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VP Boediono : In Indonesia, Science Will Prevail

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VP Boediono: Aceh’s rich natural resources, better infrastructure will help the region regain its past achievements. JAKARTA (PP) – Vice President Boediono said that “History has proven that it is rare for a nation to be able to develop by relying only on natural resources, but with science we will prevail.” he said. “I wish to make Aceh a center of excellence,” he added. The VP made the statement at the commemoration of the 5th anniversary of the tsunami disaster in Banda Aceh on Saturday. He said the region once held the status of being a center of excellence long before the conflict and tsunami disaster, news media reported. Boediono said he was sure that “the right spirit and determination and strong commitment” will allow the plan to be realized. In comments to Boediono’s reference to science as a driving force behind a nation’s development, S.D. Darmono, the founder and CEO of PT Jababeka Tbk, a prime industrial estate (the largest in Southeast Asia) in Cikarang, West Java, said: “If we can blend well our rich natural resources with science and technology, Indonesia would be in a much better position today in terms of economic and human resources development.” Darmono, who is also the cofounder of President University, added: “I hope Pak Boediono’s message is also heard by other regions and applied throughout the nation.” VIEWPOINT

RI and the ASEAN-China FTA

The fate of the ASEAN-China FTA, as part of the new cabinet’s first 100 days program, has been sidelined by many controversial domestic political issues that need to be resolved comprehensively and in an integrated manner. PAGE 2

Boediono, an Australian-trained economist, noted that before the conflict broke out, Aceh`s economy grew above average while its poverty rate was far below average, both compared to other provinces. He said Aceh`s rich natural resources and better infrastructure after the tsunami disaster provided an opportunity for the region to regain its past achievements. “We must safeguard the development projects in Aceh so that the people in Aceh will be more prosperous and welfare,” he said. Boediono visited Banda Aceh to preside over an official ceremony to mark the deadly tsunami which devastated Aceh and Nias Island (North Sumatra) on December 26, 2009, killing around 200,000 people on December 26, 2004. The gigantic tsunami, which washed away entire communities, caused nearly $10 billion in damage and more casualties than any other tsunami in history, according to the United Nations. The tsunami, which was triggered by a 8.9 Richter scale earthquake, left at least one million people homeless. President Susilo Bambang Yudhoyono declared the

tsunami a national disaster. A number of countries and international organizations have helped Indonesia reconstruct Aceh and Nias. Massive reconstruction has helped Aceh bounce back and wipe away some reminders of the tragedy. Residents held religious gatherings and a moment of silence to pay tribute to the victims. Many left flowers at the site and read prayers from small books. A few wept as they sat in the shade to escape the heat. A memorial event at a local tsunami museum featured dozens of schoolchildren clutching umbrellas with portraits of smiling children on them. Local conservationist Mike Griffiths told CNN that much of Banda Aceh was reduced to a “level plane of shards.” He compared the tsunami aftermath to that of the atomic bombing of Nagasaki in World War II. “It (Banda Aceh) is so built up now,” Griffiths said. “Now, we can barely see 100 meters because there’s been so much reconstruction. Everything’s been built up on both sides of the road.” On the same day Boediono

paid homage to tens of thousands who lost their lives and were buried in the Siron Lambaro mass grave. After visiting the mass grave, the vice president and his entourage proceeded to visit the Ulee Lheue harbor complex. Upon his arrival Boediono was met at the airport by Aceh Governor Irwandi Yusuf and former chief of the Aceh-Nias Rehabilitation and Reconstruction Agency (BRR) Kuntoro Mangunsubroto, who is currently head of the presidential working unit in charge of development supervision and control(UKP4). Also present on the occasion were State Enterprises Minister Mustafa Abubakar, Vice Chairman of MPR (People`s Consultative Assembly) Farhan Hamid and legislator Sayed Fuad Zakaria, Antara reported.

THE REGION

BUSINESS

TOURISM

Only 15% of national, regional budgets for investment In Banda Aceh Boediono also met with Aceh regional government officials during which he stated that “While we need 7% growth a year, the government could maximally provide 15 to 18% of regional and national budgets for investment.”

The Economic Integration of ASEAN

Sri Mulyani: Banks Key to Faster Pace in RI Economy

“Live the Deal” Set to Respond to Climate Change

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The ASEAN Economic Community was formed as one of the three pillars of ASEAN Community, the other two being ASEAN Security Community and ASEAN Socio-Cultural Community.

If banks manage to maintain their soundness and channel credits up to more than 15 percent of the target for 2010, the economy would perform better next year.

“Live the Deal” campaign was launched early this month during the Copenhagen Climate Summit.

He said around Rp2,000 trillion of investment was needed between 2009 and 2014. “As the government is only able to provide a small part of it, the rest should be acquired from outside the regional and national budgets from home and abroad,” he said. He pointed out that to achieve high growth and investment local and central governments must keep improving technical and non-technical infrastructure.

Aceh Governor Irwandi Yusuf meanwhile said the Aceh people had now recovered from the disaster. “The conflict and tsunami are no longer seen as disasters but opportunities to build a peaceful, just, prosperous and dignified life and making progress in all sectors,” he said, adding that the tsunami disaster had in fact expedited the peace settlement in Aceh. He said infrastructure development continues to take place

throughout Aceh, and that so far 124,454 housing units, 3,000 kilometers of roads, 1,400 school buildings and 20 ports had been constructed while 1,300 hectares of land have been turned arable. “There are still unfinished projects left, namely the 1,106 kilometer-long road development projects in the central region, unemployment and housing for tsunami victims. These are problems that have to be given attention,” he said.

Tourism Figures Rosy, Says Official

ndonesia`s tourism sector could record a 1.31% growth in the midst of economic recovery efforts following the global crisis this year, a tourism ministry official said. “Up to October 2009, the world was suffering from a global crisis affecting all sectors including tourism,” an expert staff for economic affairs, science and technology of the ministry of tourism, Titin Sukarya, said here recently, news media reported. She said from April to October 2009 some tourist destination countries in Asia suffered a decline of up to 8.4% because of the crisis.

81st among the world`s tourist destination countries based on natural beauty, specific culture, orderliness and security.

However, Indonesia`s tourism recorded a positive growth, “proving that Indonesian tourism is still attractive,” she said at the 9th Way Kambas Festival in Sukadana, East Lampung, Sumatra. She said Indonesia is ranked

Meanwhile, iIn the first ten months of 2009 the number of Dutch tourists in Bali rose 22.01% to 63,622 over the same period last year. The figures put the Dutch tenth as the resort island`s source of foreign tourists, overtaking the

Lampung district head Hi Satono said,”We will promote local culture to attract more foreign tourists.” Several tourist destinations in the region include the Way Kambas National Park, the Pugung Raharjo archeological site, the Way Jepara Kemuning Lake, the Beringin Indah Garden, the Wana Traditional House, the Pekalongan agro-tourism site and others. More Dutch tourists to Bali

Americans, Head of the Bali Provincial Statistics Office Ida Komang Wisnu said here on Monday. It was only in the past three months that the European country overtook the US, he said. Dutch tourists account for 3.21% of the 1,982,274 foreign tourists who came to Bali in the January-October 2009 period, he said. Compared to the same period last year, the number of tourist arrivals in Bali in the year ended October 2009 rose 14.22%, he said. Ida Komang said six of the ten biggest sources of foreign tourists contributed significantly to the total number of tourists visiting Bali over the period. The number of tourists from China rose 65.29%, France 51.07%, Australia 35.46%, Dutch 22.91%, Britain 12.36%, and Malaysia 9.14%.

The President Post

December 25, 2009

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Viewpoint RI and the ASEAN-China FTA The fate of the ASEAN-China FTA, as part of the new cabinet’s first 100 days program, has been sidelined by many controversial domestic political issues that need to be resolved comprehensively and in an integrated manner. We are again inundated by many classic problems that undermine our competitveness.

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By Christianto Wibisono

Motorcycle and furniture: two of Indonesia’s industries that cannot cope with the onslaught of Chinese imports

he Indonesian contingent finished third at the recent SEA Games in Laos, a modest feat indeed. In implementing the ASEAN-China Free Trade Agreement (FTA), however, Indonesia lags far behind the event’s host country, which remains calm and not panicky as our business elite are in facing the onslaught of imported goods from China. The fate of the ASEAN-China FTA, as part of the new cabinet’s first 100 days program, has been sidelined by many controversial domestic political issues that need to be resolved comprehensively and in an integrated manner. We are again inundated by many classic problems that undermine our competitveness. Our weak physical infrastructure and institutional infrastructure (legal certainty) or soft in-

frastructure which continues to plague us need to be settled soonest. The Bank Century imbroglio, which is partisan and sectarian in nature, has put our credibility amongst potential investors in question. What are the reasons behind our industries to remain weak and uncompetitive not only against China but, more seriously, amongst ASEAN members? Why are our industries decaying and continue to seek government protection? If red tape continues to burden industries, while our physical infrastructure remains insufficient, it is the task of the government to overcome them pro-actively and rapidly. Indeed, the government has found the right term, “debottlenecking”, which it pledges to do within 100 days. Most of our businesses are champions in their own turfs and

We must all have self-confidence, be assertive and strongly believe that Indonesia’s meritocracy, multiculturalism and pluralism will enable us to be on a par with global powers such as China and India. have yet to reach a sophisticated level required for them to operate outside their own country. Indonesia has many industries that enjoy state protection, both state firms as well as private conglomerates. In many seminars I have always pointed out that providing protection to business companies is akin to giving a child nutritious food and supplements in order for them to perform once they enter their schoolong years. But protectionism must only be given for a certain timeframe and not perma-

nently. A businessman that enjoys protection should be able to ‘graduate’ after a certain period of time and be ready to compete against others. That is the story behind the rise of Germany, Japan and Korea in the wake of the industrial wave as pioneered by Great Britain. This is the essence of mercantilism and protectionism of infant industries that was developed by the renowned German economist Friedrich List in order to help Germany cope against British imports. I have always said to the top

management of conglomerates and state firms that if they were toddlers then it is normal and commendable if they get breastfed as it makes them healthy and strong. But once they become adolescents but remain to be breastfed, that is not protectionism but pornography. That also becomes a sinful act bordering on commercial incest. Industries that are incestuous due to perpetual protectionism become uncompetitive as they are spoiled, lazy and mentally defect and are devoid of true entrepreneurship and creativity.

Now, 15 years after then president Soeharto in 1994 confidently, along with then US president Bill Clinton, launched free trade among APEC members, Indonesian industries continue to pester the state. What went wrong after those 15 years? The Asian financial crisis has come to an end, and Indonesia has recovered from it. Many have now come to recognize three new Asian giants, ChInDonesia (China, India dan Indonesia). These three countries have posted significant growth while others make do merely by surviving. What is wrong with our industries, our businesses and our economy?

China and India.

We must all have self-confidence, be assertive and strongly believe that Indonesia’s meritocracy, multiculturalism and pluralism will enable us to be on a par with global powers such as

Wibisono will moderate the discussions with the aim, he says, “to synergize the forces within Indonesia Inc. in order to respond correctly to the current strategic and geopolitical transformation.”

Editor’s note: The writer is the CEO of GNI (Global Nexus Institute), which is set to hold the CEO Summit: “Empowering Indonesia Inc. & ASEAN Inc. When China Rules the World” by featuring Martin Jacques, the author of the bestseller “When China Rules the World” on January 26. The Ambassador of China to Indonesia, Zhang Qiyue, and the Secretary General of ASEAN, Surin Pinnsuwat, have been invited to take part in discussions during the seminar.

Aspects of National Security A well functioning National Security System will enable a nation to have a peaceful and orderly life to maintain and increase productivity and prosperity. A productive and prosperous nation will, conversely, be able to enhance its security. By Sayidiman Suryohadiprojo

ational Security is the situation of a nation related to its well-maintained and orderly life, its stability, and the normal functioning of its government to achieve the nation’s objectives. Issues pertaining to National Security are developments that threaten and endanger that situation. They can range from relatively simple criminal matters to the dangers of narcotics to public life, activities of organized crime, actions to subvert the nation with or without foreign participation, terrorist actions, secession sentiments among segments of the nation and, last but not least, open military attacks by foreign forces. To safeguard itself from the negative result of all these possible actions, a nation should establish a National Security System. A National Security System is a system established by the government to develop the capability of the nation to safeguard its national life with all its various aspects against any threat and challenge coming from inside as well as from outside the nation. A well functioning National Security System will enable a nation to have a peaceful and orderly life to maintain and increase productivity and prosperity. A productive and prosperous nation will, conversely, be able to enhance its security. There is

therefore a close relationship between National Security and National Prosperity, which together will result in the national resilience of a nation. There is often a misconception, also in Indonesia, to separate National Defense from National Security. This misconception considers National Defense as a different category of efforts and limited to the preparation and execution of military actions against an open foreign military offensive. That was indeed the case in the 19th century. However, since the early 20th century conflicts and wars among nations have became a total effort of a nation. An offensive by an aggressive nation using military means no longer limits its objectives to military positions and facilities only. The use of air power to attack non-military objectives such as production centers and communication facilities has become a normal strategy to weaken the opponent’s military. And to wage a war, a nation needs capabilities far beyond that which is provided by a professional army. As the wars waged by Napoleon Bonaparte showed, the army is in need of more members, and this can only be met by mobilizing citizens. War efforts also include the mobilization of the economy. War is no longer a military activity; the whole na-

tion can be at war to defend itself. Therefore, one cannot discuss defense without looking at the wealth and the prosperity of a nation, which in turn is very strongly influenced by its national security. Since World War II the issues surrounding how to survive a foreign offensive have become much more complicated. Military offensive actions are often preceded by non-military attacks against the opponent’s society, with the objective to weaken its resistance, morally and mentally. In 1939 Austria was morally and mentally so weakened by Nazi Germany’s subversion that it agreed to unite with Nazi Germany (Anschluss) without German military actions. After World War II, the West under US leadership and the Communist bloc with the Soviet Union as its leader were entangled in very dangerous confrontation. But both sides took care that the conflict would not escalate into an open military war which could become total destruction on both sides caused by the tremendous effects of nuclear power. What became the reality was the Cold War. Both sides continued to strengthen their military power and their weapons of mass destruction (WMD, or nuclear, biological and chemical weapons) to enhance their leverage to prevail over the confrontation. However, the Communist

It is therefore important that a nation has a National Security Council chaired by the Head of State himself, with all cabinet ministers as members and administrated by a secretary general. In addition to the ministers, important officials such as the Commander of the Armed Forces, the Head of the National Police, the Chairman of the National Intelligence and other experts must be invited to attend meetings.

