September 2011. The company will also use the proceeds to refinance its working capital loan of Rp200 billion, which also expires next year, as well as use the remaining for capital expenditure, business expansion and investment.
Essential Parts from PT Trimitra Citrahasta By Jeannifer Filly Sumayku
PT Trimitra Citrahasta is a firm that produces automotive and motorcycle parts. Amidst a growing automotive industry in Indonesia, PT Trimitra Chitrahasta was founded in 1994 to specialize in Metal Stamping parts, Dies, Jigs, and Fixtures.
Photo: The President Post/Nandi Nanti
Do you ever notice that your motor vehicle has components that come from several different places? Each part of a vehicle has passed a production process at its place of origin and was assembled by automobile producers. PT Trimitra Citrahasta is a firm that produces automotive and motorcycle parts. Amidst a growing automotive industry in Indonesia, PT Trimitra Chitrahasta was founded in 1994 to specialize in Metal Stamping parts, Dies, Jigs, and Fixtures. Today PT Trimitra Citrahasta has more than 700 competent employees making high-quality products. Supported by state-of-the-art equipment and well- trained human resources, PT Trimitra Citrahasta strives to deliver high-quality products at reasonable prices on time. It will continuously improve all aspects of the company’s operations to guarantee full customer satisfaction. Its President Director, Johan Tamsir, is the founder of PT Trimitra Citra-
Citrahasta has gone through many troubled times. During the financial crisis of 1998, PT Trimitra had to trim down their employees, from 350 to 180, in order to cut production costs as its production level was at the time only 20% of its capacity.
Johan Tamsir
hasta. “It was a bold decision to my set up my own company,” he said in a recent interview with The President Post. Tamsir used to be a professional working at one of the biggest automotive companies in Indonesia when he decided to start his own business. At the time he had recognized the
momentum caused by the surge in local-made automotive parts in 1994. PT Trimitra Citrahasta focuses on supplying automotive parts to sole agents (ATPM) such as Suzuki, Yamaha, Kawasaki, Mitsubishi, Daihatsu, Toyota and others. The company only produces components at the request of ATPMs. In the past 16 years, PT Trimitra
Throughout a period of ups and downs, PT Trimitra Citrahasta has successfully managed to set up four affiliated companies producing plastic-based automotive parts, and machining parts. As an entrepreneur, Johan sees the automotive business still developing in the next five years. He also wishes to see its human resources becoming more competent and working efficiently in order to produce products at most competitive prices. PT Trimitra Citrahasta has already built four factories at the Jababeka Industrial Estate in Cikarang. Tamsir said that “it was my best decision to built factories at Jababeka because it has the best infrastructure.”
Photo: The President Post/Nandi Nanti
A worker of PT Trimitra Citrahasta produces metal stamping parts from press machine at one of the factory at Jababeka industry area, Cikarang.
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Investment INVESTMENT BRIEFS First Media announces rights issue for WiMax network The multimedia service company and subsidiary of the powerful Lippo Group, PT First Media Tbk, announced its plan for a rights issue to generate up to Rp450 billion, or less than half of its needs this year, for business operations and expansion which will incude WiMax internet access service. President Director Hengkie Liwanto told Tempo his company is planning to cover its capital goods spending this year of around Rp1 trillion from shareholders, internal fund sources, and right issue. Some of the Rp450 billion expected to be obtained from rights issue will be invested in WiMax network. Hengkie said earnings before tax as of June has exceeded the 2009 annual profit at Rp200 billion, Tempo reported last month.
Investment Growth Workers complete a high-rise building in Jakarta, as the National Development Planning Board (Bappenas) expects investment in 2011 to grow by 10 percent to meet the economic growth target of 6-6.3%.
ANZ seeks to increase its stake in Panin The Australian and New Zealand Banking Group intend to add its stake in Panin Bank. “If they want to sell their share, we will buy it,” said President Director of ANZ Indonesia Joseph Abraham here last month. Right now, ANZ has a 38.5% share in Panin Bank, while the Gunawan family is reported to plan to sell 44% of their shares in Panin. ANZ and Panin formed the joint venture ANZ Panin Indonesia. About 85% of its shares are owned by ANZ. “We are still awaiting approval from Bank Indonesia,” Abraham said.
Government in talks with Wilmar International Singapore’s Wilmar International Ltd, a merchandising and agriculture holding firm, plans to step up its investment in Indonesia, especially in the food estate projects in Merauke, Papua this year, the investment regulator BKPM said last month. Chairman of BKPM Gita Wirjawan said Wilmar, which is in talks with the governemnt, aims to put US$2 billion in Indonesia this year, but he could not determine how much of the investment will go to the food estate project. The group has long been operating in Indonesia through one of its local units, PT Wilmar Nabati Indonesia, a palm oil company based in Medan, North Sumatra.
Singapore investors to build NTB convention centre The West Nusa Tenggara Government has chosen PT Indosinga Invetama as its partner to build an international standard meeting hall, The NTB Convention Centre. The investor from Singapore outbid several other candidates, Tempo reported. The meeting hall plans to have 74.000 square meters with a capacity of 5000 people. The NTB Convention Centre will be built on land belonging to the Mataram provincial government of 3.3 hectares with a fund of Rp384 billion. The investment is based on built, operate and transfer (BOT) system for 30 years.
Sarinah to enter stock exchange by 2013 PT Sarinah Ltd. has plans to enter the stock exchange by 2013. “After we calculated the figures and our intention to accelerate our business, it is more realistic if we realize the IPO in 2013,” Sarinah CEO Jimmy Gani told Tempo last month. Sarinah will release 20 to 30% of its share to add to the company’s investment fund. This year, it needs Rp 100 billion capital. Besides to repair booths in Jakarta, Yogyakarta, Batam, Semarang, and Malang, the funds will be required to open new booths and strengthen capital. “With privatization, we aim to obtain Rp 300 billion from the public,” said Jimmy.
Photo: The President Post/Nandi Nanti
Saudi Investment in RI Reaches $8 billion The Saudi government has expressed its interest in investing in the rice development sector in Indonesia
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he Saudi government has invested around US$8 billion in Indonesia since the two governments established cooperation 50 years ago, a spokesman said. The Saudi government invested US$2 billion in Indonesia in the early days of the
cooperation, spokesman for the Saudi Embassy in Indonesia Ahmad Ali Kattonah said here last month. “The increase in investment was the result of good bilateral cooperation particularly in the economic field,” he said. He expressed hope the Saudi relations with West Sulawesi province, which started this year, would involve all parties particu-
larly stakeholders in the region. “The first phase of cooperation we will develop with the West Sulawesi provincial government will cover investment in the religious field according to the local government`s proposal,” he said. Saudi Arabia ready to invest on rice development in Indonesia Meanwhile, the Saudi government has expressed its interest in investing in the rice development sector in Indonesia, a cabinet minister said. Minister of Agriculture Suswono said here on Thursday that in order to meet its domestic need, Saudi Arabia imported one
million tons of rice per annum. Besides, it also imported three million tons of wheat and seven million tons of barley to meet its need for cattle feeds, he said. “The Saudi minister for agriculture expressed the readiness of his country to make investment in Indonesia, particularly in the rice development sector,” the minister said when he explained the results of his visit to Saudi Arabia on June 11-13, 2010. To follow up the results of his visit to Saudi Arabia, the minister expected that the Indonesian Embassy in Riyadh would organize an investment meeting and
formulate regulations on the investment. Besides that, the minister also proposed that the holding of a research on the development of `Basmati` type of rice because this rice type had better productivity and taste if planted in Indonesia rather than in other countries. He said that in his meeting with the Saudi Arabian Chamber of Commerce and Industry, Hani Abiras, they agreed the need to increase Saudi investment in the agricultural sector, particularly food, cattle breeding, fowl industry, cattle feed and fisheries.
RI, EU to Boost Exports and Investment in Five Sectors Indonesia and the European Union will increase communication between their businessmen to boost exports and investment to and from the two parties in five priority sectors. “We wish to identify opportunities available to increase exports and attract investment,” Indonesian trade minister Mari Elka Pangestu said at the launching of European Union-Indonesia Business Dialogue (EIBD) Forum here on Wednesday. The forum to be staged in November 2010 is expected to be able to give inputs to the governments of the two
parties to overcome problems hindering economic relations. The forum has been held once before and in connection with it this time the two parties have formed nine working groups, five of them to focus on priority sectors and four others on inter-sectoral affairs. The five sectors to be discussed are medical and pharmaceutical sectors, textiles, garment and footwear sectors. Working groups have also been set up for automotive and machinery sectors, infrastructure and food and beverage sectors. The inter-sectoral teams meanwhile will discuss physical infrastructure, services, law and reg-
Trade Minister Mari Elka Pangestu
ulation as well as urgent issues concerned with growth and trade facilities. On the occasion the head of the EU delegation for Indonesia and Brunei Darussalam, Ju-
lian Wilson, said that the forum was very important with regard to hearing voices from Indonesian businessmen wishing to expand their business to Europe or vice versa. Trade between the two parties have grown stable so far at around US$25 billion a year. Indonesia has so far always enjoyed a surplus with its exports to the region surpassing US$13 billion in value a year. “We still have a big opportunity to increase our trade,” he said. The head of the IndonesianFrench Chamber of Commerce and Industry (IFCCI), Alain Pierre Mignon, said Indonesia is a potential country for French
companies to invest. So far however French investors have not yet received correct information about the condition in the country. He said the interest of French businessmen to conduct partnership with Indonesian businessmen is high. In view of that he wished to encourage businessmen from his country to come to the forum so that they would be able to know Indonesia better. “For the past 80 years we have been successful here. Now however there are more competitors such as from China, Japan and India. May be we need a new business model. That is what we are going to discuss,” he said.
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The President Post
B4 July 12, 2010
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Management Creating High Performing Organization Connecting the Hard and Soft Lina Sukri Consultant Hay Group Jakarta
Rifki Consultant Hay Group Jakarta
C
EOs are facing increasing pressure to improve results. Highly complex and sophisticated Performance Management (PM) systems and instruments are in place but are not properly applied; and as a result, employees are not motivated in the expected way. Despite the complexity of systems, a direct link between an organization’s strategy and an individual’s own set of targets is not given in most of the cases. Another key issue is that many managers just do not manage the consequences of poor performance – giving constructive or even negative feedback still seems to be one of the biggest challenges for managers. Failing Performance Management: “A Growing Concern” As business landscape increases in competition intensity and becomes more complex, shareholders’ demand for more readable, predictable, and sustainable business and business results consequently increases. CEOs, leaders, and managers go through series of management processes1 in order to satisfy these demands. They develop the overarching strategies, translate those strategies into specific objectives and initiatives, plan the required operations to achieve the objectives and to execute the initiatives, monitor the operations, and adapt the strategies and their implementations as the results unveil. To ensure that the objectives are achieved and that the initiatives are executed as planned, CEOs, leaders, and managers need to move every organizational member in the same direction. Organizations have put in place highly complex and sophisticated PM systems and instruments to help their CEOs, leaders, and managers with part of the management processes. CEOs, leaders, and managers use PM systems and instruments to help them translate the strategy into specific objectives and initiatives for every organizational member, and to help CEOs, leaders, and managers monitor and manage the operations. Yet, PM systems fail to move every organizational member in the same direction, and therefore the expected performance level and the results are not there. What Makes Performance Management Fail Our experience from working with clients to create high performing organizations reveals, out of the many reasons for the ineffective or event failing PM systems, the same tell-tale sign about what is not working. In the majority of cases there is a gap between organizational member work and how the performance is managed and the business goals the organization are trying to achieve. There is a missing link between the ‘hard’ – the business goals and the strategy – and the ‘soft’ –culture and organizational members’ motivation – of the organization and the PM system. CEO and leaders, with a view to maximize the value of the company, have devised seemingly full proved overarching strategies and very well thought strategic goals. However, they, using the PM system, fail to translate these goals into more specific performance targets that are meaningful and make sense for organizational members further down the organization. Individual or team performance targets fail to be meaningful to the organizational members because organizational members do not see the direct line of sight between the targets and the strategic goals. Individual or team performance targets also fail to make sense to the organizational members because organizational members do not have substantial degree of control over the targets. Therefore PM system fails to motivate and engage every organizational member. In addition, over the years many organizations have invested much time and effort to implement PM “best practice” as a way to ensure competitive advan-
Figure 1: Strategic Performance Management Model (Hay Group 2010) Strategic context Performance management system
Strategic intent Business model Operating model
Culture Values
Performance model
Set of targets
Values
Appraisal
Assumptions
Reward
Artifacts*
Leadership
Beliefs
Coaching
Assumptions
Promotion
Artifacts*
Succession
Business performance Aligned metrics ROI on rewards
Employment engagement Employee enablement Climate
Beliefs
*Artifacts are the objects or products designed and used by people to meet re-occurring needs or to solve problems and are influenced by organizational culture.
