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President ‘Strongly Committed’ to Press Freedom He called on the Press to join him in building what he called “a people-based democracy, not a democracy based on the state or one that is centered on the media.” JAKARTA (TPP) – President Susilo Bambang Yudhoyono last week reaffirmed his belief in freedom of expression, telling a large gathering of the nation’s journalists that “I am strongly committed to Press freedom.” He also called on the Press to join him in building what he called “a people-based democracy, not a democracy based on the state or one that is centered on the media.” He also underscored the Press as “a force” that should make use of its position “constructively.” ”It is the discretion of the media to choose, to decide, and to define how that power is utilized for the greater good of our society,” said the President. The President, Indonesia’s first directly-elected head of state (he was re-elected in 2009 for a second and last five-year term), made the statement during a speech addressed to commemorate the 64th National Press Day (HPN) last week in Palembang, South Sumatra. ”In many countries we see media-centered democracy, which communications experts say can be an impediment. We in Indonesia are heading towards peoplecentered democracy,” he said. As power tends to veer (from its noble course), “we need to make sure that checks and balances are always applied, and this is also valid to the Press.” As part of the HPN celebration, the President gave a “maiden lecture” entitled “Failure is Not an Option” to students of the School of Journalism in Palembang. He said Indonesia has passed at least two big tests so far, namely the multi-dimensional crisis in
1998 and the world economic crisis in 2008. “The two achievements were attained by the nation`s best sons and daughters, and for that we must show our sense of appreciation to them,” he said. The President added that after the country had passed the second test, the next challenge would be to prepare a new generation of national leadership and to continue development efforts to create welfare for the people. “To that end, at least three pillars are needed, namely economic progress, development of democracy and realization of justice,” he said. President Yudhoyono said Indonesia must be able to overcome various challenges after it had successfully overcome a number of crises in the past decade. “We have passed past tests and therefore we must also be able to overcome future tests to make Indonesia more advanced in the 21st century.” The President further said crises in the past had undermined the country`s economy and triggered conflicts. “Some had even predicted that Indonesia would break up and disappear,” he said. “However Indonesia had been able to pass those difficult times,” he said. “We have survived as a nation and have made positive changes. There has been a reawakening and Indonesia`s role in the international forum is rising,” he said. “Indonesia is where it is today because we have huge capital, much experience and a new momentum,” he said.
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From SBY to the Press • to espouse values and norms that will make democracy grow • to use its power in the interests of the people. • to use its power wisely and to help the nation become successful • to safeguard corruption eradication efforts • to exercise self-censorship, cover both sides and be selective on stories (proper/improper) • to support the government and make its development programs successfu
VP, Hatta in the Same Boat on IPP: Official
ments. “PLN said it can only renegotiate with first and second categories of IPPs,” Purwono said, adding the government would wait for the results from the (B2B) negotiations. “IPPs basically want higher prices. We ask PLN to discuss this matter,” Purwono said. He added the final results of the negotiation must be audited by the Development Finance Comptroller Agency (BPKP). “Whatever PLN’s decision is, as long as it has been approved by the state auditor [BPKP] the government can approve it as well,” Purwono said.
Vice President Boediono and Coordinating Economic Minister Hatta Rajasa may have different opinions, but they are united on solving problems with independent power producers (IPP)s, says an official. Boediono’s spokesman Yopie Hidayat denied a story carried by The Jakarta Post last week, which reported a rift between the Vice President and Hatta. Yopie said that both state officials were concerned about finding a solution to the IPP problems. He explained that Boediono and Hatta met on Jan. 18 to discuss IPP problems with other public officials. During the meeting, he said, differing opinions emerged before a consensus was reached. “In the meeting, Pak Boediono and Pak Hatta were of one
voice. Both wanted to help PLN [state power firm] to deal with the 50 IPPs. They all wanted to secure PLN from possible lawsuits,” Yopie said. “All participants are committed to helping PLN and not to giving certain privileges to people who are close to the President,” he added.
ples, demanding the companies renegotiate their contracts directly with PLN management under the government’s supervision. J. Purwono, the director general for electricity and energy utility at the Energy and Mineral Resources Ministry, explained that PLN had categorized IPPs into three categories.
The 50 IPPs, having gained operating licenses between 2004 and 2009, are largely owned by prominent businessmen. Despite the small capacity of combined IPPs, totaling 500 megawatts, the Cabinet included the resolution of IPP disputes in its 100-day program. According to State-Owned Enterprises Minister Mustafa Abubakar, all problems related to IPPs would be resolved based on business-to-business princi-
The first category comprises IPPs that had secured financing and started construction. According to Yopie, there are five IPPs in the first category. The second category covers IPPs that had secured financing, but had not started construction—there were 12 in that category. The third lists IPPs that had signed power purchase agreements with PLN, but had not yet secured any financial commit-
He added the government was waiting for PLN’s decision and the BPKP audit. PLN’s business and risk management director Murtaqi Syamsuddin, said the company expected to finish negotiations within a year. “We are working on it,” he said. Murtaqi denied a report saying that PLN had dropped the negotiation with some IPPs. “That information is inaccurate,” he said.
INTERVIEW
THE ECONOMY
BUSINESS
LIVING
Harris Thajeb: “We have no authority to impose sanctions.”
The Prospects of Special Economic Zones (SEZs)
Uncovering Secrets to a Longer Life
150 out of the thousands of ads that were run in the media (television, radio, newspapers, and the internet) last year, considered to have violated the PPPI’s code of ethics.
SEZs are a means to attract domestic as well as foreign direct investments (FDIs). The main issue, however, is that our existing industrial policy should be in line with domestic as well as regional changes in consumer behaviour
Five State-Owned Companies to Go Public This Year
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The four companies to conduct an IPO this year are housing construction company PT Pembangunan Perumahan (PP), plantation company PT Perkebunan Nusantara III (PTPN) and steel company PT Krakatau Steel.
Garuda Indonesia, Shell in Corporate Sales Deal
P
T Garuda Indonesia has concluded a corporate sales agreement with PT Shell Indonesia as part of its program to cooperate with 750 companies in its bid to secure potential income of Rp2 trillion. “This conforms to the increase in our capacity after we acquired 24 new planes and opened 10 new domestic and international routes,” Garuda Indonesia President Director and CEO Emirsyah Satar said after the signing of the accord with Shell Indonesia last week. He said last year the airline signed a MoU with 580 big companies in Indonesia with total income expected at over Rp600 billion. In connection with the cooperation Emirsyah said the company had prepared special packages for Shell employees in Indonesia for domestic as
“This conforms to the increase in our capacity after we acquired 24 new planes and opened 10 new domestic and international routes.” Emirsyah Satar Garuda Indonesia President Director and CEO
well as international flights. The president director of Shell Indonesia, Darwin Silalahi, said the contract was not only based upon a discount facility as it also shows Garuda`s capability to serve large numbers of customers. To develop a corporate market, in the future Garuda will facilitate access for its corporate partners through “Garuda Online Booking Corporate” facility, Garuda`s head of communications, Pujobroto, said. Garuda recently earned a four-star class recognition from SkyTrax, an international rating agency for airline service. It expects to earn the five-star title in 2013, he said. Shell is a global energy and petrochemical business group with around 102,000 employees in more than 100 countries and regions, based in The Hague, the Netherlands. In Indonesia it operates in various locations in Java and Kalimantan. Photo: Kristupa Saragih
The secret to longevity, as I see it, has less to do with diet, or even exercise, and more to do with the environment in which a person lives: social and physical.
In the cabin: Garuda recently earned a four-star class recognition from SkyTrax, an international rating agency for airline service.
2
The President Post
February 11, 2010
www.thepresidentpost.com
Viewpoint ARISING FROM POVERTY:
The Gunung Kidul Success Story If the District of Gunung Kidul has succeeded in making the difference, other more fortunate districts should also be able to do so. The key is a strong determination that has to be kept alive day after day. By Cyrillus Harinowo Hadiwerdoyo
G
unung Kidul is the name of one of the districts in the Special Province of Yogyakarta, at the south-eastern part of the province in Central Java. In the old days, the land was barren as the district was covered by barren rocks. Finding and transporting water for their daily needs, such as cooking, took up a significant amount of time of their daily life. Sometimes, it took them hours just to bring in a few gallons of water. Not surprisingly, in those years the district became the epicenter of Indonesian hunger and poverty. Aside from the difficulties, that kind of life undermined the sense of pride of the people. In 2004 I had a chance to visit the district. It was a heartwarming experience to see that things have changed very significantly. The road to Djati Village, around an hour’s drive from the District Capital of Wonosari, was very well paved and maintained. To be honest, the road was even better than most of the roads in Jakarta. After driving through asphaltpaved road, we passed through a hardened dirt road. The construction of the small road to the
village was made possible by the collective effort of the local people; the village is now more than accessible to cars. In that village, I attended a Catholic church’s service led by a priest from Yogyakarta. The small church was clean and equipped with a simple sound system and an electronic keyboard. The congregation, around 200 people, wore simple but clean dresses that made the sight interesting. I took time after mass to go to the washroom at the side of the church. The house was made of teakwood, with ceramic flooring and a very clean bathroom with a toilet inside. When I turned on the faucet, I was surprised to see the water was very clean. The house had been connected to electricity and I noticed that there were dried paddies on the floor and a motorcycle. Later on I joined the priest and a small group of congregation for tea and simple snacks in another house. The second house was made of bricks and had not been completely finished. A motorcycle was also parked inside the house. The furniture was made of teakwood and rattan and was very well kept.
What was more interesting was the substance of the discussion. No one was talking about lack of food. In fact, the congregation felt sorry for not being allowed by the priest to serve dinner after mass. They said that this kind of gathering was only done every week. They felt sorry that they had to miss the opportunity to serve the guests. I am sure the request was made with good intentions, and not to cause unnecessary burden to the people. In that village there was only one elementary school. Apparently many of the children went to that school before moving to another village or to the district capital to attend secondary school. As such, basic education was not a problem for most of the people; their concern was sending their children to university Can you imagine that the district, formerly the epicenter of hunger and poverty, now had a completely different set of issues in the discussion? In fact, the problem of sending our children to universities is not a monopoly of that village; it is the concern of many families in this republic. To me, the discussion showed how significant-
If the District of Gunung Kidul has succeeded in making the difference, other more fortunate districts should also be able to do so. The key is a strong determination that has to be kept alive day after day.
ly the people of that district have progressed. Taking that sample to the bigger population, we can clearly see how well the district has progressed. The Djati Village that I used as an example was not a portrait of the most prosperous village in that district. In fact, it is closer to the truth to classify that village as less fortunate ones. However, the village enjoyed streams of clean water from a project done by a German NGO, which had been assisted in the field by students of Karlsruhe University of Germany. The project’s aim was to bring up water from a river around 100 meters deep down the Earth, store it inside a big tank in the village of Bribin, and have it distributed to houses through a network of pipelines. The water is drinkable and can be used for people to take baths and other daily needs. Such an effort was recently reprised in the same area for the second stage. A similar effort was also made in the Baron Coastline with the assistance of the Japanese Development Agency (JICA). Other efforts were also done by the Indonesian Government and by district itself. As
such, most of the people can now enjoy water without having too make too many sacrifices. The quality of life in that district has significantly increased by that effort. Looking at the statistics of that district, we can now clearly see the difference between what had been experienced in the past and what they have been able to achieve. I am sure the people of Gunung Kidul can take pride with what they have done so far. The district has been turned in to a very green area thanks to very successful reforestation. In fact, the Gunung Kidul District Government has maintained serious efforts in reforesting some areas so that the ideal forest-to-land ratio can be achieved within a reasonable time. The increase in forest area helped significantly efforts to conserve water in that region. When I visited that district last year, it was really heartwarming to see green paddy fields in several areas. This was partly the result of the efforts of the people in conserving water through the greening of the land.
hunger and poverty several decades ago, the district now boasts a rate of 0.8 percent of their people classified as undernourished. This level was significantly below 2 percent, the national average figure. This statistic once again showed how significantly things have changed in that district over the past several decades. Similarly, the percentage of the people classified as poor has declined significantly as prosperity has improved in that district. A private bank in that area could easily tell you that the number of people with the capacity to save and has increased.
Another interesting statistic was the rate of undernourished people. From being the center of
The writer is an economist and a regular columnist in major national news media.
It is indeed interesting to share a success story on the eradication of hunger and poverty in the most poverty-stricken district of Gunung Kidul. There are certainly many lessons that can be learned by other districts. If the District of Gunung Kidul has succeeded in making the difference, other more fortunate districts should also be able to do so. The key is a strong determination that has to be kept alive day after day.
The President Post
www.thepresidentpost.com
February 11, 2010
3
Interview HARRIS THAJEB
“The problem is, we have no authority to impose sanctions.” The size of the country’s advertising industry is quite large and this is reflected in billings. In 2009, for instance, the creative industry recorded up to Rp53 trillion in terms of spending value, with the biggest contribution coming from telecommunication and political ads. Out of the thousands of ads that were run in the media (television, radio, newspapers, and the internet) last year, the Indonesian Advertising Companies Association (PPPI) Supervisory Body found about 150 ‘problematic’ ads, or those considered to have violated the PPPI’s code of ethics. However, since the policy is self-regulatory in nature, PPPI has no authority to impose sanctions on ad agencies that produced the troubled ads. It could only recommend them to put a halt on airing the ads.
T
he association also cooperates with the Indonesian Broadcasting Commission (KPI) to maximize its supervision on advertisements in the media. To find out more on the definition of troubled ads, and those who violate the industry’s code of ethics and how the cases will be treated, The President Post’s Eka Putri met with the association’s executive chairman, Harris Thajeb, who is also the chairman of Dentsu advertising company, one of the largest in Indonesia. The following are excerpts of the interview. What is the trend in 2010, and what is your estimation of our national ad spending? Now that digital media is being developed, we see a combination of conventional and digital media. Digital media is complementary and does not undermine conventional media. The combination will continue to develop in 2010. Ad spending is expected to grow 15% compared to 2009. What do you think about the advertising industry in Indonesia now? It is showing good progress. The quality of the advertisements is also improving as seen by the number of awards received in international competitions. This has never happened before.
This industry is quite huge, how much did it earn in 2009? Approximately Rp53 trillion (about US$600 million), as the value that was recorded up until September-October had already reached Rp47-48 trillion. The percentage for television is about 53%-54%, print media 30% with the remaining going to radio and digital media. In 2009 telecommunication companies and political parties were the biggest contributors. Previously it was toiletries and telecommunications. Does this mean the figures would not be this high if it were not for the general elections? Not necessarily, the figures would still be high because when political parties started their campaigns, producers cut down their ad placements due to problems in getting slots. They then shifted to other promo media. After the general elections, they started placing ads once again. The advertising industry would never become dormant because producers are fully aware that promotion is an investment rather than an expense. They they will enjoy the fruits of what they plant now in the future. They are not wrong about incurring costs because this is part of an investment. Most important is that they must have the
insight to see the opportunity by producing high-quality advertisements that don’t violate ethics. Speaking of ethics, PPPI found 150 troubled ads with most of them violating the industry’s code of ethics. We obtained the data from PPPI’s Supervisory Board. Frankly. there are still many who violate the ethics of the industry. We have already published a book on Indonesian Advertising Ethics (EPI) that have been distributed to all agencies and advertising community. We also often hold discussions in the association. It’s true that it needs time to regulate it. The problem is, we are an industry that adopts self-regulatory measures and therefore there are no sanctions. We can only make calls to agencies, so whoever committed violations could never be punished. The most we can do is make announcements on the ads that violate the EPI during a congress. This would embarrass the agency or agencies that produced them. Can you cite an example of an ad considered to be violating the EPI? Most of the violations found in advertisements are indecent appearances and superlative claims or exaggerated statements.
We have reprimanded through KPI an ad of a coffee with milk product because it displayed an indecent shot of someone taking out the coffee product from a woman’s private part, which is logically wrong. The ad is now no longer being aired. There was also a superlative ad, for example, showing a detergent that claims it can make clothes cleanest without supporting it with facts and data. There was also an ad on a milk product for children which suggested that the child can become much taller after drinking the milk—this is also a violation. An ad can claim that the product is the cheapest, the best or whatever only if they are supported by data based on research by a third party and not from the producer itself. Ads are not allowed to claim anything if they are not supported by facts. Sometimes we see an ad that show a child lifting a heavy object after taking in a certain brand of vitamins. That is illogical and it is obvious it had violated the EPI and can be categorized as fraud. Lately, we see disguised advertisements in many infotainment and news programs. Isn’t that a violation? That’s not a violation. A violation is when the actor is not really using the product. Ads like that emerge because the Indonesian public likes to know what their idols are up to. If their idol uses product A, they would follow by using it too. Now we can also find advertisements in movies. But don’t be mistaken, that is top sell. Is it a violation? No. So movies are now also a target for advertisements and we have seen many examples of that.
PPPI is collaborating with KPI to supervise advertisements in televisions and radios. When did the collaboration start? Only recently. If we find an advertisement violating ethics, we would tell the agency, “Please, don’t air it.” So, we can only make calls, we can’t stop them from airing ads. But if the KPI considers an ad improper and violates ethics, they can ask TV or radio stations to pull it off the air. Actually, that happened recently happened, when the KPI stopped what it considered to be an indecent, negative and vulgar ad. The KPI holds political power and have broader authority. PPPI’s cooperation with the KPI was made because the public often lodges complaints on certain advertisements to us. In the meantime, we can only reprimand members of our association, but we do not have the authority to ban ads. What are PPPI’s other efforts to minimize ethics violation? PPPI has an Advertising Supervisory Body that runs a monthly check on all ads placed in televisions, radios, newspapers, magazines and others. So, we are quite thorough about this, especially when we receive reports from the public, to which we will respond immediately. The Advertising Supervisory Body always evaluates advertisements that are considered problematic. We reprimand agencies if we see something that is not right, but we cannot punish them. Has the EPI been socialized? All the time. We provide all agencies with the EPI book. Whether or not they read it, we don’t know. To be frank, giving
out the EPI book is not enough, that’s why we also hold trainings periodically to improve the quality of creative workers. Is the number of violation increasing or declining? I don’t have the data in full detail, but if you look at how the quality of advertisements in the country has continued to improve, the violation rate seems to decline. Now, whenever a member receives a letter of reprimand, they soon realize they have made a mistake. What happens if an ad obviously contained a violation and has been reprimanded by PPPI but continues to be aired? We have rules of engagement. First we make call them up, then issue a reprimand letter and later issue a strong warning. We are stronger now because we can use the KPI’s authority to remind television stations and other related media regarding problematic ads. So far, our relationship with KPI is running well. Let the KPI make the decision. Does the harshest sanction include ousting the member from the association? Not really, but the agency will at least be embarrassed about the mistake it made. However, there are of course many that have no shame at all. But they generally change after getting reprimanded once or twice. We want to be like in other countries whereas there are not too many ethics violations because they are used to discipline and feel embarrassed if they make any violation. Our problem is that we can only make calls but we have no authority to impose sanctions. That’s the problem.