bloc and the Soviet Union were totally defeated without both sides firing a single missile—the Communist bloc proved to be unable to withstand the non-military attacks against its society. It is for an aggressor nation today much more attractive to achieve its goals without an open military offensive. Launching a military attack is today very costly, even if the target of aggression is a relatively small nation. The US needed more than $700 billion to finance its military adventures to Iraq and Afghanistan. Moreover, it might require significant changes in the aggressor nation’s life, like the need for more people to build the necessary military organization. This could cause negative effects in the mood of the people, all the more so if recruited citizens become victims in military actions, as attested in US society since the Iraq War. There is also a political risk if it proves that the offensive cannot achieve its objectives. The US has to experience domestic as well as international political setbacks because it has not been able to achieve its real objectives in Iraq and Afghanistan. An attack without military means can be much more productive today, especially if the target nation can be weakened by non-military actions. It is certainly much cheaper and the risk of a

failure can be very limited. And if military means are needed in addition to non-military efforts, the actions will be much more limited because the target nation’s resistance are already weakened by non-military actions. Sun Tzu, the famous Chinese strategist, stated that the best commander in war is the one who can defeat his enemy without or with a minimal amount of military or physical means. Since people all over the world have made progress in many aspects of life, it is not longer simple and easy to defeat its will to resist. Although the aggressor has won the military war totally, like the US against Iraq in its first war, the people can still resist and mount a struggle which ultimately defeats the aggressor, as the Dutch experienced in Indonesia in 1949. It is therefore necessary for an aggressor not only to win militarily, but to win the peace. It means that the aggressor is able to make the people of the target nation submit itself to the will of the aggressor. The best example is the termination of World War II, in which the US was able to change Japan from a fanatical opponent during the war into its strongest ally in Asia after the war. The US had not only won the war against Japan, but also the peace. It is therefore very strange but remarkable that the US could not repeat its Japa-

nese success in Vietnam and now in Iraq, although both these nations are less developed nations and not to be compared to the US as a military and economic superpower. All this indicates the very broad scope of National Security today which requires the most effective use and application of national means and capabilities. It is therefore important that a nation has a National Security Council chaired by the Head of State himself, with all cabinet ministers as members and administrated by a secretary general. In addition to the ministers, important officials such as the Commander of the Armed Forces, the Head of the National Police, the Chairman of the National Intelligence and other experts must be invited to attend meetings. The Head of State as Chairman of the NSC will direct the nation’s efforts to cope with all National Security problems effectively, and will prevent possible duplication in tasks or gray areas involving other government departments, armed forces and police. The writer is a retired three-star Army general and the former chairman of the Indonesian Resilience Institute (Lemhanas). He also served as Indonesian ambassador to Japan.

The President Post

www.thepresidentpost.com

December 25, 2009

The Region The Economic Integration of ASEAN: An Assessment

Why should we keep faith in the AEC? ASEAN is a growing economy which has shown robust growth over the years. According to data published by ASEAN Secretariat on November 2009, although the recent global economic downturn has resulted in deep contraction of some member economies, one can be content with the regional average growth of 4.4%. As for the CLMV, these countries have been showing a remarkable

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The percentage of tariff lines in the CEPT (Common Effective Preferential Tariff) inclusion list of CLMV have increased steadily, and progressively narrowed the gap between ASEAN6 and CLMV over the years. As of 2009, both ASEAN6 and CLMV have placed more than 98% of their tariff lines under the CEPT Scheme Note: For 2009, Cambodia use the ASEAN Harmonised Tariff Nomenclature (AHTN) 2002 while the others use AHTN 2007 Source: ASEAN Tariff Database

figure 3: FDI INFLOW TO ASEAN

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Source: ASEAN FDI Database

figure 4: ANNUAL GROWTH RATE OF GDP AT CONSTANT PRICES IN ASEAN MEMBER STATES

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figure 1: TREND OF ASEAN TRADE ��

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Source: ASEAN Trade Database

Notes: ASEAN6 = Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore, Thailand. CLMV = Cambodia, Laos PDR, Myanmar, Vietnam. Source: ASEAN Finance and Macroeconomic Database

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Amidst the increasing percentage of business lines included in the CEPT-AFTA initiative (Figure 2) only 5% of intra-ASEAN trade comes from the application of AFTA. This is partly due to the lack of knowledge amongst the private sector on the existence of this procedure and, most importantly, the processing cost that exceeds saving after an AFTA ap-

Keeping Faith

As noted by Hadi Soesastro, ASEAN needs to find a “new ASEAN way” which incorporates so-called “defining elements” that would further deepen the integration. As he further explained: “Without a treaty, without transfers of powers, and without any budget, one should not expect a credible ASEAN Economic Community to emerge.” This change is something all have been waiting for. If a single market in 2015 is to be achieved, there is no time for ASEAN to refrain from introducing muchneeded reforms.

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Under AFAS, ASEAN has undertaken changes to encourage higher mobility of professional services through liberalized sectors. Commitments were made to reduce restrictions to trade, especially in the following subsectors: business services, professional services, construction, distribution, education, environmental services, healthcare, maritime transport, telecommunications, and tourism.

Despite these achievements, ASEAN’s economic integration process does not seem to bring the desired result. Five years after the AEC came to being, ASEAN economies have yet grown significantly closer to each other. Their economies have, indeed, been growing vastly, but not in a regional approach as defined in the spirit of AEC. Both intra-ASEAN trade and extra-ASEAN trade grew in a relatively similar speed (Figure 1). The last five years, particularly, has seen two-fold growth of both types of trade. Extra-ASEAN trade rose from US$600 billion in 2003 to US$1,252 billion in 2008, whereas, intra-ASEAN trade increased from US$200 billion to US$458 billion. This growth of trade is, however, not driven by AFTA, and the initiative itself is underutilized.

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The main body of AEC can be referred back to the existing economic cooperation in ASEAN such as ASEAN Free Trade Agreements (AFTA), ASEAN Framework Agreement on Services (AFAS), and Agreements on Investment Area (AIA). These initiatives have been successful in promoting structural changes in economic relations of ASEAN countries. In terms of trade in goods, substantial reduction of tariff barriers has been accomplished. In 1993, when Common Effective Preferential Tariff (CEPT) for the AFTA was first implemented, the average tariff rate of ASEAN-6 was 12.67%. In 2008, it was 0.79%. As for CLMV, the tariff rate is now cut to 3.69%, compared to 7.51% in 2000.

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Two main end goals were laid down: a single market and a single production base. By single market, AEC seeks to maximize the dynamic and growing regional economies. This is supported by the fact that ASEAN is a huge market, and that there has been stable increase in

Sluggish Performance

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The spirit of AEC was introduced back in 1997 when member countries created the ASEAN Vision 2020 that called for an “ASEAN Economic Region that entails free flow of goods, services and investments, a freer flow of capital, equitable economic development and reduced poverty and socio-economic disparities.” The end goal of an AEC was further identified in Bali Concord II. AEC was set to achieve the following objective: “… ASEAN as a single market and production base, turning the diversity that characterizes the region into opportunities for business complementation... a more dynamic and stronger segment of the global supply chain” by the year 2015.

The Main Structure of AEC

Regarding efforts to attract more investment to the region, the same lack of commitment by member countries has posed a challenge to the implementation of AIA. Ten years after the agreement was implemented, no concrete impact has been felt. Member countries’ reproduction of “sensitive list” of areas that should not be included in the agreement is the main reason of the slow implementation of AIA. This resulted in the low performance of intra-ASEAN FDI-flow, as compared to that of other countries from outside the region (Figure 3)

What are the lessons that can be learned from ASEAN’s economic integration? The creation of AEC Blueprint in 2007 has added to the already long list of documents and schedules set for the integration process. The problems facing AEC lie in the management, not the formulation, of initiatives. Over the years ASEAN officials have not slowed down in coming up with new cooperation schemes although existing ones are still far from being (fully) implemented. For that reason, more efforts should be given to reform the existing structure to have the needed resources in achieving pre-determined goals of AEC.

figure 2: PERCENT OF TARIFF LINES IN THE CEPT INCLUSION LIST (IL)

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A Deep Economic Integration

intra-ASEAN trade over the past years. The elimination of trade barriers would encourage more trade and, in consequence, contribute to the economic growth of member countries. A single production base reflects a state where the interconnectedness of ASEAN economies creates a more efficient business environment. Through substantial reduction of production cost in the region, AEC is positioned to be a more competitive regional bloc, thus shifting the trend of FDI-inflow from big powerhouses such as China and India towards the community.

6% economic growth in 2008 alone, evidence of its great potentials that warrant explorations in the future (Figure 4). Looking at these developments, it is correct to say that ASEAN is growing to become a great economic force in the years to come. Therefore, it is an imperative for the AEC to be successfully implemented.

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he ASEAN Economic Community (AEC) is one of the three pillars of the regional integration process in the region. Six years since its inception, this grand scheme has fallen far short from its goals. AEC was formed as one of the three pillars of ASEAN Community, the other two being ASEAN Security Community and ASEAN Socio-Cultural Community. It represents the combined population of 10 Southeast Asian countries that amount to more than 500 million people. This is bigger than that of the European Union and the US. Their combined GDP is US$ 1.5 trillion, making it one of the biggest economies in East Asia aside from China and Japan.

As for the changes in the area of investment, AEC aims to reduce impediments of investment. Through the formulation of AIA in 1998, which was further enhanced by the creation of ASEAN Comprehensive Investment Agreement (ACIA) in 2009, a series of efforts to improve investment climate was carried out. It seeks to create a transparent and non-discriminatory treatment of ASEAN-based investors and other investors coming from outside the region. Between 1998 and 2008, ASEAN has experienced robust growth of FDI-inflow, with an average 14.8% growth annually.

plication. In the area of trade in services, while barriers have been diminished, AFAS is implemented in a slow and uneven manner. There has been low commitment from other ASEAN countries, aside from Singapore and Malaysia, to significantly liberalize their service markets. The poor quality of regulation and management has also hindered this initiative be fully implemented and to maximally benefit the region.

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By Carolyn Sinulingga

The initiative also provided Mutual Recognition Arrangements as a mechanism to facilitate recognition of professional qualifications. The opening up of market on services led to strong growth of export and import of commercial services, rising from US$183 billion in 2003 to US$329.5 billion in 2007.

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The ASEAN Economic Community was formed as one of the three pillars of ASEAN Community, the other two being ASEAN Security Community and ASEAN SocioCultural Community.

The President Post

December 25, 2009

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The Economy ECONOMIC BRIEFS Government to liberalize 8,000 commodities Indonesia enjoys a US$14.27 billion surplus in The government plans to liberalize the import of around 8,000 commodities from other ASEAN member states in January 2010 in the framework of the Free Trade Agreement (FTA), a Finance Ministry official said. Some of the commodities are currently subject to 2.5-5% duties, he said. “Duties on the import of commodities from China will be lowered to 3%,” the head of the ministry`s fiscal policy board, Anggito Abimanyu, said here last week. The new ruling would be issued five days Anggito Abimanyu before January 1, 2010, he said.

Four RI seaports to operate 24 hours per day Four seaports in Indonesia will operate 24 hours a day as of February 2010, Director General of Sea Transportation Sunaryo said here last week. The four seaports are Belawan in Medan, North Sumatra, Tanjung Priok in Jakarta, Tanjung Perak in Surabaya, East Java and Soekarno-Hatta in Makassar, South Sulawesi. “The 24-hour service includes ship escorting service and readiness of the port administration to serve docking ships at any time,” he said. A 24-hour service program will also be carried out in several first class ports in the country besides the four seaports but the program would be implemented in stages, he said.

Demand for LPG to reach 4.34 million tons in 2010 PT Pertamina predicts domestic need for qualified petroleum gas (LPG) in 2010 will reach 4.34 million tons. The state-owned company`s marketing deputy director, Hanung Budya, said here on Tuesday of the total, 3.08 million tons would be for subsidized 3-kg container consumers and 1.26 million tons for non-subsidized consumers. He said the LPG supply will come among others from the company`s refinery plants totaling 818,545 tons, the company`s upstream operations 52,920 tons, other contractors 969,724 tons, domestic private refinery plants 88,550 tons and imports through Petredec 1.5 million tons. The rest, he said, will be acquired through additional imports or the refinery in Bontang. Hanung said on December 29, an LPG terminal with a capacity of 10,000 tons in Gresik, East Java, will start operating increasing supply reliability.

Government subsidizes sugar for the poor The government is set to subsidize sugar for the needy, Deputy Agriculture Minister Bayu Krisnamurthi has said. He added that the subsidized sugar would be designed for certain groups of people or certain target families (RTS). “So, this a targeted recipient subsidy,” he told news media last week. He said that the subsidy would be provided in view of the likely increase in the price of the commodity following the projected decline of stocks in the country.

West Java allocates Rp40 b for food resilience scheme

H. Ahmad Heryawan

The West Java government has provided Rp40 billion for the development of food resilience in the province, West Java Governor H. Ahmad Heryawan said. “The aim of the assistance is to develop food self-sufficiency by involving all stakeholders in food programs. This program follows up the same program that had been implemented previously,” he told Antara. West Java`s rice production in 2008 was recorded at 10.4 million tons of dried unhulled rice, said the Central Board of Statistics (BPS)`s estimates, and its s rice production in 2009 was projected to increase by 1.65 million tons.

2010: Prospects and Opportunities The United Nations predicts that the global economy will bounce back in 2010, but it also warns that the recovery will be fragile. By Atmono Suryo

GLOBAL DEVELOPMENT

he general consensus among prominent economists is that the world is firmly on the road to recovery and that 2010 holds good prospects, especially for fastmoving and expanding Asia. The world, however, is being warned that global recovery will be sluggish: Uncertainties will remain, stabilization and economic growth will be uneven and the problem of unemployment will persist. The United Nations predicts that the global economy will bounce back in 2010, but it also warns that the recovery will be fragile. International financial institutions such as the World Bank and the IMF have come up with similar forecasts. There is also grave concern, however, about the possibility that the global recovery will not be sustainable. There is even the possibility that the global economy or some individual countries could enter into a recession and will not follow the “V-Type” scenario. With the steep downturn at the beginning of 2009, world growth is estimated to be 2.2% for 2009 and 2.4% for 2010. Estimates on growth rates differ and are changing continuously. In the industrialized world, the U.S. economy is forecast to grow by 2.1% in 2010, while EU countries’ and Japan’s growth figure would be smaller. The U.N. predicts that only 21 developing countries will have growth rates of 3% or more; 60 developing countries will register a decline in per capita income. FAST- MOVING ASIA

The economic situation in Asia is quite remarkable. This vast region is now often called “Incredible Asia”. Preliminary forecast indicate that the business prospects in Asia for the year 2010 are promising. The IMF has therefore suggested that Asia take a leading role in reshaping the Post-Crisis Global Economy. The best solution, however, would be for the G20 to take the leading role with the support of Asia, which now makes up about one-third of the global economy. With Asia to be involved in the global recovery the opportunity will be opened for Asian business to take advantage of the upturn in world trade and investment. There may be business opportunities in advanced countries as they increase their economic activities. But it would be limited; it is not expected that demand in those countries would greatly improve. Their

purchasing power would still be limited in 2010. KEY MARKETS

As predicted, the most promising market in the global economy is Asia, particularly with the remarkable rise of China, followed by India and other Asian countries. Indonesia is often mentioned as the third most potential emerging country in Asia. According to the IMF WEO (World Economic Outlook) China’s GDP in 2009 is set to reach US$4.8 trillion, but still behind the US and Japan. In 2010 the figure is expected to be US$5.3 trillion. The most interesting forecast is China as the world’s second largest economy in 2010, replacing Japan. That would create a big change in the world’s economic power structure. China’s exports have been making a comeback as consumers in the United States and other advanced countries start to increase their spending. Factory output, investment and retail sales in China are growing. An important development in China is that the country is also working to boost imports and increase domestic demand. According to statistics, US$2.47 trillion have been spent in 11 months in 2009 in factories and other construction projects. ASEAN- China

ASEAN-China trade has achieved high growth, which was stimulated by China’s accession to the WTO and with its deeper integration into the world economy. Various observers are of the view that there is high potential in developing ASEAN-China economic relations. Not only in the area of trade, but also in the areas of investment, joint ventures and investment.