Figure 2: Evolutionary stages of performance management (Hay Group 2010)
More sustainable performance
Objective is to maximize value
ÒI ama truly committed to maximize my own, my teamÕs and my companyÕs performanceÓ ÒI need coaching to improve my competencies and achieve the objectives
ÒI must meet my targetsÓ
Developing Performance Model The right performance model will ensure that both strategic intent and culture can be hardwired in the design of the PM processes, tools and practices. This is to make sure that both the strategic intent and distinctive culture are reflected in the general principles of PM in order to cultivate and flourish the expected behavior from the people which at the end will drive the end result (figure 3. Performance model). To develop a performance model, at the beginning, executives need to ask themselves how they actually want to manage performance in their organization: Key questions that executives need to answer in developing performance model • What are the key levers in my business model to drive oragnizational performance? • When looking at strategic targets - what are the key metrics to apply in the measuring systems? • Who is in charge of making it happen? What is the accountability of line management? • What is my reward philosophy around differentiating different performance levels? • How do I reward the performance of my best people in terms of career opportunities? • How do I reward the performance - not just in how that feedback is given but what I need to do about how it is addressed?
Less sustainable performance 1. Focus on performance appraisal
tage. However they have overlooked the organization culture; a set of shared assumptions that have been learned over time, are taught to new members, and are believed to be the correct way to perceive, think, and feel. Organization’s culture influences the way organizational members work and coordinate their activities to achieve common goals and expectations, and also the way they’re managing performance. Hence, if overlooked, culture often becomes the biggest barriers in achieving the desired performance through PM systems. This situation is what cause some PM systems fail to deliver the expected innovation in some organizations because of the organizations’ hierarchical work culture. In such work culture, often, organizational members are not enabled with enough degree of authority and flexibility that is needed to drive innovation. Moreover, some PM systems spoil the ingredients for success because the systems were designed without linking the strategy and the required culture for success. PM systems, that use force ranking system as a mechanism to differentiate performance of each of the employees, tend to drive opportunistic behaviour. This opportunistic behaviour results in a situation where everyone cares only for him or herself, and where everyone will try to perform at the expense of others. This kind of situation will deteriorate teamwork; the very fabric that bonds every organizational member and enables them to move in the same direction. Strategic Performance Management: “Connecting the Hard & Soft” Strategic Performance Management makes the connection between the strategy and the culture of an organization and the organization’s ability to manage employee’s performance. Strategic Performance Management creates a high performing culture by creating direct line of sight
2. Focus on performance management
3. Focus on strategy alignment and performance culture
between strategic goals and individual or team performance objectives, creating alignment between the organization culture and the strategic goals and plans, and creating the alignment between organization needs and employee needs. Strategic Performance Management ensures the creation of climate that cultivates success and makes PM as part of the culture. Strategic Performance Management therefore is more than just a target setting process or enhancing leaders’ capability to give feedback. It is about aligning company strategy to team and individual goals and rewards, and ensuring the whole organisation is pulling together in the right direction. The key in connecting the ‘hard’ and the ‘soft’ of the organization with the PM system is the performance model (figure 1, Strategic Performance Management Model). The performance model serves as guiding principles for the PM system. It helps to clearly define the PM principles from a strategic and cultural context. It takes into account not only the organization’s strategic objectives and the plan to achieve them, but also the organization’s culture, which can be observed in the values, assumptions, artefacts and beliefs found in the organization. It provides a clear linkage between the individual and team targets and the company’s strategic objectives and the plan to achieve them. It also provides guiding principles for the creation of culture that engage and enable every organizational member toward achieving the individual and team targets that support company’s strategic objectives. By successfully connecting people, strategy and culture, organizations can improve their effectiveness, enhance employee effectiveness and productivity, and increase the likelihood of achieving their business objectives and delivering more sustainable business performance (figure 2. Evolutionary stages of performance management.)
By tending to the questions above, the right performance model will support the execution of the “to be” strategy and the transformation towards the desired organization culture. Success Factors in Implementing Performance Management System Referring to the right performance model, the next step is to define the PM system and process. Based our research and experiences, there are two main parts that drive success in implementing PM system. Those two parts are accounting for performance and managing for performance (Figure 5, Performance Management System). Accounting for performance is about identifying the right metrics to measure and manage. The metrics can be either tangible financial and / or operational goals that relates to company strategic goals, or behavioural competencies that underpin success. Managing for performance is about CEO, leaders and managers having the commitment to spend time with the organizational member to discuss success and setback, to give constructive feedbacks, to reward for success, and, when needed, to tell the bad news. Both accounting and managing for performance need to be done in accordance to the performance model that is defined in the context of strategy and culture of the organization. The metrics that are used, the achievements that are rewarded, the feedbacks that are given, and the rewards or punishments that are given need to be aligned and consistent with the company strategy and culture. For instance in an organization that believes teamwork culture is the key to successfully execute the strategy than that organization needs to put heavy emphasize on team performance target, encourage team achievements, provide feedback and coaching that foster teamwork, and provide team base reward. Moreover, to cater for the CEO questions about the effectiveness and successfulness of PM implementation, there are several fac-
tors that need to be considered. 1. Integration with organization objectives. Integration with organization objectives is needed in order to ensure that organization strategy gets executed and that the strategy execution is aligned with the company vision and mission. Integration with organization objectives can create better alignment between organization’s aspiration and strategic goals and individual or team goals by improving the focus and clarity of the goals, narrowing priorities, and making sure that key systems are tightly linked and sending the same messages. In order to integrate PM system with organization objectives, organizations need to: a) Make sure that all of the executives are clearly aligned with the vision and ‘must win’ battles of the organization b) Identify where value is generated in the organization c) Optimize the number of goals to increase focus at the organization, team, and individual levels d) Make sure that the vision, strategy, financial systems, metrics, operating model, organization structure, operational systems, and individual targets send the same messages about what the organization consider as performance e) Help employees to better understand the organization’s goals and know how to focus their time 2. Linkage to organization culture. Linkage to organization culture is needed to ensure that success can be achieved through the organization culture. Taking culture into account when designing a PM helps to deliver the intended results more quickly and limit the chance of unintended consequences, such as re-enforcing negative behaviors. In order to link PM system with organization culture, organizations need to: a) Assess how the key elements of culture (values, behaviors, organizational habits, symbols / levers and brand image) affect how performance is understood, evaluated, managed and rewarded b) Identify how culture has contributed to past and current performance of the company and what impact culture is likely to have on achieving future success c) Determine which elements of culture hinder and which can be used to enhance future performance 3. Linkage to Reward. Linkage to reward is needed to deliver and forge the message about the kind of behaviour and performance that gets rewarded, or the one that gets punished.
Figure 3: Performance model (Hay Group 2010) Performance Model Purpose
Strategy
Philosophy
Performance management systems
Culture
Behaviors
Results
Principles
Key metrics
Linkage between PM and reward will focus organization on execution excellence in rewards programs which will motivate employee to go for extra miles, not on sophisticated design. Differentiated rewards can drive the achievement of strategic targets. The key to truly implement a pay for performance philosophy is by: a) Ensuring that the performance model drives the total rewards mix b) Using all of the levers in the total rewards framework (salary increases, incentive compensation, equity, benefits, promotions, etc.) to create higher rewards for best performers c) Monitoring and measuring the return on investment of total rewards investments d) Making sure that both the right measures and the right targets are in place, including both the hard and soft measures of performance e) Reinforcing frequent performance dialogues to take the pressure off the end¬-of-¬the year performance rating and evaluation process 4. Leadership support. Based on our research, the main factor that determines the success of PM system implementation is leaders’ commitment. Starting PM implementation at the top level while in the mean time gaining information on employee opinion to enrich and ensure the smooth transition is the best approach for PM implementation. Provision of feedback and effective coaching session from the superior will ensure that people will be putted at the right place, doing the right thing and delivering the right result. To ensure that dominant leadership styles are consistent with the Performance Model, organizations need to: a) Equip top leaders to live and model the habit of giving honest feedback and holding people accountable b) Include the climate created by the leader as a key consideration when it comes to making decisions in the selection and recognition of leader c) Change the mindset of the leader about PM; from PM as a ‘once-a-year’ activity
mindset to PM as a fundamental and an ongoing process mindset d) Embed the PM philosophy into all leadership activities, even beyond the formal PM calendar and routine e) Ensure that the organization sees the dialogue between managers and employees as key for success. f) Focus leadership development efforts on building organizational capability to set stretch goals, give performance feedback, and hold people accountable g) Identify and address elements of the culture that prevent open, informal, and candid performance dialogue h) Hold leaders accountable on managing performance 5. Competency based. A competency based PM is needed to drive the correct behaviours and values through the organisation which is align with the organization culture and value. 6. Integration with other HR initiatives including selection and development. PM system needs to be in line with company human capital strategy and road map to obtain success through the people. 7. Continuity and consistency. At last but not least PM system need to be a continuous and consistent process. To obtain a solid PM system, which at the end can have an impact on business performance and able to fulfil what is the aspiration of the organization, PM should not be a “one project show”, but rather continuous improvement and commitment. 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.
Figure 4: Performance management system (Hay Group 2010)
OrganizationÕs Strategic Goals
OrganizationÕs Culture
Performance Model
Accounting for Performance
Department Goal
KPI for Individual Job Aligned with Department Goals
Individual/Team Goals
Output/Key Performance Indicators Coaching
Managing for Performance
Link with Remuneration, Training & Development, Career and Talent Management
Behavioral Competency Defined to Achieve Optimal Output/KPI and Create Desired Culture
Process/Competency
Performance Planning
Link with Other HR Systems
Coaching
Department Goals Translated From Overall OrganizationÕs Strategic Goals and OrganizationÕs Culture
Coaching
Mid Term Review
Year End Review
Coaching
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July 12, 2010 B5
Leadership Employee Motivation Real Practice or Pure Plain Talk Dr. Karan Singh MBA, DBA
Do we try to control our employees or are we committed to their welfare, success and productivity? Which comes to the classic question on the bias towards the carrot or the stick. The carrot, a metaphor for reward, and the stick, needs no real explanation.
Yes, there is a hidden message in there that the Leader must already possess what is propounded for the Manager. However, the proposal here is that everyone, at any stage of one’s career, would benefit best by imbibing the qualities of the Leader, which under one umbrella would contain all the adjectives that support the success of both the organisation and individual. Very much so also in considering the virtues of Theory X and Theory Y, the latter being a more effective paradigm for overall long term success. It is well accepted that successful Team Leaders are Theory Y managers. Theory X assumptions allow for blaming, accusing and nonparticipative behaviours. When we believe that workers are, for example, lazy, we don’t take time to develop them or challenge them. The same is the case if we assume workers are unintelligent (“He won’ be able to cope, he’s a school dropout.”). Most Theory X assumptions prompt supervisors to create audit systems to check subordinates, which can hamper their ability and dampen their enthusiasm and effectiveness. Theory X assumptions often become selffulfilling prophesies in a kind of a vicious spiral. Assumptions like Theory X and Theory Y give rise to work and organisational paradigms, which often lead to Paradigm Paralysis. “I’ll believe it when I see it”, Or “I’ll see it when I believe it”. A Paradigm is defined as a Model or Pattern of Thinking into which a life experience is
Figure 3. Control and Commitment Paradigm Control Paradigm
Commitment Paradigm
Elicits compliance Believes Supervision is necessary Focuses on Hierarchy Biased toward functional organizations Manages by policy Favours audit and enforcement processes Believes in selective information sharing Believes bosses should make decisions Emphasis on means Encourages hard work Rewards conservative improvement Encourages agreement
Engenders Commitment Believes education is necessary Focuses on customers Biased toward cross-functional organizations Manages by principle Favours learning processes Believes in open information sharing Believes workers should make decisions Emphasis on ends Encourages balanced work/personal life Rewards continuous improvement Encourages thoughtful disagreement
Theory Y
Most people are lazy Most people need to be controlled Most people need to be motivated Most people are not very smart Most people need encouragement to do good work
People like to work People have self-control People motivate themselves People are smart People want to do a good job
Figure 2. Leader versus Manager
Visionary
Rational
Passionate
Business-like
Creative
Persistent
Inspiring
Tough minded
Innovative
Analytical
Courageous Imaginative Experimental
Similar situations take place often in management. Kimball Fisher, author of ‘Leading Self Directed Work Teams’ , suggests that to understand SDWTs, one must have, or develop, a SDWT paradigm. And noted Employee Involvement Expert Richard Walton contrasts two kinds of paradigms – Control and Commitment (Figure 3).
Independent
“Most of us have been heavily influenced by the control management paradigm because it is the most prevalent operating paradigm of management in modern organizations of all kinds” (Kimball Fisher ). Even the Titles that are used reinforce the paradigm (Figure 4).
Inspires through great ideas
Structured
Shares Knowledge Trusting Warm and radiant
Deliberative Authoritative Stabilising Centralises Knowledge Guarded
AGER
Expresses humility versus Rarely admits to being wrong. The first is a virtue for all, Leaders, Managers, Supervisors alike. The latter, more of a misfortune, again, for all concerned.