“
We have rules of engagement. First we make call them up, then issue a reprimand letter and later issue a strong warning. We are stronger now because we can use the KPI’s authority to remind television stations and other related media regarding problematic ads.
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The President Post
February 11, 2010
www.thepresidentpost.com
The Economy ECONOMIC UPDATES Govt earns Rp5.45 trillion from bonds issuance The government earned Rp5.45 trillion from the sales of four series of state bonds in an auction late last month, the ministry`s director general of debt management, Rahmat Waluyanto, said in a statement. The state bonds up for the auction were series SPN20110113 due on January 13, 2011, FR0031 November 15, 2020, FR0040 September 15, 2025, and FR0050 July 15, 2038, the Finance Ministry official said. The government received Rp2.30 trillion bids for the bonds series SPN20110113 with the highest yield of 7.25 percent and the lowest yield of 6.78%, and Rp4.16 trillion bids for the bonds series FR0031 with the highest yield of 10.16% and the lowest yield of 9.63%.
Govt promises to solve power outages problem in 2010 The government has pledged to solve the electricity shortage problem in the country this year so that people would no longer have to endure power outages. “We are resolved to make all possible efforts, so that the problem will be solved this year,” President Susilo Bambang Yudhoyono said in Banten, West Java recently. Susilo Bambang Yudhoyono The government, he added, would accelerate improvement of distribution and transmission channels and speed up the first and second phase of the 10,000 MW development project. On the same occasion President Yudhoyono also dedicated the Labuhan Angin coal-fired power project in North Sumatra which has a capacity of producing 2x115 MW electricity but is not part of the 10,000 MW project.
West Sulawesi produces 150,000 tons of cocoa per year Cacao estates in West Sulawesi province are now producing more than 150 thousand tons of cocoa per year said West Sulawesi Governor Anwar Adnan Saleh here Sunday. “With a total of 180,835 ha in five regencies in West Sulawesi, the cacao growers will produce more than 150,000 tons of cocoa per year,” he said. He said the biggest cocoa producer among the five regencies is Mamuju regency covering 65,448 Anwar Adnan Saleh ha producing 53,457.9 tons per year.
World Bank loans for channel normalization project The World Bank will facilitate funding for a normalization project involving a number of river channels in Jakarta, said the World Bank East Asia and Pacific Development Director, John A. Roome, at Jakarta City Hall recently. According to Roome, the river channel normalization and the flood canal projects are an important step that must be taken by the Jakarta municipality. Jakarta governor Fauzi Bowo added that the channel normalization project is currently in the
dredging phase. “The canals that have not been dredged for 30 years,” he added.
Russians interested in RI’s mining sector Indonesian Ambassador to Russia Awaluddin Hamid said several Russian investors were interested in investing in Indonesia`s mining sector. “Some Russian businessmen are interested in investing in gold and coal mining,” Awaluddin said at the Foreign Affairs Ministry here last week. A number of Russian entrepreneurs had joined the Russian Business Academy to offer cooperation to Indonesian entrepreneurs to run mining ventures, Awaluddin said. He said the Russian businessmen appreciated Indonesia`s natural wealth and rapid government response to foreign cooperation opportunities. The ambassador also urged regional government heads in Indonesia to be more pro-active in promoting their regions` potentials. In 2009, Indonesia-Russia trade experienced an increase of 48% to US$1.6 million, Hamid said. “Palm oil is the most popular commodity in Russia; the market is still asking for additional supplies,” he said.
Global Economic Prospects and a Subdued Recovery In these transition years Asia is in a more favorable position than the developed countries and other developing regions. East Asia can play a positive role in the international efforts to achieve full recovery and sustainable growth. By Atmono Suryo
T GLOBAL
he World Bank’s latest economic report “Global Economic Prospects – crisis, finance, and growth 2010” clearly confirms that recovery is underway. But, it will be a subdued recovery given the severe financial crisis that rocked the world in the fall of 2008. The outlook will remain clouded with many challenges and uncertainties. As the Bank points out, the depth of the recession has left the global economy seriously wounded. The impact of the recession is mostly felt by developed countries, which suffered severe contractions. Immense sums were needed to bail out important banks, while unemployment rates reached high levels and millions of consumers were hit hard. It is expected that countries will continue to feel the pain of the crisis for years to come, as the World Bank emphasized. Therefore, the Bank appealed that countries should not respond passively. To that end, the G7 (industrialized countries) just announced that they will continue with their stimulus programs. It looks that in 2010 industrial production and trade levels have yet to regain pre-crisis levels. Unemployment has reached double digits in many countries and continues to rise. Developing countries will still be operating about 3% below their level of potential output. It is not quite reassuring to note that the world has been warned that there are no silver bullets to mitigate the worst symptoms of the crisis that will take a longer time to subdue. SUBDUED RECOVERY
The World Bank reaffirms, however, that the acute phase of the crisis is over. Stock markets have recovered – bond flows have returned – developing countries currencies have regained – the freezing up of credit markets and the reversal of capital flows have stopped. This trend is being shown in clear terms in East Asian countries. Indonesia is often considered to be one of the countries with solid growth, after China and India. Overall recovery, however, will be subdued and uncertainties will remain to cloud the outlook (Table 1): High-income countries will
grow from -3.3% (minus growth) to 1.8% in 2010 and 2.3% in 2011. World growth will reach 2.7% in 2010 and 3.2% in 2011 (compared to 3.9% in 2007). Developing countries will grow to reach 5.2% in 2010 and 5.8% in 2011; compared to 8.1% in 2007. As can be seen from the above data, the highest world growth will be in East Asia and in Pacific led by China, India and transition countries. Indonesia’s growth forecast will be between 5-5,5% EAST ASIA
Compared to the situation in advanced countries such as the United States and Europe, and compared also with other developing regions, East Asian economies, including Indonesia, were less affected by the crisis. It cannot be denied, however, that East Asian economies were hard hit by the collapse of global business during the last part of 2008 and the beginning of 2009. It will be recalled that many countries in East Asia depending on exports of manufactured goods (durable and investment goods) experienced dramatic declines in trade and production between September 2008 and March 2009. In the area of finance, local equity markets fell by 60% or even more and currencies tumbled to a large degree. There was an immense outflow of funds from the region and the credit squeeze was substantial. A very critical situation developed at that time. That was also the case in Indonesia. The impact in our country was mostly felt in the financial area and less severe in the area of trade. YEARS AHEAD
Growth East Asia’s recovery from the global downturn is quicker and more robust than in other parts of the world. It is led by China: China’s upturn, among others through its stimulus program (amounting to $575 billion) and increases in industrial production serves as the stimulants of growth (Table 2). For East Asia, the trend for the years 2010-2011 will be up especially in the areas of GDP growth and private consumption. In other areas the trend will be down namely in the area of public consumption and current account balance. Exports will grow from minus 13.5% in 2009, to 6.6% in 2010 and 8.8% in 2011. The trend in imports will also increase. Early indications suggest that Indonesia may follow the general trend
Innovative Leaders Forum Innovative Leaders Forum was held by the Modernisator on January 29, 2010. Indonesia will have a strong political modernization. Modernization is not only change the way of thinking but the way of behavior. This is the hot topic of discussion at the Innovative Leaders Forum which was held by the Modernisator on January 29, 2010. The speakers were Anas Urbaningrum from Democratic Party faction, Arif Budimanta from Indonesia Democratic Party - Struggle, Mustafa Akmal from Prosperous Justice Party faction, and Basuki Tjahaja Putra. The forum was moderated by Dr. Bima Arya Sugiarto, a political observer of the Charta Politika. He is also a noted lecturer from Paramadina University.
The discussion was opened by the co-founder of Modernisator, Dr. Dino Patti Djalal. He said that Indonesian people already had a way of thinking towards modernization through various political activities. This trend persist a big trigger in May 1998 when the reform movement began to increased awareness of political rights of every citizen. People are now free to express themselves in a more open and democratic society that is Indonesia. Many people in the audience raised critical questions. They included ambassadors and private sectors leaders.
of East Asia. Finance As to the years ahead, it must be realized that tighter regulation will have to be taken by the advanced countries. But this will have its impact on developing countries including Asia. There will be less capital available for countries in need to spur growth such as Indonesia. In addition, there will be higher capital costs in the coming years which will also have their impact on the flow of capital. All this may impede and restrain the developments and growth of the developing countries. In the case of Indonesia, the stabilization of international finan-
cial markets, renewed capital inflows especially from new sources of supply, such as the Middle East and also China, are expected to stabilize the economy and maintain growth in 2010-2011. An important trend to note for countries such as Indonesia is that capital which fled away in 2008-09 to safe-haven countries, especially the United States, is returning. In addition, the positive developments of financial markets in Asia is underpinning rapid rebound of equity markets in individual countries. It is reported that bourses in Indonesia and Thailand have more than doubled. The markets, however, continue to reflect the day-to-day fluctuations of world markets.
TRANSITION
The two years ahead (20102011) could be considered as the transition years to achieve in particular pre-crisis levels of production, trade and investment. The most difficult area would be in the area of international finance, which needs a great deal of improvements. In these transition years Asia is in a more favorable position than the developed countries and other developing regions. East Asia can play a positive role in the international efforts to achieve full recovery and sustainable growth. It will also be in a position to take advantage of the opportunities which are opening up.
Table 1: MODEST RECOVERY (real GDP growth, percentage change from previous year)
2007
2008
2009e
2010f
2011f
3.9
1.7
-2.2
2.7
3.2
2.6
0.4
-3.3
1.8
2.3
Euro Area
2.7
0.5
-3.9
1.0
1.7
Japan
2.3
-1.2
-5.4
1.3
1.8
United States
2.1
0.4
-2.5
2.5
2.7
8.1
5.6
1.2
5.2
5.8
East Asia and Pacific
11.4
8.0
6.8
8.1
8.2
Europe and Central Asia
7.1
4.2
-6.2
2.7
3.6
Latin America and the Caribbean
5.5
3.9
-2.6
3.1
3.6
Middle Asia and North Africa
5.9
4.3
2.9
3.7
4.4
South Asia
8.5
5.7
5.7
6.9
7.4
Sub-Saharan Africa
6.5
5.1
1.1
3.8
4.6
excluding transition countries
8.1
5.6
2.5
5.7
6.1
excluding China and India
6.2
4.3
-2.2
3.3
4.0
Region World High-income countries
Developing countries
Memorandum Items Developing countries
Source: World Bank Note: e=estimate; f=forecast; growth rates aggregated using real GDP in 2005 constant dollars.
Table 2: East Asia and Pacific forecast summary (annual percent change unless indicated otherwise)
GDP at market prices (2005 US$)b
1995-2005a
2006
2007
2008
2009e
2010f
2011f
7.4
10.1
11.4
8.0
6.8
8.1
8.2
GDP per capita (units in US$)
6.3
9.2
10.5
7.2
6.0
7.2
7.3
PPP GDP c
7.3
10.1
11.3
8.0
6.8
8.0
8.2
Private consumption
5.7
8.1
8.7
6.7
5.9
7.3
7.5
Public consumption
8.1
8.2
9.8
7.8
11.1
8.4
7.3
Fixed investment
8.1
12.4
8.7
5.3
14.3
9.3
9.3
Exports, GNFS d
12.5
18.8
15.4
7.4
-13.5
6.6
8.8
Imports, GNFS d
9.7
12.7
11.0
4.9
-12.1
6.2
8.5
Net exports, contribution to growth
0.7
3.4
3.0
1.7
-2.0
0.7
0.8
Current account balance/GDP (%)
2.2
8.4
9.9
8.8
7.1
6.5
6.4
GDP deflator (median, LCU)
5.9
4.4
3.5
4.3
3.2
3.3
3.4
Fiscal balance/GDP (%)
-1.8
-0.7
0.0
-0.6
-3.3
-3.7
-3.1
Memo items: GDP East Asia excluding China
3.5
5.7
6.2
4.8
1.3
4.7
5.1
China
9.1
11.6
13.0
9.0
8.4
9.0
9.0
Indonesia
2.7
5.5
6.3
6.1
4.5
5.6
5.8
Thailand
2.7
5.3
4.9
2.6
-2.7
3.5
4.0
Source: World Bank
The President Post
www.thepresidentpost.com
February 11, 2010
5
The Economy
The Prospects of Special Economic Zones (SEZs) SEZs are a means to attract domestic as well as foreign direct investments (FDIs). The main issue, however, is that our existing industrial policy should be in line with domestic as well as regional changes in consumer behaviour By Bob Widyahartono
A
s we enter the second decade of the 21st century, one of the development strategies of Indonesia’s economic policymakers and players should be the creation of a plan to develop SEZs (Special Economic Zones) in selected provincial regions. The required characteristics of the provincial regions are namely, infrastructure, quality and quantity of labour, knowledge spillover, and the ability for existing supporting and related companies to attract new companies to move into the areas. In SEZs, agglomerations and clusters of industries are the main players. Agglomerations and clusters should be treated equally, meaning that industrial factories and distribution facilities come together in a common location and form a concentrated business area outside regional capitals in order to avoid large-scale urbanization. Industrial clustering is indeed of great importance in terms of economic growth. SEZs are a means to attract domestic as well as foreign direct investments (FDIs). The main issue, however, is that our existing industrial policy should be in line with domestic as well as regional changes in consumer behaviour on the following products: • electric appliances • wood and wood products • garments • household appliances • pulp and paper • leather products and footwear • fish and shrimps • agriculture Our macroeconomists claim that Indonesia’s success in industrialization is due to macro-economic stability, export-oriented policies, trade reforms, investment licensing deregulation, investment in infrastructure and education. The speed of industrialization has however led to a relatively “shallow” structure. In the early 1990s ‘broad-based’ industrial policies resulted in shallow export-driven industrialization. When the Asian crisis (19971998) occurred, not many members of our elite were fully aware of a number of factors in our manufacturing sector, stemming from long-standing weaknesses such as narrow export base and limited capacity to cater to in regional as well as international
Batam: as one of the areas in Indonesia that will be prepared to become the special economic zones as attached in the 100-day program drawn by the second United Indonesia Cabinet.
markets. Several weaknesses can still be obeserved in the concentration of industries in Java, particularly in Jabotabek (Jakarta-BogorTangerang-Bekasi), Bandung, Semarang and Surabaya-GresikMojokerto (the East Java triangle). There exists a low level of local component content in industries and limited capability in adopting as well as absorption of appropriate technology in industries. There is no significant ‘clustering’ of industries’ to enable effective use of resources, and the list of resources includes oil and gas, tin, nickel, and other mineral resources, hydropower, lumber, special marine products and agriculture products. In new SEZs, clustering would be more realistic since they encourage product specialization in certain locations and enhances competitiveness. In short, this means grouping intensively interlinked industries. In the outer regions, and especially in Sumatra, Sulawesi, Kalimantan, Maluku and Nusa Tenggara islands, there has not been much industrial clusters involving SMEs, since a small number of large foreign affiliated or even wholly Indonesian non-oil industries on the sites usually have their profit transferred to Jakarta or outside the country, leaving little in the regions in question. This makes it more difficult to foster the establishment or growth of small local businesses. In reality, interaction between local government and existing industry associations has been mostly confined to taxation and regulations, and limited to public-private networking in the form of formal irregular dialogues. Because of time constraints, what took place in the 1990s and 2000s are short-term
industrial and export diversification, productivity enhancement and skill development in product and process technology, and assessing international competitiveness. Dialogues are constrained not only by time, but also by weak analytical capacity of most industry associations as well as lowquality professionalism on the part of local authorities involved in facilitating industrial development.
semi government-led export processing zones. These forms of industrial clusters have several shared features despite differences according to category. There are strong externalities derived from vertical as well as horizontal linkages through sub-contracting and what is referred to as ‘inter-firm alliances that produce ‘collective efficiency’. With the advancement of information technology (internet, facsimile, hand phones)
logues. Lastly, the role of government and local authorities is also significant since clusters could mainly consist of small-and medium scale enterprises (SMEs). Clustering, in our case, is of importance in terms of economic growth. The creation of industrial parks in alliance with Japanese industries has proven beneficial since the 1990s. But this kind of alliance must be further encouraged by other qualified investors. It must be borne in mind that creating industrial clusters is
The success or failure of SEZs in selected provincial regions will also depend on institutional framework i.e. legal system, competent and credible participatory actors, coordination/networking with actors having continuously ethical sensitivity and behaviour in ‘ better, faster and cheaper’ in the provision of services. Therefore, regular upgrading is a bigger requirement in the region so as to enable associations to absorb information on how to effectively pursue industrial development for members. Meanwhile, the function of local authorities must be confined to provision of services and executing ‘good governance’, since too many regulations and interventions will hamper the productivity and efficiency of the related industries. Clustering will still be beneficial to society as the stakeholders of economic development. Wellplanned industrial clusters in SEZs could effectively function in places where locally specialised items are produced or where a large core firm has a handful of subcontracting or parts makers surrounding it. It should be in the vicinity of large cities – in order to create a multiplier effect to society – and government-led or
accumulated knowledge is also shared. On the other hand, transportation and communication costs are unavoidable factors in the sense that when they are high, firms prefer to concentrate or rely on one and another. Knowledge is crucial in any cluster. R&D (Research and Development) activities, new devices and skills are inevitably shared in the community through regular interactive meetings and dia-
not always and instantly successful. It depends on several factors: Firstly, infrastructure (highways, ports, electricity supply, banking services, health and local transportation facilities etc.); Secondly, institutional framework, e.g. legal system, and networking based on trust. Thirdly, good public governance and to a certain extent government support in terms of laws, taxation and financing, and
Fourthly, the required human resources in terms of basic knowledge in business as well as professional and skill development. The private sector particularly in the regions should be encouraged to develop and operate demand-driven technical training centres, in alliance with training institutions with financial and other incentives (e.g. tax), and under a very carefully designed quality control and accredited system. Take the case of Japan with their industrial policy, which from time to time is reviewed since 1970s until now. Their METI (Ministry of Economy and Industry) orchestrates the development of their ‘picking winners’ strategy in their home market as well as the international market. Since the 1980s a number of Japanese firms have been allocating a substantial amount of their budget for R&D: onethird on new products and twothirds on new processes resulting in faster entry and penetration into domestic as well as regional (East Asian) markets. Japan’s industries have never been confined to large-scale industries, the majority are more medium-scale in size. Why do certain locations attract firms to take part in cluster-
ing? Several factors that should be understood by the stakeholders in charge of promoting prospective SEZs are, Firstly, essential raw materials must be easily accessible by industries in the zones, as well as well-organized infrastructure such as sea transportation facilities e.g. port facilities, efficient shipping, and highways. Secondly, stable supplies of electricity, gas and water are indispensable. Thirdly, a large pool of quality labour to attract firms must be in place. Fourthly, city government facilities are essential, providing tax incentive as outlined by the Central Government with no ‘additional local tax”. Fifthly, our representatives and embassies abroad should actively and continuously promote SEZs to interested business circles, domestic as well as international. The success or failure of SEZs in selected provincial regions will also depend on institutional framework i.e. legal system, competent and credible participatory actors, coordination/networking with actors having continuously ethical sensitivity and behaviour in ‘ better, faster and cheaper’ in the provision of services. The writer is a senior economist and lecturer in International Business at Jakarta-based Tarumanagara University.