Table 1: Indonesian trade 2004 - 2009 EXPORT

IMPORT

YEAR - MONTH OIL & GAS

NON OIL & GAS

TOTAL

OIL & GAS

NON OIL & GAS

TOTAL

2004

15,645.3

55,939.3

71,584.6

11,732.0

34,792.5

46,524.5

2005

19,231.6

66,428.4

85,660.0

17,457.7

40,243.2

57,700.9

2006

21,209.5

79,589.1

100,798.6

18,962.9

42,102.6

61,065.5

2007

22,088.6

92,012.3

114,100.9

21,932.8

52,540.6

74,473.4

2008

29,126.3

107,894.2

137,020.4

30,552.9

98,644.4

129,197.3

2009

10,316.9

59,984.4

70,301.3

10,766.9

49,001.0

59,767.9

January

1,025.5

6,254.6

7,280.1

1,281.5

5,319.1

6,600.6

February

1,024.5

6,109.9

7,134.3

964.4

4,974.6

5,939.0

March

1,281.6

7,333.1

8,614.7

930.1

5,624.1

6,554.1

April

1,253.9

7,200.0

8,454.0

1,232.3

5,474.5

6,706.8

May

1,136.7

8,072.1

9,208.8

1,560.1

6,081.1

7,641.3

June

1,452.1

7,929.4

9,381.5

1,441.8

6,493.7

7,935.5

July

1,488.9

8,195.2

9,684.1

1,836.8

6,846.5

8,683.3

August

1,653.6

8,890.1

10,543.8

1,519.9

8,187.4

9,707.3

Source: Central Board of Statistics

Table 2: Growth is projected to gradually return to more typical rates in the coming years (annual percentage change) 2008

2009

2010

2011

Gross domestic Product

6.1

4.3

5.4

6.0

Consumer price index

9.8

4.7

5.6

6.5

Major trading partner growth

2.1

-1.8

3.3

3.4

15.4

14.2

13.6

11.5

Poverty rate Source : MoF, BPS via CEIC and World Bank

na is a great potential country for our exports, especially coal, minerals, natural rubber, wood and wood products, pulp and paper. Indonesian exports of nonoil and gas to China went up from US$6.6 billion in 2005 to US$8.3 billion in 2006, US$9.6 billion in 2007 and US$11.6 billion in 2008. Imports from Chi-

ten countries, seven are in Asia. This means that Asian countries are is Indonesia’s greatest trading partner. China and India have become important trading partners of Indonesia. Total trade with India went up from US$3.9 billion in 2005 to US$6.5 billion in 2007 and US$10 billion in 2008.

There is the need to reshape the Post-Crisis Global Economy. The G20, which includes five Asian countries, should take the lead with Asian support. It is expected that the post-crisis period will see competition on the rise, which in turn will enlarge the risk of protectionism. It should be kept in mind that Asia’s growth during the last few decades was spurred by the expansion of open market econoThe 2010 economic outlook for Asia, with Indonesia among the top mies and remarkable increase in countries, ranges from “good to bright” in the areas of economic stability international trade. The 2010 economic outlook and growth, expanding trade, positive balance of payments, adequate for Asia, with Indonesia among financial flows, high foreign exchange reserves, expansion of domestic and the top countries, ranges from “good to bright” in the areas of regional demand and the possible increase in FDI. economic stability and growth, expanding trade, positive balance of payments, adequate financial flows, high foreign exchange reAs Asia is predicted to grow serves, expansion of domestic and On the other hand, China and na show higher figures, reachASEAN are developing countries ing US$15.2 billion in 2008. faster than the other regions in regional demand and the possible and are competing against each This means that Indonesia suf- the world, Indonesia’s export po- increase in FDI. other. The Indonesian market fered a trade deficit with China sition for non-oil and gas is seNow is the time for Asia to tap is already flooded with various of US$3.6 billion in 2008. cured. Exports are expected to into its increasing potentials in products from China, at low pricAs can be seen from Table 1, increase in 2010 by 5%, while order to further strengthen their es and of better quality. It com- Indonesian trade has been im- economic growth is projected at economies and businesses and soprises not only of textiles and gar- proving since 2004. 5.4% in 2010, possibly even 6%. lidify their position in the globments but also motorcycles and According to BPS (the govern- al economy. Closer economic coother industrial products. ment-run statistics body) Indo- THE YEAR 2010 operation and integration among nesia’s non-oil & gas exports in 2010 will be a critical year for Asian countries is however imIndonesia 2007 go to 10 main trading part- the global economy. The world perative, as well as efforts to cope China is a huge market for vari- ners, namely Japan, the US, Sin- economy still abounds with un- with political issues which tend ous products from ASEAN coun- gapore, China, India, Malaysia, certainties, recovery is expected to hinder business development tries. For Indonesia, in particular, South Korea, the Netherlands, to be sluggish, but prospects re- and economic growth in the region. it is important to note that Chi- Thailand and Taiwan. Out of the main rosy.

The President Post

www.thepresidentpost.com

December 25, 2009

The Economy

Boosting RI-EU Trade and Investment It should be realized by the Indonesian private sector that the European Union is presently the largest global trader with a total trade volume of more than US$3.6 trillion in 2007. By Atmono Suryo

t this present stage of global recovery and growth, it is of considerable importance for Indonesia to expand its external economic relations, especially in trade and investment, not only with Asian countries but also with other potential regions, including the European Union (EU). On that score the seminar organized by Eurocham and supported by the Delegation of the European Union should serve as an eye-opener for the Indonesian public. Most Indonesians may not realize that the Europe of today is different from the Europe of some ten years ago, particularly in terms of economics and business. The present European Union covers a very large economic area, almost as large as the North American continent. It should be realized by the Indonesian private sector that the European Union is presently the largest global trader with a total trade volume of more than US$3.6 trillion in 2007. It is also the largest exporter and importer of commercial services in the world. Furthermore in ASEAN the EU is a highly leading investment partner. The seminar which discussed in detail trade and investment opportunities and obstacles between Indonesia and EU was attended by Minister of Trade Dr Mari Elka Pangestu and EU Ambassador Julian Wilson, both of

whom who made important observations. They recognized that the opportunities to expand trade and investment are large and should be tapped. The existing obstacles, however, should therefore be removed as far as possible.

It will be noted that EU exports to Indonesia consist of more sophisticated items such as telecommunications and various types of machinery. They also include specialized capital equipment and high technology products as well as specialized food and consumer products. The most important Indonesian exports to the EU are more simple products such as apparel articles and clothing accessories. Also, footwear, cork and wood manufactured items, vegetable fats and oils. There are a number of products of a more sophisticated nature such as telecommunications and sound-recording equipment. Indonesia is still eligible for GSP (general systems preferences) treatment. Indonesia has always been an important exporter of commodities and raw materials. The question arises whether it would be time for the country to upgrade its export products by starting to process commodities to become more sophisticated, higher-priced and well-packaged attractive consumer items. As Indonesia is blessed with natural resources, the time has come for the country to develop resources-based and value-added industries to cater for the expanding domestic market and to increase exports.

INDONESIA-EU TRADE

According to the studies revealed at that meeting, in 2008 the EU (27) was the third largest trading partner of Indonesia after Singapore and Japan. The very large trade volume between EU and Singapore is quite remarkable. It will be noted, however, that a significant part of the trade and economic interaction between the EU and Indonesia occurs through Singapore. In addition, the EU is a leading investment partner of Indonesia. The importance of EU as a very potential economic partner for Indonesia is not duly recognized here. Compared to other ASEAN countries in terms of percentage, Indonesian exports lag behind. EU imports in 2008 came from Malaysia (25%), Thailand (25%), Singapore (23) and Indonesia 19%. For most Indonesian traders the European market is difficult to penetrate. They recognize that European standards are high and regulations are strict. Many of the traders are also not aware of the opportunities open to them. A “learning process” may be needed for many Indonesian traders.

EU INVESTMENT

In ASEAN, the EU is by far the largest source of FDI (foreign direct investment). EU FDI flows to Singapore, Thailand,

Malaysia, Indonesia and the Philippines. Compared to the other three ASEAN countries, Indonesia again lags behind, as is the case with trade. Poor investment and business climate are the main reasons, but Indonesian statistics show there have been improvements during the last two years in the flow of EU FDI to Indonesia. Table 1 indicates possible investment opportunities in Indonesia (but they are largely in the negative list). The indicated areas with high potential are: construction, machinery and electronics – transport and communications -- hotel and restaurant, and the food industry. According to EU studies Indonesian domestic investors have concentrated their projects in food, chemicals and pharmaceuticals. Foreign investment is concentrated in large plantations, chemicals, automotive, machinery, pharmaceuticals, transportation, warehousing, communications and construction. European investors in Indonesia have focused their investments on market-seeking investments, and to a lesser extent resourceseeking. They are apparently not focused on the oil & gas and energy sectors. European observers, however, agreed that in terms of overall attraction to invest, Indonesia has some advantages over other countries. Indonesia has a sound growth pace, an improved degree of macroeconomic stability,

a large domestic market and expanding market potential. In addition, ASEAN integration will offer new opportunities in terms of expanding markets. It would be of strategic importance if European investors would see the advantage of establishing their stronghold in Indonesia. However, this requires greater confidence on the part of EU towards Indonesia. Indonesia is a potential powerhouse with a large expanding domestic market, a large variety of natural resources and a fast expanding middle-income group (more than 10 million people) with better education and of young age. In the years ahead Indonesia is set to become one of the main bases of the EU to maintain closer economic interactions with: that is a big opportunity as well as a challenge for the EU and Indonesia.

In the years ahead Indonesia is set to become one of the main bases of the EU to maintain closer economic interactions with: that is a big opportunity as well as a challenge for the EU and Indonesia. Figure 1: EU EXports to, imports from, and trade balance with indonesia ��

��

Source: European Community, Eurostat 2009. Consultant’s calculation

Table 1: Possible investment opportunities in indonesia CRITERIA

SECTOR Construction

Domestic Market Potential

Regional Market

Investment Climate Negative list

Indonesian Export Market

Very high potential

High potential

restrictions

Machinery and Electronic

High potential

restrictions

Hotel and Restaurant

High potential

restrictions

Textile Industry

Low-Medium Potential

Low potential

restrictions

Low growth rate

Transport and Communication

Very high potential

High interest

restrictions

Low growth rate

Chemical and Pharmaceuticals

High potential

Medium potential

restrictions

Medium growth rate (chemicals)

Very high potential

High potential

restrictions

High growth rate

Food Industry

High growth rate

Source: Consultant’s own formulation

THE INDONESIAN ECONOMY:

2009 Inflation rate at 3.04% Generally, inflationary pressures are probably still out of sight as far as incoming data is concerned. Prices of some commodities such as gold and palm oil have increased lately, but the inflation impact should be somewhat counterbalanced by the strengthening of the rupiah in recent months.

Indonesia: Selected Economic Indicators

2006

2007

2008

2009E*

2010E*

National Accounts By Anton Gunawan

Dec-09* (forecast)

Nov-09

Oct-09

Sep-09

Headline CPI (% chg y-o-y)

3.04

2.41

2.57

2.83

Headline CPI (% chg m-o-m)

0.57

-0.03

0.19

1.05

Headline CPI (% chg y-t-d)

3.04

2.45

2.48

2.28

Real GDP (% y-o-y)

5.5

6.3

6.1

4.3

5.2

Domestic demand ex. inventory (% y-o-y)

3.7

6.0

9.1

3.4

6.9

Real Consumption: Private (% y-o-y)

3.2

5.0

5.3

5.1

5.0

Real Gross Fixed Capital Formation (% y-o-y)

2.9

9.2

11.7

3.9

8.0

GDP (US$bn) — nominal

364

433

507

532

641

1,641

1,925

2,227

2,309

2,744

10.3

9.8

8.6

9.9

9.8

Exports, fob (% y-o-y, US$ bn)

18.3

-19.0

11.0

Imports, fob (% y-o-y, US$ bn)

6.3

15.4

36.8

-26.7

15.8

29.7

32.8

22.9

27.6

26.5

3.0

2.5

0.1

1.8

0.5

Central government debt (% of GDP)

39.2

35.1

32.0

29.9

28.2

International Reserves –IRFCL (US$ bn)

42.6

56.9

52.1

64.8

71.1

4.5

6.2

5.4

9.4

9.0

Currency/US$ (Year-end)

9,020

9,419

11,120

9,600

9,750

Currency/US$ (Average)

9,143

9,163

9,767

10,350

9,675

BI policy rate (% year end)

9.75

8.00

9.25

6.50

7.50

Consumer prices (% year end)

6.60

11.20

4.00

6.70

Fiscal balance (% of GDP; FY)

-1.0

-1.3

-0.1

-1.9

-1.0

S&P's Rating -FCY

BB-

Source: Bloomberg, *Danamon estimates

December Inflation Preview: Mild Seasonal Pressures

ecember data would be announced early next year. Our forecast for monthon-month inflation is at 0.57%, with inflationary pressures expected to come mostly from nonfood components of CPI, such as housing (kerosene, cement), clothing (including gold accessories up by 7.9% mom), education, sports & recreation, and transportation & communications. Although some food prices remained relatively stable (cooking oil, chicken, rice, and meat), others (sugar, corn, and soy bean) increased rather significantly. Accordingly, year-on-year headline inflation may increase moderately to 3.04% from 2.41%. Core inflation is also expected to climb from its low of 4.29% last month, in part due to a high base effect. Generally, inflationary pressures are probably still out of sight as far as incoming data is concerned. Prices of some commodities such as gold and palm oil have increased lately, but the inflation impact should be somewhat counterbalanced by the strengthening of the rupiah in recent months. Policy Implications and Market Significance