Theory X
MAN
Management theorists first identified the great qualities of the Supervisor then embarked on bettering that by expounding on the virtues of a Manager in surpassing that of the Supervisor. The Leader is now positioned to be more blue blooded than the Manager, as attempted above. To pause for a moment and examine each one of the differences may involve precious time, though looking at some, at random, may reveal that they could easily be inter-changeable. Let’s take every fourth on the list of
Independent versus Stabilizing. If leaders are not meant to stabilise, then who are, especially in times when the sea is rocky, which in today’s context is all the time? And how would managers manage without being independent, both in thought and in action?
Figure 1. McGregor’s differences in Management Assumptions.
ER
Theory X is finding it more and more difficult to survive in our post modern world. Very much in the spirit of today’s thinking about the confluence of Supervisors and Managers into one wholesome entity called Leadership. To illustrate this point lets examine the differences outlined between a Leader and a Manager by Andrew J DuBrin in his book on Leadership. The chart is titled ‘Leaders versus Managers’ (Figure 2).
Innovative versus Analytical. More innovative managers can manage greater efficiencies. Which leader can get away from being analytical?
translated. It provides each one of us with our own personal interpretation of reality; a sort of special, individual lens that shows us our own reality. And the paradigm is formed based on our experiences, values and culture. And often a paradigm does not allow us to see beyond it – designated Paradigm Paralysis by noted thinker Joel Barker – a rigidity of thinking that does not let people see things outside their frames of reference. Take the experiment with a stereoscope – a viewing instrument that allows for two images to be displayed, one for each eye individually. When loaded with two sports’ images, one of a matador and the other of a baseball player, the American sees the latter and the Spaniard the former, even though both are displayed at the same time in the stereoscope.
LEAD
A
s senior managers running an organisation, do we try to control our employees or are we committed to their welfare, success and productivity? Often one hears that a new electronic finger print recognition machine has replaced the attendance register, or new forms of penalties are being imposed on defaulting adult employees; or certain websites are not available to reduce wastage of official work time. Which comes to the classic question on the bias towards the carrot or the stick. The carrot, a metaphor for reward, and the stick, needs no real explanation. Douglas McGregor formulated Theory X (autocratic) and Theory Y (democratic) to classify management assumptions (Figure 1). It is important to note that McGregor suggested management assumptions and not management styles or techniques; though in real life there is always profound influence of the former on the latter.
eighteen. Visionary versus Rational. Why wouldn’t a manager want to be a visionary. In fact, a rational manager who is also a visionary would indeed be more successful than otherwise. Are we saying that Leaders don’t need to be rational?
Expresses humility Initiator Acts as Coach, Consultant, Teacher
Today’s agreed upon system is following the three-step-process. One, categorising employees according to their effectiveness and commitment to the company and its goal. Two, providing training, especially for the laggards, and Three, astutely letting those go who do not wish to change and rise to the challenge in the endeavour to improve upon the eighty-twenty rule.
Cool and reserved Rarely admits to being wrong Implementer Acts as a boss
Does the right things
Does things right Commands through position
Knows results are achieved through people
Focuses on results
A collateral element supporting the way titles are used, is the language that Leaders choose: Control Paradigm
Commitment Paradigm
“I did this”
“We did this” / “The team did this”
“He works for me” / “She reports to me”
“We work together” / “My colleague”
“My employees”
“The Team”
Next to language is also the way an organization is described – the organization chart – and that often very strongly depicts the control paradigm. Very clearly, independent thinking and self-leadership require the commitment paradigm – in getting rid of the top-downway - and many a learning organization today are shedding those artefacts of culture that are based on the control paradigm. Of course, one cannot get away from practicality and real time questions like the obvious differences in efficiencies amongst employees, and the eighty-twenty rule, where twenty percent of the people are supposed to be doing eighty percent of the work. Well, today’s agreed upon system is following the threestep-process. One, categorising employees according to their effectiveness and commitment to the company and its goal. Two, providing training, especially for the laggards, and Three, astutely letting those go who do not wish to change and rise to the challenge in the endeavour to improve upon the eighty-twenty rule.
figure 4. the Titles reinforce the paradigm Title Used
Insinuation
Could be
Supervisor
‘Superior Vision’ / More important (than workers)
Team Leader / Advisor
Controller (Finance)
‘Look over’ (The shoulder)
Communicator
Auditors
Check you / Mistrust
Teachers
Director
You can’t do it yourself
Facilitator
Chief Executive Officer
As if execution takes place at the top
Chief Learning Officer
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. With a DBA focus in Cross Cultural Management, Dr. Singh also trains expatriate managers in how to be more effective in Indonesia.
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Executive Highlights Moody’s Investors Service has raised its outlook on Indonesia’s BA2 credit rating to positive from stable. The positive outlook means the agency will likely raise the rating, which is two notches below investment grade, within 12-18 months. Moody’s last upgraded Indonesia’s credit rating in September 2009. In its statement, the ratings agency said the move reflected Indonesia’s capacity for sustained growth, its effective fiscal and monetary policies and prospects for further improvements in the government’s financial and debt position. Aninda Mitra, Moody’s vice president for Indonesia, said recent instabilities in the European debt markets have had no serious implications on Indonesia’s improving credit fundamentals. He noted that the recent appointment of former banker Agus Martowardojo as finance minister and the nomination of Darmin Nasution as Bank Indonesia governor were supportive of policy continuity and institutional credibility. Mitra also remarked that the central bank’s recent measures to reduce volatility in capital flows were “ratings neutral” as it did not fundamentally restrict the servicing of debt obligations.
Bank Indonesia (BI) has introduced measures to reduce speculative money flow and encourage investors to keep funds in longer-term rupiah denominated instruments. Most analysts agree the steps taken by the central bank are aimed at short-term, speculative capital and are unlikely to discourage foreign investors. The measures include a one month holding period for those investing in its Bank Indonesia bills (SBI). BI also widened the spread between its overnight repo rate and its benchmark rate to +100 basis points (bp), and the spread between the overnight deposit rate and the benchmark rate to -100 bp, all of which boosts the cost of borrowing from the central bank while reducing returns from investing in SBIs. BI will also introduce nine-month and 12-month SBIs in the second half of the year to complement the bank’s shorterterm debt paper. Acting BI governor Darmin Nasution emphasized that the new measures were not “capital controls”, but were aimed at helping the central bank improve the effectiveness of its monetary policy and strengthen the country’s resilience to global financial shocks.
plan to raise electricity rates by an average 10% effective 1 July. It is the country’s first tariff increase for electricity since 2004 and, despite the sensitivity of the issue, the public outcry over the hike has been modest. In his statement, President Yudhoyono said the hike was necessary to safeguard the economy while protecting the poor. Tariffs for households with capacity of 1,300-5,500 volt ampere (VA) will be raised by 18%. Electricity tariffs for users with capacity of between 450 and 900 VA, which are mostly low-income households and accounts for almost half of the number of users, will remain unchanged. Tariffs for businesses and industrial operations with capacity of up to 2,200 VA will be increased by 6%; between 2,200 VA and 200 kiloVA by 9%; and above 200 kiloVA by 15%. The government has allocated Rp55.1 trillion for electricity subsidies in its revised 2010 state budget, up from its original forecast of Rp37.8 trillion. Bank Indonesia, meanwhile, said it did not expect the increase in electricity rates to have a significant impact on inflation, and is retaining its 2010 inflation projection of 5.1-5.2%.
The government has given the green light to develop the longdelayed US$1.4 Billion Donggi-Senoro LNG project in Central Sulawesi. This comes after the energy ministry formally approved the allocation of up to 75% of the LNG produced from the planned facility for exports. Last year, then Vice President Yusuf Kalla insisted the bulk of the project’s output go to the domestic market, prompting Mitsubishi – the majority shareholder in Donggi-Senoro - to threaten to withdraw from the project and prevent the Japan Bank for International Cooperation (JBIC) from extending low-cost funding to develop the facility. State-owned oil and gas firm Pertamina and local energy company Medco Energi Internasional holds 29% and 20% stakes respectively in the project. The LNG facility, which will have a capacity of two million tons per year, is now scheduled to start operations in 2014. Japan’s Kyushu Electric Power Co. and South Korea’s Korea Gas Corp. are among the likely buyers of the exported LNG. The Donggi-Senoro facility will get its gas from the Senoro and Matindok fields jointly operated by Medco and Pertamina.
its compared to Rp1.6 trillion in losses in the year earlier period. The firm also posted a 14% increase in revenue to Rp35.5 trillion in the first quarter.
structure was a significant milestone for the company and would allow it to accelerate development of Ridlatama Tambang and become a major coal producer in the region. The concession has an estimated JORC resource of 2.73 billion tons. Churchill said it also converted to a 75% direct ownership in Ridlatama Trade Powerindo, which holds a mining license to a 5,386 ha area adjacent to Ridlatama Tambang.
Australia’s Churchill mining has acquired direct ownership of its Ridlatama Tambang coal concession in East The U.S. export-import Kalimantan. bank gave preliminary The company said the decision to convert its indirect contractual approval for a US$1 arrangements in the mine to direct equity interest comes follow- billion lending facility ing passage of the 2009 mining law and the recent issuance of the to 11 Indonesian banks. legislation’s implementing regulations allowing foreign companies to taka direct equity ownership in locally incorporated companies holding mining concessions. Churchill managing director Paul Mazak said the restructuring to a simple ownership
The 11 banks are the Lembaga Pembiayaan Ekspor Indonesia (Indonesia Exim Bank), Bank Mandiri, Bank Negara Indonesia (BNI), Bank Rakyat Indonesia (BRI), Bank Central Asia (BCA), Bank Danamon, Panin
Selected Instant Indicators EXCHANGE RATE 2009 - 2010 16,450
15,000
14,389
15,800
14,500 14,000
15,150
13,500
14,500
13,000
13,850 13,200 12,550
US$ (LHS)
12,500
100 YEN (LHS) EURO (RHS)
12,000 11,500
11,900 11,250
11,000
10,659
10,500
10,600
9,927
9,950 9,300
Currency traders expect Bank Indonesia to intervene at this support level to reduce rapid fluctuations and prevent further appreciation that could harm the country’s export competitiveness. However, given the strength of Indonesia’s economic fundamentals relative to its peers, analysts expect the rupiah to see further strengthening over the mediumterm. The rupiah has already risen 15% against the U.S. dollar over the past 12 months, the largest gainer in Asia.
Parliament has approved a government
9000
9,015
8,650
8,500
8,000
8,000 Jun 09
J
A
Sep
O
N
D
J-10
F
Mar
A
2009
M
2010
21 Jun
STOCK MARKET INDEX
IDX
USA S&P 500
IDX - Jakarta
3,100
2,416
2,500 2,300 2,100
1,100
1,113
1,053 2,027
1,000
1,900 1,700
919
1,500
900 Jun 09
J
A
Sep
O
N
D
J-10
F
Mar
2009
A
M
2010
21 Jun
8.0 Deposit Rate Interbank Call Rate SBI 6.3 6.5
6.5 6.5
6.1
6.0
5.5 Jun 09
J
A
Sep
O
N
D
J-10
F
2009
Mar
A
M
2010
21 Jun
INTERNATIONAL RESERVES AND TRADE BALANCE US$ Mn
US$ Bn 88
3,500 3,048
Trade Balance
3,000
84 78.6
Net FX Reserves
80 76
2,500
72
1,960
2,000
68
1,669
1,568 1,500 1,000
Financial details were not disclosed. Bank Permata president director David Fletcher said the acquisition would support the bank’s focus on expanding its consumer and commercial segments, and reflected the commitment of the bank’s two major shareholders, Astra International and Standard Chartered Bank, to accelerate Permata’s growth and establish the bank as a premier financial services firm in Indonesia. GE Finance Indonesia has 10 branches across the country, administering a range of credit cards servicing more than a million subscribers. The firm also provides automotive financing in ventures with Astra Sedaya Finance and Federal International Finance. GE Finance Indonesia posted net profits of Rp93.8 billion in 2009, up 84% from a year earlier.
64
64.5
57.4
60 56
837
56.6
518 500
52 48 44 40
0 A-09 May
J
Jul 2009
A
S
O
N
D
Bank Mandiri secured a US$100 million loan from France’s Development Agency Agence Francaise de Developpement (AFD). The funding will have a 7-10 year term and will be used to finance projects in the energy sector focusing on geothermal and re-
INTEREST RATES
Proceeds from the issue will be used to fund the firm’s program to modernize and expand its transmission and distribution network. PLN will issue two series of conventional bonds worth Rp2.5 trillion, a series A with a five year tenor and an indicative yield of 9.15-9.9%, and a series B with a 12 year maturity and an indicative yield of 10.0810.81%. The firm will also issue Rp500 billion in syaria bonds in two series with tenors of five and 12 years respectively. Danareska Sekuritas, Mandiri Sekuritas and Trimegah Securities have been appointed to underwrite the bond issue. Local ratings agency Pefindo has assigned an AA+ rating with a stable outlook for PLN’s bonds. The Indonesian stock exchange (BEI) is scheduled to list the debt paper with the local bourse on 9 July. As of Q1, PLN posted Rp2.9 trillion in net prof-
The Australia and New Zealand Banking Group (ANZ) has finalized its US$100 million acquisition of the Royal Bank of Scotland’s (RBS) retail, commercial and private banking businesses in Indonesia.