6
The President Post
February 11, 2010
www.thepresidentpost.com
The Region Asia and the Global Economy Rising Asia has become an important economic powerhouse in the global economy. Aside from Europe and North America, Asia is moving from the periphery to the center of world economic gravity.
It is predicted that at one time in the future (2025) three of the world’s largest economies will be Asian, namely China, Japan and India. This will further strengthen Asia’s economic position in the global economic setting (Figure 1).
importance, and one can clearly see that ASEAN continues to be on the “driver’s seat” in many Asian forums. This role has been accepted by ASEAN partners such as China, Japan, South Korea, India and other economies in the region, as well as outside the region such as the European Union, Russia and the United States. Asia recognizes that its economies have benefitted greatly from the open multilateral order, particularly in the area of trade. The expansion of global trade has been of considerable importance to Asia.
THE CHALLENGE TO ASIA
REGIONALISM
By Atmono Suryo
S
Rising Asia
purred by its high trade and economic growth pace, Asia is heading towards a new era, one that is filled with new developments, fresh challenges but also new opportunities, particularly in the area of trade, finance and services. Asia is also facing a new economic environment. Rising Asia has become an important economic powerhouse in the global economy. Aside from Europe and North America, Asia is moving from the periphery to the center of world economic gravity. Policy instruments
Access to science and technology, its development and spread, has become an important tool for countries in Asia to leap forward towards becoming new modern Asia. This is already shown by China, India and South Korea. As noted by the Asian Development Bank (ADB), Asia’s rising economies are also underpinned by its growing integration, which continues to gain momentum. The emerging Asian regionalism will offer a new platform for economic development. ADB emphasized that Asia’s process of integration is beneficial not only to all countries in Asia but also the global economy. This is an important policy statement which should be well understood by all concerned, in-
cluding the Indonesian political and business societies, as Idonesia often considers Asian countries only as competitors rather than as potential economic partners. ECONOMIC SIZE
In terms of population Asia is much bigger than Europe or North America. Such an enormous size of human resources poses many challenges and many opportunities as well. Asia’ human resources with its expanding middle class will be an important policy tool to transform Asia to become a modern Asia. This is already happening in China and India. Asia is not only on a par but is even larger than Europe or the USA. In the present economic thinking the economic size of countries or group of countries is considered to be of strategic importance on account of the consumption factor. ASIA – EU27 – USA ($ million) EU27
ASIA*
USA
15,247
19,662
14,265
*) Asia represented by ASEAN: 2,762; China: 7,916; Japan: 4,354; India: 3,288; South Korea: 1,342 Source: ASEAN Secretariat
One immediate challenge concerns the present international expectations and even pressure on Asia along the following lines: • Asia is expected to take the lead to achieve global recovery and global sustained growth • With Asia’s experience in coping with the Asian financial crisis of 1997/98, Asia is expected to be also ahead in reshaping the post-crisis global economy These are two most difficult challenges facing Asians. The question is, would Asia be in a position to take up these challenges and take the lead within the international community to achieve global recovery and to reshape the post-crisis global economy? As to the problem of reshaping the post-crisis global economy our immediate response would perhaps be that this should be left to the G-20. After all, Asia is well-represented in that prestigious grouping Multilateral order
ASEAN’s role has been of key
In the ADB report on “Emerging Asian Regionalism”, Asian countries are increasingly connected through various channels: trade, financial transactions, direct investment, technology and tourist flows. More than half of Asia’s trade is now conducted within Asia. ASEAN countries have been at the forefront of Asian regionalism. ASEAN has established the ASEAN+3 (PRC, Japan and the Republic of Korea). It has also set up the East Asian Vision Group to look into the possibility for the creation of an Easy Economic Community. The East Asia Summit is already on its way, which includes Australia and New Zealand. Asian regionalism will affect the lives of almost 4 billion people who inhabit the region, and will impact the world as a whole. Asia’s contribution to the global economy is growing faster than that of any other region The integration process in Asia is different than that of the European Union. EU integration is a top-down process, while Asian
regionalism is basically a bottomup process and driven by market forces. Until recently formal economic cooperation lagged behind market-driven integration. This trend, however, has changed considerably during the last ten years. Numerous trade agreements have been signed, including the ASEAN-China Free Trade Area (Figure 2). ASIA AS A “POWER HOUSE”
In the global economy a rising and integrated Asia is expected to become another powerhouse in the global economy. INDONESIA: It must be realized that it is of strategic importance for Indonesia to continue to be part of ASEAN’s economic growth and to be fully prepared for the upcoming Asian integration. • As things now stand, Indonesia is not yet tuned in with this process as evident with the implementation of the ASEANChina Free Trade agreement • It is, therefore, very urgent that the still weak private sector build and strengthen their competitive position and forge closer cooperation with other Asian businesses • As can be seen from Figure 3, Indonesia is still on the lower end not only on such matters as “doing business”, but also in industrial and technology development, services and some sectors of trade • Although Indonesia is considered as a highly potential country, it is lagging behind China, India, South Korea, Singapore, Malaysia and Thailand. Vietnam is fast coming up. International business confidence in Indonesia is also on the low end • It is urgent that the govern-
ment take effective and concrete steps to improve the business and investment climate through such means as providing the required infrastructure (electricity, roads and harbors, credits and incentives, good regulations, law and order etc.) Indonesia cannot afford to fall behind in the development to-
wards greater regional integration in Asia. The upcoming integrated Asia is expected to become another powerhouse in the global economy alongside the European Union and North America. The writer is a retired career diplomat and former ambassador to the EU.
Figure 1: Real GDP growth in per cent USA 14,265
China 4,402
Japan 4,924
EU27 18,142
India 1,210
ASEAN 1,507
ROK 947
ANZ 1,139
Figure 2: Increasing intraregional trade shares (long term trend: 1955 - 2005 70 50 30 10 1955
1965
Integrating Asia
1975
1985
North America
1995
2005
Europian Union
Figure 3: Ease of doing business varies across asia (rankings of 178 economies by the world bank, 2007) Singapore Hong Kong, China Japan Thailand Malaysia Republic of Korea Taipei, China Brunei Darussalam People’s Republic of China Vietnam India Indonesia Philippines Cambodia Lao People’s Dem. Rep.
1 4
0
12 15
20
24 30
40
50
60
78 83
80
91
100
120 123
120
133
140
145 160
164 180
The President Post
www.thepresidentpost.com
February 11, 2010
7
Property RI Industry Players Set to Take Center Stage at Bali Meeting Indonesia is well-positioned to share its experience with property developers and realtors who will gather in Bali next May. At the same time, it can also learn from the experiences of overseas property industry players. By Jeannifer Filly Sumayku
T
he Indonesian property industry has experienced rapid changes in its orientation, shifting its focus from development of residential compounds to office blocks, integrated complexes, and is now set to realize the concept of “green property” development. The concept of “green property”, also known as “eco-property”, is basically about developing property projects that are friendly to the environment in order to create and preserve a good ecological balance. This property development philosophy will be amplified on a global scale when property magnates, practitioners and government policymakers gather in Bali to attend the 61st International Real Estate Conference which is organized by FIABCI, the federation of international real estate developers.
property industry leaders who will address the conference include James Riady from the Lippo Group and Ciputra from the Ciputra Group. They will share their views on the future of property industry development in the Asia-Pacific region. The theme of the conference is “Green Shoot for Sustainable Real Estate”, in reference to efforts to explore the resurgence and the empowerment of the property sector that has in recent years declined on a global scale. Participants will take this opportunity to conduct some kind of introspection, in the sense that while there is a need to continue developing the industry, greater attention must now be given to environmental and ecological considerations. They will even talk about the need to strike a good balance between property development and preservation of local cultures. This apparently is the reason why the government will be represented by Minister of Tourism and Culture Jero Wacik and Gover-
According to Pingki Elka Pangestu, chief organizer of the conference and Asia-Pacific president of FIABCI, Indonesian
JABABEKA’S PROPERTY INDEX October-December 2009 No.
SIZE - M
SEGMENTS
Building
2
PRICES
Land
RESIDENTIAL
The Veranda Town House
1
Veranda Deluxe
294
166
Rp. 2,008,000,000
2
Veranda Premium
294
153
Rp. 2,073,600,000
3
Veranda Corner
345
210
Rp. 2,305,600,000
Simprug Garden
1
Green Pine
53
112
Rp. 470,000,000
2
Yellow Pine
70
120
Rp. 532,000,000
3
Golden Pine
90
136
Rp. 728,000,000
Orchid
1
Orchid Deret
53
120
Rp. 266,500,000
2
Orchid Corner
53
225
Rp. 382,600,000
3
Orchid Corner (Limited)
53
189
Rp. 424,600,000
Tropikana Garden
1
Zelosa - Standard
113
119
Rp. 817,665,000
2
Axela Standard
155
160
Rp. 1,017,678,000
3
Ortiz - Standard
188
300
Rp. 1,525,560,000
Metropark Condominium Tower A
1
Deluxe , 2nd fl
27/1 Bdr
Rp. 218,950,000
2
Deluxe ,3rd fl
27/1 Bdr
Rp. 218,950,000
3
Deluxe, 5th fl
27/1 Bdr
Rp. 224,500,000
4
Deluxe , 7th fl
27/1 Bdr
Metropark Condominium Tower B
5
Deluxe , 2nd fl
27/1 Bdr
Rp. 218,950,000
6
Deluxe, 3rd fl
27/1 Bdr
Rp. 218,950,000
7
Deluxe , 5th fl
27/1 Bdr
Rp. 224,500,000
8
Premium, 6th fl
54/2 Bdr
Rp. 416,300,000
9
Deluxe, 6th fl
27/1 Bdr
Rp. 261,900,000
10
Deluxe , 7th fl
27/1 Bdr
Rp. 261,900,000
Pavilion-Exclusive Boarding Houses
1
Grande-Corner
COMMERCIAL
Pavilion Niaga
1
Block A3
100
50
Rp. 575,000,000
2
Block A2
100
50
Rp. 575,000,000
Ruko Sunter Niaga Mas
1
Corner
165
71.5
Rp. 1,025,000,000
2
Standard
120
52
Rp. 750,000,000
Ruko Sentra Niaga Square
1
Block 8B Standard 1 (4 x 11), 2nd fl
80
44
Rp. 495,000,000
2
Standard 2 (5 x 10), 3rd fl
150
50
Rp. 715,000,000
3
Corner (6 x 10) , 3rd fl
180
60
Rp. 891,000,000
4
Block 8C Standard 1(4 x 11) , 2nd fl
80
44
Rp. 495,000,000
5
Standard 2 (5 x 10) , 3rd fl
150
50
Rp. 715,000,000
6
Corner (6x10) , 3rd fl
180
60
Rp. 891,000,000
Rp. 257,500,000
221
216
Rp. 1,287,000,000
SIZE - M
2
INDUSTRIAL
Land
Factory
Office
1
Standard Factory Building
1380
831
128
Call
2
Grand Standard Factory Building
3931
830
115
Call
3
3-IN-1 Factory Building
576
310
146
Call
4
New 3-IN-1 Factory Building
1214
304
124
Call
5
Supporting Industrial Building
360
80
80
Call
6
R & B 360
360
80
80
Call
7
Land Plot
Call
SALES and MARKETING OFFICE Jababeka Center, Plaza JB Jl Niaga Raya Kav 1-4 Kota Jababeka, Cikarang Baru Bekasi, West Java, Indonesia Ph. (+62 21) 893 4350 Fax. (+62 21) 893 4331 / 4038
Notes: The Above Prices are not Included: Tax 10%; PPAT; BPHTB fee; KPR/Notarial Fee and can be changed without prior notice
nor of Bali I Gde Mangku Pastika, both of whom will address the conference. Pangestu says that green property is now the direction of the Indonesian property industry. In some areas, including Bali, he added, developers have begun to readjust their business strategies to this new trend as they consider ecological balance a high priority. Industry specialist Teguh Satria, who is also involved in the FIABCI conference, says that Indonesia should have hosted the conference in 1998 but a political crisis that led to a change in national leadership derveloped and prevented it from doing so. Indonesia was then competing against Norway and Italy to be the host of the 61st conference but not until the crisis was over did it regain international recognition to host the prestigious international meeting which will be held at the Grand Hyatt, Nusa Dua, Bali, on May 24-28, 2010. Property Trends 2010 and Key Players
In a related development, industry leaders say that the Indonesian property development has taken a new route, namely development of integrated complexes comprising residential space such as apartments and office blocks. This is expected to be the trend as of 2010 because of rising demand for such kind of property. Jabebeka City is an example of such property development concept, combining residences, shopping and office areas with educational facilities, including President University. Under this grand strategy, Jababeka Group—led by Setyono Djuandi Darmono—has developed 5,600 hectares of integrated compounds for almost a million people occupying 30,000 houses. The tiny city in the eastern outskirts of Jakarta also houses 1,400 companies, including Unilever, Samsung Electronics, ICI, Mattel, United Tractor, KAO, Nissin, and Akzo Nobel, representing international investors from 27 countries. This integrated con-
cept employs around 3,000 expatriates and a huge number of local workers. Jababeka’s integrated property development concept also includes eight hotels and condominiums, 24 shopping malls, 55 hospitals and clinics, two driving ranges, 16 sport clubs and 18 public transportation lanes. The annual production value of this integrated area is US$31.5 billion, with export worth estimated at $10.3 billion. At least US$21 billion worth of investments have poured in to turn
“
Jababeka’s integrated property development concept also includes eight hotels and condominiums, 24 shopping malls, 55 hospitals and clinics, two driving ranges, 16 sport clubs and 18 public transportation lanes.
Jabebeka into one of Indonesia’s most popular new cities. This is apparently the reason why industry analysts are saying that developers cannot survive the tough competition unless they implement a strategy similar to Jababeka’s.
Foreign Property Ownership Set at 70 Years Foreign property ownership will be extended from 25 years to 70 years, in a ruling that now awaits the approval of the Housing Minister, said Lucy Rumantir, Jones Lang LaSalle Indonesia Chairman, in a press conference in Jakarta, last week. Lucy, who is also the Permanent Commitee Head of Property Services for the Indonesian Chamber of Commerce and Industry (Kadin), is a member of the team who formulated Government Regulation (PP) No. 41/1996. Under this regulation, foreigners could only own a house for 25 years. According to Lucy, Indonesian properties occupancy rates are not optimal yet because of government-imposed limitations. Under this PP, foreigners can only own a home or flat built on land with a right to use (hak pakai) certificate . Foreigners complained that while Indonesians could easily own houses abroad, it is difficult for expatriates to buy houses in Indonesia.
Lucy said that in Australia, foreigners could own a house just by having a passport. “But they may only buy new houses,” she added. “Later, step by step, we will formulate a regulation to allow right to use land to become right to build land (hak guna bangunan),” said Lucy. “For example, foreigners could only own properties priced above Rp1.5 billion,” she added. Lucy added that if more foreigners buy properties in Indonesia, state revenues will increase. According to her, the number of foreigners in Indonesia is 83,000 people. “If just one percent of them buy properties, this translates to 800 people. And 800 times Rp1.5 billion is quite a big revenue for Indonesia,” she said. “And if demand rises, property development will also rise. From there, demand for curtains and furniture will increase, and this means that other industries, such as textile and furniture, will also grow.”