Given the lack of dynamics on

inflation, the BI rate is set to remain at 6.50% in January, perhaps until the end of 1Q10 or early 2Q10. As it plans to bring down bank interest margins, BI still appears unsatisfied by the slow pace of credit growth—despite October data showing signs of improvement. Accordingly, BI’s monetary policy statement may not turn hawkish very soon. Bank Indonesia’s plan to squeeze the interest margin of banks may lead to a continuing decline of bank lending rates, despite higher inflation expectation. In view of the political situation, we see limited upside potential for the rupiah to gain against the dollar in the immediate future. We maintain our YE09 forecast for the IDR at 9,600/ US$, which then may weaken towards the end of 2010 towards 9,750/US$. November Trade Data Preview

Meanwhile, we expect the No-

vember foreign trade data, also to be released early next year, to show a narrower trade surplus and back to a more normal level after a surprising jump in October. Exports and imports of oil & gas are expected to be slightly down despite relatively stable prices of oil. Despite higher prices of key exports, commodity prices and non-oil & gas exports are expected to be lower than that in October, as there was no more cumulative reporting as in October. A more positive view of the economic prospects and increasing capacity utilization of manufacturing industries may have supported higher imports of non-oil & gas. We also expect that imports to stay robust following the appreciating trend of the IDR. The writer is the Chief Economist at Treasury & Capital Markets PT Bank Danamon, Tbk. He can be reached at anton. gunawan@danamon.co.id

Dec-09* (Forecast)

Oct-09

Sep-09

Aug-09

Export Growth (% y-o-y)

12.6

10.1

-19.9

-15.4

Import Growth (% y-o-y)

1.2

-11.8

-24.2

-21.2

Trade Balance (US$bn)

1.69

2.42

1.27

0.84

Source: Bloomberg, *Danamon estimates

GDP per capita (US$) — nominal Open Unemployment Rate (%) External Sector

Trade balance (US$ bn) Current account (% of GDP)

Merchandise import cover (months)

Other

Source: CEIC, *Danamon Estimates

The President Post

December 25, 2009

www.thepresidentpost.com

Education SBY Government is Working Hard to Standardize National Education System The first thing that the government needs to do after disbursing 20,000 more scholarships to schools across the country during its first 100-day in office is to provide more facilities to schools, especially those in the outer islands, and repair damaged facilities across the country. By Alci Tamesa

ow that the government has defended its decision to administer the muchdebated National Examination, it has the responsibility to ensure a fairer distribution of facilities in order to establish better quality education on every level of study, educators say. The first thing that the government needs to do after disbursing 20,000 more scholarships to schools across the country during its first 100-day in office is to provide more facilities to schools, especially those in the outer islands, and repair damaged facilities across the country. Education analysts say that after 64 years of independence, Indonesia is still gripped by the problem of discrepancies in the execution of education policies. For instance, schools on the island of Java are much better facilitated than those in other islands. Also, schools in cities are much better equipped and therefore are higher in quality than those in rural areas. Teachers are better paid in big cities than in remote places, not to mention the wide income gap separating the rich and the poor. Even in urban areas, there seems to be some kind of discrimination between state-owned and private schools in that the former are usually the recipients of government facilities and subsidies but the latter feel as if they have been treated like step-children.

Critics have therefore said that the answer to this situation is not a nation-wide administering of national exams but improvement of facilities and upgrading of quality in every aspect of learning. Due to this, the government has reversed its orientation and is now working feverishly to improve the situation. For instance, the National Education Standard Board and the Ministry of National Education have established eight standards for education to be implemented during the term of President Susilo Bambang Yudhoyono.

Quality graduates can only come from quality schools and quality schools are the ones with quality teachers and sufficient teachinglearning facilities.

The eight standards are related to education facility, teachers and educators, graduate competency, educational quality, educational process, educational management, educational financing, and evaluation. Quality graduates can only come from quality schools and quality schools are the ones with quality teachers and sufficient

teaching-learning facilities. The government therefore is being challenged by top educators to prove its commitment by giving this issue a bigger attention. But given the fact that Indonesia is such a huge archipelago, the task of standardizing national education may not be completed fully during President SBY’s term of office. But the President has laid the right foundation for the purpose. This includes continuous increase in the number of scholarship recipients, improvement of school facilities and so forth, observers say. According to government statistics, 52,65% of workers in Indonesia are elementary school graduates and dropouts. These are the segment of society that needs to be given vocational training, empowering them to have a better living. Another painful reality the government is working to overcome is that only 32% of elementary schools have a library. The ratio at junior high school is 63.3%. Meanwhile, almost half of the nearly 900,000 classrooms are damaged, according to Kompas. Another challenge is the low quality of teachers. As of this year, according to official statistics, 88 percent of KG teachers are unqualified while on the elementary school level the figure is 77.58 percent. According to Prof. HAR Ti-

First Lady Mrs Ani Yudhoyono strongly believes that education in the regions must be improved.

laar, senior educator at Jakarta State University (UNJ), the direction of education even at elementary school is not clear enough because students are being taught through either a coercion or intimidation kind of method. This prevents self confidence from growing properly. Worse, he theorizes, their talents are not being developed properly as they only follow whatever the school provides even against the need of developing their actual potentials. Prof. Tilaar says that this is a serious problem the government

must handle quickly because otherwise as the students grow older, they will become unqualified individuals with an inferiority complex. Meanwhile, Prof. Lydia Freyani Hawadi, lecturer of Psychology at the University of Indonesia (UI), says that the education system in Indonesia has yet to develop students’ potentials—a task that must be given priority through proper government policy. She says that students cannot be taught in a random or generalized manner because they were born with uniquely different tal-

ents; the duty of educators is to develop these talents maximally. Only then can Indonesia’s human resources compete in the international arena, she theorizes. In order to tackle such issues, the government is working to certify up to 2.8 million teachers through 2015. As the government multiplies effort to tackle these issues, a much bigger problem looms large—the issue of degradation of morality even among scholars and intellectuals. This is the reason why Indonesian prisons are inhabited also by scholars from

Photo: www.presidenri.go.id

different fields of study. The issue of morality erosion is so serious that there seems to be no way of handling it properly. For instance, pornography is already a social malady haunting students at all levels, even at elementary and junior high schools. The mass media, especially the electronic media such as television and the Internet have become a dangerous area from which negative influences are haunting the younger generation. This is an issue government ministries have yet to handle properly, educators say.

Thousands of Talented Students Receive Government Scholarships Vice President Boediono says these scholarships will be given primarily to talented students from across the archipelago whose families are unable to finance their education. By Alci Tamesa

he government is rushing against time to disburse 20,000 more scholarships for students from poor families to realize a promise President Susilo Bambang Yudhoyono made a year ago. Vice President Boediono says these scholarships will be given primarily to talented students from across the archipelago whose families are unable to finance their education. The President actually made the promise in August 2008 when he attended the second Asian Science Camp in the resort island of Bali. He said then that the government would provide scholarships for Indonesian Science Olympic gold medalists to pursue a PhD degree while silver and bronze medalists will have the opportunity to obtain a Master’s degree either at home or abroad. SBY had not been re-elected for a second term when he made the statement and he was not actually aiming to use this as a political gimmick. The reality was that by then Indonesia had had many Science Olympic medalists who had not been given proper attention by the government. So the President apparently saw the need to develop maximally the potential

of these young talents as national assets. But when Vice President Boediono announced the scholarships on December 10, 2009, he made it appear that this was part of the realization of the new Cabinet’s 100-day programs, which is usually understood as a demonstration of the government’s seriousness in satisfying people’s aspirations. “We aim to disburse up to 20,000 scholarships during the first 100 days of our administration,” the Vice President said during a meeting with Indonesia’s 2009 Science Olympic medalists at his office. That 100-day period began on October 20 when SBY installed his second Cabinet. The government wants to make sure that there will be no more stories of talented Indonesian students not being able to pay for their education only because they are poor. Due to this, the government has increased both the number of recipients and amount of scholarships from elementary school to university levels. This is also part of the government’s anticipatory solution toward the impact of global economic crisis on poor families in Indonesia. According to sources at the Department of Education and Cul-

The government has increased the number of recipients and amount of scholarships.

ture, the government had actually anticipated such circumstances long before it proposed the draft state budget for 2009. That is the reason why the amount of scholarships for 20092010 academic year had been fixed at more than Rp3 trillion, according to Dr. Dodi Nandika, Secretary General of the Ministry of National Education. The number of scholarship recipients at elementary school level

was increased in 2009 to 2.2 million from 690,000. With this, the government hopes that there will be no more dropouts from poor families. Throughout 2009, up to 841,000 more elementary students had dropped out for not being able to pay school fees, up to 28.1 million the total number of Indonesia’s elementary school dropouts in recent years. The SBY government therefore

Photo: www.presidenri.go.id

aims to provide Rp 30,000 to every poor student per month. The fund is to cover their uniforms, books, pens, and transport expenses. On the junior high school level, the amount is Rp48,000 per month and up to 998,000 students will receive this facility. As of December 2009, the total number of dropouts at junior high school level is 211,643. Meanwhile, on the vocation-

al high school level, the number of recipients will be increased by 200,000 to a total of 928,539 and the annual amount of scholarship for every student will be Rp780,000. So the total fund of this category is Rp724 billion. On the university level, the number of recipients has been increased by 70,000 to 240,000 students to be financed from a total allocation of Rp600 billion this year and as of 2010 the allocation will be raised to well over Rp1 trillion. In a related development, education observers noted that international agencies have, over the past five years, channeled in a total equivalent of Rp4.2 trillion to finance Indonesian students pursuing education abroad. More than 60% of this was disbursed in the form of grant while the rest came in the form of soft loans. Over the past five years alone at least 7,250 students had been sent abroad on such overseas scholarships while the government has provided similar facilities for a total of 1,921 students. The overseas scholarships came mainly from Australia, Germany, the USA, and the Netherlands. Students take the scholarships mainly to pursue higher education in the fields of economics, accounting and trade, public policy and governance, science and technology as well as education. Among educators in Indonesia, SBY is popularly known as a “pro-education President” because of his total commitment to improving the quality of human resources through education. It is also during his term of office that the sector of education received 20% of the national budget.

Over the past five years alone at least 7,250 students had been sent abroad on such overseas scholarships while the government has provided similar facilities for a total of 1,921 students.

The President Post

www.thepresidentpost.com

December 25, 2009

Technology

Internet Cafés: Boon or Bane? iCafés should not be overlooked by policymakers as they are an opportunity to provide low cost technology access in burgeoning emerging markets. By Rajesh Soundararajan Regional Shared Access Lead for Microsoft APAC

uch is spoken about the ubiquitous growth of mobile phones and its influence over economic growth, yet little is discussed about the impact and influence of Internet Cafés (iCafés). Known by many names in different parts of the world — Gaming Centers, Cyber Café, Net iCafés, Internet parlors — customers are typically first-time users and those who cannot afford a home personal computer (PC). iCafés should not be overlooked by policymakers as they are an opportunity to provide low cost technology access in burgeoning emerging markets. Especially when one considers the fact that there are an estimated 13 million iCafés with around 207 million users in these markets, and that this number is expected to grow by more than 70 per cent over the next three years.

Country

2007

2010

iCafe users

Internet users

iCafe users

Internet users

China

45.0M

189.4M

110M (^144%)

302M (^59%)

India

39.0M

98.9M

65M (^67%)

204M (^106%)

Brazil

21.0M

40.6M

29M (^39%)

56M (^38%)

Russia

3.8M

42.9M

5.7M (^50%)

64M (^49%)

Other EM*

98.0M

229.5M

140M (^43%)

294M (^28%)

EM Total

207M

601.3M

350M (^69%)

920M (^53%)

*Emerging Markets

Compound this with the rapid proliferation of broadband connections, lower communication costs and the predominantly positive outlook toward computers; these small iCafés are literally bringing technology and internet access to thousands of people in emerging markets at a significantly lower cost than 1-to-1 PC access.

negative stereotyping. They are most often seen as nothing more than game centers or “hang-out joints”. While it is easy to focus on the potential negative influence of iCafés on society, what is required by government, academia and business alike in the realm of the iCafé is a holistic approach of cost-benefit to society.

kok, Thailand. It joined with the True iCafé chain in the country to provide eLearning services combined with Microsoft certification to their students, enabling them to be proficient in IT before they attend university. This allows the university to improve the productivity of their students throughout the four years of their course of study.

The pervasive nature of iCafés does come with challenges. Their image has assumed some

One example of the constructive use of iCafés is what Sriphatum University has done in Bang-

Rajesh Soundararajan can be reached at rajesh.soundararajan@ microsoft.com

These small iCafés are literally bringing technology and internet access to thousands of people in emerging markets at a significantly lower cost than 1-to-1 PC access.

ICT Training in Philippines’ iCafés In May this year Microsoft announced an agreement with Philippines-based iCafé operator Netopia to launch an innovative pilot program under the Microsoft Unlimited Potential umbrella. The pilot program brings new learning and training opportunities to people through Netopia’s 169 iCafés. It will provide access to software such as Microsoft Office 2007, in addition to digital literacy courses and free certifications through the Microsoft IT Academy Learning Portal, to help citizens gain the skills and education necessary to build or advance their careers. “Our mission is to provide affordable access to information and communication to people without computers and the Internet. Now, with the digital literacy courses and certification from Microsoft, we are expanding our services and enabling new opportunities.” George H. Tan, CEO, Netopia, the Philippines

The President Post

December 25, 2009

Entrepreneurship

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BIFA : A School That Provides Jobs T

hey stand tall, look smart and and exude aplomb. Standing erect, the 16 proud youngsters stand on a maksehift podium at a hangar that is the site of their graduation ceremony at the Bali International Flight Academy (BIFA) last August. On their shoulders – and those of their colleagues in the future – rest the future of the country’s aviation world: “the sky’s the limit.” President & CEO Garuda Indonesia Emirsyah Satar, as well as his staff and local officials, considered the occasion – and the flight school itself – so important that they took time to be present. “BIFA is a milestone in the history of our aviation world and I appreciate the initiative taken by its founders. Garuda Indonesia is sure to accept graduates of BIFA,” said Emirsjah. The Transportation Ministry estimates that up to 2012 the Indonesian aviation industry needs at least 2.500 pilots. This is based on the assumption that there will be 250 planes coming in stages in the next four years. Each plane requires five pilots. Flight schools in Indonesia can only produce about 140 pilots a year. The STPI in Curug, Banten, which is managed by the Transportation Ministry, for example, can only produce 120 pilots per year as of 2008. The high demand for pilots is due to the steep increase in aircraft in Indonesia in the coming years. Each year the number of aircraft passengers is expected to rise by about 25%. On the other hand, many Indonesian pilots prefer to work overseas because of higher salaries. Sources say that this year alone about 350 pilots have gone overseas to seek a better income. In addition to about 200 pilots that are now on contract with foreign airliners, there are now some 500 Indonesian pilots manning foreign registered aircraft.