1,200
2,700
7.0
Standard Chartered Bank subsidiary, Bank Permata, has acquired General Electric Finance Indonesia, the local unit of General Electric Capital.
2,942
S&P - USA
2,900
%
State power utility PLN has given indicative yields of 9.15-10.81% For Rp3 trillion in bonds it plans to float next month.
newable energy, energy efficiency and the domestic use of gas to replace fossil fuels. AFD country director Joel Daligault said it was the agency’s first direct loan to a state-owned enterprise in Indonesia, and reflected AFD’s broader cooperation with the Indonesian government on climate change and efforts to reduce the country’s carbon emissions by up to 40% by 2020. Thomas Arifin, Mandiri’s director of treasury, financial institutions & special asset management, said the loan would strengthen the bank’s dollar base and meet customer needs as demand for more strict environmental standards on energy projects grow. He added that the deal reflected AFD’s strong track record on climate change issues and promoting sustainable growth in emerging markets.
1,300
3,300
7.5
The rupiah hit the key level of Rp9,000 to the U.S. Dollar following Moody’s rating outlook revision and China’s decision to allow more flexibility in the yuan.
10,000 9,500
10,225
Bank, Bank CIMB-Niaga, Bank OCBC Indonesia, Bank International Indonesia and Bank UOB Buana. U.S. Exim Bank president Fred P. Hochberg said the agreement would enable Indonesian firms to access low interest rate financing through local banks. He added that the facility offered short, medium and long repayment terms and would be eligible for both public sector and private sector borrowers. Hochberg further remarked that Indonesia would offer huge opportunities for U.S. exporters as the country’s diverse economy continues to grow. In fiscal 2009 and 2010, the U.S. Exim Bank authorized nearly US$1 billion in financing to support the export of 30 Boeing 737-8000ER aircraft to Indonesian low-cost carrier Lion Air.
J-10
F
Mar 2010
Apr
Alex Thursby, ANZ’s chief executive of Asia Pacific, Europe and America, said the bank has completed the rebranding of 18 RBS branches and 29 ATMs in Indonesia and moved customers and staff to ANZ with minimal disruption. He added that ANZ was now focused on working on it relationship with former RBS customers and instilling confidence in ANZ. The acquisition has significantly expanded the scale of ANZ’s operations in Indonesia, which now includes 28 branches in 11 cities serving more than 900,000 customers. Thursby remarked that ANZ was now in a very strong position to deliver relationship-focused banking for its high-end retail clients. He noted that the bank has recently introduced ANZ Signature Priority Banking which offers affluent customers a dedicated relationship manager and full wealth management services.
Hong Kong-based commodities trader Noble Group has acquired a 51% stake in local palm oil
producer Henrison Inti Persada. Financial details were not disclosed, though some analysts estimate the deal to be worth more than US$80 million given the value of Henrison’s plantation assets. Noble’s executive chairman, Richard Elman, asserted that the deal would complement its global agricultural and energy business. It would allow the group, which is a major supplier of agricultural commodities to China, to expand its edible oil supply chain and help ensure a continuous flow of crude palm oil. Noble is slated to develop around 32,500 hectares of land in Sorong, West Papua for palm oil production as part of its investment in Henrison. The latest acquisition marks Noble’s first venture in Indonesia’s palm oil sector, though the group already owns several coal and cocoa assets in the country. Noble’s local partner in Henrison is Kayu Lapis Indonesia Group, the largest forestry operator in the region.
High-end retailer Mitra Adiperkasa announced a Rp300 billion expansion plan for its international franchises to meet surging demand from high-income consumers. Fetty Kwartati, Mitra’s general manager for investor relations, said the firm would be opening 20 new Starbucks Coffee outlets in Jakarta, Surabaya, Denpasar, Bandung, Medan, Yogyakarta, Semarang and Balikpapan over the course of this year. The company also plans to open 10 new Burger King restaurants, 10 new Domino’s Pizza shops and a new SOGO department store in Jakarta in the second half of the year. Mitra currently operates 74 Starbucks Coffee outlets, 11 Burger King eateries, five Domino’s Pizza shops, and 10 SOGO department stores across Indonesia. Fetty said the firm was targeting a 20% annual increase in sales this year to Rp4.9 trillion on the back of the country’s growing urban, middle and upper-class consumers.
Business Highlights are contributed to The President Post by CASTLEASIA/PT Jasa Cita from information supplied to members of their CEO Forum, the Indonesia Country Program. They are reprinted here with permission. For more information about CASTLEASIA programs, please contact Juliette or Wijayanti at 62 21 572 7321 or email castle@castleasia.com subject CEO Forum
The President Post
www.thepresidentpost.com
July 12, 2010 B7
Markets INDONESIA ECONOMIC BRIEFING
June Inflation Spike: Is it Temporary? By Helmi Arman and Anton Gunawan
W
hile June inflation numbers sparked some jitters, May trade data was positive. The trade surplus widened back towards $2.47bn as exports were slightly up (by 4.06% m-om) and imports declined (down by 10.5% m-o-m). The April trade surplus was also revised upward from $0.5bn to 0.8bn. These improvements somewhat reverse last month’s import surge worries, although the trend for the trade surplus is still for a gradual narrowing going forward.
to slightly lower. This still reflects the full year trend of the former growing faster than the latter. It’s heartening to see non-oil & gas exports to Europe (e.g. Germany and France) still holding up despite the economic prob-
Oil and gas exports rose again by 2.97% m-o-m, despite the 10% drop in the Indonesian oil price, suggesting that export volumes probably rose in May. Non-oil & gas exports rose supported by primary commodities (e.g. coal, palm oil and iron & ore) while manufacture-based exports (e.g. machinery) were flat
indonesian foreign trade: trade surplus further narrows
Jun-10 (Actual)
Jun-10 (Fcast)*
Jun-10 (Cons.)
May-10
Apr-10
2007
2008
2009
2010E*
2011E*
Headline CPI (% chg m-o-m)
0.97
0.51
0.40
0.29
0.15
Real GDP (% y-o-y)
6.3
6.1
4.6
5.6
6.2
Headline CPI (% chg y-t-d)
2.42
1.90
1.84
1.44
1.15
Domestic demand ex. inventory (% y-o-y)
6.0
7.5
5.4
7.2
7.4
Core CPI (% chg y-o-y)
3.97
n/a
3.90
3.81
3.70
Real Consumption: Private (% y-o-y)
5.0
5.3
4.9
5.0
4.9
Real Gross Fixed Capital Formation (% y-o-y)
9.2
11.7
3.4
9.0
11.9
GDP (US$bn) — nominal
433
507
542
672
775
1,925
2,227
2,350
2,880
3,280
9.8
8.6
7.9
7.6
7.1
Exports, fob (% y-o-y, US$ bn)
14
18.3
-14.4
17.5
12.5
Imports, fob (% y-o-y, US$ bn)
15.4
36.8
-27.7
24.6
15.7
Trade balance (US$ bn)
32.8
22.9
35.2
35 .3
36.4
2.5
0.1
2.0
0.9
0.4
Central government debt (% of GDP)
35.1
32.0
28.8
26.0
24.2
International Reserves –IRFCL (US$ bn)
56.9
52.1
66.1
82.2
93.2
Source: Bloomberg, CEIC, *Danamon estimates
May-10
Apr-10
Mar-10
Feb-10
Export Growth (% y-o-y)
37.8
42.4
46.6
56.5
Import Growth (% y-o-y)
53.3
67.5
68.6
59.9
Trade Balance (US$bn)
2.47
0.80
1.58
1.67
Source: CEIC, BPS
BI Rate
6
Core Inf.
4
US$mn
US$mn
Imports
8000 6000 4000
Nov-09
May-10
External Sector
Merchandise import cover (months) Exports
Trade Balance (RHS)
Inflation May-09
Open Unemployment Rate (%)
Current account (% of GDP)
10000
8
National Accounts
GDP per capita (US$) — nominal
12000
Source: BPS, CEIC
Indonesia: Selected Economic Indicators
3.91
10
Nov-08
Helmi Arman is Economist, Treasury & Capital Markets PT Bank Danamon Indonesia, Tbk
4.16
INDONESIAN FOREIGN TRADE: MONTHLY
May-08
hiked in early-2011, as we see inflation creeping up to over 6% next year.
4.46
14000
Nov-07
Policy implications While June inflation rang some bells, we don’t think it
changes the full-year outlook for inflation. BI’s inflation forecast of 5.3% (in-line with ours) still looks conservative enoug. Hence, we don’t expect a build-up of calls to raise rates soon. We think the likelihood is still for rates to be
4.57
% y-o-y, p.a.
May-07
significance of this, as monthly trade data is known to be very noisy.
5.05
12
2
On the import side, oil and gas
imports receded as we expected (-19.5% m-o-m). However, nonoil & gas imports also declined, especially capital goods (down by 25.2% m-o-m) such as machinery, aircraft and ships. Yet again we don’t want to exaggerate the
Headline CPI (% chg y-o-y)
INDONESIAN CPI INFLATION 14
lems engulfing the region. Exports to Japan and China also improved in May, although shipments to Singapore, Malaysia and South Korea declined.
May-08 Source: BPS, CEIC
Nov-08
May-09
Nov-09
May-10
6.2
5.4
9.4
9.4
9.2
4000
Currency/US$ (Year-end)
9,419
10,950
9,403
9,150
9,325
3000
Currency/US$ (Average)
9,163
9,767
10,356
9,175
9,238
2000
Other
1000
BI policy rate (% year end)
8.00
9.25
6.50
6.50
7.50
0
Consumer prices (% year end)
6.60
11.20
2.78
5.30
6.20
-1000
Fiscal balance (% of GDP; FY)
-1.3
-0.1
-1.6
-1.7
-1.5
S&P's Rating -FCY
BB-
BB-
BB-
BB
BB+
Source: CEIC, *Danamon Estimates
The President Post
B8 July 12, 2010
www.thepresidentpost.com
Pictorial Events Breakfast Dialogue at The Financial Club Jakarta
Photo: The President Post/Nandi Nanti
The Financial Club held a Breakfast Dialogue on June 22, featuring Prof Dr Roy Sembel, MBA, professor in finance, Dean of Business School and Director of Graduate Programs UPH, who spoke on “Unconventional Strategy Under Uncertainty”, and Sari Wahyuni, PhD, Editor in Chief of The South East Asian Journal of Management Faculty of Economics, University of Indonesia, who presented “How to Increase Company Competitiveness in a Global Crisis”. Present on the occasion were prominent businessmen and professionals, among others Pandji Choesin, Krisnaraga Syarfuan, Bunardy Limanto, Leo Tanubrata, Lukman Arief, Irwan Habsjah, Pri Notowidigdo, Mike Nicholson, Karan Singh, and Sujuno Respati.
The Opening of ASEAN Centre at Moscow State Institute of International Relations
USINDO Event Dr. Ir. Kuntoro Mangkusubroto, Head of the Presidential Unit on Development Monitoring and Oversight (UKP-PPP), led a stimulting discussion on June 25 at the Aryaduta Hotel Jakarta after he delivered his address “Ushering in Reform in Indonesia” and shared his experiences in instituting change and monitoring the Cabinet, and in ensuring delivery of its far-reaching development goals.
Photo: The President Post/Nandi Nanti
The ASEAN Centre was inaugurated in Moscow on June 15, 2010, in a ceremony attended by Minister of Foreign Affairs of the Russian Federation Sergey V. Lavrov, Deputy General Secretary of ASEAN Sayakane Sisouvong, Rector of the Moscow State Institute of International Relations (MGIMO) Anatoly Torkunov, senior officials of the Russian foreign ministry and ambassadors of ASEAN countries accredited to Russia. In his address, Lavrov pointed out that the project takes on a special importance in the context of the upcoming 2nd Russia-ASEAN Summit in Hanoi, Vietnam, this autumn. He said the Centre is set to become a successful platform for wide-ranging discussions on issues of development and multi-dimensional cooperation between Russia and the countries of Southeast Asia. “It will also help our societies
Indonesia Australia Business Council (IABC) A farewell party for outgoing Australian Ambassador Bill Farmer and Elannie Farmer was held and attended by Australian Embassy staff members, Indonesian politicians and businessmen and diplomats from several countries.
Sergey V. Lavrov, Minister of Foreign Affairs of the Russian Federation.
to learn more about each other,” he said. The activities of the Centre include organizing and holding joint academic and practical conferences, seminars, lectures and researches, and providing assistance in student exchanges and information work. Dr. Victor V. Sumsky, a renowned
The CEO Reference The TV Program of Intellectual Business Community presented Dr. Mochtar Riady founder of Mochtar Riady Institute for Nanotechnology and Mochtar Riady Comprehensive Cancer Centre with host Dr. Bayu Prawira Hie. Present at the discussion among others were Ali Basyah Suryo, Alex Ibarat, Johnwei, Bunardy Limanto, Mochtar Riady, Dr. Boenjamin Setiawan, Dr. Bayu Prawira Hie, Sariputra Sumana
Hawaiian Style Gathering
A Hawaiian-style gathering was held by the Mercantile Athletic Club with the purpose of establishing a rapport among its members. Dinner, dancing competition, lucky
draw & entertainment were the main features of the event, which was also attended by businessmen, representatives of embassies and many other expatriates. Among those present were Simin Bell,
Sandra Tjahyakusuma, Paul Griffith, Nick Dyer, Sutara Martadisastra, FX Dharmasetiawan, Lily Leman, Ita Basuki Smith, Tety Artatie, Luc St-amour, Mira Marini, Frank Perry , Arief Faisal, and others.