“We realize that such is the preferred trend today,” says Rosihaan Saad from PT Perdana Gapuraprima Tb, another key player in the industry. He was quoted by vivanews. com as saying the sales of such property are on the rise because buyers prefer to live near their offices and in areas where they can easily obtain everything they need. As an example, he said, every single space in the GP Plaza, which is owned by Gapuraprima, is already sold out even before work on the building is completed. People buy them up because they like the integrated concept of the compound, he added. Tirta Setiawan, another property industry analyst, says that nowadays buyers prefer residences that are close to their offices or business fields. In other developing countries, Setyawan adds, buyers prefer to live not at the city center but outside of it because they don’t like noise. In Indonesia, it is the other way around—people actually prefer to live at the city center because that is where they can easily get whatever they want. Given this situation, developers must build residences that are integrated with shopping malls, business centers or offices, education and sport facilities. So, Indonesia’s concept must be an all-inone concept, he theorizes. “In the past, price was the primary consideration; today that is no longer the case. The primary consideration is completeness of a location and its comfort,” he was quoted by Kompas.com as saying. In recent years, many Indonesian developers have shifted attention to developing integrated complexes. Lippo Karawaci is another example of integrated property development. Established in 1990 under the name of PT Tunggal Reksakencana, Lippo Karawaci Township, which came to being in 1996, was its maiden success. It is now listed among Indonesia’s well-developed townships, housing Universitas Pelita Hara-
pan (UPH), Sekolah Pelita Harapan (SPH), thousands of offices and residences, sports facilities, and such popular shopping malls as Matahari, Hypermart and Debenhams. It also features Times Bookstore, a joint project of Matahari Department Store and Times Bookstore Singapore, thereby providing local and expatriate communities with access to quality and globally-oriented reading materials. Lippo Karawaci is also where Siloam Hospital is situated. It is one of Asia’s best centers for neurosurgical treatments, attracting patients from Singapore and other neighboring countries. Meanwhile, the property philosophy of Dr. (HC) Ciputra is another towering example one must learn from. He has developed many integrated townships in Indonesia, Vietnam and India, and has in recent years developed educational facilities as an integral part of its property development philosophy. The Ciputra University and
Ciputra schools in Surabaya are good examples of how one-stop property compounds should be developed. And they don’t stop there, as Ciputra is in fact the pioneer of Indonesia’s entrepreneurial education. At all of his schools, entrepreneurship is the main stream of education, while the Ciputra Entrepreneurship Center provides training to lecturers from private and state-owned universities, enabling them to work not just as teachers but business trainers as well. This way Ciputra is building a new generation of entrepreneurs who will are expected to give added ballast to the development of Indonesia’s economy, including the property sector, which is his main line of business. With all these developments going on, Indonesia is well-positioned to share its experience with property developers and realtors who will gather in Bali next May. At the same time, it can also learn from the experiences of overseas property industry players.
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The President Post
February 11, 2010
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Education
Yogyakarta Sultan Takes Lead in Stimulating Society’s Reading Habit Photo: www.newsmerdeka.wordpress.com
As the Sultan champions the campaign to stimulate reading habit in society, other parts of Indonesia are waiting for similar champions to emerge. By Alci Tamesa
I
ndonesia has for decades been recognized as a nation that reads very little, meaning that reading is not a habit in society. This is an anathema that must be eliminated if Indonesia is to become an advanced nation. Against this backdrop and the belief that reading is the key to knowledge and expertise, a tragic lack of society’s interest in reading means that this nation will continue to stand at the receiving end. The reason is the inability to absorb and develop new technologies and competitive business practices that propels a nation’s economy. With such a philosophy in mind, Sultan Hamengkubuwono X, the ruler of Yogyakarta, recently launched a new initiative to spur reading habit in society. This was done when he inaugurated a mobile library called “Guru Bangsa Gus Dur” (Teacher of the Nation Gus Dur) to perpetuate the memory of Indonesia’s former president and champion of pluralism and democracy, Abdurrahman Wahid, who passed away on December 30, 2009. The mobile library actually belongs to Galangpress publishing company in Yogyakarta, which fills the car with 720 titles of book for its tour of the city every day. In spite of the fact that Gus Dur was partly blind in the latter half of his life, he was widely recognized as a broad-minded statesman with an internation-
al horizon and long-range vision. Strangely, though, he was also an intellectual who used to read a lot of books in his own way. So the inclusion of his name in the mobile library is apparently meant as a stimulus to encourage everybody with normal eyesight to read more books than Gus Dur did, especially those on science and technology, because
every day. In Beijing, the official says, some 10,000 people visit public libraries every day. In a way this indicates that Jakarta residents do not like to read books; they prefer to watch television, or read newspapers and magazines that contain hot or controversial issues. Such a tendency is not very helpful in the nation’s drive to
est illiteracy rate: only 0.94% of the population. Iti is followed by Jakarta (1.04%), Riau (2.25%), Central Kalimantan (2.73%), West Sumatra (2.86%), South Sumatra (3.16%), and North Sumatra (3.1%). On the contrary, provinces with high rates of illiteracy are those inhabited mainly by ethnic tribes of Java, Madura, Bugis, and Papua, according to a statement from the Ministry of Education and Culture. One of the reasons is that in those high illiterate provinces, people use their mother tongues instead of the national language in daily life. Given that most
Nationally, the highest rate of illiteracy remains in Papua (16.50%), followed by West Nusa Tenggara (13.05%), East Nusa Tenggara (10.47%), West Papua (10.22%) and Central Java (9.42%) even though Central Java is the biggest “producer” of Indonesia’s ministers of education. even a near-blind person such as Gus Dur was fond of reading. Sultan Hamengkubuwono X is himself a staunch advocate of holistic education as proven in his continuous attention to the entire process of education, from elementary to university levels. But as the Sultan champions the campaign to stimulate reading habit in society, other parts of Indonesia are waiting for similar champions to emerge. In the capital city of Jakarta, for instance, no significant breakthrough has come to sight in terms of arousing society’s reading habit. According to Bose Devi, chief of the Jakarta public libraries network, only a maximum of 200 people show up at 30 public libraries in this metropolitan city
compete in the global market because mastery of science and technology that can be done through reading books is the primary engine of modernization. And yet, this is where Indonesia lags far behind other countries in Asia. Factors Causing Poor Reading Habit
The question is, why don’t Indonesians like to read? According to Jakarta educators, there are many reasons behind this situation. Firstly, even though the focus of education since independence in 1945 was to combat illiteracy, it has not been easy to do so due to cultural reasons. Even today Indonesia is not yet totally free from illiteracy. North Sulawesi has the low-
books are written in the national language as well as English, such people have difficulty reading them. For instance in Bone regency, South Sulawesi, which is the home village of former Vice President Jusuf Kalla, the rate of illiteracy is still 12.87%. Even East Java, which has produced three presidents—Soekarno, Abdurrahman Wahid and Susilo Bambang Yudhoyono—still has a high rate of illiteracy, says Prof. Bambang Soedibyo, the former minister of education. Nationally, the highest rate of illiteracy remains in Papua (16.50%), followed by West Nusa Tenggara (13.05%), East Nusa Tenggara (10.47%), West Papua (10.22%) and Central Java
Sultan Hamengkubuwono X is himself a staunch advocate of holistic education as proven in his continuous attention to the entire process of education, from elementary to university levels.
(9.42%) even though Central Java is the biggest “producer” of Indonesia’s ministers of education. The second factor that causes a lack of reading habit in society is a change in the orientation of family spending. Books are not on the priority lists of every family except compulsory books as required by school teachers. The parents themselves are not fond of reading; they prefer to watch television, so it is difficult for them to persuade their children to read books. This is unlike in Japan, for instance, where mothers are required to read for
at least 20 minutes before sending children to bed. Even in presenting birthday gifts, very few—if any at all— would buy books as most Indonesian parents prefer to provide mobile phones and luxuries. Thereby, children get the message that reading is not important. The third factor causing a lack of reading habit is society’s sudden shift from oral transmission and absorption of information as done through folk tales to electronic and digital methods. With the electronic media now dominating family life across the
country, only parents who understand proper child upbringing require children to read books. Most parents do not take action even when their children hate reading. A lack of regular school assignments, which require a lot of reading, is to blame as the fourth factor causing students’ rejection of reading as a necessity. And to make things worse, public libraries are not being promoted as a good place for the younger generation to visit. These are challenges Indonesia needs to overcome to elevate itself as a reading-minded nation.
SBY Government Increases Assistance for Developing Public Libraries Photo: www.presidenri.go.id
The government of President SBY has, as of 2007, begun to upgrade public libraries, giving priority to development of 100 big libraries across the Indonesian archipelago. Each library will receive at least Rp75,000,000 in assistance annually. By Alci Tamesa
T
he Government of President Susilo Bambang Yudhoyono has in recent years increased the amount of assistance for the development of public libraries—a move that has been greeted with guarded optimism by holistic educators. The assistance has soared significantly from a mere Rp14.9 billion allocated annually since 2007. For this year there is a further increase in the total allocation for libraries because of the 20 percent allocation in the total portion of educational spending in the national budget. Library spending for this year is focused on development and restoration of facilities in remote areas, especially in provinces with high rates of illiteracy, according to Sularsih, an official from the Ministry of National Education. She explains that Indonesia currently has 440 public libraries but only half of them are reasonably furnished. Nevertheless, according to independent observers, many of the furnished libraries, including those in the capital city of Jakarta, do not have reasonable and up-to-date titles or reading materials. In fact, many libraries are still poorly equipped with
old books that fail to attract the younger generation or arouse society’s reading habit. The government of President SBY has, as of 2007, begun to upgrade public libraries, giving priority to development of 100 big
Given the fact that the private sector is now working hand in hand with the Government in arousing society’s awareness for reading, it is perhaps fair to say that there is still hope for Indonesia to see a reading generation emerge in the not-toodistant future libraries across the Indonesian archipelago. Each library will receive at least Rp75,000,000 in assistance annually. In order to encourage reading habit in society, the Government
has also provided around 100 mobile libraries, 50 of them were released in 2007 in remote regencies. Each car is worth around Rp200 million. This strategy has been adopted by the private sector, especially publishing companies, which provides mobile libraries to provincial capital cities. The latest instance occurred recently in Yogyakarta, where Galangpress publishing company launched a mobile library called “Teacher of the Nation: Gus Dur”, inaugurated by Sultan Hamengkubuwono X. The dire need for good libraries is felt most obviously by Islamic boarding schools, educators say, adding that most books provided at such schools are out of date and that students are not interested in reading them. These calls for concrete action come from the Ministry of Religious Affairs, which is responsible for developing religious schools. On another front, however, the Government is working to promote society’s reading habit by building small libraries at public health centers. This year, the Special Region of Yogyakarta has taken the lead, having equipped at least 10 pub-
In order to encourage reading habit in society, the Government has also provided around 100 mobile libraries, 50 of them were released in 2007 in remote regencies. Each car is worth around Rp200 million.
lic health facilities with a library. The aim is to provide good reading materials for patients and their relatives visiting health centers. But here is the good news from Kompas-Gramedia Group (KGG). As of this year, they will increase assistance for up to 200 libraries across Indonesia, with special focus on facilitating li-
braries in Jakarta, Bogor, Depok, Tangerang, and Bekasi. Under a project called “Books for All”, KGG will help renovate library buildings apart from providing books. Funds for this come from the stakeholders of Kompas and independent donors. But what is more important, according to Ria Purwiati,
chairperson of KGG’s Information Center, is the need to build a small library in every house; thereby children will be encouraged to read books instead of wasting time on unproductive activities. She says that a family library will have educational, informational, recreational, and research functions so every family must
start building it now. Given the fact that the private sector is now working hand in hand with the Government in arousing society’s awareness for reading, it is perhaps fair to say that there is still hope for Indonesia to see a reading generation emerge in the not-too-distant future, despite the onslaught of a digital lifestyle in society.
Business BUSINESS BRIEFS Chinese investors put Rp405 billion in West Sulawesi China has been constantly developing cooperation with Indonesia, including making investments in the country, the latest foray being in West Sulawesi, for which it had set aside Rp405 billion. “This year, China has prepared grants for investment in Indonesia totalling Rp 1,000 trillion, including in West Sulawesi,” Governor Anwar Adnan Saleh said here last week, according to Antara. Anwar also said that the investors have prepared Rp405 billion for various development projects. Chinese investors have been eying three development areas planned by the West Sulawesi provincial administration. He said the three development projects include hydro-power plant PLTA Karama, Mamuju, an international seaport in Belang-Belang, Mamuju, a 104km coastal road of a width of 8 meters from West Tappalang subdistrict to BelangBelang port, which will become a trade center in the area. With regard to PLTA Sungai Karama, Mamuju, Chinese investors are said to be interested in building it. “A positive responsive to the project is still awaiting from the central government and the National Planning Development Board (Bappenas) in Jakarta,” the governor said.
Tourist arrivals in Bali up 14% More than 2.38 million foreign tourists visited Bali last year, up 14.48% from a year earlier, the local statistics office said. “In December 2009 alone, the number of foreign tourists visiting the resort island was 222,546, a 26.47% increase compared to the same period a year earlier or a 20.42% increase compared to November 2009,” head of the Bali statistics office Ida Komang Wisnu last week told Antara. He said Australia was Bali`s biggest source of foreign tourists, contributing 446,570, an increase of 42.62% from the year before. China came in second place with 205,151 tourists, up 56.98% compared to 2008, he added. Meanwhile, the number of Japanese, South Korean and Taiwanese tourists visiting Bali last year fell, respectively, 7.20%, 7.43% and 7.67% respectively from 2008.
Petrochemical firms to invest US$1.12b this year Five Indonesian petrochemical companies plan to invest a total of US$1.12 billion this year, the association of olefin and plastic industries said. The projects involve Chandra Asri, Dow Chemicals, Pertamina, Polytama and Try Polyta, and are expected to improve the short supply of petrochemical products in the country, the association said. Chandra Asri, the country’s largest producers of petrochemicals, is set to build two factories in Banten, the association said. The company plans to build the country’s first butadiene factory with an investment of US$100 million and a BTX extraction plant to cost around US$70 million, Antara reported. Meanwhile, US company Dow Chemicals plans to spend US$500 million on a petrochemical factory project, and state oil and gas company PT Pertamina is to spend US$200 million on a polyethylene factory project in Balongan, West Java.
Thailand`s PTT expands RI coal mining investment In a bid to diversify investment risk in the energy industry, Thailand’s PTT Group has taken a syndicated loan of US$380 million or some Bt12.5 billion from four domestic commercial banks to invest in Indonesia’s coal mining business through Straits Asia Resources Limited (SAR). The four banks are Siam Commercial Bank and Krung Thai Bank, as joint lead arrangers, with Bangkok Bank and Standard Chartered Bank acting as co-lenders. Chitrapong Kwangsuksathit, acting managing director of PTT International, a PTT subsidiary, said the loan amount would be used to increase SAR’s coal production capacity to 11-12 million tons this year from 9 million tons in 2009. It is expected the capacity would rise to 20 million tons in the next five years. He said the coal output would be exported to Japan, Hong Kong, and China. It is estimated the group would earn revenue of around US$500-600 million from the business.
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Display until February 24, 2010 /// N0. 09
Five State-Owned Companies to Go Public This Year The four companies to conduct an IPO this year are housing construction company PT Pembangunan Perumahan (PP), plantation company PT Perkebunan Nusantara III (PTPN) and steel company PT Krakatau Steel. By Eka Putri
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tate Enterprises Minister Mustafa Abubakar said five stateowned companies would be ready to go public this year. “If all goes well, five stateowned companies will go public this year, four through initial public offerings and one, namely Pertamina (oil company), will go public but not be listed at the stock exchange,” the minister said at his office here on Friday. The four companies to conduct an IPO this year are housing construction company PT Pembangunan Perumahan (PP), plantation company PT Perkebunan Nusantara III (PTPN) and steel company PT Krakatau Steel. PT PP will likely be the first to go to the trading floor as the process is just awaiting share price fixing. “PP`s shares have been confirmed. However, based on a regulation a company is only allowed to announce the price of its shares after receiving an effective statement from the Capital Market and Financial Institution Supervisory Board
(Bapepam-LK),” he said. Mustafa said the next stateowned company ready to go public would be PT Garuda Indonesia, which plans to sell 25% to maximally 40% shares to raise up to US$300 million to repay its debts and improve its service. Mustafa said Garuda`s management has been effective in preparing various aspects to smoothen its initial public offering. “Garuda right now is still selecting financial advisors,” he said. He added that Garuda`s financial performance continues to improve from year to year as shown by the company`s profits. According to records, Garuda is expected to earn a profit of up to Rp2.1 trillion this year, up 20% from 2009`s profit of Rp1 trillion. Regarding PTPN III`s IPO, Mustafa said PTPN III, IV and VII had already received the approval to conduct an IPO from the privatization team but that PTPN III is considered the most ready because of its good performance. “It is impossible for two companies of the same sector to go public at the same time,” he said.
Mustafa said his office was now also preparing PT Pertamina to become a public non-listed company. “The audit of Pertamina`s financial statement is expected to finish in April so that the company`s plan to go public is expected to be realized in the first semester of 2010,” he said. State companies` assets revalued to Rp2,505 trillion
The State Enterprises (BUMN) Ministry has revised upward the value of state-owned firms` assets, from Rp2,400 trillion to Rp2,505 trillion, an official said. “The increase in the value of the state companies` assets was reported at the shareholders meetings of 141 state companies,” Said Didu, secretary of the ministry of state enterprises, said here last week. Didu said that a number of BUMNs announced increases in their asset values after they reevaluated them on current market prices. He said the big ten state firms in terms of assets were stateowned electricity firm PLN with Rp423 trillion, Bank Mandiri with Rp400 trillion and Bank BRI with Rp367 trillion. They are followed by Bank BNI with Rp257 trillion, telecommunication company Telkom with Rp107 trillion, Jamsostek workers insurance firm with Rp92 trillion, housing ownership credit bank BTN with Rp66 trillion, Taspen with 41 trillion and fertilizer firm Pusri with Rp37 trillion. He said the ten state firms had
“The next stateowned company ready to go public would be PT Garuda Indonesia” Mustafa Abubakar State Enterprises Minister
assets totaling Rp2,100 trillion or 83.8% of the overall value of state-owned companies` assets. Didu said the assets of stateowned oil and gas company Pertamina had not yet been reevaluated Government raises state firms` net profit target for 2010
The government has meanwhile revised upward the net profit target of 141 state companies for this year to Rp92.7 trillion from Rp90 trillion previously.