In Buleleng, north of Bali, an international-class flight school is set to produce pilots that will determine the course and future of the country’s aviation world. Text and photos by Taufik Darusman

Garuda Indonesia alone needs 225 pilots between 2008 and 2010 – 2008 111 pilots, 2009 54 pilots and 2010 20 pilots – after factoring in the number of pilots that go into retirement and an estimated 10% growth in the number of planes. ‘’The job situation for pilots is good,’’ says Robby Djohan, chairman/founder /shareholder of BIFA. “Imagine, in 1998 there were only six million passengers, a figure that by the end of 2007 rose to 30 million. So Indonesia needs even more aircraft, which means more pilots and technicians,” he added. “Garuda Indonesia alone this year requires 100 pilots as they are getting five new planes. Private airliners are also expanding their fleets. So far the short supplyof local pilots are made up by foreigners.’’ Robby acknowledged that tuition fees at BIFA is not exactly low (about US$55,000), but he pointed out that the salary of a pilot at present is no less than US$ 2000 a month. ‘’So the money will be recouped in four to five years so long as they remain employed, maybe even sooner as pilots’ income is always rising,’’ he says. BIFA operates in Buleleng, north of Bali, since the beginning of the year and is managd by professionals, among others former Garuda Indonesia top brass. The academy’s facilities are close to excellent: a spacious boarding house and comfortable classrooms, pleasant and nutritious food, an expansive hangar

and (for the time being) five USmade Cessna trainer aircraft. “Soon enough the number of trainer planes will reach ten,” says Robby. “We employ professional instructors from the US, Canada and Australia. In turn they will train Indonesian personnel to replace them,” he added. BIFA goes out of its way to make sure the students can also relax aftwr a grueling day of classes by providing a swimming pool and a tennis court. But what draws most visitors’ attention is an aircraft simulator that costs hundreds of thousands of dollars. The state-of-the-art equipment, which resembles a mini aircraft cockpit, allows students to train themselves and learn how to cope with any situation in the sky— without being airborne thousands of feet above the earth. How did BIFA exactly came into being? “About three years ago several former Garuda Indonesia senior executives came to me with the idea of setting up a flight school at the Letkol Wisnu Airfield, Buleleng, Bali,” Robby recalled. “I was once the CEO of Garuda Indonesia and I understand well the problem of getting pilots. That’s why I promised them to look into the matter.” Later on Robby convinced successful business people such as Edwin Soeryadjaya, Teddy Rahmat, Benny Subianto, Tanri Abeng and Tience Sumartini to put their money in a flight school they agreed would be called the Bali International Flight Academy (BIFA). “Total investment is US$2.5

million, including the construction of a hangar and a boarding house plus four trainer aircraft,” says Robby. As a former banker who started his career in Citibank and later led Bank Niaga followed by Bank Mandiri, Robby is very wellversed in the numbers game. “By my own reckoning the investment will be recouped in no longer than four years,” he says. But the return on investment in BIFA does not figure high in Robby’s mind. His personal wealth includes, among others, a five-star hotel in Legian, Bali, and several office buildings in Jakarta. “We see ourselves as educators. Education is music to my ears. We also conisder ourselves as providers of jobs. BIFA graduates will easily get jobs as the national aviation industry will continue to grow rapidly,” he said.

From top to bottom: BIFA’s trainer planes are new and well-maintained; the simulator of a Cessna aircraft; BIFA provides recreational facilities for its students; pilot graduates pay tribute to their tutors; and BIFA founder Robby Djohan (third from left) and Emirsyah Satar, (President & CEO of Garuda Indonesia (fifth from left) pose with graduate pilots.

Business A BPH Migas official, Jugi Prajogio, said here on Sunday that the decision was made at a BPH Migas committee meeting on December 23, 2009. The fuel oil quota for the two companies amount to 129,602 kiloliters, of which AKR will distribute 109,162 kiloliters of diesel oil to 34 locations apart from public gas stations in Medan, Deli Serdang, Binjai, Metro, Central, East, South, North Lampung, Bandar Lampung, Pontianak and Banjarmasin, while Petronas will distribute 20,440 kiloliters of diesel oil to four gas stations in Medan, Antara reported

Government to develop condensate industry The government will develop oil, gas and condensate industries in East Java and East Kalimantan, in a plan that forms part of the first 100 days program of the Industry Department. “East Java produces condensate, but no industry uses it as yet,” said Director General of Agro and Chemical Industries of the Industry Department Benny Wahyudi on Tuesday. The government, he continued, will push East Kalimantan to become a gas-based cluster area producing ammoniac, ethanol and urea as ammonium nitrate derivatives.

Bentoel, BAT to merge management

The shareholders of PT Bentoel Internasional Investama (Bentoel) and PT British American Tobacco (BAT) Indonesia have agreed to merge their management, according to Bentoel CEO Nicholas Tirtadinata recently. The shares of BAT Indonesia will be replaced by that of Bentoel with a ratio of 7,68 Bentoel shares for every BAT Indonesia’s share. According to Nicholas, the merger will be effective as of January 1, 2010, creating one of Indonesia’s most powerful cigarette companies as it will have a wider coverage of its product distribution. The company plnas to control 8,2% of the national cigarette market, or about 260 billion of cigarettes per year.

Indofood`s net profit up 43% PT Indofood`s net profit increased 42.34% to Rp1.58 trillion in the past nine months from Rp1.11 trillion over the same period last year, the company`s Corporate Secretary Werianty Setiawan said in a press statement. While corporate sales dropped 5.7% to Rp28.20 trillion, its gross profit rose by 3.5% to Rp7.76 trillion, thanks to the sales of its consumer branded products, which reached 43% of total consolidation sales. In the same period in 2008, consumer brand product sales accounted for only 30% of total consolidated sales.

Russian investors to build resort in Bintan Russian investors are set to develop a tourist resort in Bintan, Riau Islands Province, Mardhiah, head of the integrated Bintan district licensing and investment promotion body, told Antara last week. “Russian investors` are prepared to invest in this province as expressed in a meeting by Mr. Oleg Gurbulen, a Russian representative,” Mardhiah said. Russian investors plan to build a tourist resort at a 55-hectare coastal area at Berakit village, Bintan District. Construction work is expected to start late December 2009 or early January 2010.

Government Revokes Hundreds of Bylaws to Boost Business Sector Home Affairs Minister Gamawan Fauzi has revoked 206 bylaws which he deemed as double taxation. By Eka Putri

o help spur growth in the business sector, Home Affairs Minister Gamawan Fauzi has revoked 206 bylaws which he deemed as double taxation. He argued that the bylaws violated laws and other regulations that fall under higher legal grounds. “I have revoked many bylaws since I became Home Affairs Minister. All of them are impeding the business sector,” Fauzi said in Pekanbaru, Riau, last Sunday. Fauzi said the business sector such as the hotel or plantation sectors have been burdened by hundreds of bylaws. “Businessmen have paid for building permits and hotel operation permits and yet still have to pay fees for other permits or retributions issued by local governments. These tax bylaws are extra burdens that businessmen have to bear and they are very cumbersome,”

he said. Fauzi said the overlapping bylaws have discouraged business people from investing in the country. “We all know that Indonesia is the country where it takes the longest time to process business permits. We have to fix this problem. Now, four other ministers have agreed to cut the time for investment permit issuance to 17 days,” said Fauzi. He added that the government will impose stern measures on mayors or regents who do not comply with the new policy. The government has appointed the Supreme Audit Agency (BPK) to supervise the permit issuance process. “We will take stern measures should we find in the BPK audit result that regional heads are not complying with the decree. All regional heads must follow the decree about the investment permit issuance process, which is that it has to be ready in only 17 days,” he explained.

Five ministers, Home Affairs Minister Gamawan Fauzi, Justice and Human Rights Minister Patrialis Akbar, Manpower Minister Muhaimin Iskandar and representatives of the Industry Ministry and the Capital Investment Coordinating Board (BKPM) had earlier signed a joint ministerial decree for acceleration of business permit issuance on Wednesday in Jakarta at the Vice President’s Office. Vice President Boediono said he was delighted with the breakthrough to cut red tape from 40 days to 17 days. He said the decree would make it easier for foreigners to invest in the country. Boediono said that at 17 days, Indonesia is ahead of Thailand, where 30 days are required to process an investment permit issuance. “But Indonesia is still behind Singapore which can provide permits in only three days and Malaysia 11 days.” Boediono added that this was an important momentum to make Indonesia an investment target, adding that in the future the permit system will be done electronically so as to expedite the process. Earlier, Industry Minister MS Hidayat said that in his 20102014 strategic work plan, the gov-

ernment vows to see all branches in the manufacturing sector to post positive growth. This year the government has set a 1.84% growth target for the industry sector, but since the global economy is recovering from the crisis the government has set an optimistic industry growth target for the period 2010-2014 at 6.79% on average with 4.65% growth in 2010, 6.1% in 2011, 6.75% in 2012, 7.47% in 2013, and 8.95% in 2014. The government has set 13.31% growth target for at least nine industry branches, namely food, beverages, tobacco this year, which are expected to grow 6.64% in 2010, 7.92% in 2011, 8.15% in 2012, 8.9% in 2013, and 10.4% in 2014 with average growth of 8.4%. “From the growth target that we have set, we hope to provide jobs for about 3,224,275 people or an average of 644,855 people per year,” Hidayat said during a working meeting with House Commission VI last month. He added that Rp735.95 trillion is needed between 2010 and 2014 or Rp147.191 trillion per year to achieve the growth target in the manufacturing industry. Hidayat also expected the industry to start moving to outside Java during the 2010-2014 peri-

od, from 75% in 2009 to 64.79% in 2014. Gradually, the spread of industry in the Java island will further decline to 54.66% in 2020 and 47.65% by 2025, he said. The government is also set to have the blueprint for industry revitalization ready by the end of the year. The Industry Ministry has included the sugar, fertilizer, and cement industries in its industry revitalization plan. The government also urges stock market investors to play a role in the industry sector through foreign direct investment. Hidayat said his ministry has included 45 sugar mills in the industry revitalization program which is dominated by state plantation company PTPN. He added that he has coordinated with the Energy and Mineral Resources Ministry, Directorate General of Oil and Gas, BP Migas to secure gas supplies, which often hamps the fertilizer industry. “We must start the initiative. This is a joint program that needs support from many parties,” he said. The ministry also included the cement industry in its agenda. The infrastructure acceleration program is expected smoothen distributions and logistics.

Operators Compete to Provide BlackBerry Service The services are provided by Indosat, XL Axiata, Telkomsel, Axis, and Smart Telecom, with the number of users already exceeding 500,000. By Eka Putri

elecommunication operators are competing to provide BlackBerry services by targeting various market segments with attractive packages. Indonesia’s second biggest telecom operator, Indosat, for example, is launching BlackBerry Enterprise Services (BES) On Demand, setting their sights at small and medium scale entrepreneurs (SME). “BES on Demand is the first of a kind in the world. We provide this solution to respond to corporate customers’ needss for this service,” Indosat Chief Marketing Officer Guntur Siboro said in Jakarta last week. Indosat provides two options for the BES on Demand service, namely BES on Demand non-hosted and BES on Demand hosted. BES on Demand non-hosted is provided to customers who already have BES infrastructure but wish to use prepaid cards like Mentari and IM3. The BES on Demand hosted service enables customers

to activate their BES service via SMS, a similar method offered by BlackBerry on Demand or retail BlackBerry service. The BES service used to be available only to large corporations with servers under specific specifications. But now customers can access the service through Matrix, Mentari and IM3 cards without the hassle of preparing certain hardware and software. “Companies also don’t need to have a server and can install additional device. They could simply activate it via SMS,” Siboro pointed out. Indosat has so far attracted 250,000 BlackBerry customers with 12,000 being BES customers. A new player in the telecommunication scene, Axis, refuses to lag behind its older rivals Indosat and Telkomsel by launching an economic BlackBerry service dubbed BlackBerry Mail and Friends with a friendly tariffs starting from Rp3,000 per day, Rp20,000 per week and Rp55,000 per month. Although similar to other economic packages, the service has its limits. The BlackBerry Mail package, for instance, only provides email and instant messag-

ing services. The BlackBerry Friends package is provided for those who like to stay online but have a limited budget. The service is limited to only instant messaging and social networking sites with tariffs of Rp3,000 per day, Rp20,000 per week and Rp65,000 per month. Meanwhile, in a bid to tap the lucrative BlackBerry market, handphone vendor ZTE launched the GC990 Qwerty phone and collaborated with Telkom Flexy to offer a complete package. Telkom Flexi Executive General Manager Triana Mulyatsa acknowledged that the collaboration was made to accommodate the BlackBerry fever in the country. “That’s why we call it FlexiBerry,” Mulyatsa said at the launch of the phone on Friday last week. GC990 is a dual SIM Card phone (GSM and CDMA) with the CDMA slot that can only be operated with a Flexi card. The product is targeted at youths and is equipped with Windows Live Messenger, Yahoo Messenger, Facebook and Twitter application. Most of the features in the phone are standard, but GC990

project chief Ni Fei promised that in the future it will integrate the phone with value-added services such as digital music, gaming mobile online, and public services. Despite the BlackBerry wave in the country, Canadian-based Research in Motion (RIM) said it still has no plan to open a representative office in Indonesia. Its products became a hit with sales soaring up to 500% compared to that of last year. “We still don’t have any plan to appoint a Country Manager for Indonesia. Everything is still under control from Singapore,” RIM Regional Vice President RIM Asia Pacific Gregory Wade told detikINET recently. The number of BlackBerry users in Indonesia continues to grow rapidly. The services are provided by Indosat, XL Axiata, Telkomsel, Axis, and Smart Telecom, with the number of users already exceeding 500,000. Meanwhile, Indosat said it has just finished upgrading its network capacity to boost access connection to its BlackBerry service. The upgrade include increas-

hone.com

Downstream oil and gas regulatory agency (BPH Migas) has declared PT Aneka Kimia Raya Corporindo Tbk (AKR) and PT Petronas Niaga Indonesia as partner companies in the distribution of subsidized fuel oil in 2010.

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Pertamina gets partners to distribute fuel oil in 2010

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BUSINESS BRIEFS

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ing the router interface capacity that connects Indosat’s backbone with that of RIM’s. “Our backbone is now 120 MB, but our router interface has been upgraded to 1 GB,” Siboro explained. Siboro said upgrading the router interface was important to guarantee stability in BlackBerry data network especially amidst its rapid growth.