Russian specialist in Southeast Asia, was appointed as the Director of the Centre. The project is supported by the Russia-ASEAN Dialogue Partnership Financial Fund (DPFF), into which Russia makes regular voluntary payments from the federal state budget.
SECTION
The President Post
Automotive
Display until August 12, 2010 /// N0. 14 www.thepresidentpost.com
C
Automobile Industry Running in High Gear Despite Traffic Jams In fact, according to Gaikindo’s projections, car production in Indonesia will continue to soar through 2015 in tandem with a steadily rising demand and rapid expansion of the size of middle and upper class segments of our society.
T
he history of Indonesia’s automobile industry began in 1894 when a dealer named John C. Potter brought in a Benz Phaeton car for the Sultan of Solo. Potter was the first car dealer ever recorded in Indonesian history. After he’d brought the car in, more civilian cars entered the country to be used by Dutch and Indonesian public figures. According to a survey by Augustina Kurniasih from Mercu Buana University in Jakarta, all these cars were traded by foreigners. Only in 1938 did indigenous businesspersons have a chance to enter the business. RP Soenaryo Gondokoesoemo stepped in as an agent of General Motors in Yogyakarta that year, followed by Hasjim Ning in the 1950s, William Soeryadjaya, Syarnoebi Said and Soebronto Laras in the 1960s, 1970s and 1980s respectively. During those periods, the domestic automobile market was dominated by General Motors products under the brand of Chevrolet. Japanese brands entered the market in the late 1950s when domestic demand began to soar. The domestic automobile industry began to flourish in the
By Alci Tamesa
Indonesian Automotive Market & Forecast 1997-2015 by GAIKINDO 1500
(X 1000 unit)
1400 1,250
1300
OPT
1200 1,050
1100
NOR
1000
890
900
780
800 700
604
500 400
387 301
300
600 483
433
560
700 620
318
300
354 319
200
94
100 0
534
483
920 820
680
600
1,000
58 Ô97
Political & Economic Crisis
Ô98
Ô99
Ô00
General Election 1999-2004
Ô01
Ô02
Ô03
General Election 2004-2009
late 1970s when the government issued tough restrictions on importation of completely builtup cars. By 1976 the manufacturing industry had begun to thrive when the government enforced the policy obliging industry to use locally-made automobile components. As of late 1990s the government began to tax knockeddown car imports based on the extent to which locally made components were used. The aim
Ô04
Ô05
Ô06
Domestic Fuel Price Increase in March & October
Ô07
Ô08
Ô09
Global Economic Crisis
was to encourage the growth of domestic component industry. This policy has proven useful in the sense that Indonesia is now a good source of such automobile components as storage batteries, tires, suspension engines, car window panes, and various other products made by assembling units across the country. In 1996, then president Soeharto issued a presidential decree which instructed the Minister of
Ô10
Ô11
General Election 2009-2014
Ô12
Ô13
Ô14
Ô15
New Taxation Policy
Industry and Trade, Minister of Finance and Chairman of Investment Coordinating Board to formulate a strategy for developing what was later known as Indonesia’s “National Car.” The aim was to have a car factory built, run and fully owned by Indonesian business entities which would produce their cars inside Indonesian territory. Under this plan, 20% of the national car’s components would be made locally in the first year,
40% in the second year, and 60% in the third year. This decree was strengthened by a government ordinance that exempted importers from luxury goods tax. PT Timor Putra Nasional (TPN) got the privilege to run the show to produce Timor sedans but this was short-lived as the company—it was owned by Soeharto’s youngest son Hutomo “Tommy” Mandala Putera— went bankrupt after Soeharto’s regime had collapsed. In 1999, a year after the fall of Soeharto’s New Order, the government issued an economic deregulation package which allowed importation of Completely Built-Up (CBU) cars. This was obligatory given Indonesia’s participation in APEC, AICO, and AFTA which required member countries to liberalize trade and curb entry barriers. Since then, competition in the automobile industry began to grow wild. But at the same time, the appreciation of the US dollar against the national currency rupiah as well as high import duties provided ample opportunity for local players to open automobile production companies. By the year 2006 it was known that more than 200,000 people had been employed in the in-
dustry which involved at least US$2.2 billion in direct investment. That year saw a national production capacity of 800,000 cars and trucks as well as 3 million motorcycles per annum. These were produced by more than 50 component producing groups of companies. Indonesia’s export of completely-built-up (CBU) cars began to soar that year to 30,975 units while that of completely-knocked-down (CKD) cars reached 105,917 units, not to mention 285,124 sets of components, according to a 2007 report of Gaikindo (the Association of Indonesian Automotive Industries). In fact, two years earlier Indonesia had begun to export Toyota Avanza to Thailand in CBU form and to Malaysia in the form of CKD. So it is not surprising why Toyota is popular in the domestic market even to date. Between 1997 and 2007 at least 321,543 cars were sold out in the local market annually. Only in 1998, when Indonesia was engulfed in a political turmoil that saw Soeharto’s departure from politics, did car sales drop by 500%. But by the year 2000, domescontinued on page C2
The President Post
C2 July 12, 2010
www.thepresidentpost.com
Automotive Automobile Industry Running in High Gear Despite Traffic Jams from page C1
tic car market had regained vitality—thanks to the robust growth of the consumption side of the economy. The year 2000 saw a drastic sales surge of 68% in rhythm with an increase in the consumption sector. By the year 2005, Indonesia had seen an unusual surge in domestic car sales but the following year saw a decline resulting from the government’s unpopular move to remove fuel subsidy in October 2005. The following table shows the growth of domestic cars market between 1995 and 2006: Year
Units Sold
Growth (%)
1995
378,704
1996
332,035
-14.06
1997
386,691
14.13
1998
58,303
-563.24
1999
93,843
37.87
2000
300,964
68.82
2001
299,634
-0.44
2002
317,780
5.70
2003
354,208
10.40
2004
483,148
26.60
2005
533,917
9.51
2006
318,904
-67.42
Source: GAIKIDO
The growth of Indonesia’s automobile industry is closely related to the expansion of public transportation, car rental business, sales of new and secondhand cars as well as school transportation needs. The industry has grown so rapidly over the past 15 years that traffic jams are everywhere in Indonesia’s big cities. Privately owned (passenger) cars comprise more than 80% of the total number of cars in the capital city of Jakarta alone. By 2007, the number of Gaikindo members had reached 39, comprising 29 dealers and 10
manufacturing companies. But some have left the market due to their poor grip on the market, including PT Inremco, which used to import Ford sedans and PT Timor Putra Nusantara, producer of Timor sedans. According to Soebronto Laras, the boss of Indomobil, a natural selection occurs in the domestic market in the sense that new players would either be accepted or rejected naturally by the market depending on the quality of their products and their aftersales services. This to some extent is also determined by how they position themselves in the market against old players which control 90% of the local market. The old players are the manufacturers and or distributors of such popular brands as Toyota, Daihatsu, Suzuki, Mitsubishi, and Isuzu. Demand for cars fluctuates greatly in Indonesia, depending on the condition of people’s income as well as their spending patterns. Cars are still considered a luxury to the majority of population as most of Indonesia’s 240 million people are from low-income layers. But the opposite assumption is also true: as the size of the middle class continues to expand, the automotive industry has a bright future in that many more new families will buy cars in the future. Automotive consumers in Indonesia cannot be easily categorized in terms of their selection preferences. This is easily visible in car exhibitions. For instance, some people can only afford to buy Daihatsu Xenia which costs around Rp80 million, but others can buy Bentley cars which cost Rp4.5 billion. The price of a Bentley car is equal to the cost of building 1,000 houses for low-income civil servants. By now dealers know very well the consumption patterns of local
buyers. For instance, housewives prefer to have small cars they can drive easily such as Suzuki Karimun, Hyundai AtoZ, Daewoo Matiz, Kia Visto, Daihatsu Ceria, Suzuki Aerio, Hyundai Getz, Chevrolet Aveo Honda Jazz, Kia Sorento, Suzuki Swift or Toyota Yaris. Those who seek to appear sporty usually buy Nissan Xtrail, Ford Escape or Toyota Land Cruiser. But big families usually buy Toyota Kijang, Toyota Innova, Mitsubishi Kuda, APV, Isuzu Panther and so forth. Toyota, Honda, Suzuki and Daihatsu cars dominate the domestic market as they are distributed by what is known as ATPM or agents with exclusive rights to sell certain brands. For instance, in order to tap the market of families ready to spend no more than Rp100 million to obtain a decent car, Daihatsu and Toyota Astra collaborate to produce Xenia and Avanza city cars. This success story motivated Suzuki Motor Company to do the same with Indomobil by producing APV (all-purpose vehicle) cars. Now they are preparing to intensify APV production for exports to Latin America, Africa and the Asia-Pacific region.
China’s Great Walls is a newcomer in Indonesia’s automobile market but it is moving on confidently. The same is true for India’s Tata Mahindra, Italy’s Fia and Malaysia’s Proton which has been picking up in recent years. Following are the types of cars the majority of Indonesian families prefer to buy, according to data from Gaikindo, the Association of Indonesian Automotive Industries. Type Sedan
MPV 4z2
SUV 4x4
Despite this encouraging picture of industry growth, one thing remains unsettled—where to drive comfortably. The growth in the number of cars has far exceeded provision of roads. As a result, traffic jam happens in every corner of big cities, preventing people from quickly reaching their destinations. So many sick people have died on the road because of heavy traffic while Jakarta is fast becoming an unpleasant place to live in simply because of
this situation. According to Sutiyoso, the former governor of Jakarta, the central government must help municipal authorities continue the development of monorail and subway projects that have were put on hold due to financial difficulties. When completed, these projects will help remove traffic jams from many parts of the city, Sutiyoso says. But before a solution is found, for the sake of boosting the man-
Specification
ufacturing industry which employs a lot of people and contributes a great deal to the state’s treasury, the automobile production show must go on in, yes, high gear! In fact, according to Gaikindo’s projections, car production in Indonesia will continue to soar through 2015 in tandem with a steadily rising demand and rapid expansion of the size of middle and upper class segments of our society.
Name of Cars
CC < 1.5 lt (G/D)
Suzuki Esteem, Daihatsu Serion, Hyundai Getz
1.5 lt < CC < 3.0 lt (G) /2.5 lt (D)
Honda Civic (1/8 AT, 1.8 MT or 2.0 AT) Honda City (i-DSI or VTEC: Facelift AT, Faclift MT) Honda Accord (VTO : AT, MT, or VTIL : AT, MT) Toyota Camry (2400 G AT, 2400 V AT) Mercedes-Benz (B 170, C 23-\0 Elegance, E200 Kompressor, E 280 Elegance)
CC >3.0 lt (G) / 2.5 (D)
Toyota Camry (3500 Q AT) Mercedez-Benz S 350L, E 340
CC < 1.5 lt (G/D)
Suzuki APV, Suzuki Carry, Daihatsu Xenia, Toyota Avanza
1.5 lt ≤ CC < 2.5 lt (G/D)
Toyota Alphard (AS 2.4, ASG 2.4), Toyota Kijang, Mitsubishi Kuda, Isuzu Panther, Honda Stream (1700cc AT, 1700cc MT, 2000cc)
2.5 lt < CC < 3.0 lt (G)
Toyota Wish, Honda Oddessey
CC > 3.0 lt (G) /2.5 (D)
Mercedes ML
CC < 1.5 lt
Daihatsu Taruna, Hyundai Atoz, Suzuki Karimun
1.5 lt < CC < 3.0 lt (G) /2.5 lt (D)
Toyota Fortuner, Honda CR-V (2.0 AT, 2.0 MT, 2.4 AT), Nissan X-Trail, Nissan Terrano, Ford Escape
CC > 3.0 lt (G) / 2.5 (D)
Toyota Land Cruiser VX, LandRover Prado, Mercedes Jeep, Ford Everest
Source: GAIKINDO
Honda, meanwhile, pursues a different approach. Instead of establishing its production base in Indonesia, it prefers to build component manufacturing centers wholly owned by Honda Motor Company. Ford, meanwhile, has taken a slightly different approach. In the past its sales were done by PT Inremco; it has now been returned to Ford under PT Ford Motor Indonesia. Nissan also follows Ford’s strategy; its PT Nissan Motor Indonesia is doing its best to get a bigger share of the local market by targeting well-todo families. Its cars are popularly known inside Indonesia as “Japanese limousines.”