“Based on the results of their general shareholders meeting the net profit target of state firms for 2010 has been set at Rp92.7 trillion, a 25.27 percent growth compared to their net profit of Rp74 trillion last year,” Didu said. The government also raised the income target of state companies for 2010 to Rp1,050 trillion from Rp1,100 trillion, he said. In line with the rise in the profit target the operating expenditure of the state firms was expected to increase to Rp890 trillion from Rp785 trillion as earlier projected, he said. Didu said the net profit target of state plantation companies for this year was raised to Rp2.95 trillion from Rp2.14 trillion previously. The net profit target of state firms in the agricultural sector was raised to Rp2.6 trillion from Rp1.52 trillion, he said. State companies in the strategic industrial sector also had revised upward their net profit target to Rp1.8 trillion from Rp1.1 trillion, he said. He said the net profit target of state construction companies for 2010 was raised by Rp170 billion to Rp1.2 trillion from Rp1.05 trillion. The significant increase in the net profit target of state plantation companies was based among others on an increase in sugar prices and production, he said. In addition, state plantation companies were also expected to see a significant increase in their net profit this year because of improving commodity prices in the global market, he said.
Pertamina Projects Rp25.011t Net Profit in 2010 The net profit figure was calculated assuming the Indonesian Crude Price (ICP) was US$65 per barrel and the rupiah`s exchange rate at 10,000 per US dollar.
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tate oil company PT Pertamina has set its net profit-making target for this year at Rp25.011 trillion, the company`s finance director, Ferederick Siahaan, said here last week. Speaking at a meeting with the House of Representatives` Commission VII, Siahaan said the net profit figure was calculated assuming the Indonesian Crude Price (ICP) was US$65 per barrel and the rupiah`s exchange rate at 10,000 per US dollar. “The net profit target for this year is Rp25.011 trillion or up by about Rp10 trillion compared with only Rp15.07
trillion last year,” Siahaan said. He said the profit figure was in accordance with the company`s work and budget plan (RKAP) for 2010 and had been approved by the government. Siahaan said Pertamina`s income this year was projected to reach Rp386.817 trillion and its business expenditures Rp350.586 trillion. So its business profit would be Rp36.241 trillion,” he said. But in the company`s 2009 prognosis, business income reached Rp356,378 trillion and business profit Rp26.119 trillion. Siahaan added that in 2009, subsidized fuel oil distribution caused a loss of Rp6.496 trillion because the figure set for distri-
bution cost proved to be lower than the amount actually spent. He said business income from subsidized fuel oil distribution activity in 2009 reached Rp184.139 trillion and business cost Rp190.635 trillion.
point the company`s chief executive officer, technical director, operations director and chief commissioner.
Pertamina, PGN to form LNG terminal services jv
Pertamina has meanwhile started conducting exploration of two gas wells in Ulu Lais village, Lebong Utara subdistrict, Lebong district, Bengkulu province for the construction of Gas Power Plant (PLTG). The PLTG is estimated to generate power for 55 Mega Watt (MW), head of the Energy and Mineral Resources provincial office, Winarkus, said here Friday at the corner stone laying function of the PLTG construction, marking that Pertamina has started doing the exploration. “They have started carrying out the construction work and at the first phase from June to July this year, the two gas wells will be able to produce 55 MW of
Pertamina and fellow state enterprise State Gas Company (PGN) have reached a deal to form a joint venture engaged in LNG Terminal services in West Java. The cooperation agreement was signed by PGN Director Hendi Prio Santoto and Pertamina President Director Karen Agustiawan last week. The joint venture will become fully operational by the end of 2011 with a 1 million to 1.5 million tons per year storage capacity. Pertamina`s stake in the joint venture company will be 60% and it will have the right to ap-
Pertamina starts explorations on two gas wells
Batik has Own Mall in Jakarta
B
atik as Indonesia’s heritage finally gained international recognition. International body UNESCO awarded batik along with Javanese dagger kris and puppet wayang with the certificates of intangible cultural heritage and a certificate recognizing the best practice of cultural preservation. Known for its beauty and artistic designs, batik has captured the hearts of not only Indonesians but also people of other countries and thus inspired them to produce their own batiks. With the certificate recognizing the best practice of cultural preservation, UNESCO will grant Indonesia with elaboration projects to prepare books, movies and exhibitions. Until a few years back, batik had lost its appeal among young Indonesians. Many considered
batik as outdated and clothes worn only by older people or during wedding ceremonies. Batik regained its popularity after the country’s top designers started producing fashionable and trendy batik clothes. Now, to maintain batik’s popularity, especially after securing the international recognition certificate and going through the fuss about a neighboring country promoting batik as its own cultural heritage, a mall of batik was finally opened. The mall, officially called Pusat Batik Nusantara, and located at Thamrin City, Grand Indonesia complex, Jakarta, was inaugurated by Trade Minister Mari Elka Pangestu last week. The place will gradually turn into a shopping mall selling handicrafts and products from around the country, including batik. “Our dream to see small and medium entrepreneurs sell-
ing their batik products directly to consumers at a market with wider coverage has finally come true,” Pngestu said during the handicraft center launch. Mari said Thamrin City, which focuses on selling batik and handicraft products, will open a wider market access for SMEs and at the same time will serve as an alternative place for consumers to buy batik products. Thamrin City Chief Executive Officer Hadi Satyagraha said the mall will not only be focused on selling batiks but also other products from around the archipelago. The mall has been introduced as a batik center since November 2009 although in a smaller scale. Thamrin City’s turnover has now reached Rp3.5 billion. “I think it would be too arrogant if we call it the mall of batik although we have to admit
power, which will be distributed through the South Sumatra and Jambi interconnection network,” he said. The electric power which was produced from the two wells will be distributed through the interconnection channel with the South Bengkulu in a bid to meet the electric power demand of the region, he said. In addition, the electric power for North Bengkulu and Mukomuko districts will be supplied through the interconncetion channel from Padang, West Sumatra. “The installation of interconection network will be able to meet Bengkulu`s demand of electric power. We will even supply the needs of Southern part of Sumatra of the electrict power,” Winarkus said. According to him, the stateowned electricity company PT PLN will buy the power from Pertamina.
Garuda Indonesia, Korean Air to Increase Joint Operations
The mall has been introduced as a batik center since November 2009 although in a smaller scale.
Pusat Batik Nusantara was inaugurated by Trade Minister Mari Elka Pangestu last week at Thamrin City
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that in terms of space, we provide the biggest space for batik traders. I would say, it is most appropriate if we call it the mall of handicraft that sells batik, souvenirs and etc,” he elaborated. Hadi explained that batik traders cover two floors of the Thamrin City building or around 500700 traders from the total of 7,000 outlets provided at Thamrin City and generating turnover of Rp70-75 million per day each. Various batik types from Java and Jambi, both printed and hand-made, are available at Thamrin City with prices ranging from Rp30,000 to Rp500,000 a piece. “Our target is to sell batik from across the archipelago here,” said Hadi. He added that the building management leases each kiosk for Rp2 million per 3 months or traders can own it by paying around Rp40 million per unit.
Korean Air Lines Co., South Korea`s largest airline, said Friday it would increase joint operations with Garuda Indonesia on the Incheon-Jakarta route starting next week. Korean Air, which has been offering seven trips a week between South Korea`s main gateway and the Indonesian capital on a code-sharing basis with the Indonesian carrier, will expand the service to 10 trips a week. The two airliners currently operate code-shared flights 10 times a week between Incheon and the resort island of Bali. Code sharing allows one carrier to sell its tickets on the other`s flights in order to boost revenue by increasing passenger numbers and destinations.
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10 February 11, 2010
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Business IDX Asks Matahari to Explain Unit Sale The Indonesia Stock Exchange (IDX) has asked Matahari Putra Prima (MPPA) to provide detailed information on the company’s move to sell its Matahari Department Store (LPPF) unit. IDX has previously asked MPPA to provide explanation on the corporate move but the answers provided by the management were considered insufficient. “We still have a few questions for Matahari,” said IDX Director Eddy Sugito. “In general, they have been quite informative but we want to know their reason for selling it plus there are a few other questions that we need them to explain,” Eddy said.
Matahari Putra Prima sold 90.76% of its shares in Matahari Department Store (MDS) to CVC Capital Partners for Rp7.16 trillion. Before the transaction, LPPF shareholder composition was as follows: MPPA controlled LPPF with 2,648,220,000 shares (90.76%), Pacific Asia Holding Ltd with 211,203,500 (7.24%) shares and the public owned the remaining 58,494,580 (2%) shares. MPPA is forming a joint venture with CVC Capital Partners called Meadows Asia Company (MAC). MAC’s shares are 80% owned by CVC and 20% by MPPA. According to the plan, MAC will
Singapore Investor to Build US$40m Dump Site A Singaporean investor will soon invest Rp400 billion (about US$40 million) in the construction of a dump site at Cipeucang, Serpong subdistrict, South Tangerang municipality, Banten province, an official said. Head of the South Tangerang Municipal Cleanliness, Park and Funeral Services Didi S. Wijaya said the local authorities had prepared 2.4 hectares of land for the construction of the dump site. The Singaporean investor and the local authorities are expected to sign a Memorandum of Understanding this month, he said. He added the Singaporean investor would build the dump site using zero waste modern technology capable of processing 700 tons of garbage per day. It would take four months to build the dump site, he said. One of the benefits the Singa-
porean investor would gain from the dump site would be electrical power resulting from garbage processing, he said.
acquire 90.76% of MPPA’s shares in LPPF and purchase 7.24% of Pacific Asia shares for Rp2,705.33 per share, bringing the total acquisition value of 98% MAC’s shares to Rp7.735 trillion. Meanwhile, MPPA is targeting 150 new Matahari Department Store outlets in the next 15 years and eyes Rp15.5 trillion revenue this year. MPPA President Director Benjamin J. Mailool said that by forming an alliance with CVC, an additional of 10-12 stores a year or 150 new stores in 15 years is very possible. The company is also upbeat on 15-20% revenue growth to Rp15.5 trillion this year from
Rp14 trillion last year. “If nothing extraordinary happens, we will see an average growth of 15% or 20% at the most. Our expectation is that we can book more than Rp14 trillion,” MPPA Vice President Corporate Communications Roy N. Mandey said. Meanwhile, MPPA is allocating Rp1.2 trillion in capital expenditure for the whole group, which will be funded from internal funds. Roy said that in the past 2-3 years, the group’s total capex had been steady at Rp1-1.2 trillion, adding that the company’s cash was at Rp3 trillion as per September 2009.
Hitachi Set to Up Investment in RI Hitachi Asia Ltd. Intends to expand its investment in Indonesia, Chief Executive & Chief Innovation Officer for Asia, Hitachi Ltd, Yasunori Taga, said here recently. “We want to realize the plan as soon as possible,” Yasunori Taga said in a Media Briefing Hitachi Young Leaders Initiative Alumni Forum. He said Indonesia was a potential country with abundance of energy namely gas, liquefied natural gas (LNG), coal and others. But Yasunori added that he was currently focusing on social infrastructure development sector such as railway system, transportation facility, or other business which has a direct contribution to the Indonesian economy. He also noted that the global financial crisis did not have any negative impact on Indonesia, which he says is one of the countries with a positive gross domestic product (GDP) growth.
“I have confidence in Indonesia,” he says. “We build high-voltage equipment here for export purposes to thye Middle East,” Yasunori added. He also said he would remain using local content in an optimal manner. Yasunory further said Hitachi would focus on long-term social infrastructure business. “It is a long term business that will directly effect the people at large, and therefore we have to make sure that the country where we invest has political and economic stability,” he said. Established in 1995, Hitachi Asia has been marketing various products and services for the industrial sector such as power generators, transmission networks and distribution systems, industrial components and equipment, air conditioners, elevators, and escalators.
Chubu Electric to Buy 700 Metric Tons of Tangguh Gas
Intiwitz International Readies Rp3t to Build 60 Hotels Intiwitz International, a subsidiary of Intiland Development, is set to build 60 new hotels using the brand Witz Hotel in the next five years. The company is planning to build 12 hotels per year with around 120-150 rooms and investment value estimated at Rp50 billion per hotel. “The long term growth is the target to build 60 Witz hotels in five years,” said Intiwitz International President Director and CEO Moedjianto S Tjahjono after signing strategic cooperation agreement with Realta Chakradharma at Intiland Tower in Jakarta last week. The cooperation with software company Realta Chakradharma will cover the installation of Hotelite, an integrated information technology system in all Witz Hotels chain. “Good hotel management demands punctual administrative and financial works to help the hotel management
to make decisions and to analyze performances based on the reports effective,” he explained. The hotel is expected to save 20% of the total administration costs by implementing the Hotelite IT system which has three integrated and complete main modules, namely front office, general ledger, and logistics. The company plans to finance the project through bank loans and cooperation with the land owners. For the first stage, Intiwitz plans to operate its first Witz Hotel in Yogyakarta at Malioboro area in June 2011, which will be built on 850m2 land. The hotel will have 103 rooms. The second hotel will be built in Semarang on 1,000 m2 land with 150 rooms. The rates of hotels will range between Rp300,000Rp400,000 per room per night. Moedjianto added that Intiwitz International is also planning an initial public offering in the next 3-4 years but declined to say how much shares it is planning to release to the public.
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Japanese electrical company Chubu Electric Power will buy Tangguh liquefied natural gas this year. The shipping for Chubu will begin this year and lasts until 2018. “The Minister of Energy and Natural Resources Darwin Zahedy Saleh has approved it,” said the Head of upstream oil and gas regulator BPMigas R. Priyono in a meeting with the House of Representatives Energy Commission yesterday. Chubu has an allocation of 700,000 metric tons per year after Korea Gas Corp (gas company from South Korea) delayed its order because of the economic crisis. Korea Gas signed an agreement to buy 1 million tons of Tangguh LNG in 2010-2012. “The buy-sell gas price is the highest among other gas contracts,” Priyo said. The remaining 300,000 metric tons of LNG for which shipments have been delayed has not been decided upon yet. On the Tangguh LNG allocation for domestic market, Priyono said there was a decision to supply 1.5 million metric tons to a power plant in Belawan, Bali.
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February 11, 2010 11
Human Capital PAYING FOR PERFORMANCE:
Using Incentive Compensation to Drive Superior Performance Naresh Makhijani
Money is not the only motivator of performance. Work related aspects such as meaningfulness of work, variety, attitude of others, culture, etc., all play a part.
“W
hat gets mea sured gets done,” is a wellknown adage in management circles. Less well known is that it is actually the first part of a longer saying: “what gets measured gets done, but what gets rewarded gets done quicker.” The fact is that the promise of rewards - most powerfully when they are financial- tends to motivate. As a simple illustration, give an employee two tasks, of equal complexity and challenge. Tell them that a bonus will be paid on the successful delivery of task one, but not on completing task two. Which task do you think that the employee with prioritize? In the previous edition of President Post we described how to better link the performance appraisal process with the strategic goals of the enterprise by the creation of dedicated “personal scorecards.” A personal scorecard enables every individual to clearly understand their roles and responsibilities, as well as the capabilities needed to perform. As much as anything it is a job description and development plan rolled into one. A personal scorecard, we explained, should become the individual’s performance appraisal system. Performance appraisal, whether captured in a personal scorecard or not, is typically linked to incentive compensation. Our research finds that incentive compensation (or bonuses) provides one of the most complex challenges to HR organizations. Although the promise of a bonus can certainly motivate it is also true that employees are rarely satisfied with the bonuses they receive, or for that matter their basic level of compensation. Employees typically believe that they are worth more that they get paid (even if their managers and coworkers know otherwise). Research finds that most people think that their performance is above average - about 60% believe they are in the top 10% of their company’s performers. Although this is clearly untrue, it poses significant challenges to HR organizations in the successful management of performance.
they do. When the financial rewards are equal, or at least close to being so, then other powerful factors come into play as part of the recruitment process. But once within the organization, pay for performance is the best way to continually motivate employees to do excellent work. This is why nearly every organization in the private sector uses pay for performance plans in some form or the other. For instance, 90 percent of the Fortune 1000 companies report that they use incentive compensation plans. Moreover, an in-depth survey of the HR practices within Indonesian organizations to support our book: Managing Human Capital in Indonesia: Best Practices in Aligning People with Strategic Goals, found that fully 93% of organizations link compensation with performance (figure 1). In the book, we explained that for pay for performance to work organizations should adhere to these key principles. • Communicate the plan’s design so that all participants know how it works and what it takes to be successful. Perceived fairness is as important as the reward itself. • Are rewards based on individual or group efforts? Most successful plans will include a mix of both (see below). • If using a Balanced Scorecard (about which we have spoken at length within previous issues of The President Post, but which is essentially a strategic performance management framework that comprises a financial and three non-financial perspectives of customer, internal process and learning and growth and that identified objectives, measures and targets) then which perspectives are in-
Krishnan Rajendran
cluded in the Plan? Incentives should be spread across all four perspectives. But perspectives could be given weights to focus employee attention on critical drivers of performance (see below). • Should you use lagging or leading indicators in the plan? A good mix of both ensures focus both on results today and the determinants of sustaining that success. As an example of the difference, profit is a lagging performance indicator (in that it describes past performance) whereas new products in development is a leading indicator (in that it describes the processes that are in place to drive future financial performance). It is normal that only a part of the incentive compensation payout is based on performance to individual targets. More common is that the payout will be also partly based on performance to business unit Balanced Scorecard (or other dashboard in the absence of a scorecard). And over the years there been some neat mechanisms put in place to make this work. Early scorecard adopter the US-headquartered Cigna Property & Casualty (P&C) is one of the best-known examples of an organization that implemented a
Financial
Customer
Internal Processs
Employee Learning & Growth
Total Payout
Simultaneously, each individual could earn additional shares during the year based on their own performance. For example, consider an individual who was awarded 50 $10 shares at the start of the financial year. If the business unit of the P&C that s/ he worked for performed poorly against scorecard objectives, then at the end of the year the unit’s share value may have been $5. However, if at the same time the individual performed well, he may have earned 100 additional shares. His bonus would be the final share price ($5) multiplied by the total number of individu-
al shares (150). This would have equaled a bonus of $750. Conversely, if the unit performed well and received a share rating of $14, but that same individual gained only 10 extra shares, his bonus would have been $840. However, if the individual had accumulated 150 shares and the business unit’s share was $14, then the bonus would be $2100. Oftentimes, incentive compensation is paid according to the unit scorecard in isolation. Figure 2 shows such an example. As we can see the perspectives are weighted depending on the importance of the perspective. So, in this example, the financial perspective is weighted at 40%, with customer, internal process and learning & growth all receiving a 20% weighting. Typically, the financial perspective will receive the greater weighting, simply because in the final analysis success or otherwise is based on financial results. That said, weighting can be a powerful mechanism for re-
directing the attention of employees onto other performance areas where the organization wishes to make rapid improvements. A good example was provided in a case study on The Gold Coin Group, which appeared within the best-selling book: Mastering Business in Asia: succeeding with the Balanced Scorecard - written by Naresh Makhijani and James Creelman. In one of the countries within which the company operated customer retention was proving a significant problem. Therefore, a much higher compensation weighting was assigned to the customer perspective with the largest component of the metric being based on customer retention. As a result, customer retention rose sharply and in a remarkably short time. As a public sector example, consider the City of Christchurch, New Zealand. Fully 450 people have their bonuses tied to scorecard (covering all the management layers – from the CEO, through department heads to team leaders. - and forming
“
about 1/8 of the workforce) have the major portion of their incentive remuneration tied to scorecard results. The compensation link works this way. The performance assessment is weighted to highlight the council’s scorecard priorities. Therefore in 2007 35% of the bonus was dependent on performance to the customer perspective, 20% was allocated to the financial perspective, people 15% and process 10%. The remaining 20% of the bonus is linked to individual development targets. Aligning incentive-compensation is one of the most complex challenges facing HR organizations. Few get this right. Those that do provide their parent enterprise with a powerful tool for driving superior performance that can be sustained over the longer term. This article is extracted from the book: Managing Human Capital in Indonesia: Best Practices in Aligning People with Strategic Goals (Azkia, Indonesia, 2009)
in Cikarang Company In-house Programs. Public programs at President Executive Club. Two day training programs Week long development programs One day seminars
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Figure 2: Example of using a Balanced Scorecard to link bonuses to performance at the business unit level. MEASURE
successful, incentive-compensation system. Cigna P&C devised a performance share plan comprising “phantom” shares that were assigned a standard valuation of $10. At the start of each financial year, each employee was allocated a number of these shares depending on their personal responsibilities. The performance of P&C during that year determined the final value of the shares.