Jasa Marga Aims for Higher Revenue This Year

Bumi Waras to Build CPO Processing Plant in Bengkulu The construction work of the CPO processing plant would begin early 2010.

The Bumi Waras (BM) Group is set to build a CPO (Crude Palm Oil) processing plant in Pino Raya sub district, South Bengkulu District, Bengkulu Province. The company would invest tens of billions of rupiahs for the CPO processing plant, according to Risman Sipayung, head of the Bengkulu provincial plantation service, here on Sunday. The construction work of the CPO processing plant would begin early 2010, he told Antara. The plant would need around 200 tons of CPO to be processed daily, he said. There are a number of oil palm plantations around Pino Raya sub district which could supply the company with oil palm. The factory is expected to produce margarine and cooking oil,

while its residue could be used to produce fodder and raw materials to make soap. “Indonesia`s CPO production in 2010 will increase by 1-1.5 million tons from this year`s estimated figure of 20 million tons. The 2010 prediction is realistic, but it could even reach 2 million tons,” said Dorab E. Mistry of Godjred International Ltd. Speaking at the “Indonesia Palm Oil Conference and Outlook 2010,” Dorab said that the increase in Indonesia`s CPO production would happen because Indonesia has vast areas and is active in expanding plantations, particularly in 2007, that would boost its production next year.

The country’s largest toll road operator Jasa Marga expects to collect slightly higher revenue this year as it predicts higher transaction volume from last year’s transaction at the end of the year. CEO Frans Sunito said recently that in the third quarter Jasa Marga had earned Rp2.6 trillion with a net profit of Rp784 billion. It aims to post Rp3.6 trillion in revenue and more than Rp800 billion in net profit at the end of the year, exceeding its 2008 revenue of Rp3.5 trillion. The state company operates 77% of all toll roads in the country and plans to build seven new roads three in Jakarta, East Java (Gempol–Pasuruan and Surabaya– Mojokerto), and Central Java (Semarang– Solo).

Cipularang highway

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10 December 25, 2009

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Business Property Investments to Rise

Garuda Indonesia’s MCB Debt to be Converted into Shares

The property sector is seen to be offering competitive benefits with rather stable profits. The highest profit of 9-12% comes from the retail sector. By Eka Putri

nvestments in the property sector next year may be rising as a result of stable economic condition and low interest rates. “Compared to 2009, investments may be up by 10 percent,” Cushman Wakefield analyst, Andi Susanto Loe, said Jakarta yesterday. The property sector is seen to be offering competitive benefits with rather stable profits. The highest profit of 9-12% comes from the retail sector. Profits from the residential sector range from 7-9% while the office sector gives 6-8% profit. The increase is also taking place in the Asia Pacific, which is estimated to be growing more rapidly compared to Europe. The Indonesian property market will be dominated by local investors, especially those with access to funding and banking facilities. Indonesian investors have also gone international, doing business in such countreis as the US and China as they believe the profits are higher compared to investing locally. Jakarta Investors Eye Properties in South Sulawesi

Meanwhile, Real Estate Indonesia (REI) has let it be known

The process of converting into shares Garuda Indonesia’s debt of Rp1.19 trillion (US$125 million) in mandatory convertible bonds (MCB) to Bank Mandiri is expected to be completed this year. The conversion of the debt, not including interest, will make Bank Mandiri a 10.6% shareholder of the nation’s flag carrier, Abdul Rahman, a director of the state bank, said. Rahman said the government, as a Garuda shareholder, will take over the responsibility for settling the interest payment, he said.

that in 2010, Jakarta entrepreneurs are set to invest in and develop several strategic housings in Makassar. “Investment and property development in Jakarta and Java has reached a saturation point. Next year, property entrepreneurs will invest in East Indonesia area, especially in Makassar,” said Deputy Chief of REI Djoko Slamet Utomo during a “Short Course on Small Scale Housing Development with BTN Financing” in Santika Hotel last week. Djoko explained that East Indonesia, represented by South Sulawesi, is an area with a large potential in the housing sector. The area, he said, still has huge potential to be developed as housing areas, adding that the housing sector development there is very alluring with its above average regional revenue and economic development. The greatest appeal is the availability of green areas in Makassar, its suburbs and in the regions, which are already hard to find in Jakarta and in large cities in Java, he said. “We see that there still are opportunities to build housing near nature and people in Makassar and South Sulawesi,” he said.

Profits from the residential sector range from 7-9%

Photo: Jababeka

“Investment and property development in Jakarta and Java has reached a saturation point. Next year, property entrepreneurs will invest in East Indonesia area, especially in Makassar,” said Deputy Chief of REI Djoko Slamet Utomo South Sulawesi REI Deputy Head of Education and Training Haris Houdy said that eight big developers will invest in the region next year. He added that they will either invest directly or form a partnership with local entrepreneurs. “The plan to invest in the housing sector, Haris said, will be profitable as it will speed up

housing procurement and increase competitiveness with local products,” he said. “This is positive because it will help city development.” He added that to face competition in the property business, local entrepreneurs have to increase their capacity in all areas, because most of them still lack knowledge, education and ability to

open new areas. Two housing types will be developed in 2010, middle and low class landing houses and vertical houses. Haris appealed to the government to provide stimuli for housing development area in South Sulawesi, such as tax cuts which he said burden local developers.

Meanwhile, Garuda is set to resume Malang-JakartaMalang flights this month, following the repair and improvement of the runway of Malang`s Abdulrachman airport, East Java. “A decision to that effect is made on the basis of the result of a verification of the feasibility and improvements on

the runway by a team of the air transportation directorate general and substantiated by the validation of the supporting capacity of the runway by a team of the transportation ministry,” Senior General Manager of PT Garuda Indonesia for East Indonesia, Suranto, said in Surabaya recently. He said the airport can now by used again for take off and landing operations of its Boeing 737300s, 737-400s, and 737-500s. “The flights would be resumed on the occasion of Christmas and New Year,” he said. The Malang-Jakarta-Malang flights will be carried out by Boeing 733-300s each with 16 business and 94 economy class seats, he said. But, he added, for the time being there will only be one daily flghts at 1.30 p.m from Jakarta to Malang, and at 3.20 p.m from Malang to Jakarta, with each flight to last about 1 hour and 20 minutes.

Photo: www.airliners.net

The President Post

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December 25, 2009 11

Business

Sri Mulyani: Banks Key to Faster Pace in RI Economy If banks manage to maintain their soundness and channel credits up to more than 15 percent of the target for 2010, the economy would perform better next year. By Eka Putri

inance Minister Sri Mulyani Indrawati has said that banks play a key role in determining the pace of the Indonesian economy. She also said the growth of the economy in 2010 is subject to banks’ “soundness and their credit disbursement”. “I believe the Indonesian economy will perform better next year,” she said after taking part in a loan agreement signing event involving state electricity company PT PLN and a number of banks here recently.

economy would perform better next year, she said. This year`s inflation is possibly below 3%,Mulyani said, because in terms of monetary stability what had happened in 2009 was “good”. “From a stability point of view what happened in 2009 in terms of inflation, interest and rupiah exchange rates were all good. In 2009 the inflation rate will possibly reach below 3% with the rupiah appreciating in a performance that is the best in the world,” she said.

If banks manage to maintain their soundness and channel credits up to more than 15 percent of the target for 2010, the

She added that in 2009 the inflation rate in Indonesia was quite good and low. “As such in 2010 it is expected

New PLN Board to Cut Expenditures by Rp 15 trillion State-owned electricity company PT PLN is to save up to Rp 15 trillion in expenditure by cutting fuel oil use by as much as 35% By Eka Putri

The newly-installed management of state-owned electricity company PT PLN is to save up to Rp 15 trillion in expenditure by cutting fuel oil use by as much as 35%, a minister said. “The cut in fuel oil use will be one of the radical concepts Dahlan Iskan (the new PLN president director) has offered,” State Enterprises Minister Mustafa Abubakar said at a press conference after inaugurating the new PLN board here on Wednesday, news media reported last week. Mustafa said Dahlan has a concept to solve PLN`s problems. “The concept is good and radical, and is about empowering PLN now and in the future,” he said. He also said the concept offered new breakthroughs to eradicate fuel subsidy for power generating plants, to bring new technology and increase the use of gas and coal. “Dahlan pledged to seek a new funding scheme to finance power plants and reduce the company’s huge debts,” he said.

Dahlan has a concept to solve PLN`s problems.

“The cut in fuel oil use will be one of the radical concepts Dahlan Iskan (the new PLN president director) has offered”. Mustafa Abubakar State Enterprises Minister

As reporters men at the conference questioned the capability of the former boss of Jawa Pos Group in improving PLN, Mustafa said the government would give him an opportunity to implement his concept well. “There is no political contract. It needs to be appreciated and supported. We hope Dahlan, who has a journalistic background, will be able to lead the company,” he said.

that inflation will remain low despite increasing inflationary pressures,” she said. She said it was expected the rate of inflation in 2010 would be 5%, plus or minus 1%.

He said with the JanuaryNovember annual inflation at 2.45%, inflation in the entire year of 2009 is expected to be around 3% “or a bit lower or higher than that.”

Coordinating Minister for the Economy Hatta Radjasa shared her view on the inflation rate this year, saying this year`s inflation was expected to reach 3%. “Inflation is expected to be 3% or somewhat below that figure,” he said. The head of the Central Bureau of Statistics, Rusman Heriawan, said he predicted this year`s inflation would also be around 3%, as “prices of commodities are low.”

He added that inflation pressure in December was expected to come from the price of rice due to year-end seasonal factors. Transportation sector is also expected to rise, he added. He predicted that the price of chili, which had earlier become an inflation driver, will drop sharply this month. “So based on the past two weeks of observation I think inflation could be far below 1% because the price of some commod-

ities such as red chili has dropped very sharply although the price of rice has risen a bit,” he said. “We have however not yet taken into account the price of transportation which is rising ahead of Christmas holidays.” The director of macro-planning of the National Development Planning Agency, Bambang Prijambodo, also shared the view saying this year`s inflation could be around 3%. He said global price of various commodities is still quite low while the supply is “safe”. “World demand is still not normal and that the price of commodities is still quite friendly,” he said.

Finance Minister Sri Mulyani Indrawati

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The President Post

12 December 25, 2009

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Human Capital Indonesia Companies are Failing to

“Manage Talent”

In addition to the financial benefits, top performing organizations also reported high scores for areas such as employee engagement (by analyzing performance across areas such as culture, work environment, management and leadership style, challenging work, performance feedback, fair rewards and growth opportunities) and productivity (revenue per employee of $421 for the top performers versus $295 for the peer group). Hackett’s findings point to a persuasive causal effect. Engaged employees are much more likely to provide that extra discretionary effort in their daily work; this in turn drives up productivity which positively impacts the financial results. We find it useful to think of talent management according to five dimensions:

Strategic workforce planning to identify the talent a company needs, now and in the future; and to create an action plan to close the gaps This is about identifying the key skills and competencies re-

Attracting, recruiting, selecting, hiring, and on-boarding the appropriate talent. HR must develop a firm grasp of the key skills and competencies required by the organization and ensure that people with these requirements are in place.

Creating the right skills and competencies through learning and development efforts, then managing performance When identifying the requisite strategic skills and competencies, HR must ensure that delivering to these requirements is central to their learning and development efforts. HR must also make sure that the appropriate performance management system is in place so that the people with these skills and competencies are both expected to, and allowed to perform.

Ensuring the necessary flow of talent through succession planning and management (for high potentials and critical positions); engaging and retaining the workforce through initiatives that build an attractive environment, identifying a satisfying career, and providing meaningful rewards Maintaining a well stocked “talent bench” is a crucial HR role. When this bench is empty or occupied by below standard candidates the future of the enterprise is compromised. But stock-

ing the “talent bench” requires that close attention is paid to creating a workplace experience and environment that encourages talent to stay with the organization. This has myriad dimensions: the cited learning and development aspect, cultural interventions and the creation of right appraisal, compensation and reward systems, as examples.

Helping employees exit the workforce when the time comes for them to move on either to another career or into retirement. Like any process, there is a start and an end to talent management. When it comes time for the employee to leave the organization, the leaving process must be managed effectively. The use of exit interviews to determine why the employee is departing the organization and to gain an understanding of how they experienced the organization is useful for making continuous improvements to HR practices and policies. Participants in OTI’s research study did not believe that HR organizations are playing a role in managing talent within Indonesia-based companies. However, these same business leaders rated “to attract, maintain, develop and retain talent,” as the second most important role of HR (Figure 3). Clearly, business leaders are awake to the fact that the battle for the best employees that is raging throughout the world has reached the Indonesian shores and that they are looking to their HR departments to deliver the talent solutions. Giving the compelling financial and other benefits available to those who effectively manage talent, this can be decoded as nothing short of a “call to arms” for Indonesia’s HR organizations.

figure 1: Managing Talent is Not Presently a Key Role for the HR ORganization 30%

26.15%

24.62%

23.85%

25% 20% 15%

12.31%

10%

7.69% 3.85%

1.54% Any other

Acting as the link between employee and management

Managing change

Carrying out HRM activities that are linked to Business Strategy

0% Managing talent

Figure 2: Financial performance of talent management top performers versus the Fortune 500 companies. Talent Management top Performers

Fortune 500

Annual impact on average Fortune 500 company*

EBITDA

16.2%

14.1%

$399 million

Net profit margin

7.1%

5.8%

$247 million

ROA

5.5%

3.7%

$992 million

ROE

17.3%

13.6%

$340 million

Financial metric

*Averages for Fortune 500: revenues = $19 billion, assets = $55.1 billion; equity = $9.2 billion

Figure 3: Business Leaders Rank Managing Talent as the Second Most important Role of HR Organizations in Indonesia 30%

27.62%

25% 20%

17.13%

15% 10%

9.39%

9.39% 7.18%

6.63%

8.29%

9.39%

3.87%

1.10% Other

To commit and engage people to organization

To keep people motivated

To improve competence

To complete globally

0% To attract, maintain, develop and retain talent

By using a sophisticated modelling approach, Hackett researchers identified and grouped those organizations from its global database of about 3000 companies that could be described as top-performers in talent management. Hackett analyzed talent management performance according to four components: 1. Strategic workforce planning (as examples, workforce gap assessment and leadership gap assessment). 2. Staffing services (such as recruiting & staffing and exit process). 3. Workforce development services (as examples learning & development and career planning). 4. Organizational effectiveness (such as employee relations and

The researchers then compared the financial performance of the talent management top-performers with the Fortune 500 companies. The findings were stunning. Those organizations that are talent management top performers significantly outperform the Fortune companies against financial metrics (Figure 2). The size of the gap between top performers and the Fortune 500 companies strongly suggests that any cutbacks in talent management might indeed cut shortterm costs but will likely have a deleterious financial impact over the longer-term.

quired by the organization to deliver to its strategy. This requires HR to have a detailed understanding of the strategy of the enterprise and its business units and be able to identify those “strategic job families” (those that are the most critical for long-term success) that must be protected and nurtured.