EnvironmentalFriendly Tires A visitor inspects environmental-friendly tires produced by PT Gajah Tunggal in Jakarta. The GT Radial Champiro ECO-type tire was produced using Nanotech Silica Technology, which allows more efficient save fuel consumption, reduce CO2 emission and meet the European regulatory standards on noise level. Photo: The President Post/Nandi Nanti
The Art of Creation: the New BMW 5 Series The model won the Red Dot Award 2010 for best design quality, and was named the “Best Designed Car of the Year” in the 2010 Auto Bild Design Award. PT BMW Indonesia has introduced the sixth generation of the BMW 5 Series with the concept “The Art of Creation”. The sixth incarnation of this BMW 5 Series is released under three variants: BMW 535i, BMW 528i and BMW 523i Executive. Each is equipped with BMW Efficient Dynamics technologies, including Brake Energy Regeneration, electromechanical steering and low rollingresistance tires. “The new BMW 5 Series has been a
hit with customers since it was launched a few months ago in Europe and has won numerous accolades,” said Ramesh Divyanathan, President Director of BMW Indonesia. The model won the Red Dot Award 2010 for best design quality, and was named the “Best Designed Car of the Year” in the 2010 Auto Bild Design Award. It also received the maximum 5 stars from the stringent Euro-NCAP crash test, achieving more points than its competitors.
Ramesh added, “The traditional strength of the 5 Series in engine, transmission and chassis is now combined in the new 5 Series with increased comfort and space in the rear cabin to create an outstanding product.” The new BMW 535i is a pure sports executive sedan equipped with high quality HiFi system professional LOGIC7, featuring 16 loudspeakers and 600 W amplifier power, and Dolby Pro Logic. USB Audio interface and Bluetooth interface are also standard in this model. It is the first to combine a turbocharger and TwinPower technology with High Precision Direct Injection, outputting 306 hp with a torque of 400 Nm at just 1,200 rpm. The BMW 528i features a rear-seat entertainment system with two 8” high resolution monitors and DVD drive, hi-fi
loudspeaker system with 12 loudspeakers and 205 W digital amplifier, onboard monitor with TV function and 10.2” display, USB Audio interface and electric rear sub-blinds for the side and rear windows. Meanwhile, the BMW 523i is equipped with a hi-fi loudspeaker system with 12 loudspeakers and 205 W digital amplifier, high resolution 7” display monitor and USB Audio interface. All new BMW 5 Series models have a keyless start and electric glass roof as well as comfort features, cruise control with braking function, Bi Xenon headlight with LED light rings, Servotronic steering assist driven by refined in-line 6-cylinder engines mated to 8-speed automatic transmissions. Safety features which won the model its 5-star crash test rating are provided by front, side, head airbags, an array of advanced electronic stability systems
and Dynamic Brake Lights that flash in emergency hard breaking situations. The wheelbase of all new BMW 5 series is the longest in its class, at 2,968 mm, 58 mm longer than the outgoing model. The new BMW 5 Series is the first to feature an 8-speed automatic transmission and double-wishbone front suspension and aluminum integral rear-axle. With its long wheelbase and short overhangs, long bonnet, dynamic lines, athletic body and the coupe-like, sleek roofline, the new model is a distinctive BMW 5 Series – designed and built to ensure the sixth generation retains the legacy created by the first 5 Series. There are several color options of the exterior such as: Alpine White, Black Sapphire, Imperial Blue, Sophisto Grey, Space Grey, and Titanium Silver. While the interior available in Black, Cinnamon Brown, Beige, and Oyster. (JFS)
The President Post
C4 July 12, 2010
www.thepresidentpost.com
Automotive Gaikindo: Where Automobile Producers and Dealers Unite for a Noble Purpose By Diana Sasmita
This association was established in 1969 as a non-profit organization and now has 16 assembling companies, 21 distribution agents, seven spare parts suppliers and four companies supplying the industry’s primary components as its members.
I
ndonesia’s automakers and distributors are grouped under Gaikindo, an acronym that sounds a bit Japanese but is in fact acronym for “Gabungan Industri Kendaraan Bermotor Indonesia,” literally translated “the association of Indonesia’s motor vehicle industries.” This association was established in 1969 as a non-profit organization and now has 16 assembling companies, 21 distribution agents, seven spare parts suppliers and four companies supplying the industry’s primary components as its members. The purpose of this association is to advance the automotive industry and, in the process, improve the people’s welfare. In order to realize its vision and mission, Gaikindo has taken a few important steps as follows: • Broaden communication and disseminate information as well as views regarding development of the automotive industry, including introduction of new
technologies • Develop programs for trade to assist member companies • Export and import activities involving member companies’ products • Promotional activities to attract foreign capital • Provision of spare parts for member companies • Conduct social welfare activities within the industry • Establish coordination with government agencies, and • Improvement of customer satisfaction in order to extend the reach of after-sales services. Over the past couple of years, Gaikindo members have reportedly suffered a lot from the impact of the global financial crisis. However, in spite of the difficult situation domestic demand for their products has continued to rise. Appreciation of the US dollar and the Japanese yen against the national currency rupiah, for instance, brought an extra burden to component importers because imports are valued in those major foreign currencies. Sole agents f e lt
Photo: www.gustomobil.wordpress.com
optimistic about their business prospects. PT Ford Motor Indonesia (FMI), for instance, announced a bold plan to develop its after-sales services to customers. In January 2009 the company opened a new superstore dealer in Bekasi, the sixth in the area, confirming Fords’ grab of a sizeable portion of the domestic market. In total, Indonesia will see at least 5,400 luxury cars sold out before the end of 2010, he predicted after launching three
newest models, namely C300 Avantgarde, E300 Avantgrade, and E36 AMG. Of the 5,400 luxury cars, MBI expects to sell 3,700 units representing a 28.2% increase from last year’s performance with 2,884 cars delivered to customers. All through last year MBI controlled 69% of luxury cars’ market share in Indonesia. Between January and April 2010 MBI sold 1,170 units or 40% of last year’s performance.
GAIKINDO MEMBERS No.
COMPANY
BRAND
S
1
PT. ASTRA DAIHATSU MOTOR
DAIHATSU
x
D
M
2
PT. ASTRA INT’L Tbk - PEUGEOT SALES OPERATION
PEUGEOT
3
PT. ASTRA NISSAN DIESEL INDONESIA
NISSAN DIESEL
x
4
PT. AUTO EURO INDONESIA
RENAULT
x
5
PT. BMW INDONESIA
BMW
6
PT. CENTRAL SOLE AGENCY
VOLVO
x
7
PT. FORD MOTORS INDONESIA
FORD
x
8
PT. FOTON MOBILINDO
FOTON
x
9
PT. GARUDA MATARAM MOTOR
AUDI/VW
x
10
PT. GAYA MOTOR (ASSEMBLER)
DAIHATSU, PEUGEOT, BMW, ISUZU, NISSAN DIESEL, FOTON
11
PT. GM. AUTO WORLD INDONE
CHEVROLET
x
12
PT. GRANDAUTO DINAMIKA
JAGUAR
x
13
PT. HINO MOTORS MANUFACTURING INDONESIA
HINO
14
PT. HINO MOTORS SALES INDONESIA
HINO
15
PT. HONDA PROSPECT MOTOR
HONDA
x
x
16
PT. HYUNDAI INDONESIA MOTOR
HYUNDAI
x
x
17
PT. ISUZU ASTRA MOTOR INDONESIA
ISUZU
x
x
18
PT. JAVA MOTORS
LAND ROVER
x
19
PT. KIA MOBIL INDONESIA
KIA
x
20
PT. KRAMA YUDHA RATU MOTORS
MITSUBISHI
21
PT. KRAMA YUDHA TIGA BERLIAN MOTORS
MITSUBISHI
x
22
PT. MAZDA MOTOR INDONESIA
MAZDA
x
23
PT. MERCEDES-BENZ DISTRIBUTION INDONESIA
MERCEDES-BENZ
24
PT. MERCEDES-BENZ INDONESIA
MERCEDES-BENZ
x
25
PT. MESIN ISUZU INDONESIA
ISUZU
x
26
PT. MITSUBISHI KRAMA YUDHA MOTOR & MANUFACTURING
MITSUBISHI
27
PT. NISSAN MOTOR DISTRIBUTOR INDONESIA
NISSAN
28
PT. NISSAN MOTOR INDONESIA
NISSAN
29
PT. PROTON EDAR INDONESIA
PROTON
x
30
PT. SUZUKI INDOMOBIL MOTOR
SUZUKI
x
31
PT. TC. SUBARU
SUBARU
x
32
PT. TJAHJA SAKTI MOTOR
BMW
x
33
PT. TOYOTA ASTRA MOTOR
TOYOTA
x
34
PT. TOYOTA MOTOR MANUFACTURING INDONESIA
TOYOTA
x
35
PT. TRIJAYA UNION
MITSUBISHI
36
PT. UNICOR PRIMA MOTOR
CHERY
x
S
x x x
x
x
x
x x
x x x
x
x x x
x
x x x
Note : (S) Sole Agent, (D) Distributor, (M) Manufacturer
NON-GAIKINDO MEMBERS No.
COMPANY
BRAND
D
M
1
PT. KORINDO MOTORS
HYUNDAI (TRUCK & BUS)
2
PT. KORINDO HEAVY INDUSTRY
HYUDAI TRUCK (TRUCK & BUS)
x
3
PT. NATIONAL ASSEMBLER
SUZUKI PICK UP, KIA, CHERY
x
x
Note : (S) Sole Agent, (D) Distributor, (M) Manufacturer
Photo: www.km77.com
Sales of Luxury Cars Up, Dealers Optimistic about RI’s Purchasing Ability By Alci Tamesa
Automakers and dealers are confident about their future business prospects given the fact that Indonesia has over the past couple of years registered the highest economic growth rate in ASEAN region.
I
f you wish to measure the purchasing ability of Indonesians, ask PT Mercedes-Benz Indonesia (MBI). In less than a month after its launch in June, at least 20 of its Rp4.7 billion Mercedes-Benz SLS AMG series sedans have been sold. In fact, by the end of June, barely two weeks after the new entries came into the local market, 19 of them were already booked. This explains why Deputy Marketing Director of MBI, Yuniadi H Hartono, says that Indonesians’ purchasing power actually far exceeds their projected quota. And there is more to it: if you wish to get it next year, you need to place an order today, he says while extolling the virtues of the sporty two-seater sedans with Gullwing doors. In a related development, president Director of MBI, Rudi Borgeinheimer, says that buyers of SLS AMG cars are from the upper class segments of society who
won’t mind waiting for months before getting their dream cars. And you want to know why they do so? It is because to this segment of society, luxury cars are not just a symbol of their status; they also comprise part of their luxury and antiques collections. These people believe that investing today in such luxury cars is worthwhile because in the future the prices of such cars will soar as it becomes categorized as antiques. Overall, Mercedes-Benz is optimistic about being able to reach its sales target of 3,500 units per annum. Even during the first quarter of this year, a total of 997 “Mercy” cars were bought by Indonesians who intended to display the luxury side of their lifestyle. It is this particular development that motivated MBI to upgrade its sales target, as the Indonesian economy has over the past couple of years performed quite well. During the first quarter of
2009 alone there was a 55.2% increase in the sales of exclusively luxurious cars which translates into 642 units. Compare this to 997 units sold out during the same period this year. This was apparently the reason MBI released the E-Class Cabriolet series. Optimistic about this first quarter’s development, the company announced in May this year that it was going to launch 11 new luxury series. According to Roland Staehler, the Marketing Director of MBI, in total they will launch 21 types of cars but that 11 to be launched first were SLS AMG, M-Class Grand Edition, SLK Grand Edition, E-Class Cabriolet, two V-Class types, RClass facelift, S-Class Coupe, GL with new diesel engines, G-Class and Smart Fortwo. SLS and V-Class series will be introduced to the general public during the Indonesia International Motor Show (IIMS) this
Photo: www.ausmotive.com
month whereas the Smart series will hit the streets in November this year. News reports say that BMI is also aiming to offer its articulated buses to rejuvenate Transjakarta (busway) which will use gas (CNG) instead of petrol. It also plans to offer busses for suspension Sprinter Midbus dan 20-seat Sprinter Minibus for transport to the Jakarta international airport. Automakers and dealers are confident about their future business prospects given the fact that Indonesia has over the past couple of years registered the highest economic growth rate in ASEAN region. Staehler says that if political stability remains well guaranteed as it is today and economic development continues uninterrupted, the automotive industry will grow even faster than predict-
ed because Indonesia is a huge market where the size of the upper class segment of society is expanding rapidly. It is interesting to note that while the sales of Japanese brands are decreasing in Indonesia as of January this year, German-made cars are fast becoming a source of preference to Indonesia’s well-todo families. Other Brands If we include all the other brands, the situation is a bit different. For instance, during 2009, the total number of cars sold in Indonesia reached 488,912 units. In 2008 a total of 596,166 units were sold. So in 2009 there was a decline of 17.9%. President Director of Toyota Astra Motor (TAM) Johnny Darmawan says that in 2010 there will be a 20% increase in sales to 550,000 units and that
Toyota cars are expected to dominate the market. He predicts that there will be more people buying cars on the retail level than on the wholesale level (from sole agents to dealers). In 2009 Toyota enjoyed 38.9% of the market share though it suffered a 8.9% decline in total sales target, transacting only 190,471 units compared to the previous year’s transaction figure of 209,130 units. Yet this is still much better than the performance of other sole agents, according to Kompas newspaper. Daihatsu was ranked second last year after having edged Mitsubishi out. Daihatsu sold 75,169 units in 2009, down by 2.9% of its performance in 2008. Mitsubushi came third with 64,334 units sold or a 23.8% decline from its performance in 2008.