An in-depth survey of the HR practices within Indonesian organizations found that fully 93% of organizations link compensation with performance
Figure 1. Percentage of Indonesian organization that link bonuses with performance.
Of course money is not the only motivator of performance. Work related aspects such as meaningfulness of work, variety, attitude of others, culture, etc., all play a part. Young people entering the workplace today are increasingly drawn to companies that share the same values and aspirations as
PERSPECTIVE
James Creelman
TARGET
WEIGHT
ACTUAL
PAYOUT
ROE
15%
30%
16%
3.0%
Revenue Growth
25%
10%
20%
0
Customer Satisfaction
75%
15%
77%
1.5%
Repeat Purchase Percentage
80%
5%
75%
0
On-time Delivery
90%
10%
85%
0
Manufacturing Efficiency
85%
10%
85%
1.0%
Competency attainment-% of Employees gaining 3 new competencies
70%
12%
75%
1.2%
Employee Turnover
5%
8%
4%
0.8% 7.5%
Leadership Emotional Intelligence Business Entry Level Training. Cross Cultural Management Creativity Problem Solving Decision Making Selling Skills Presentation Skills Negotiation Skills Team Building Initiative.
Hybrid Programs to suit your Training Needs Assessments University Certification
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t us & Mee e a FREE w iv rece let on hoa k t boo conduc ds to ng Nee i t Trainsessmen s A
The President Post
12 February 11, 2010
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Management
Merger & Acquisition Games The Silver Bullet of Success
Sylvano Damanik Managing Director Hay Group Jakarta
D
Growing M&A hunger
Mergers and acquisitions are a challenging game when striving for strategic growth and increasing shareholder value. They are one of the most difficult corporate undertakings. The rewards can be high, but so are the risks. A poor due diligence or badly executed merger can diminish the potential integration synergies and significantly destroy shareholder value. How can senior executives uncover the true potential synergies and ensure that their M&A initiative delivers the promised value?
uring the global downturn, the M&A deal activity has shifted from hard hit developed regions to comparatively stable emerging economies. The share of developed economies (Western Europe and North America) in the overall deal activity has fallen consistently since 2007 as these regions were hit relatively harder by the global economic crisis. On the other hand, the share of the emerging markets in Asia has increased over this period, primarily due to better financial and economic condition of the companies in these regions as a result of comparatively stricter government policies and regulations. The economic data is turning the right way in 2010 and M&A activity will follow strong GDP growth very closely. When the economy is picking up there is likely to be an increase in risk appetite in equity markets and in the boardroom. According to Merger Market Intralink the sentiment towards M&A’s in Asia Pacific region is strong. In their M&A survey three quarters of corporate respondents expect that in the Asia Pacific region the M&A activity will increase greatly (8%) or increase (68%) this year , with not a single respondent expecting deal making to fall. Indonesian market developments and government policies will support this upward trend in M&A deal making. Foreign investment in Indonesia is again picking up and domestic investments doubled. The ASEAN-China Free Trade Agreement (ACFTA) will put pressure on the competiveness of the domestic markets and will uncover weaknesses in protected industries and companies. Currently there are too many telecommunication operators for the Indonesian market compared to other countries and operators also need to strengthen their data business for future competitiveness. These developments will push the telecommunication industry for acquiring the right capabilities and consolidation. In banking, Bank Indonesia will keep pressing forward with the consolidation programme for a sound, strong and competitive banking system. All in all Indonesia seems to be the ideal arena for the M&A game. Low M&A success rate
As always, investors are concerned – now more than ever – about how to realize maximum value and mitigate risk from M&A activities. How can they ensure that their investment delivers on the promises of cost reduction and growth? And what can be done to create new shareholder value as quickly as possible? Beyond seizing the perceived immediate opportunities, organizations should also keep in mind the longer-term sustainability of the merged organization. However recent Hay Group research shows that in reality deals often fail to reach anywhere near the potential expected of them. Much of this failure can be attributed to an underestimation of the importance of intangible capital by merging organizations. Analysts say that the value of a business linked to organizational, relational or human capital – the intangibles, should be in the region of 75% of market capitalization. Yet the executives we surveyed suggest that no more than a third of value is attributable to such intangible capital. And although there is an improvement in recognition of the importance of intangible capital to longer-term integration success, they spend only a quarter of deal time identifying and managing such risk. There is often a heavy focus on the financials – leading to an incomplete view of the value of the
Ed Krancher Managing Consultant Hay Group Jakarta
company being acquired. Consequently the handling of ‘intangible capital’ - the silver bullet that is critical for success - does not always get the attention it merits. Most 90-day deal implementation plans aim to achieve quick wins by integrating ‘hardwiring’ - the tangible assets such as IT, financial systems and property portfolios. But aligning intangible capital or ‘soft wiring’ is more difficult. Executives must take time to evaluate intangibles right from the start of M&A activity. However, because it is easy to identify and manage risks to tangible assets and difficult to audit intangible capital, priorities can remain focused on the former. The consequences can be severe. If intangible capital is disregarded, integration languishes and the synergies fail to materialize. By undervaluing intangibles, buyers risk destroying value. Rewards come to those who measure, evaluate and value intangibles. Yet in our survey: • nearly a third of buyers (31%) did not carry out a formal intangibles review.
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and seek other ways to penetrate the market. Also after the deal has been made, organizations must avoid stepping into the pitfall of focusing mainly on the tangible assets, and need to balance it with focus on the intangibles. A leading global geophysical services and equipment company that partnered with Hay Group in preparing the merger and executing the post merger integration, experienced this first hand. The undivided attention to the intangible assets proved to be one of the main factors for the successful cross cultural merger. The silver bullet of M&A success: Intangible capital
So what is intangible capital. The Hay Group model of ‘Intangible capital’ consists of three elements: ‘organizational’, relational’ and ‘human’ capital, as detailed in figure one. Measuring these elements during due diligence will ensure that you will make a balanced decision on a M&A deal. Taking these elements into account during the
Leadership M&A activity necessarily results in leadership changes as integration takes place. How such changes are handled is the next major hurdle. A common mistake is to send contradictory messages through the selection of individuals for key positions. CEOs can too easily promote those they favor, not those that are most suited to implement a successful integration. Mergers are about the relationships, both formal and informal, that are forged as two distinct enterprises come together. Collaborative, empathetic skills are required. Problems with internal relationships, resistance to change and unwillingness to collaborate across organizational lines feature regularly in dysfunctional mergers. Frequently it takes too long to determine which roles and people should stay, or decisions can be made on inappropriate criteria, such as judging leadership capacity on an individual’s personal presence, rather than their capabilities in managing M&A integration.
Indonesian companies should focus on opportunities and strive for committed and talented leaders, a strong culture with engaged employees, a loyal customer base, a sound operating model and transparent governance structure. This will create a solid foundation for a healthy competitive business with strong capabilities to grow and a strong bargaining position in a merger or acquisition process.
• of those who did, 70% considered their merger to be a success. Indonesian companies that carried out a formal intangibles review responded a 90% success rate. While quite the opposite, Indonesian companies that neglected a formal intangibles review reported only a 10% success rate . • two-thirds (66%) of business leaders believe an increased and earlier focus on intangibles throughout the deal lifecycle would improve deal success. 100% of the Indonesian business leaders believe that an earlier focus on intangibles would have given them more deal success. • almost two-thirds (61%) plan to increase the focus on intangible capital in their next transaction. For Indonesian business leaders this is 79%. These are figures that are not to be taken lightly. In Hay Group’s M&A experience organizations that do not execute a proper due diligence on intangible capital and take the post merger integration process too lightly in terms of intangibles, will fail to make the merger work. Or at the best will succeed but at significant unexpected financial and human capital costs that could otherwise have been avoided. If intangible capital risks and costs would have been known to the company upfront, they would be part of the deal making, balanced with the financials and tangibles. Although the financials and tangibles might show a good deal, the outcome of an intangible capital due diligence might proof this wrong, as also a Hay Group client in the FMCG sector experienced. When Hay Group performed an intangible capital due diligence for our client on the target organization in China it became clear that the merger would come with considerable risks due to a completely different business culture, almost opposite management philosophy and a poor talent pool. Although the financials seemed right in the beginning, in the end our client thought it wise to blow of the intended merger
post merger integration process will enhance the success of the integration (Figure 1). Four clear issues in integration
Culture Dealing with cultural issues of the target company is the biggest challenge to successful post merger integration, according to Hay Group research. This is a complex issue and during M&A, three elements of culture – national, organizational and management culture – must be considered. The difficulty is that during due diligence, buyers might not have sufficient access to the target organization to assess cultural fit. Even if they do, culture is often regarded as a ‘soft’ issue, not worthy of serious analytic thought. This is a mistake that many companies make. When two separate cultures keep on existing after a merger, in essence two hidden companies co-exist next to each other under one roof, and possible synergies will be lost.
About half of the respondents in our research (52%) reviewed leadership capabilities during due diligence. It is by far not enough. If leadership is fundamental to a successful integration, keeping your talent aboard and engaged and maintaining your client relationships, this figure should be nearer to 100%. Instead we see the focus of many executives shift after due diligence towards the running of the daily business rather than positioning the levers right for successful integration. Integrating the customer base Following issues around culture and leadership, getting the most from the target company’s customer base is ranked as the next major obstacle for executives. After integration, executives can focus on internal matters to the detriment of customers. At a time when customers worry about continued service levels, this is concerning and, as both customers and employees read press coverage, rumor can
obscure fact. As employees communicate with customers all the time, there is much scope for misinformation and mishandling. Accordingly, during due diligence it is vital to consider how client relationships will be maintained. Both the acquiring company and that being acquired will handle client relationship management, account management and procedures such as sales processes differently. Throughout integration, customers must be at the heart of operation. Corporate governance Uncertainty around corporate governance, particularly where accountabilities are unclear or the operating model is in flux can cripple organizations. It is the fourth biggest barrier to integration success. Driven by legislation, the need for tax efficiency as well as the need to bring together two different sets of processes, the newly merged entity will require new governance procedures. For key senior individuals, changes in governance can result in a loss of autonomy and decision-making power. So retention strategies may be required if key people are not to leave for new opportunities. A threat or opportunity?
In these challenging and highly competitive times in the Indonesian market place, does the possibility of a merger or take over pose a threat or an opportunity? It depends on which end of the game your are and how you want to look at it. Executives can see the ASEAN-China Free Trade Agreement as a threat or as an incentive to shape up the organization. If an industry is always protected, it will never become a competitive, strong and resilient industry with the capability to expand beyond it’s geographical borders. Indonesian companies should not waste energy on focusing strongly on their weaknesses and the threat of “unfair” competition, being taken over or even diminishing. Instead Indonesian companies should focus on opportunities and strive for committed and talented leaders, a strong culture
with engaged employees, a loyal customer base, a sound operating model and transparent governance structure. This will create a solid foundation for a healthy competitive business with strong capabilities to grow and a strong bargaining position in a merger or acquisition process. In case of an M&A, more and more organizations will belief in the power of doing a due diligence on intangible capital. When you are acquiring a company make sure that you balance the tangibles with the intangibles before making a decision. If your company is on the verge to be taken over and it proves to be a good catch in as well the tangible and intangible areas, then your bargaining power is enhanced. Your company will come out strong as also one of our Indonesian clients in the FMCG sector noticed. Having a strong and responsive management, a loyal customer base, cohesive culture and proven operating model, our client was a good catch for the acquiring partner. At first the acquiring partner wanted to replace most of our client’s management in the merged organization and impose it’s operating model. Because of their many strengths, our client was able to put a stronger mark on the new to be formed organization and in the end it actually went the other way around. Whichever way you look at it, Indonesian companies need to build and develop their strengths to survive in the competitive and challenging arena. About Hay Group
Hay Group is a global consulting firm that works with leaders to turn strategies into reality. We develop talent, organise people to be more effective, and motivate them to perform at their best. With 86 offices in 47 countries, we work with over 7,000 clients across the world. Our clients are from the public and private sector, across every major industry, and represent diverse business challenges. Our focus is on making change happen and helping organisations realise their potential. Visit www.haygroup.com.
About the research Hay Group’s global research program was conducted in conjunction with ‘mergermarket’ (part of the FT group), and questioned more than 560 senior management level executives with experience of M&A transactions worth at least $500m over the past three years. Respondents were drawn from disciplines including corporate finance, strategy, M&A, finance, risk, operations, IT and HR and included board-level executives in sectors such as financial services, industrials, energy, mining and utilities, consumer and retail, technology, media and telecommunications, pharmaceutical, medical and biotech and business services.
Figure 1: Hay Group model of intangible capital ORGANIZATIONAL CAPITAL
RELATIONSHIP CAPITAL
Culture and market convergence Shared values, attitudes, beliefs and customs
Brand External and inetrnal image and reputation All that touches the customer experience
Governance Aligned business processes Clear and effective governance
Climate intimacy Knowledge of the client Market coverage
Agility Capacity to manage internal business transformation React quickly to new market demands
Client loyalty Client satisfaction Low turnover and high rate of referrals
Communication and teaming Willing to share information Simple channels/information flow
External networks Strong relationships with suppliers distributors and other partners or centers of influence
Energy and clarity Communicated and understood business strategy Clear direction for people to mobilize their energy
Internal networks Effective internal communication High impact cross functional teams Enabling relationships across organizational and geographic Boundaries
Organizational Structure Effectiveness of the organization to deliver the strategy Tacit ‘know-how’ and information Willingness to innovate Unpatented intellectual property
HUMAN CAPITAL Leadership Clear vision established and communicated Conflicts of interests coordinated and balanced for all stakeholders Team commitment and employee recognition Employees High potentials identified, developed and rewarded Strong commitment, loyalty and value by the organization Development and management New skills, knowledge, leadership style acquired with training and coaching Engagement Employee empowerment and degree of attachment to the company Productivity Efficient management of costs, resources and time
The President Post
www.thepresidentpost.com
February 11, 2010 13
Investment RI Only One Notch From Investment Grade The global rating agency Fitch had upgraded the country`s credit rating to BB+ earlier in the day.
B
ank Indonesia (BI or central bank) said Monday Indonesia was only one notch away from an investment grade after global rating agency Fitch had upgraded the country`s credit rating to BB+ earlier in the day. “Given the upgraded rating, we only need to go up one more notch to reach an investment grade,” Bank Indonesia (BI) Deputy Governor Hartadi A. Sarwono said in a short text message to journalists. Among the positive factors pushing up Indonesia`s rating was the Indonesian economy`s resilience amid external upheavals, he said.
The other factor was Indonesia`s balance of payments, which had tended to continuously record a surplus in terms of current account and capital account, he said. Hartadi said Indonesia`s foreign exchange reserves had continued to increase and now totaled nearly US$70 billion, up from US$69 billion at the end of last year. Indonesia`s state budget deficit was still sound compared to those of other countries belonging to the same group and this was another factor considered to upgrade its credit rating, he said. If Indonesia continued to manage its macro economy consis-
tently and carefully, its economic prospects would become even better, he said. Fitch upgraded Indonesia`s credit rating to BB+ on Monday, one notch below the investment grade. The rating`s outlook is stable. The upgraded rating is for Indonesia`s long-term debts. Fitch also upgraded the rating of Indonesia`s country ceiling from BB+ to BBB and maintained the rating of its short-term debt at B. Ai Ling, a director in Fitch`s Sovereign Ratings team, said in a statement the rating reflected Indonesia`s relative resilience to the 2008-2009 severe global financial stress test, underpinned by continued improvements in the country`s public finances, a fundamental sovereign rating strength, and a material easing of external financing constraints. Fitch also noted that Indonesia`s
Sasol in Talks with RI Firms on Coal Liquefaction Project
public debt ratio continued to fall to only 30% of gross domestic product (GDP) in 2009. Foreign exchange reserves, including gold also rose by 28% to US$66 billion and economic growth increased to 4.6% last year. But Fitch added the priority risk of long-term development would overshadow the performance if inefficient fiscal spending remained unsolved in line with deferred increase in electricity tariffs and fuel oil prices. Finance ministry expects upgraded rating to attract investment The Finance Ministry also expects Indonesia`s upgraded credit rating from BB to BB+ will encourage more foreign investment inflows to the country. “It is expected the upgraded credit rating will not only make the cost of borrowing more ef-
ficient but also encourage more foreign investment inflows to Indonesia because of the declining country risk,” the ministry`s director general of debt management, Rahmat Waluyanto, said last week. Given the upgraded rating, the country would only need one more notch to reach an investment grade, he added. Rahmat said there were several factors underlying Fitch`s decision to raise Indonesia`s credit rating. The factors included Indonesia`s success in weathering the 2008 global crisis as reflected by its economic growth momentum and manageable financial system. The upgraded rating also suggested international recognition of fiscal and monetary authorities` performance in managing the state budget including state debts, he said.