To link people to strategy

These pressures are converging to create shortages, not always of bodies but of the right bodies to fill essential roles. smart companies also recognize that when talent walks out of the door they

Moreover, there is compelling evidence that those that invest in talent management reap considerable benefits - most importantly financial. In 2007 the US-headquartered strategic advisory and benchmarking firm The Hackett Group launched an indepth study to determine whether talent management strategies had a direct impact on financial results.

individual performance management).

Developing the human resource

Therefore, by some distance the most worrying statistic that emerged from a major research study that we commissioned to

This is particularly worrisome because the evidence suggests that “talent management” will increasingly become more akin to a “war” than a simple HR management process - and for a number of key reasons. • The aging of the workforce (for instance, the so-called post war baby boomers are reaching retirement age) • Changing demographics and altering attitudes toward work and work-life balance (for instance, the so-called “generation y” – those people born after 1980 – are looking for a different work experience than their parents) • Globalization and the competition for talent around the world (as stocks dwindle talent is being sourced globally) • Mismatched demand for and supply of critical skills (there is simply not enough talent to go around)

are losing individuals with institutional knowledge and critical business relationships.

To impement strategy

In our book “Managing Human Capital in Indonesia,” we define talent as: “someone who has the required skills, competencies and attributes to fulfill his or her present job and who also clearly has the capabilities to evolve into future roles (typically more senior). Such people consistently deliver outstanding performance and are highly motivated. In short, their contribution is of value to the organization today and into the future.” We would argue strongly that the managing of such talent (talent management) should be a core concern of business leaders and a central focus of their Human Resource (HR) functions in good times or bad.

support our book was that just 3.85% of business leaders believe that HR organizations within Indonesia are playing a role in managing talent (Figure 1).

To improve productivity/ performance of individual and organization

he global economic meltdown that resulted from the socalled “credit crunch” has forced many organizations to dramatically cut costs. Many business leaders have been quick to cut out all “unnecessary” discretionary spend such as around people development (which as intangibles are expensed rather than capitalized) as well as making sometimes drastic headcount reduction. Although saving money and boosting earnings in the shortterm, there is a cost to re-hiring and re-training new employees when the economy takes off again. Not to mention lost revenue if the company is unprepared

to take advantage of new opportunities. But perhaps the most frightening consequence of these cutbacks will be that many organizations will emerge from the downturn without the requisite talent to compete in increasingly global marketplaces – where the abilities of the employee base provide the greatest, and perhaps only, sustainable competitive advantage.

James Creelman

Administrative

We define talent as: “someone who has the required skills, competencies and attributes to fulfill his or her present job and who also clearly has the capabilities to evolve into future roles (typically more senior).

Krishnan Rajendran

To maintain competitiveness

Naresh Makhijani

The President Post

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December 25, 2009 13

Tourism

“Live the Deal”

Set to Respond to Climate Change “Live the Deal” campaign was launched early this month during the Copenhagen Climate Summit. By Eka Putri

n innovative, global campaign to help travel companies and destinations respond to Climate Change, reduce their carbon footprint and move to the Green Economy, was launched early this month during the Copenhagen Climate Summit. Announcing the new initiative, called “Live the Deal”, long time tourism green campaigner Geoffrey Lipman UNWTO Assistant Secretary-General said: “What Copenhagen represents is a new commitment by the world community towards sustainable low carbon growth patterns. The targets and mitigation actions that countries develop and negotiate through this process will be a new base for travel industry action. What we are providing is a very simple way to get behind the evolving government initiatives, to keep pace with changing patterns and to demonstrate that our sector is acting, not simply talking.” He added ”We should not be

ashamed to promote the growth of smart travel – clean green, ethical and quality - it’s the lifeblood of trade, commerce and human connection”. “Live the Deal” follows the pattern established in the UN led Copenhagen Seal the Deal campaign by its single minded focus, its simplicity and its broad based engagement goals. It will seek to encourage the sector directly and through representative organizations. It has been developed with the support of UNWTO, whose Secretary-General Taleb Rifai calls it “The kind of link between global policymaking and responsible tourism action that we are looking to inspire and encourage.” “Our sector fuels the economy, creates jobs and is one of the biggest development opportunities for the world’s poorest countries – and it can be a leader in the transformation to a green economy”. The campaign will be underpinned by a simple carbon calcu-

lation tool that allows easy correlation with government targets and implementation measures, as well as a Think Tank and Annual Innovations & Investment Summit. The inaugural Summit will be in Abu Dhabi in the last quarter of the year. Live the Deal will be promoted by a multimedia video “We can take this Climate Change” from platinum album writer and singer Alston Koch which will be profiled around the world in 2010 (See animated video on www.UNWTO.org). Meanwhile, the United Nations World Tourism Organization (UNWTO) and the World Travel & Tourism Council (WTTC) this month released a joint communique saying that Travel & Tourism is one of the largest industries in the world providing a strong impetus to global economic development. In 2009, the Travel & Tourism Economy is expected to account for 9.3% of global GDP

The campaign will be underpinned by a simple carbon calculation tool that allows easy correlation with government targets and implementation measures, as well as a Think Tank and Annual Innovations & Investment Summit.

and to generate over 210 million jobs, or 7.4% of global employment. In 2008, 922 million international tourist arrivals were recorded, contributing US$944 billion in international tourism receipts. The industry has often acted ahead of regulation to adopt and disseminate standards and best practices on greenhouse gas (GHG) mitigation and adaptation. Joint Communiqué from UNWTO and the World Travel & Tourism Council (WTTC)

The sustainability of the Travel & Tourism industry and that of the environment are mutually dependent. Using its role as an international conduit for peace and prosperity, the industry is actively engaged in the protection of fragile ecosystems and indigenous communities and contributes towards the successful advancement of the UN Millennium Development Goals, especially poverty alleviation in develop-

ing countries. Travel & Tourism’s far-reaching benefits position it as a leading player in a strong, united, global effort at combating climate change. The World Travel & Tourism Council (WTTC) and the World Tourism Organization (UNWTO) are, respectively, the leading private and public sector entities within Travel & Tourism. WTTC is the business leaders’ forum for 100 of the foremost Travel & Tourism industry companies while UNWTO is a specialised UN agency, with a membership of over 150 countries and some 400 private and public tourism stakeholders. Working together, the two world bodies are aligning efforts to unify a fragmented Travel & Tourism industry, speaking with one voice on the critical issue of climate change. In order to show their commitment both organisations jointly hosted a side event during the COP-15 negotiations: Addressing the Challenges of Climate Change – Perspectives from the Travel & Tourism Sector. The event highlighted innovators from the private and public sector from across the world and all sectors of the industry. Under the leadership of WTTC and UNWTO examples of best practice were presented in order to communicate to policy-makers and the rest of the industry Travel & Tourism’s proactive approach to carbon emissions’ mitigation and adaptation. A sound framework is critical for the Travel & Tourism industry to give companies the trans-

The Travel & Tourism industry has in the past developed, and will continue to develop, sustainable solutions, which will assist the industry to be at the forefront of efforts to combat climate change parency necessary to make informed investment decisions, many of which can strongly influence a nation’s economic development. The Copenhagen Agreement provides a unique opportunity to set the foundation upon which a resilient green economy can be developed. “UNWTO’s Davos Declaration Process on climate change response paved the way to position the tourism industry as a relevant player of global climate neutrality,” said UNWTO Secretary-General ad interim Taleb Rifai. “Joining forces for tourism to speak as one in Copenhagen responds furthermore to a key recommendation of the UNWTO Roadmap for Recovery, highlighting the importance of building a strong public-private dialogue and boosting strong partnerships. The great crosscutting impact of our industry makes it necessary to establish and maintain this close collaboration,” he added, “and I am confident that together we will contribute to a better positioning of travel and tourism in the global climate response agenda.” Public and private sector partnership in this issue is essential. “The Travel & Tourism industry urges global leaders in the

wake of the Copenhagen Agreement – regardless of its final form – to actively engage the private sector in translating the internationally agreed framework into transparent, supportive and progressive national and regional policies,” Jean-Claude Baumgarten, WTTC President & CEO, stressed. “The Travel & Tourism private sector has always sought a deeper working relationship with governments, and the anticipated Copenhagen Agreement will provide an excellent opportunity to further develop this relationship.” The Travel & Tourism industry has in the past developed, and will continue to develop, sustainable solutions, which will assist the industry to be at the forefront of efforts to combat climate change, and will play a much needed role in terms of exchange of innovative technology to advance carbon emissions’ reduction. Incentives and policies, as well as global sectoral approaches, supported by a ‘level playing field’ void of restrictions to trade, will allow the industry to efficiently pursue the scale of change for progressive transformation to occur. Only then can the true potential of the industry be unlocked. (UNWTO)

About UNWTO

About WTTC

The World Tourism Organization (UNWTO), a United Nations specialized agency, is the leading international organization with the decisive and central role in world tourism. It serves as a global forum for tourism policy issues and a practical source of tourism know-how. Its membership includes 154 countries, seven territories and more than 400 Affiliate Members representing local government, tourism associations and private enterprise.

The World Travel & Tourism Council (WTTC) is the business leaders’ forum for the Travel & Tourism industry, working with governments and other stakeholders to raise awareness of the importance of one of the world’s largest generators of wealth and employment. With Chairs and Chief Executives of the world’s 100 foremost Travel & Tourism companies as its Members, WTTC has a unique mandate and overview on all matters related to Travel & Tourism.

The President Post

14 December 25, 2009

Travel

Sunny

Sanur A vibrant village in the 1970s, Sanur in southern Bali retreated to the background as the island’s upscale Nusa Dua, cozy Legian, artistic Ubud and elegant Seminyak took center stage. It has, however, in recent times reclaimed its rightful place among its peers on the back of its intrinsic time-honored allure. Text and Photos by Taufik Darusman

anur is not exactly Bali’s best-kept secret. After all, it was precisely the village’s exotic appeal that attracted tourists the world over to the island and sparked its tourism growth in the early 1970s. The island is now a perennial winner of major travel magazines’ much-coveted ‘the world’s most favorite resort’ title. Rock stars Mick Jagger and David Bowie always make it their point to spend time in Sanur to re-charge their batteries after doing exhausting concerts in Australia. Celebrities such as Sarah Ferguson and Sophia Loren have put Sanur in their list of must-visit places (maybe now no longer, but certainly during their happier days). And when years ago Dewi Soekarno, to the delight of incorrigible voyeurs, decided to bare her natural assets -- albeit somewhat depreciated -- in a coffeetable book, it was said that she would settle for no less than Sanur as the site for the steamy photo session. “Sanur stands out among other areas in Bali for its wide appeal that caters to a wide spectrum of visitors,” said Ida Bagus Ngurah Wijaya, the chairman of the Denpasar-based Bali Tourism Board (BTB) and owner of the Segara Village cottages, told this magazine recently. He added: “Here you’ll find sandy beaches, spectacular sunrises, a golf course, a shopping center, art galleries, a five-star hotel and beachfront villas. The culinary scene is also picking up pace, with new eateries opening at a steady rhythm.” “No village in Bali can boast such a wide range of facilities, including international schools due to its sizable foreign community. At present, we’re in the opening of spas mode.” In many ways, with its irresistible drawing power of sun, sand, spa and (a little bit of discrete) sex, Sanur defines Bali. But there is more to Sanur than that. The aura of old money and new money is in the air, an interesting combination that takes shape in Jalan Danau Tamblingan, a treelined street dotted with villa hotels, chic boutiques, fine-dining restaurants and art galleries, many of which owned by foreigners with locals as their fronts. On Saturday evenings, the place to be for good, reasonablypriced food and good, reasonably-performed music is Cafe Batujimbar on that very same street. Says BTB’s Wijaya: “Our promotional drive also focuses on the so-called ‘silver market’, baby-boomers who have retired and have discretionary income and free time to spend outside their countries. So far we have been able to attract large numbers of retirees from Holland, who come here to stay for up to six months as they enjoy special rates.” But no matter where they come from and spend their time in Sanur, they all share a common desire to visit the Le Mayeur Museum, the former house-studio of the famous Belgian impressionist painter of aristocratic stock who came to Bali in 1932 and stayed there for almost three decades. The museum displays parts of his large body of work in several rooms, whose upkeep leaves much to be desired. But what the

museum lacks in good maintenance it makes up in historical original paintings that never fail to amaze even the uninitiated. “In presenting Sanur to the world, we try to combine tourism and art,” says Ida Bagus Sidharta Putra, owner of the chic Griya Santrian Hotel & Resort. Putra, who is also an art patron—he is the chairman of the Himpunan Pelukis Sanur, an association of Sanur painters—actively promotes Sanur by holding an annual event that features the Sanur’s dynamic art, culture and cuisine. “Sanur comprises seven small districts that are seamlessly bound by a common interest, that is to preserve its cultural heritage in ways that allow us to come to terms with modernization,” he said. The atmosphere from sunrise till sunset in Sanur is of endless opportunities to discover how Balinese, who are blessed with a strong artistic flair, conduct their life. This explains the high number of art galleries you’ll find in many parts of Sanur. Sanur was the site of Bali’s first modern hotel, then called Bali Beach, which suffered in 1992 a fire that destroyed a major part of the hotel. One room was mysteriously untouched, however, and the Balinese have dedicated that room as a shrine, never to be occupied. In the late 1970s the BaIi Hyatt took center stage amidst a boom in the island’s tourism. In the course of time new modest but comfortable hotels and villas sprung up along the coast, attracting more and more tourists not only to stay but stay for an extended period of time. The atmosphere here is laid back, which is probably the main reason why it’s popular with the above 50 crowd. On any given day a stroll along beachside path that binds Sanur’s main hotels and villas, you are likely to come

across long-staying foreign tourists enjoying their retirement period. Hotel owners say many European baby-boomers would spend months in Sanur to avoid the cold harsh winter back home. Sanur also offers moderate waves that surfers and people with young kids find ideal. But its nightlife is basically confined to bars, pubs and restaurants that, however, provide respectable live music. In deference to globalization fast-food joints such as McDonald’s and KFC are on hand. In recent times, however, Italian eateries have made their way to Sanur, one of which is The Village, which lies on the main road. It has a unique wine cellar and is open daily up to midnight. Another pleasant aspect of Sanur is its wide beach front. A footpath of square stones covers the entire distance from the Griya Santrian to the Grand Inna Hotel and beyond, leading to the Le Mayeur Museum. This allows visitors to stroll along or stop when they feel like it for a drink or snack at a beach side restaurant. Or, for that matter, just occupy one of the beach chairs lying around and reminisce the good times in the past and at the same time hope for even better times in the future. How to get to Sanur