Pretty much like Toyota, Honda is also making huge fortunes as its market grip strengthened thanks to increased demand. Honda has seen a 37% increase in sales or 5,965 cars during the first five months of this year, and as of June the sales made by PT Honda Prospect Motor reached 28,842 units. The types of Honda cars that sold well included Honda Jazz, CR-V, Accord, Civic, and Honda City. The strangest thing with Indonesia’s automotive market is that while these types of cars suffer a decline in sales, Indonesians are buying luxury cars in big numbers. German-made cars are enjoying a good ride in the local market here, thanks to a surge in public demand for luxury cars. This is why BMW and Mercedes-Benz have been harvesting a great deal of fortune in Indonesia these days.
The President Post
www.thepresidentpost.com
July 12, 2010 C5
Travel Quite, Peaceful
Amed Text and photos by Taufik Darusman
Few places in Bali allow you to enjoy a simple coconut oil massage while lying on a bamboo bed in the shade of a fishermen’s hut as Amed.
T
he Bali that was, longtime Bali-based expat residents insist, can still be found lying a twohour leisurely drive from Kuta. A calm and peaceful place, Amed has in recent times rose to discrete prominence, a much-deserved status arrested in the past by bad roads and lack of power and communications, which actually complements its irresistible quietness. Every bay, some sandy, others rocky, appears to be lined with double-outrigger traditional fishing boats (jukung). The horizon almost invariably is rife with literally hundreds of the boats’ colorful triangular sails heading off to the fishing grounds morning and afternoon. Amed is a near-perfect destination for the more mature (read: above 50 years of age) travelers
though younger people like it too as it offers them a daily fix of peace and tranquility. The locals lead a quite lifestyle, making Amed an ideal place for you to spend time either writing your bio, taking stock of your life or doing just nothing and relax. This relatively undeveloped north-eastern coastal strip in the Karangasem Regency of East Bali, where Amed is located, features some of the island’s best snorkeling amidst spectacular sunrises over the neighboring island of Lombok. On any given time you are apt to come across tourists strolling slowly along the road or the beach. Or elderly couples walking holding hands, rekindling their love for each other in their own special way, Amed-style. And almost everywhere there you can hop on a traditional fishing boat for a sunset tour, again to reignite the proverbial fire that
simmers inside you. Amed is actually not just one village but a string of smaller villages, starting with the village Amed in the north followed by Congkang, Jemeluk, Bunutan, Lipah, Selang, Banyuning and ending with Aas. At present Amed is mostly a quiet place with stunning ocean vistas as well as one of the best places in Bali for scuba diving. The landscape comprises a series of headlands overlooking bays, lined with fishing boats. From the top of the hill, one cannot but marvel at the serene scenery and feel grateful that the long tracts of land have no given way to tacky opulence in the way of star-rated hotels. Located on the dry side of the mountains Agung and Saraya, Amed is short in rain throughout the year. The landscape is very arid and the slopes of the moun-
tain look bare. The sleepy village still remains untouched by the effects of tourism, but as developments, albeit at a snail’s pace, take place along this strip, Amed is likely to become one of the island’s major tourist areas, a gain for local people in search of a decent livelihood but a pain to advocates of the environment. In the meantime, many locals subsist by producing salt thanks
to their proximity to the sea. To reach Amed is an exhausting trip but is an experience in itself: it is rich in curves and very steep ups-and-downs. From Amed the road south via Jemeluk, Lipah, Bunutan and Selang is narrow but moderately paved, offering stunning views of mountains on one side and the Lombok Strait on the other. “Jemuluk, which is a protected bay, is an ideal place to begin snorkeling. Four kilometres
further south along the coast is Banyuning, where there’s a small Japanese wreck and beautiful coral gardens,” said the driver. “The corals are alive and beautiful, but you have to travel a couple of meters to find the most vivid colors.” Diving schools are available in the area, and readily point you out the best dive spots. Snorkeling and diving off the black-sand beaches here is exceptional for the variety and numbers of fish. But just to be anywhere along the coast or sit in one of the seaside restaurants and observe dolphins playing in the waves is just as enthralling.
To fly from Jakarta to Bali in a 90-minute journey only to settle down in undeveloped Amed might be an uncool thing to do— it is even more uncool if you’re there and cannot manage to visit the site even for a few hours. To get to Amed from Kuta, head for the Bypass towards Sanur and exit to take the road on your right that leads into the coastal highway heading east. The coastal road was completed a couple of years ago; it now allows you to drive all the way from Tirtagangga in a clockwise manner. Reprinted by permission from Garuda Inflight magazine
The President Post
C6 July 12, 2010
www.thepresidentpost.com
Living Is Your Marriage Making You Sick?
“
By Elizabeth Cohen
You eat right. You exercise. You get an annual physical. You probably think you’re doing everything you can to stay healthy. But here’s one more thing you need to do: Learn how to argue well with your spouse.
A
new study from Ohio State University shows just how physically harmful it can be to argue the wrong way. In the study, 37 married couples were brought into a hospital research lab, and a tiny vacuum device gave them eight 8-mm blisters on their forearms. Each couple was then videotaped while having conversations, and researchers graded them on their communication skills, noting who had distressing or hostile styles of communicating. After 12 days, the researchers noticed that the blisters healed faster on the couples who had more positive communication styles, and the blisters healed the slowest on the couples with more negative styles. Why would physical wounds heal more quickly among the better communicators? The researchers at Ohio State who did the study think it might have something to do with oxytocin. “Oxytocin is a protective hor-
mone,” says Janice Kiecolt-Glaser, the lead author of the study, who noted that the better communicators in her study -- the ones whose wounds healed the fastest -- had the highest levels of oxytocin in their blood. There are certainly many examples of high-profile troubled marriages. For example, actor Charlie Sheen was arrested in connection with an argument he had with his wife last Christmas Day; a court hearing on the case was delayed Monday. But husbands and wives don’t always make the connection that stressful marriages can actually harm your physical health. “People get very surprised when they hear that marital stress is actually worse for your health than workplace stress,” says Tara Parker-Pope, author of “For Better: The Science of a Good Marriage.” Overall, couples with more marital stress have worse immune function and higher blood pressure and heart rates, accord-
ing to Debra Umberson, a professor of sociology at the University of Texas, who studies couples and stress. “Marital stress is so pernicious because it’s chronic, long-term, and you can’t get away from it,” she says “You’re having these problems day in and day out year after year, decade after decade.” While both sexes suffer, some, but not all, studies show women suffer more physical effects from a bad marriage than men, Umberson adds. Of course, having a happy marriage or relationship is easier said than done. Here are some tips for limiting marital stress to make you happier and physically healthier. Argue well “We tend to focus on how often we fight -- as in, ‘we’ve been fighting a lot lately’ or ‘we’ve haven’t fought much lately,’” Parker-Pope says. “But that’s actually pretty meaningless. What really matters is the quality of your arguments.” Let’s say, for example, your house is messy. You have a choice: you could say something like “This house such a mess, and you never help me clean it up” or you could say “I want us to learn how to be neater.” The latter, marriage experts say, is better not just for your marriage but for your and your
Overall, couples with more marital stress have worse immune function and higher blood pressure and heart rates. solution to your problems, which might include identifying the role you’ve played in your marital difficulties. The website for the American Association of Marriage and Family Therapy can help you find a therapist near you.
Photo: www.weddingcaketoppers.blogspot.com
partner’s physical health. “Any elements of criticism or demand make your words stressful,” Umberson says. Here’s another example. Let’s say your partner has just baked cookies and the kitchen looks like a hurricane hit it. “You could walk into the kitchen and notice the mess but not the cookies,” she says. “Or you could say, ‘It smells great in here, and I can’t wait to have one of those cookies, but wow, it’s messy in here.” If you think style doesn’t matter, think back to that Ohio State study, Parker-Pope adds. “Think about those blisters, and how slow they were to heal after a nasty comment,” she says. “This should make everyone stop and realize, ‘I need to think about what I’m doing to my health and my partner’s health and make sure I’m fighting well to stay well.’”
Your spouse is annoying -- accept it! Umberson noticed something interesting in her studies of happy couples. “It’s always been striking to me that when people get along, they just accept something annoying about their partner. They don’t try to alter it,” she says. Case in point: The wife in one of her happy couples had the habit of stacking up books in various places around the house, including doorways. Her husband wasn’t thrilled with it, but he learned to live with it -- and more. “He saw her as a creative, interesting, quirky person,” she says. “He just saw it as a reflection of why he’d fallen in love with her in the first place.” Here are more tips on how to have a happy marriage from the National Healthy Marriage Resource Center.
Don’t yell at a yeller If you’re married to a yeller, don’t yell right back, advises William Doherty, a marriage and family therapist and professor in the Family Social Science Department at the University of Minnesota. “Be strong without shouting,” he says. For example, if you’re dealing with a chronic yeller, you could respond by saying in a calm voice: “This behavior that you’re doing now I will not accept in this relationship, and if you continue it, I’m leaving.” Limit the Greek chorus Doherty says he’s noticed that women who are unhappy in their marriages will often confide in their girlfriends, and the typical response tends to be, “What a jerk!” While it’s fine to seek support from your social circle, it’s also important to go to a counselor, who will do more than commiserate, and actually help you find a
Recall the happy times Even in stressed-out marriage, there are often moments of happiness. Tracy Todd, a licensed marriage and family therapist in Virginia, and spokesperson for the American Association for Marriage and Family Therapy, recommends analyzing them. “Think of some recent times that were OK to positive. How did they occur? What did you do to help create the situation? What can you do to recreate a more positive environment?” he says. “Recall exceptions to the bitterness.” Assess your sex drive If you’re not interested in sex— but you would like to be —there might be a medical explanation. Reduced blood flow: Diabetes and high blood pressure are among the health problems that can restrict genital blood flow. Hormonal issues: Menopause, breast-feeding, birth control pills, and thyroid problems can dampen sexual desire. Medication side effects: Antidepressants and chemotherapy agents such as tamoxifen are frequently to blame.
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The President Post
www.thepresidentpost.com
July 12, 2010 C7
Living
5
Things Happy People Do By Gabrielle LeBlanc (O—The Oprah Magazine)
Sages going back to Socrates have offered advice on how to be happy, but only now are scientists beginning to address this question with systematic, controlled research. Although many of the new studies reaffirm timehonored wisdom (“Do what you love,” “To thine own self be true”), they also add a number of fresh twists and insights. We canvassed the leading experts on what happy people have in common—and why it’s worth trying to become one of them.
1
They find their most golden self
Picture happiness. What do you see? A peaceful soul sitting in a field of daisies appreciating the moment? That kind of passive, pleasure-oriented—hedonic—contentment is definitely a component of overall happiness. But researchers now believe that eudaimonic well-being may be more important. Cobbled from the Greek eu (“good”) and daimon (“spirit” or “deity”), eudaimonia means striving toward excellence based on one’s unique talents and potential—Aristotle considered it to be the noblest goal in life. In his time, the Greeks believed that each child was blessed at birth with a personal daimon embodying the highest possible expression of his or her nature. One way they envisioned the daimon was as a golden figurine that would be revealed by cracking away an outer layer of cheap pottery (the person’s baser exterior). The effort to
know and realize one’s most golden self—”personal growth,” in today’s lingo—is now the central concept of eudaimonia, which has also come to include continually taking on new challenges and fulfilling one’s sense of purpose in life. “Eudaimonic well-being is much more robust and satisfying than hedonic happiness, and it engages different parts of the brain,” says Richard J. Davidson, PhD, of the University of Wisconsin-Madison. “The positive emotion accompanying thoughts that are directed toward meaningful goals is one of the most enduring components of well-being.” Eudaimonia is also good for the body. Women who scored high on psychological tests for it (they were purposefully engaged in life, pursued self-development) weighed less, slept better, and had fewer stress hormones and markers for heart disease than others—including those reporting hedonic happiness—according to a study led by Carol Ryff, PhD, a professor of psychology at the University of Wisconsin-Madison.
2
They design their lives to bring in joy
It may seem obvious, but “people don’t devote enough time to thinking seriously about how they spend their life and how much of it they actually enjoy,” says David Schkade, PhD, a psychologist and professor of management at the University of California San
Diego. In a recent study, Schkade and colleagues asked more than 900 working women to write down everything they’d done the day before. Afterward, they reviewed their diaries and evaluated how they felt at each point. When the women saw how much time they spent on activities they didn’t like, “some people had tears in their eyes,” Schkade says. “They didn’t realize their happiness was something they could design and have control over.” Analyzing one’s life isn’t necessarily easy and may require questioning long-held assumptions. A high-powered career might, in fact, turn out to be unfulfilling; a committed relationship once longed for could end up being irritating with all the compromising that comes with having a partner. Dreams can be hard to abandon, even when they’ve turned sour.