Footwear Factories in China PLN to Build Special Coal Move to Indonesia Major shoe producers like Nike, Adidas, and New Balance, have relocated their shoe purchases from China to Vietnam and Indonesia.
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rade Minister Mari Elka Pangestu said there seems to be a tendency for shoe manufacturers in China to relocate to Indonesia. The strengthening Chinese yuan can be one reason for this, along with the increasing cost of manpower and its regulations in China. “This is a permanent trend,” Mari said last week in Tangerang, Banten. Major shoe producers like Nike, Adidas, and New Balance, have relocated their shoe purchases from China to Vietnam and Indonesia. Such a trend, Mari said, has been going on since 2005.
For the last four years, the value of these moves to Indonesia have netted US$1,8 billion. “Buyers are coming in large numbers,” she said. The relocation, Mari continued, will improve production and investment in the country, especially when Indonesian shoes are now capable of competing with Chinese and Vietnamese products. Meanwhile, the Indonesian Shoe Association board chairman, Harijanto, said with top shoe brands coming to Indonesia, the national shoe industry is set to restructure the production system to become more efficient. “But the government must ensure that electricity supply is reli-
able and that infrastructure, like roads are repaired,” Mari said. She cited the example of the Panarub factory in Pabuaran, Tangerang, which can only reach Tanjung Priok Port through the congested Tomang toll road. Harijanto also asked for more efficiency in arranging investment permits, especially in the provinces. Mari promised to cut the bureaucracy, including the time to process the licenses. She said New Balance investors admitted that the cost and production of Indonesian manpower is competitive and the staff turnover is stable, as is the national political situation. “There is also infrastructure that needs to be repaired,” she said. PT Panarub Dwikarya CEO Hendrik Sasmito said the local shoe industry will remain competitive against China and Vietnam, as long as it can keep down the cost of production. Panarub currently produces four shoe brands, namely Adidas, New Balance, Mizuno, and Specs. A pair of New Balance shoes is sold at US$12 to 16. Panarub has two factories and will open a new one in Cikupa, Tangerang. Panarub has exported 1 million pairs of shoes. Until the end of 2010, an additional 500.000 pairs per month will be produced.
Terminal State power company PT PLN will build a special coal terminal in Labuan subdistrict, Pandeglang regency, for the supply of coal to PLTU Labuan, unit 2. “PT PLN has already submitted a plan for the special coal terminal, which is currently still under discussion,” head of the Pandeglang cleaning and zoning agency, D. Hasahatan, said here last week. The discussion covers matters related to development in close harmony with government policies of central and regional level, port development and optimizing the utilization of zoning and integrating local, regional and national transformation. He also said that the master plan in the making needs to cover territorial waters and land zoning on the basis of the aspects and parameters of nature, operations, facilities, equipment, and type of cargo. “The master plan also needs to be flexible to support development and environmental aspects,” he said. According to the National Zoning Plan, part of Banten province is covered by a certain area which gets priority in development, namely the Cilegon industrial estate and Tangerang within Jabo-
detabek (Jakarta, Bogor, Debok, Tangerang and Bekasi), which are classified as a fast development enclave. The Soekarno-Hatta international airport is the national gateway and the port of Bojonegara as an international port are integrated with Jakarta`s Tanjung Priok of Jakarta. The same is also true with Sunda Bay, an international lane linked to the Indian Ocean and the South Chinese Sea. PLTU Labuan, unit 2, in Labuan subdistrict, Pandeglang regency, Banten province, inaugurated by President Susilo Bambang Yudhoyono on January 28, 2010, needs coal to move its two turbines. The power plant has a capacity of 300 x 2 megawatts (MW) and was built to meet the power supply shortage in Java and Bali power grid. Member of Commission VII of the House of Representatives Irna Narulita Dimyati has asked to prioritize Banten province in getting power supply from PLTU Labuan. “The PLTU is a national project, but as it is located in Pandeglang, it is only reasonable that Banten has the last say on power supply from the power plant,” Irna said here last week. Of the total number of people of Banten, only 250 thousand families are enjoying electricity.
In Batam, the investment process is being carried out through the internet. The use of electronics is expected to be carried out in all of Indonesia this year. Last year, investment in Indonesia amounted to Rp 135 trillion, in which Rp.100 trillion came from foreign investors and Rp. 35 trillion from domestic investors. “This is different from the previous blueprint, targeted for 2012. We are accelerating it to 2010. With this simplification, investment will definitely increase,” said Wiryawan after a visit to the Tirta Investama “Negotiations company in Klaten, were in progress Central Java, last with oil and gas week.
South Africa’s Sasol Limited, the world’s largest producer of synthetic fuel, has begun talks on developing a US$10 billion coalliquefaction plant with two Indonesian state companies. Negotiations were in progress with oil and gas company PT Pertamina and coal miner PT Tambang Batubara Bukit Asam, Gita Wirjawan, the chairman of the Investment Coordinating Board (BKPM) said. State fertilizer companies like PT Pupuk Sriwijaya might also be involved in the project, Wirjawan said.
Last month, Sasol and the Indonesian government signed an initial agreement company PT to study the feasibilPertamina and coal To publicize this ity of the project. miner PT Tambang integrated service, Investment preBatubara Bukit Wiryawan plans to dicted to increase at Asam.” visit Central Java arleast Rp. 13 trillion eas like the ones he Wirjawan is opGita Wirjawan BKPM Chairman made to Semarang, timistic that IndoSolo and Klaten. nesian investment “I met governors value increase from and regents to brainstorm about 10 to 15 percent this year. The reason cited was the enact- the potential targets that can be ment of the one-door integrated achieved by Central Java in order service, which will simplify the pro- to improve coordination between cess of capital investment through the central and regional governments,” he said. the internet in every region. Samiaji, Klaten Deputy Regent, The impact of this new system proposed several investment has started to show with an in- schemes such as dairy cattle crease of investments in Jakarta. breeding, steel foundry and crafts.
US Companies to Expand Operations in RI Seven United States-based companies will invest and expand in Indonesia. They are Caterpillar, Ford Motor Company, The Dow Chemical Company, Cargill, General Electric Company, Monsanto and News Corporation.
contract insurance, especially in the oil and gas field. The businessmen also asked Indonesia to abide by long-term contracts that had been signed. “They often encounter disputes during implementation of contracts,” Hidayat added.
Industry Minister M.S. Hidayat announced this after receiving the US-ASEAN Business Council delegation in his office yesterday. Caterpillar, he said, will expand in the heavy machinery sector, while Ford in automotive components, News Corporation in the creative industry by entering the film industry, and Cargill in the health sector. The one thing that they asked, Hidayat said, was long-term
The US-ASEAN Council President, Alexander C. Feldman, said his delegation came to assist Indonesia in the infrastructure sector. According to Feldman, the US companies are committed to stay in Indonesia. “This can be seen with Obama coming very soon,” he said. US President Barack Husein Obama plans to visit Indonesia in June or July this year, according to reports.
ADVERTORIAL
A Promising Place to Make Money and Live in Harmony To create something from nothing is not easy; it requires perseverance, honesty and sincerity. It is also quiet an achievement to start a business. Soegeng (61) has succeeded in doing just that by having 3 workshops in Jababeka’s Indus-
trial Estate. Humble, low profile and simple. That best describes Soegeng, who started his Electro Motor Workshop 30 years ago in Pulo Gadung Industrial Estate. Soegeng decided to buy a Standard Factory Building (“SFB”)
in Jababeka’s Industrial Estate in 1993 for Rp. 250 Million. He found the information in an advertisement in the newspaper at that time. Soegeng saw a large potential market in Jababeka and believed that investing was the best decision to make. “Kota Jababeka is a promising place to everyone who wants to make money and live in harmony,” he said. Now the price reached Rp. 4.5 billion. Imagine that 99% of the tenants in Jababeka have used his workshop services, which include both big and small motor repair and maintenance. His diligence in running the business of Electro Motor Workshop is supported by the international Electrical Apparatus Service Association (“EASA”). In 1990, Soegeng became a member of EASA, an association that covers a company or individual that runs a business in the electro motor field, including manufacturers, sales
outlets, repair shops, etc. For the first 10 years, Soegeng was the only EASA member from Indonesia, however, he is now followed by 3 other members. The R&B factory building, which is usually located on the edge of Jababeka’s Industrial Estate, is available with 2 or 3 floors and is particularly suitable for commercial, retail or restaurant businesses. Soegeng chose such R&B building in order to expand his motor workshop, which is used by many customers daily and to diversify to the textile industry as well. With the success of his workshop business, Soegeng tried to diversify to the textile industry, especially catering to providing employee uniforms for companies within Jababeka’s Industrial Estate. This decision was taken with the consideration that many companies require a uniform for their employees, which is a fixed cost every year. Soegeng’s second daughter runs this textile industry until now.
In 2008, Soegeng bought a Threein-One Building because a partner offered him to co-operate in a new business. However this co-operation failed and the factory was then rented out to a third party. However, the tenant offered him a share of the company and today Soegeng’s share is 32% of the sync plating industry, which is still operating, that operates in the Threein-One Building. Soegeng emphasizes The Management of Religion not only to his family but also to his employees. Because by believing in God, Soegeng, father of 3 children, has succeeded. This Management of Religion had finally moved Soegeng’s heart and he decided to make his employees more prosperous. Soegeng bought 50 units of houses in Kota Jababeka to be given to each of his employees. Soegeng drew the attention of S.D. Darmono, President Director of PT Jababeka Tbk,
Budi Tulus Prakoso, Soegeng’s youngest son.
and soon an agreement was successfully made between PT Graha Buana Cikarang (subsidiary company of PT Jababeka Tbk that takes care of the Housing and Commercial sector) and Soegeng on the transaction of these houses. Besides, Soegeng also provided the Umroh (pilgrimage to Mecca) to his employees, whom had worked at least five years with him. “Looking
for an honest person is not easy. It is easier to look for a clever person” he explained. Now, his warehouse in Pulo Gadung is handed over to his first daughter and another warehouse in Jababeka Industrial Estate is handed over to Budi Tulus Prakoso, his youngest son.
The President Post
14 February 11, 2010
www.thepresidentpost.com
Tourism UI - PT. TWC Borobudur, Prambanan & Ratu Boko Signed a Cooperation Agreement By Jeannifer Filly Sumayku
In an effort to preserve Indonesia’s cultural heritage, the University of Indonesia (UI) recently signed a cooperation agreement with PT. TWC Borobudur, Prambanan & Ratu Boko. The purpose apparently, is to utilize the expertise of UI’s archeologists in managing the historical objects based on scientific principles. Dr. Nining I. Soesilo, from the UI’s Faculty of Economic says that this cooperation will create a synergy which is inconformity with UNESCO’s program to preserve cultural heritage around the world. Purnomo Siswoprasetjo, the Director of PT.TWC Borobudur, Prambanan & Ratu Boko, says that this cooperation will lead to provision of better services
for tourists, students, researchers, and the public in general. Under this cooperation with the Department of Archeology, they will organize ASEAN Archeological Congress near the Borobudur temple on December 13th 2011 to call inside the celebration of 20 years of UNESCO’s recognition of Borobudur temple as a world cultural heritage.
must be made to promote Indonesia’s other cultural heritage and preserve them for scientific, social, economic, and recreational purposes.
Meanwhile, PT TWC has also setup cooperation with PT BAB publishing Indonesia to publish a book entitled Borobudur: Majestic, Mysterious, Magnificent. The book is expected to inspire the public especially Budhists to learn more about the architecture, archeology, ancientistry, and story of Borobudur temple. The issuance of this book was sponsored by Joop Ave, former Minister of Tourism. Observer say that more efforts
The purpose of the coopertaio agreement, is to utilize the expertise of UI’s archeologists in managing the historical objects based on scientific principles.
The Leader Behind the Scene Purnomo is believed to be the executive who prepared Oktagon to become the marketing division of the famous Tanjung Lesung resort project. Few people may realize that the man behind the scene in the preservation of Borobudur and Prambanan temples is also a key figure in the Jababeka Group. Purnomo Siswoprasetjo, director of PT TWC Borobudur, Prambanan & Ratu Boko — the company is involved in the UNESCO-associated cultural heritage project — has since 1990 joined forces with Setyono Djuandi Darmono, the CEO of Jababeka, to run what is now one of Indonesia’s leading property developers. They started off with only a four-member staff; looking back, they now say the much progress they have made entitles them to call their property business a success. Purnomo is believed to be the executive who prepared Oktagon to become the marketing division of the famous Tanjung Lesung resort project. He got his bachelor and postgraduate degrees on industrial management from Trisakti University and was involved in the South Banten Development Foundation
which peacefully relocated around 5,000 houses to make way for industrial development. According to Agus Canny, VP for Corporate Marketing of Jababeka Group, Purnomo is a wise and humble-hearted person with a calm personality who always advocates harmony. He sometimes fasts and practices meditation “the way ancient kings use to do.” He is also a good listener who prefers to listen thoroughly before expressing ideas, Agus says. And more importantly, Purnomo always pays attention to the aspirations of his employees.
ASEAN Launches New Tourism Campaign
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en ASEAN countries last month launched a new tourism campaign built around the slogan “ Southeast Asia: feel the warmth”. A dynamic, new, interactive website, SoutheastAsia.org has been created as the primary marketing tool. The new campaign, officially supported by the 10 ASEAN tourism ministers at the ASEAN Tourism Forum in Brunei, will immediately target tourists in medium and long haul markets such as the UK, Australia, India, North America and Hong Kong. “Southeast Asia: feel the warmth” and SoutheastAsia. org will emphasize the warmth of Southeast Asia’s hospitality and climate and the diversity of the region’s cultural attractions and tourism activities. The ten participating countries are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.
Starting from Rp. 1,880,000* per night Explore Yogyakarta’s three must favourite golf course: Hyatt Golf, Merapi Golf, and Borobudur Golf Course with our special Yogyakarta Golf Adventure. Package includes one Garden View room including American Breakfast, relaxing massage at the Hyatt Spa and all related land transfers. FEEL THE HYATT TOUCH* For further information please call Hyatt at +62 274 869 123 or e-mail: yogyakarta.regency@hyatt.com Jalan Palagan Tentara Pelajar, Yogyakarta 55581, Indonesia TELEPHONE +62 274 869 123 FACSIMILE +62 274 869 588 yogyakarta.regency.hyatt.com Price is nett and valid for one person minimum two nights stay. Weekend and high season surcharge apply. Valid until 30 June 2010. *Terms and condition apply
In announcing the campaign, Pehin Dato Yahya, Brunei’s Minister of Industry and Primary Resources, told ASEAN Tourism Forum delegates and media that the new campaign had been built on four principles. “First, the fact that ‘Southeast Asia’ has greater recognition in international source markets than ‘ASEAN’. Second, the trust that online consumers now put in meta-search tools and user-generated content. Third, the importance of authenticity and ‘warmth’ in travelers’ decision making processes. And fourth, the tremendous opportunities that Southeast Asia offers to visitors who are interested in exploring niche themes such as culture, adventure, shopping, ecotourism, island holidays, train travel, spa, culinary experiences, river and sea cruises, and much more.” Felix J. Cruz, Chairman of the ASEAN Tourism Association (ASEANTA) and Vice President for Marketing at Philippine Airlines, said that the campaign had the supporting objectives of promoting multi-destination travel within ASEAN countries, boosting tourism as a tool to fight poverty in the poorer areas of
ASEAN, and helping small and medium-sized tourism enterprises showcase their tourism services to a wider audience. “Southeast Asia: feel the warmth” was jointly created by ASEANTA and the ASEAN Competitiveness Enhancement (ACE) office in collaboration with the ten ASEAN member countries of Southeast Asia. The region’s national tourism organizations played a key role at each stage of the brand and campaign development. The ACE project was designed and funded by the United States Agency for International Development. ACE Project Director R. J. Gurley said: “We are particularly excited about the boost in demand our theme-based approach to content will bring to niche-focused small and medium-sized tourism enterprises throughout ASEAN.” In January 2009, ACE and ASEANTA signed an agreement to work together on a new branding and marketing campaign that would encourage travelers to visit multiple Southeast Asian destinations, stay longer, and spend more money in the region. Since then, ACE has created alliances and agreements across the public and private sectors to build the campaign. For example, for SoutheastAsia.org, Lonely Planet is supplying insights and practical information on more than 8,000 travel attractions and things to do in Southeast Asia. Singapore-based travel search engine, Wego, created the integrated map, trip planner, and meta-search engine which will be the key application integral to the new website. Another Singapore firm, Qais, developed the site and will build traveler awareness of SoutheastAsia.org through a sustained e-marketing campaign, which also starts with the 25 January launch. The initial phase of the SoutheastAsia.org launch is centered on a contest to populate SoutheastAsia.org with user-generated text, images, videos, and articles. The user-generated content will supplement professionally-sourced content from Lonely Planet, ASEAN’s national tourism organizations, professional travel writers and other contributors. Contestants submitting content can win prizes. The website and broader online marketing campaign will be
fully launched at ITB Berlin in March. As part of the roll-out, the ASEAN Tourism Association, with support from ASEAN NTOs, has agreed to establish an ASEAN Tourism Marketing Center, initially within the ACE project in Bangkok. The center’s ACE-funded staff will coordinate with Wego and Qais to build awareness of SoutheastAsia.org and handle consumer queries. ACE has financed the development of “Southeast Asia: feel the warmth”, SoutheastAsia.org, the e-marketing campaign and the staffing of the ASEAN Tourism Marketing Center. While SoutheastAsia.org has been created with a flight and accommodation search interface (meta-search engine), bookings and payments will take place on the website of the travel supplier. Gurley said that ACE’s objective was to “create a fully functioning and integrated global development alliance based on public and private sector partnership that would serve Southeast Asian tourism”. The ASEAN Tourism Association (ASEANTA) was formed on 27th March 1971. ASEANTA is a non-profit tourism association comprising both public and private tourism sector organizations from ASEAN. ASEANTA has grown to become a tourism association of influence within the ASEAN tourism landscape, playing an integral role in shaping tourism development growth and policies in the ASEAN region. ASEAN Competitiveness Enhancement (ACE) was designed and funded by USAID’s Regional Development Mission in Asia (RDMA), which is based in Bangkok. ACE’s objective is to enhance the integration and competitiveness imperatives of two of ASEAN’s priority sectors: travel & tourism and textiles & apparel. The ACE Project is part of the broader ASEAN-US Enhanced Partnership which was launched in 2006, under which the United States pledged its support to ASEAN in pursuing its objective of becoming an ASEAN Community by 2015. The ACE Project is managed by Nathan Associates Inc. Email: rjgurley@ace-advance.com. Website: www.ace-advance.com.