Garuda Indonesia flies the Jakarta-Denpasar route 59 times in a week. It takes 25-30 minutes by car to get to Sanur from Ngurah Rai International Airport, subject to the density of traffic due to Bali’s rapid economic dcevelopment. Recommended places to stay

Sanur Beach Hotel, Griya Santrian, Segara Village Hotel, Bali Beach Hotel Reprinted by permission from Garuda Inflight Magazine

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The President Post

www.thepresidentpost.com

December 25, 2009 15

Health Normal Cholesterol Doesn’t Guarantee Healthy Heart People with normal levels of LDL (bad) cholesterol still need to be screened for a marker of inflammation

eople with normal levels of LDL (bad) cholesterol still need to be screened for a marker of inflammation in order to identify those who may benefit from cholesterol-lowering statin therapy to reduce their long-term risk of heart attack, stroke and death, say U.S. researchers. “This study builds on results from the landmark JUPITER trail, which showed that statins can prevent heart disease in people with normal LDL-c, or bad cholesterol, and an increased level of CRP,” study co-author Dr. Christie Ballantyne, director of the Center for Cardiovascular Disease Prevention at the Methodist DeBakey Heart & Vascular Center in Houston, said in a news release. C-reactive protein (CRP) is a blood-borne marker of inflammation that has long been linked to cardiovascular risk. Questions regarding the usefulness of CRP measurements remained after the results of the JUPITER trial, which was stopped at two years median patient follow-up, were released in 2008. One major question was whether observed cardiovascular disease event rates would persist with time. “The new study analyzed patients’ risk over an average of seven years to determine that CRP is, in fact, a long-term indicator of cardiovascular risk. This is important because approximately one in five men over 50 and women over 60 has a similar profile of increased CRP but normal LDL,” Ballantyne said. The researchers demonstrated that a simple screening test — age plus CRP — can identify patients who may benefit from statin drugs. The study was published Dec. 11 online in the Journal of the American College of Cardiology. Which Statin Will Lower Your Cholesterol? Lipitor (atorvastatin), Zocor (simvastatin), Crestor (rosuvastatin), and other statins can dramatically lower levels of arteryclogging cholesterol in the blood, an ability that makes them hugely popular in our cholesterol-rich country. Heart researchers have estimated that these drugs could save 1,000 lives each week for every 10 million high-risk heart dis-

ease patients who take them. One study of nearly 20,000 patients found that, after a heart attack, taking a statin can prevent the risk of death within one year by 25%. Among patients who don’t even have cardiovascular disease, taking a statin preventively can reduce the risk of a major coronary event like heart attack by about 30%. When Denise Foley, 57, of Philadelphia, went through menopause, her cholesterol shot up from 160 to 240. Her doctor warned her that that number, along with her family history of heart disease, put her at risk for a heart attack or stroke. But she didn’t want to take heart medication. “I really wanted to lower my risk without drugs,” she says.

“

One study of nearly 20,000 patients found that, after a heart attack, taking a statin can prevent the risk of death within one year by 25%. Seven years ago she was prescribed Lipitor to control her high cholesterol. Soon after, she started feeling depressed for no reason. “I went to a party filled with good friends, and I sat in the corner and thought everyone hated me,” she says. Turns out depression can be a side effect of Lipitor. Her doctor switched her to Zocor, which she now takes successfully. Her cholesterol is in a safe range. “I worry about the long-term effects of these drugs,” she says. “But I also know that without medication, I might be dead from a heart attack or stroke.” Statins May Worsen Heart Failure for Some Since statins can cause muscle damage, they could theoretically also harm the heart—which

“Nanosensors” Detect Early Signs of Cancer “Nanosensors,” a blood-based technology, can spot early signs of cancer, according to a new study. By taking everyday blood samples from patients, the device can lead to quicker detection and treatment, said the study, whose findings were published online Dec. 13 in the journal Nature Nanotechnology. The sensors were developed by researchers at the Yale Institute for Nanoscience and Quantum Engineering in New Haven, Conn. The device hunted for and picked up biomarkers for prostate and breast cancers, according to study co-author Mark Reed, associate director at the institute. The technology “can generally be applied to many other types of biomarkers,” said Reed. “The real achievement here was demonstrating this with blood, which was a longstanding goal,” Reed explained. “It could not be done before because blood has too much salt and other stuff in it, which prevents this type of sensing. We developed a method to filtrate out specifically what we want to detect.” Only small amounts of blood

were needed and the process took all of 20 minutes, according to Reed. “From a personalized medicine point of view, you could take a spot of blood from a finger prick and get results within minutes,” said William C. Phelps, program director of Translational and Preclinical Cancer Research at the American Cancer Society. “It would be simple, stable and relatively inexpensive,” he said. “There`s a crying need for things like this in lung cancer, where you would want to be able to detect biomarkers in a sputum sample, and pancreatic and ovarian cancer,” Phelps said. “You can`t really detect these early, so they`re very hard to treat,” he noted. Although the technology has yet to make it to the doctor`s office, it is revolutionary in more than one way, experts say. Previous technologies work in much the same way, but can only detect biomarkers in purified solutions, not the real thing -- meaning fluid samples from patients. (Xinhua-OANA)

is, essentially, a big muscle—although there is no evidence that this is the case. To investigate whether the drugs might affect the heart and other muscles in heart failure patients, Dr. Mike Cahalin and his colleagues analyzed data on lung function and exercise tolerance in 136 patients, 61 of whom were taking statins.

Photo: www.wikivisual.com

Overall, the patients taking statins had worse lung function and exercise tolerance than those who weren’t taking the drugs. But when Cahalin and his team analyzed patients with the two different types of heart failure—systolic and diastolic— separately, they found the drugs seemed to help those with the systolic version, and hurt those with diastolic heart failure. He speculated that the anti-inflammatory effect of the statins could be helping systolic heart failure patients, while their muscle-weakening effects might impair breathing in those with diastolic heart failure. A major problem with the study, notes Dr. Horwich, is that there were a number of factors that could have contributed to the findings; for example, it’s not clear from the study why doctors chose to put some patients, but not others, on statins. Systolic heart failure patients may have seen more benefits because they were more likely to have coronary artery disease, she adds. “I think it’s definitely possible that statins may not be helpful in diastolic heart failure,” Dr. Horwich says. She notes that the importance of diastolic heart failure has only become clear relatively recently. Although doctors have a good handle on how to help patients with systolic heart failure, she explains, there really aren’t

CHINESE SCIENTISTS:

Undersea Probe May Help Produce New Medicines

Photo: www.wellnesstaskforce.org

any treatments that are known to help patients with diastolic heart failure. According to Cahalin, it could make sense to do a simple lung function test on heart failure patients before prescribing statins. That way, he says, it would be easy to tell if their lung function got worse while they were on the

drugs. And if someone with diastolic heart failure is prescribed the drug and his or her heart failure symptoms—such as weakness, fatigue, and shortness of breath—get worse, he adds, “that should be investigated.” (health.com)

Chinese scientists have recently said that China`s ongoing undersea probe of a sulfide deposit could help produce new medicines by studying the submarine hydrothermal organisms. China`s home-made underwater robot “Hailong 2” grasped 7 kilograms of sulfide in a deep-sea hydrothermal “chimney” vent 2,700 meters below the sea`s surface near the equator in the eastern Pacific on Oct. 23. It may contain many deep-sea microbes widely regarded by scientists as the planet`s original life forms. Ma Weilin, one of the chief scientists on the Dayang 1 Scientific Investigation Ship, told Xinhua the organisms living in an extremely high pressure environment suffused with poisonous sulfide were

worthy of study in developing gene-based medicines. Hydrothermal solution is produced by hot magmatic emanations in deep water, around which many hydrothermal organisms survive by chemical combination. Wang Chunsheng, marine ecologist of the Institute of Oceanography under the State Oceanic Administration, said, “The hydrothermal organisms have the potential to help the development of new anti-toxin drugs.” They live in an aphotic depths of the sea, an environment quite similar to the very early stages of the earth when living things came into being, Wang said. (Xinhua/OANA)

The President Post

16 December 25, 2009

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Lifestyle How Aussies Plan to Get Healthy in 2010 Independent market analyst Datamonitor found that more than three-quarters of Australians are placing greater importance on maintaining or improving their health. A similar proportion (71%) of Australians reported that they ‘make conscious attempts to eat healthily’ either ‘all’ or ‘most of the time’.

he latest research conducted by independent market analyst Datamonitor found that more than three-quarters of Australians are placing greater importance on maintaining or improving their health. A similar proportion (71%) of Australians reported that they ‘make conscious attempts to eat healthily’ either ‘all’ or ‘most of the time’. Katrina Diamonon, Consumer Markets Analyst, noted that this mindset even applies to our alcohol purchases. Indeed, more than a quarter of Australian drinkers make choices with health considerations in mind. Looking at the number of lowcarb brews on offer nowadays, it is evident that not even our beloved beer is immune from rising health consciousness.

Photo: www.food.gov.uk

Clearly, Australians are putting in a genuine effort to make more informed choices, and in the coming year, this effort will manifest itself in a growing attentiveness to the nutrient profile and ingredient composition of foods. As health conscious Australians show a greater interest in what goes into their food, and ultimately their bodies, the most important labels around will be those in the supermarket. Indeed, nutritional labeling has emerged to become a hot topic in food and beverage marketing, not just in Australia but globally. Nearly half (48%) of Australians report that they routinely rely on nutritional information on product packaging to help make food and drink choices, compared to a global average

of 44%. “This attentiveness puts additional pressure on food and beverage manufacturers to respond via effective product reformulation that is communicated in an engaging, believable manner,” comments Diamonon. But what information in particular are these label-conscious Australians looking for? Growing industry and media attention surrounding niche followings such as soy-rich and gluten-free diets would suggest that this is the new craze. Yet Datamonitor found it is still the traditional ‘dietary evils’ that preoccupy Australians’ choices. Nearly half (46%) of Australian consumers deem ‘low sugar or no added sugar’ claims to exert considerable influence on their

product choices, while 44% perceive the same about ‘low or reduced fat’. Diamonon noted, “the implication is that, while newer health considerations offer considerable future potential, they are not yet mass market considerations. Marketers must therefore adopt tempered expectations when it comes to using the newest ‘vogue ingredients’ in health-driven product reformulation.” Indicative of rising knowledge about the link between diet and

Photo: www.breakthroughempowerment.com

Tips for Beating Holiday Jet Lag

oliday plane travel is rarely hassle- free. Packed airports, delayed (or canceled) flights, and lost luggage can send even the most stable of travelers into an emotional tailspin. But for people who struggle with insomnia, flying can present additional problems. The disruption to normal schedules caused by flying—and especially jet lag—can wreak havoc on sleep patterns. If you’re traveling between time zones this season, try these tips. Though they won’t work for everyone, they just may keep you from yawning your way through the holidays Melatonin--a natural hormone also sold as a supplement that regulates the body’s sleep-wake cycle. Levels rise after dark, peak overnight, and then fall in the morning. In some studies, taking melatonin has been shown to help fight jet lag. Experts recommend taking melatonin after dark on the day that you travel, and for a few days thereafter. For people flying east, some experts recommend taking melatonin in the evening (at 6 or 7 p.m., say) for a few days before your flight. Melatonin can interact with medications, and if taken incorrectly can actually disrupt sleep,

so be sure to consult your doctor before trying it. Lavender oil—(also known as lavender essential oil) is a proven sleep enhancer. In a small 2005 study conducted by psychologists at Wesleyan University, in Middletown, Conn., lavender was shown to act as a mild sedative, promoting deep sleep and leaving the people who took it feeling more refreshed the next day. Pycnogenol—a dietary supplement—a trademarked extract of the bark of French pine trees— reduced jet lag symptoms in a small 2008 study conducted in Italy. People who took 50 milligrams of Pycnogenol three times a day for a week, starting two days before their flight, had substantially fewer symptoms (including fatigue, insomnia, and mental slowness) than people who took a placebo. And what symptoms the people in the Pycnogenol group did experience lasted just 18 hours on average, compared to 39 hours in the placebo group. As with any supplement, you should consult your doctor before trying Pycnogenol. Prescription sleep medications

Carlos Schenck, MD, a sleep expert at the Minnesota Regional Sleep Disorders Center and

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the author of Sleep: The Mysteries, The Problems, and The Solutions, says that short-acting sleep medications such as Sonata or Ambien can be helpful when traveling west to east (especially on transatlantic flights). When flying in the opposite direction, longer-lasting pills such as Lunesta or Ambien CR tend to work better, he says. You should never take these drugs without a prescription, and they shouldn’t be mixed with alcohol. Adds Dr. Schenck, “Never take any sleeping pill for the first time on a plane; get used to it at home first.” Soak up the sun

When flying west to east, you’re likely to feel sleepy on the day after your arrival. Getting as much sleep as possible the night before will help, and so will getting some sun. “To keep awake, get bright light early in the day by turning on a bright lamp or taking a walk in the sunshine,” says Dr. Schenck. And avoid naps, he adds, because they tend to prolong jet lag. If you fly from east to west and arrive in the afternoon, says Dr. Schenck, recharge by getting some late-afternoon sun, and try to stay awake until your usual bedtime back east.

PUBLISHED BY Yayasan President University CEO & EDITOR IN CHIEF Ali Basyah Suryo CONTRIBUTORS Atmono Suryo Cyrillus Harinowo Hadiwerdoyo Naresh Makhijani Taufik Darusman Thomas W. Shreve Wuryastuti Sunario Vidya Dahlan

EDITORIAL & ADVERTISING/ CIRCULATION DEPARTMENTS Cory Margaretha LAYOUT & DESIGN Mohamad Akmal

health, salt has emerged as the ‘new villain’ in the food industry. Accordingly, a growing number of initiatives have been launched in the region to raise consumer awareness of the negative effect of salt on health. The Australian Division of World Action on Salt & Health (AWASH), for example, launched the Drop the Salt! Campaign in a commitment to reduce salt intake in the Australian population to 6 grams a day by 2012. Expect salt content to be top-of-mind for Australian consumers in the

coming year, and labeling of salt information to be a major focal point for manufacturers. It is important to note however, that growing concern surrounding ingredient composition will be accompanied by increased skepticism over product claims. This ‘trust void’ will also characterize Australian consumer sentiment and purchase behaviour in 2010. Indeed, less than one-infour Australians deem the general nutritional claims made by manufacturers to be trustworthy.

Going forward into 2010 and beyond, Australians will pay closer attention to product formulation, using nutritional labeling as a primary cue for assessing the health credentials of a product. “In short, if Australians make a real effort to review the actual ingredient composition of the foods they eat, they give themselves the best chance of achieving those ever-elusive new year’s resolutions once and for all,” concludes Diamonon. (Datamonitor)