3
They allow themselves to be happy
As much as we all think we want it, many of us are convinced, deep down, that it’s wrong to be happy (or too happy). Whether the belief comes from religion, culture, or the family you were raised in, it usually leaves you feeling guilty if you’re having fun. “Some people would say you shouldn’t strive for personal happiness until you’ve taken care of everyone in the world who is starving or doesn’t have adequate medical care,” says Howard Cutler, MD, coauthor with the Dalai
Why You’ll Never Have to Pay for Facebook By Nicholas Carlson Photo: www.toploadboards.com
Millions of Facebook addicts worldwide worry that someday soon they’ll have to pay to use the site. The fact that you keep coming back to Facebook makes it easier for Facebook to sell more ads -and make more money. Millions of Facebook addicts worldwide worry that someday soon they’ll have to pay to use the site. If you go to Facebook.com and search for the terms “Facebook free” or “Facebook charge,” you’ll find hundreds of groups with names like, “If 1 Million People Join Before 9th July 2010 Facebook Will Stay Free!” or “If Facebook Charges A Fee We Will Discontinue Using It.” Some of these groups have dozens of users, others have thousands. During a recent press conference, Facebook CEO Mark Zuckerberg said while Facebook users do care about privacy, the question of whether or not Facebook will eventually charge for its service is actually a much bigger concern among the site’s 500 million users. But are these fears justified? No! Facebook will never charge you to be a member and use the site. Don’t take it from me. Here’s Facebook spokesman Larry Yu on the issue: “We have absolutely no plans to charge for the basic service of using Facebook.” He continues: “Last year we saw a similar rumor circulating that Facebook was going to begin charging $1.99 to use the site, but this year we’re hearing that fee increased to $14.99 with the spread of this rumor. We look forward to hearing what Facebook might be rumored to cost for use next
Facebook CEO Mark Zuckerberg
year.” If you press Facebook employees on this, they will tell you the reason they will never charge for access is that putting up a paywall runs counter to the company’s mission to make the world more open and connected. But even if you don’t buy that idealistic hoopla, you should understand Facebook has a deep profit motive to never charge you for access. Why? Because Facebook makes its money bringing together as big of an audience as possible and then selling that audience’s attention to advertisers. It’s a business that works. Facebook should bring in as much as $2 billion in revenue this year. That’s more than twice as much as Facebook brought in last year. If Facebook started charging users, its membership would start shrinking fast -- and so would its revenues. So while Facebook may charge you for certain bonus features, such as gifts for your friends, or credits to play games like Farmville, it will never charge for basic access to the site. Why then do people worry Facebook might start charging
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During a recent press conference, Facebook CEO Mark Zuckerberg said while Facebook users do care about privacy, the question of whether or not Facebook will eventually charge for its service is actually a much bigger concern among the site’s 500 million users. soon? Probably because Facebook users feel like they’re getting something valuable for free, and everybody knows there’s no such thing as a free lunch. Just remember: The fact that you keep coming back to Facebook makes it easier for Facebook to sell more ads -and make more money. Your lunch isn’t free, it’s sponsored.
Photo: www.canhcung.com
Lama of The Art of Happiness in a Troubled World. “The Dalai Lama believes you should pursue both simultaneously. For one thing, there is clear research showing that happy people tend to be more open to helping others. They also make better spouses and parents.” And in one famous study, nuns whose autobiographies expressed positive emotions (such as gratitude and optimism) lived seven to 10-anda-half years longer than other nuns. So, for any die-hard pessimist who still needs persuading, just think of how much more you can help the world if you allow a little happiness into your life.
you should see a significant improvement in your overall happiness. Taking action is key. Another recent study, at the University of Missouri, compared college students who made intentional changes (joining a club, upgrading their study habits) with others who passively experienced positive turns in their circumstances (receiving a scholarship, being relieved of a bad roommate). All the students were happier in the short term, but only the group who made deliberate changes stayed that way.
Fortunately, changes don’t have to be big ones to tip the joy in your favor. Schkade says that if you transfer even an hour of your day from an activity you hate (commuting, scrubbing the bathroom) to one you like (reading, spending time with friends),
If only I get a better job...find a man...lose the weight...life will be perfect. Happy people don’t buy into this kind of thinking. The latest research shows that we’re surprisingly bad at predicting what will make us happy. People also tend to misjudge
4
They avoid “if only” fantasies
their contentment when zeroing in on a single aspect of their life—it’s called the focusing illusion. In one study, single subjects were asked, “How happy are you with your life in general?” and “How many dates did you have last month?” When the dating question was asked first, their romantic life weighed more heavily into how they rated their overall happiness than when the questions were reversed. The other argument against “if only” fantasies has to do with “hedonic adaptation”—the brain’s natural dimming effect, which guarantees that a new house won’t generate the same pleasure a year after its purchase and the thrill of having a boyfriend will ebb as you get used to being part of a couple. Happy people are wise to this, which is why they keep their lives full of novelty, even if it’s just trying a new activity (diving, yoga) or putting a new spin on an old favorite (kun-
dalini instead of vinyasa).
5
They put best friends first
It’s no surprise that social engagement is one of the most important contributors to happiness. What’s news is that the nature of the relationship counts. Compared with dashing around chatting with acquaintances, you get more joy from spending longer periods of time with a close friend, according to research by Meliksah Demir, PhD, assistant professor of psychology at Northern Arizona University. And the best-friend benefit doesn’t necessarily come from delving into heavy discussions. One of the most essential pleasures of close friendship, Demir found, is simple companionship, “just hanging out,” as he says, hitting the mall or going to the movies together and eating popcorn in the dark.
The President Post
C8 July 12, 2010
www.thepresidentpost.com
Health Study: Anxiety in Youth Linked to Heart Attacks Later on As many as 28 percent of people are diagnosed with anxiety at some point in their lives By Amanda Gardner
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en diagnosed with anxiety in their late teens or early 20s are more than twice as likely to have heart disease or a heart attack later in life than their more laid-back peers, according to a new Swedish study. As many as 28 percent of people are diagnosed with anxiety at some point in their lives, according to an editorial accompanying the study in the Journal of the American College of Cardiology.
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Anxiety is more than feeling stressed out. People with anxiety disorders feel excessive or irrational worry and can have anxietyrelated physical symptoms, such as fatigue, headaches, trembling, sweating, panic, and nausea. Experts have a number of hypotheses as to why anxiety and heart disease may be linked, though the new research can’t confirm that anxiety -- not some other factor -- is the cause of heart disease and heart attacks in the study. “Anxiety increases adrenaline; stress and anxiety trigger an adverse response,” says Dr. Tracy Stevens, M.D., a spokesperson for the American Heart Association and a cardiologist with Saint
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“Anxiety increases adrenaline; stress and anxiety trigger an adverse response,” says Dr. Tracy Stevens, M.D., a spokesperson for the American Heart Association. This stress could affect the fatty plaque lining coronary arteries; if the plaque ruptures, it can lead to clots and heart attacks.
Low “Good” Cholesterol Linked to Cancer Risk Photo: www.awakeningcharlotte.com
By Amanda Gardner
P
eople who have low levels of the so-called good cholesterol have long been known to be at higher risk of heart attacks and heart disease. Now, a new study suggests they may have a higher risk of cancer, too. Each 10-point increase in good cholesterol—known as highdensity lipoprotein (HDL)—corresponds to a 36% decrease in a person’s risk of developing cancer, the study found. Guidelines say that men and women should keep their HDL over 40 and 50 mg/dL, respectively, though everyone should shoot to maintain levels above 60 mg/dL. The study doesn’t prove that low HDL actually causes cancer. Nor does it prove that boosting your HDL — exercise and healthy eating are two ways to do it — will reduce the risk of cancer, as it has been shown to do with heart disease. Cholesterol levels — both good and bad — tend to plummet in people with cancer, so low HDL “might just be a marker of people who are about to die from cancer” rather than a contributing factor, says the lead author of the study, Richard Karas, MD, executive director of the Molecular Cardiology Research Institute at Tufts Medical Center, in Boston. Low HDL might also simply be a sign of an unhealthy lifestyle that may itself up cancer risk, since people who exercise regularly, have a healthy diet, and don’t smoke tend to have higher levels of HDL. Although the researchers controlled for health factors such as age, body mass index, and smoking in order to zero in on the effect of cholesterol, other unidentified lifestyle factors may have shaped the results. In the study, which appears in the June 22 issue of the Journal of the American College of Cardiology, Dr. Karas and his col-
For now, the best prescription for raising HDL is an old-fashioned one: Eat right, stay fit, and quit smoking. leagues re-analyzed data from 24 clinical trials that included nearly 150,000 generally healthy people. The trials were originally designed to test the effectiveness of statin medications, which lower bad cholesterol (known as LDL). How HDL may affect cancer risk is still a mystery. HDL may boost the immune system’s ability to fight precancerous lesions and cancerous tumors lurking in the body, Dr. Karas says. Another possibility is that HDL has antioxidant properties that neutralize chemical compounds in the body that contribute to cancer by damaging cells. A third explanation is that HDL may reduce inflammation, which is associated with both heart disease and cancer. The study should bring some long overdue attention to HDL, which has been unjustly overshadowed by its evil twin, LDL, says Peter Alagona Jr., MD, the director of general cardiology at the Penn State Heart and Vascular Institute, in Hershey. Part of the reason is that blockbuster statin medications can
lower bad cholesterol, but can’t do much to raise HDL, says Dr. Alagona, who was not involved in the new research. Raising HDL with medication is indeed trickier, says Jennifer Robinson, MD, program director of the Lipid Research Clinic at the University of Iowa, in Iowa City. Prescription niacin pills can help raise HDL slightly, she says, but there are few effective prescription drugs available. “We don’t know that giving someone a drug to raise HDL will prevent cancer, or even heart disease,” says Dr. Robinson, who wrote an editorial accompanying Dr. Karas’s study. For now, the best prescription for raising HDL is an old-fashioned one: Eat right, stay fit, and quit smoking. “Do everything you can in terms of weight control [and] quitting smoking,” says Jay Brooks, MD, chairman of the hematology and oncology department at the Ochsner Clinic Foundation in Baton Rouge, La. “We don’t have any good pharmacologic means of raising HDL really well at this point, so concentrate on the things you can do the best.”
Luke’s Mid America Heart Institute, in Kansas City, Missouri. This stress could affect the fatty plaque lining coronary arteries; if the plaque ruptures, it can lead to clots and heart attacks. However, that’s just a theory at the moment, says Stevens, who was not involved in the research. Although it’s known that anxiety can affect blood pressure and heart disease-related chest pain in the short term, the long-term effects are unknown. “It’s a very provocative observation to say that one’s state of anxiety at a fixed point in time can in some way foretell an increased risk of cardiovascular disease 20 years down the road,” says Dr. Gregory Dehmer, M.D., professor of internal medicine at Texas A&M Health Science Center College of Medicine and director of the cardiology division at Scott & White, in Temple. “It would be terribly premature to base any kind of therapeutic decision on this,” he says. “If a patient says they’re anxious and the doctor puts them on an anti-anxiety drug for 25 years to prevent a heart attack, that’s a huge leap of faith.” There is, however, already a fairly well-established link be-
tween depression and a heightened risk for heart disease. The new study involved almost 50,000 Swedish men born between 1949 and 1951 who were undergoing medical examinations for military service. A research team, led by Dr.Imre Janszky, M.D., Ph.D., of the Karolinska Institute, in Stockholm, looked at the men for the next 37 years, a feat made possible by the fact that Sweden has universal health coverage and maintains detailed records on patients. Unlike previous researchers, these authors found no link between depression and heart disease or heart attack. But they did find that people with anxiety had more than double the risk of heart disease and two-and-a-half times the risk of suffering a heart attack. All the men classified as having anxiety or depression had been diagnosed by a psychiatrist, a big plus for the study. However, the authors admit, certain risk factors for heart disease, such as cholesterol, were not fully taken into account. In a second report in the same issue of the journal, researchers
combined data from 20 studies, including a total of almost 250,000 healthy people from Norway, the Netherlands, Russia, Sweden, Japan, and Britain. The participants were followed for an average of about 11 years by a team led by Annelieke Roest of Tilburg University, in the Netherlands. In this study, people with anxiety had a 26 percent increase in the risk of heart disease and a 48 percent increase in the risk of dying of heart-related causes. There was also a hint of an association between anxiety and nonfatal heart attacks, but this information was based only on five studies and was not statistically significant. Still, there may be something physicians and their patients can do, which they probably should be doing anyway. “If a person has a diagnosis of an anxiety disorder, such as panic disorder or phobia -- not if they’re just nervous or tense -- I would be more likely to tighten up on lipid levels and blood pressure,” says Lawrence Hergot, M.D., professor of medicine and director of general cardiology, University of Colorado Health Sciences Center, in Denver.