The President Post
www.thepresidentpost.com
February 11, 2010 15
Health Gene Mappers Untangling Common Cold Mysteries A cure for the common cold has eluded scientists since the dawn of mankind.
C
ommon colds -- also known as human rhinovirus -- affect billions of people worldwide every year and have more than 100 different, but related, strains. Each of these strains can cause a variety of symptoms in sufferers. Doctors say that variety is what makes the common cold so hard to understand and so hard to treat. Last year, researchers from the University of Maryland and the University of Wisconsin-Madison announced that they had taken the first step in finding a cure for rhinovirus by mapping each strain’s entire genome. Now, those same scientists have found some interesting things about all those different strains. “We continue to see a new virus that appears to come from two viruses,” said Dr. Stephen B. Liggett, co-leader of the project and a professor of medicine and physiology at the University of Maryland School of Medicine. “So a person can become infect-
By mapping the genome of the different strains and assembling the results into a “family tree,” scientists can better understand how virus strains are related, as well as their differences. ed with two viruses, and a third unique virus is formed.” Why those mutations develop is still a major question, but Liggett says most of them don’t cause any harm. “It’s really more about why they develop ... because many are not very strong, but in some cases, they are,” he said. “So we need to better under-
stand them.” When the different strains of the common cold were mapped early last year, researchers were looking for ways to develop diagnostic tests and eventually possible treatments. Since the completion of the mapping, researchers have been working on a diagnostic test for
Your Cold and Flu Symptoms, Explained
the virus. Originally, the test was expected to cost about $2,000, but they have perfected the technique and found they can develop a much cheaper test for about $20. That means a test for the cold may one day be common in doctors’ offices. A fast and inexpensive test is good news for asthmatics and people who have chronic obstructive pulmonary disease, for whom colds can be life-threatening. “Fifty percent of the exacerbations that occur in patients who have these two diseases are due to a rhinovirus infection,” Liggett notes.
“So it’s that group of people we are targeting. Those would be the first group we’d like to help.” Respiratory infections including colds and the flu are some of the most common causes of asthma flare-ups, especially in young children, according to the American Asthma Foundation. Although the genetic mapping of the different strains is a positive step, many in the medical community say the virus itself is just too complex to tackle. Dr. Andrew Shorr, a pulmonologist with Washington Hospital Center, says that map-
What it means: Your body is expelling bacteria and other particles with a sudden, involuntary burst of air. Don’t suppress a sneeze, as your body is trying to evict the irritants. When to worry: Almost never, but if sneezing interferes with your life or persists after other symptoms are gone, talk to your doctor to find out if an allergy might be the cause. Home remedies: Using Kleenex Anti-Viral tissues helps prevent the spread of viruses. No tissue? Sneeze into your upper sleeve, not your hands. You’ll be less likely to pass germs along. Over-the-counter remedies: Some antihistamines (the sedating varieties) can help cut down on the sneeze reflex. But most experts advise you to leave this fairly innocuous symptom untreated. The symptom: Chills and fever
What it means: Chills are the way the body generates heat when it feels cold. They usually precede a fever, the body’s method for defending itself by raising its temperature to fight a virus. When to worry: Call your doctor if your temperature rises above 102 degrees, if a fever persists for 72 hours without breaking, or if you also have shortness of breath or dizziness. Home remedies: To stay hydrated, sip your favorite liquids. Sponging off with warm water may also give you relief. Over-the-counter remedies: Acetaminophen (Tylenol), ibuprofen (Advil, Motrin), or naproxen (Aleve) can lower a fever that’s making you uncomfortable. The symptom: Sore throat
What it means: Mucus is drippi ng into the back of your throat, causing irritation and inflammation. When to worry: If you have severe difficulty swallowing or breathing, call your doctor to rule out a more serious illness, such as a bacterial infection. Home remedies: Gargle
with warm salt water. Soothe a scratchy throat with liquids, such as caffeine-free tea and broth, or cool down a fiery one with an ice pop. Over-the-counter remedies: Acetaminophen or ibuprofen will help decrease inflammation. The symptom: Runny nose
What it means: Your body has stepped up mucus production to remove the cold or flu viruses from your nasal passages. When to worry: If your health doesn’t improve after one week, you could have a bacterial sinus infection, which may require treatment with an antibiotic. Home remedies: Drink fluids to thin mucus. Chicken soup may help reduce inflammation. Sniff gently into a tissue, as blowing hard can lead to sinus problems. Over-the-counter remedies: Use a saline spray to help irrigate your nasal passages, or use an oral decongestant or an antihistamine Drixoral or Benadryl for example). The symptom: Sinus pressure
What it means: Mucus has congested the nasal passages and may be trapped in the sinuses because they are not draining properly. When to worry: If you have a fever of more than 102 degrees, you may have a bacterial infection, which can be treated with antibiotics. Home remedies: Keep your sinuses moist by using a humidifier, or stand over a sink filled with hot water. Over-the-counter remedies: A decongestant spray (such as Dristan or Afrin) can help ease congestion and swelling. The symptom: Cough
What it means: A reflex that keeps the throat clear, a cough is triggered when excessive mucus (or some other irritant) has irritated the nerve endings in the respiratory tract. When to worry: If you’re short of breath and coughing up blood or discolored mucus, you may
Last year, researchers found that human rhinovirus strains are organized into about 15 subgroups, so a “one-drug-fits-all”
approach to treat the cold probably won’t work. But Liggett says he and his fellow researchers hope to streamline those 15 subgroups into five, which would make it easier to treat the virus. “Better to have five treatments than 15,” Liggett said. “Right now, vaccines and other treatments aren’t our main goal,” Liggett added. “Hopefully, we will be able to design treatments some day. Taking our research little by little will help us understand a virus we’ve never been able to figure out before. And for now, that’s what’s most important.” (CNN)
Happy Living
There’s a reason for each and every sniffle, sneeze, ache, and pain. Learn why your body behaves the way it does, and discover the quickest ways to feel better. The symptom: Sneezing
ping the genome of the different strains of the common cold is “no big deal” because the complexity of the virus makes the likelihood of finding a specific cure highly unlikely. But Liggett ignores the naysayers; he says that by mapping the genome of the different strains and assembling the results into a “family tree,” scientists can better understand how virus strains are related, as well as their differences.
In Your Golden Age
have bronchitis, sinusitis, or pneumonia. Home remedies: Skip the medicated cough drops; they have been proven ineffective. Instead, soothe an irritated throat with your favorite hard candy, or drink warm fluids. Over-the-counter remedies: Products with pseudoephedrine work but can make you sleepy. Nondrowsy versions with phenylephrine aren’t as effective. Naproxen may reduce throat inflammation. The symptom: Swollen glands
What it means: Your lymph nodes are producing an army of infection-fighting cells to battle the invading virus. When to worry: If your glands remain enlarged for several weeks after a cold or the flu is gone, that could be, in rare cases, a sign of a more serious illness, such as lymphoma. Home remedies: There’s not much you can do to reduce swollen glands. They should return to normal within a few weeks. Over-the-counter remedies: Other cold or flu symptoms will probably bother you more, but acetaminophen or ibuprofen can ease any discomfort caused by the engorged glands. The symptom: Body aches
What it means: More common with the flu, allover aches are a sign your body is releasing chemicals that help your white blood cells fight off infection. When to worry: Only if the aches are incapacitating, which is rarely the case with a cold or the flu. Home remedies: Get plenty of rest, and take warm baths to soothe your muscles --or try using a heating pad or a heated water bottle. Over-the-counter remedies: Acetaminophen or ibuprofen will relieve the pain.
When we enter the golden age of retirement, what will happen to us? What are our activities? What are our priorities? How about selfactualization at that time? Talking about life accomplishment, the golden age of retirement may be the highest point in your life when the goals you had when you were young can be achieved. Housing options are becoming an important aspect when we want enjoy life at an old age, both physically and spiritually. It is undeniable that our body’s natural process will experience decline with age. The fast-paced and busy life of the city makes it difficult for our children to give us all the help we need or accompany us on a regular basis. The “Senior Community” is an emerging trend in big cities today. The seniors spend time and their activities together and share their experiences. Senior Housing Jababeka Medical City will present a new concept and paradigm; seniors are living near their children’s hearts, but are not always accompanied or assisted by their children and are free to do activities on their own and be creative. Senior Housing will be part of a
regional integrated one stop world class health service. The location is just a few meters from International Hospital facilities, so that all medical emergencies can be handled without facing traffic problems of a large city.
The “Senior Community” is an emerging trend in big cities today Access and residential facilities are user friendly and especially catered to the capabilities and needs of its seniors. Toilets and its accessibility are designed to prevent injuries and facilitate mobility, especially for those who use a walker. The Senior Community will be built and become the heart of the activity center, where seniors can spend quality time together and maintain a healthy body and soul. Exercise programs, such as garden-
ing and flower planting, keep the seniors fit and games for the mind keep the brain and memory active. Senior sport facilities designed for seniors are also available. Library, skills room and karaoke are other facilities and activities for seniors in Jababeka Medical City. We don’t have to feel that we are far from our family, because every time our children and grandchildren visit, we can do activities together. “Family Day” events will be held to enliven the atmosphere and get to know each others family. Remove the old paradigm and find out that living independently in the golden age means time to enjoy in Senior HousingJabebeka Medical City. For those of you who still work part time at your golden age or for those of you who have fully retired, to all your needs can be catered.
(021) 893 4580 ext. 414 & Rossy 0811 851 769
The President Post
16 February 11, 2010
www.thepresidentpost.com
Living
G N I R E V UNCO
Secrets to a Longer Life Photo: philip.greenspun.com
The secret to longevity, as I see it, has less to do with diet, or even exercise, and more to do with the environment in which a person lives: social and physical. By Dan Buettner
I
n the same way organisms select for characteristics that favor the survival and well-being of its species over successive generations, so too do cultures. With organisms, we call this process evolution and it represents a sort of accumulated wisdom. There is no word for this process in cultures, but there is one for the result. And that word is tradition. For that past eight years, my team of scientists and National Geographic researchers have explored five parts of the world -“Blue Zones” -- where people live measurably longer lives. Compared to American averages, we found a bronze-age culture in Sardinia’s interior that produces about 10 times more male centenarians; a remote peninsula in Costa Rica where 50 year-olds have a three-fold better chance or reaching age 90; a Greek island completely free of Alzheimer’s (about 50 percent of Americans over age 90 suffer from dementia); and islands in southern Japan where people suffer one-sixth the rate of heart disease. How do they do it?
The Danish Twin Studies established that only about 20 percent of average lifespan (within certain biological limits) is dictated by genes. Lifestyle explains most of the rest of the longevity formula. We found that all five Blue
Zones possessed the same nine lifestyle characteristics. Among them: a low-meat, plant-based diet (all of them ate a lot of beans) and a ritual of “downshifting” each day. They experience the same stresses we do -kids, health, finances -- but they managed it through daily prayer, meditation, ancestor veneration or city-wide happy hours (like the Sardinians).
ents’ wisdom and care while the centenarians feel the motivation to stay active, to get out of bed in the morning, and live for a purpose. They live in cities where it is easy to walk to their friends’ houses, to the store or to church. So, we figured they get about 105 minutes of physical activity everyday -- and no health club membership!
The secret to longevity, as I see it, has less to do with diet, or even exercise, and more to do with the environment in which a person lives: social and physical. What do I mean by this? They live rewardingly inconvenient lives. They walk to the store and to their friends’ homes and they live in houses set up with opportunities to move mindlessly. They do their own yard work, hand-knead their own bread dough, and, in the case of Okinawa, get up and down off the floor several dozen times a day. They live in strong families that keep them motivated to support loved ones. Centenarians are still living near their children and feel loved and the expectation to love. Instead of being mere recipients of care, they are contributors to the lives of their families. They grow gardens to contribute vegetables, they continue to cook and clean. This has a powerful two-fold effect: Children and grandchildren in these families benefit from their grandpar-
We know from the Framingham studies that happiness, smoking and obesity are all “contagious.” If your three best friends are obese, there’s a 70 percent better chance that you’ll be overweight. People in the Blue Zones either proactively surround themselves with people who practice the right behaviors or are born into communities of people who do -- or people whose idea of fun is gardening, or bocce ball or swimming; people who eat meat sparingly, who have faith, who are trusting and trust-worthy. Why is this so important? No supplement, hormone, antioxidant or pill of any sort has been shown to reverse, stop or even slow aging. The problem is two-fold: to do the study properly, you’d need to follow two groups of people for life: one who takes the pill, the other that doesn’t. Then you’d have to control for all other factors and compare the average age of death for each group. No such study has ever been done on a “longevity”
supplement. The second problem is adherence. People in general just don’t stick to doing anything for very long. Are you taking supplements? How long have you been taking them? I’ll bet not more than a few years. Science (and hucksters) have offered us countless diets but research done by the University of Minnesota’s Dr. Robert W. Jeffrey has shown that fewer than 2 percent of people adhere to diets for more than two years. For anything to really impact your life expectancy positively, you need to do it for most of your
Men Don’t Cheat Because Their Wives are Ugly By Jessica Wakeman
Men who cheat do it because they are unhappy with their life, not their wife’s appearance, columnist says. Men who cheat do it because they are unhappy with their life, not their wife’s appearance, columnist says. When my high school boyfriend cheated on me, I found out the other girl’s Instant Messenger screen name and “confronted” her online. (Not the most mature move, I know. But give me a break! I had just turned 17.) You know what this girl had the audacity to say to me? “I’ve seen a picture of you! No wonder he cheated.” Sadly, that dopey logic is not confined to teenage soccer players who give hickeys to other girls’ boyfriends; it has cycled over and over and over in my mind as this alleged Tiger Woods affair has played out. Surely you, like me, have heard numerous friends or significant others say something to the effect of, “How could he have cheated on his wife? She’s so gorgeous!”
Yes, Elin Nordegren is a blondehaired Swedish former model and her turd husband allegedly still cheated on her. What I want to know is why we insist a woman’s beauty -which is highly subjective! -- is some kind of barometer -- which is highly shallow! -- of whether or not her hubby will cheat. Let’s get this clear: People cheat because they are unhappy in their relationships. That’s it. I’m not naive: I know plenty of people cheat because their paramours have gained weight/lost too much weight and said paramours are no longer an object of physical attraction. But it’s an underlying and relatively shallow factor, not cause-and-effect at all. Most relationships have these little things called “love,” “trust” and “respect”; relationships that have all those things don’t have cheating. If you really, really love someone, you will deal with the inevitable aging process. The implication is that Nordegren is too pretty to cheat on
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and that Tiger’s infidelity would make more sense if she were ugly -- but since she’s beautiful, there must be something else she did that drove him to do something so insane. Let’s stop insinuating that when a man cheats, it is always because of something the wife did (or didn’t do). And that’s especially true when we’re talking about somebody like Tiger Woods, who appears to have allegedly cheated with a bunch of random cocktail waitresses all over the country. None of them appear to be love matches. Furthermore, Tiger Woods has plenty of coin to hire a divorce lawyer. If he was/is really unhappy in his marriage to Elin Nordegren, I’m sure plenty of attorneys would jump at the chance to handle his breakup for him. Cheating, as they say, is the coward’s way out. At the end of the day, it is Tiger who allegedly cheated. It is Tiger who allegedly tried to cover up the mobile phone trail. It’s Tiger who is at fault, not his beautiful wife. (TM)
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 Eka Putri
EDITORIAL & ADVERTISING/ CIRCULATION DEPARTMENTS Monica Siregar LAYOUT & DESIGN Mohamad Akmal
life. Friends, unlike pills or diets, are much more likely to be much longer-term undertakings. The secret to solving much of America’s health care crisis and battle with chronic diseases lies in emulating the environment in Blue Zones. Is it possible? Last year, my partners and I made Blue Zones-inspired changes to the environment of an entire American town -- Albert Lea, Minnesota, (see AARP Magazine article). We made the town more walkable and bikeable, dug public gardens, made it easier for kids to walk to school and people to expand their face-to-face social
networks to include more people motivated to change their health habits. The results were astounding. If the trends continue, life expectancy for the average participant would rise about three years and health care costs for city workers would decrease by 48 percent. The wisdom of the world’s Blue Zones represents centuries or even millennia of observed human experience. As many argue over how to solve the health care crisis, perhaps they should take a moment to consider the wisdom of their grandmothers. CNN
They live in cities where it is easy to walk to their friends’ houses, to the store or to church. So, we figured they get about 105 minutes of physical activity everyday - and no health club membership!