ASEAN 2015 - United World · in Southeast Asia now constitute one of the most peaceful, stable and prosperous re-gions in the world,” he says. “I don’t think this would have

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Our World#Asean

ne of the world’s most dynamic economic re-gions and home to more than

600 million people, Southeast Asia is on course and going full speed ahead to become even more prosperous. This is thanks to its ambitious plans, which kick off next year, that will work to bind the countries closer together through en-hanced cooperation in a num-ber of fields.

The 10 nations of the Association of Southeast Asian Nations (Asean) – B r u n e i D a r u s s a l a m , Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam – are already an established global economic power with a future most assured.

Once known as “The Tigers of East Asia”, these former developing nations have a sterling track record of bouncing back from ad-versity, such as with the crisis of 1997 which brought their economies to their knees and came very close to trigger-ing even deeper problems around the world.

But quick and decisive action by the International Monetary Fund, coupled with sweeping reforms to the re-gion’s financial, banking and currency systems, soon had Southeast Asia again on its feet and “The Tigers” came roaring back.

Their res i l ience was demonstrated once again when in 2008 the financial implosion triggered by the sub-prime loan debacle in the United States triggered a worldwide recession.

Yet from 2007 to 2013, the economies of the Asean countries actually grew fast-er than the global average. Last year, the world’s GDP grew 3%, while that of the as-sociation increased by 4.9%. Quite an achievement for a

group which was founded in 1967 by five of the current members and designed as a regional alliance to promote economic prosperity, social progress and cultural cohe-sion, as well as provide a fo-rum for stability and peace-ful coexistence.

But not everyone was con-vinced it could be a success in a region then embroiled in a major war pitting the United States against North Vietnam with the inevitable spillover into neighboring states.

“The media described us as dominoes about to fall at any time,” recalls the Minister of Foreign Affairs for Singapore, Professor S. Jayakumar.

“Indeed, there was no optimism on the fu-ture of the countries of Southeast Asia. But now, some 30 years later, the situ-ation is very differ-ent. The countries in Southeast Asia now constitute one of the most peaceful, stable and prosperous re-gions in the world,” he says.

“I don’t think this would have been pos-sible if it were not for Asean.”

Success has been im-pressive, especially as an eco-nomic power. As a group, Asean members have a com-bined GDP of more than $2.4 trillion, and if counted as a single entity its econ-omy would rank sixth in the world after the United States, China, India, Japan, and Germany.

Economists say if growth remains constant, it will be the fourth largest economy on a global scale by 2050.

Its attraction as a market is evident as the region boasts a population of 600 million people, more than North America or the European

Union, and the labor force, at 300 million people, is the third largest in the world af-ter China and India, which means a rapidly growing mid-dle class fueling demand for quality goods and services.

According to economists, between 1991 and 2013 some 83 million workers in the Asean member countries moved up in-to the middle class, and they fore-cast the number to hit 144 mil-lion within the next three years.

Other indicators are just as impressive. For example, since 1990, almost 60% of Asean’s total growth has been derived from gains in productivity with further growth expected.

And that progression is already clearly evident. Last year, the association’s five key members – Indonesia, Malaysia, the Philippines, Singapore and Thailand – attracted more foreign direct

investment (FDI) than their giant manufacturing neigh-bor to the north, China.

Asean’s statistics show that FDI rocketed from $100 bil l ion in 2010 to $122 billion last year. The European Union led the charge, with FDI rising from $18 billion in 2012 to $27 billion in 2013, to comprise 22% of the total and making the EU the biggest source of foreign investment into the region and second only to Asean itself.

At the same time the re-gion remains one of the hot-test tourist destinations in the world, and major ho-tel companies, tour opera-

tors and airlines are ex-panding their regional

operations from the stunning, blinding-

ly white beaches of the Philippines to the green, jun-gled highlands of Myanmar.

Over the past decade, the avi-a t i o n i n d u s t r y a l o n e h a s w i t -

nessed remarkable development that

is the envy of rivals around the world. In

that period of time, international arrivals

tripled from 33 million in 2003 to almost 100 mil-

lion in 2013, matched by the capacity of the region’s air carriers which increased nearly threefold from 94 million seats to 268 mil-lion seats.

It is clearly a region on the move and its remark-able progress is a talking point among the movers and shakers of the world economic community.

“I must confess that ev-ery time I visit the region and observe its multiple fac-ets, I feel a rush of ener-gy,” International Monetary Fund Managing Director Christine Lagarde said in

a recent speech in Asean member state Malaysia.

“Asia does not stand still – it is constantly reshap-ing itself and each time I am here I see a new, im-proved, upgraded version. I wish sometimes that I could pick up a packaged version of dynamic Asia and take it to other parts of the world,” she said.

Asean leaders them-selves are not shy about the achievements the region has made from those humble be-ginnings back in the 1960s. Furthermore, they highlight working together and mu-tual understanding among their different political sys-tems, national aspirations, and very diverse peoples as key to the association’s im-pressive performance.

“Asean has been success-ful because there is a very strong commitment among members for cooperation,” explains Malaysian Foreign Minister Abdullah Haji Ahmad Badawi.

“Cooperation for the ben-efit of all and cooperation for stability and peace in the region. This is a very impor-tant hallmark of Asean.”

In a recent speech in London to a conference on the regional associa-tion covering its history, its successes and its ambitious plans for the future, Asean Secretary-General Le Luong Mihn perhaps best summed up its significance for the entire world when he said:

“Asean’s efforts to build such a community have un-derpinned the peace and stability of the region, al-lowing our regional and na-tional economies to flourish and remain resilient.

“All these have not only benefited the Asean region as a whole, but also present-ed significant contributions to the Asia-Pacific region and the international com-munity at large.”

Next year, the Association of Southeast Asian Nations will join in an even more cohesive relationship: the Asean Economic Community.

The new common market will represent one of the world’s greatest new economic powers

‘DURING THE DARK DAYS OF THE GLOBAL FINANCIAL CRISIS, IT WAS ASIA THAT KEPT THE FLAME ALIVE, ACCOUNTING FOR ABOUT TWO-THIRDS OF GLOBAL GROWTH. CLEARLY, THE MOMENTUM IS HERE, THE DYNAMISM IS HERE, AND THE FUTURE STARTS HERE”

CHRISTINE LAGARDE, Managing Director of the IMF

One year to go

ASEAN 2015


Monday, October 13, 2014 Distributed by USA TODAY ASEAN 20152

AEC’s open market for an open worldIn boardrooms and manage-ment schools around the world, the mention of Asia conjures of thoughts of the two most powerful emerg-ing economies of the region: China and India.

Both have become buzz-words for their massive mar-kets and proven potential as producers of the goods and services, whether electronic components or outsourced of-fice work, on which the global economy has come to depend.

But generally missing from the limelight are the dynamic economies of the 10 nations of the Association of Southeast Asian Nations (Asean) which, if they were a single entity, would rank as the sixth largest economy in the world. And it is about to get a lot bigger.

After years of hard work and meticulous planning among its members, Asean will become an even more formidable economic and fi-nancial power with a true sin-gle economic market in 2015 as existing barriers to trade and investment fall.

Known as the Asean Eco-nomic Community, or AEC, it is designed to allow a free flow of goods, services and investments, as well as make the already almost border-less movement of capital and skills even freer.

In addition, AEC will give investors the opportunity to boost their market reach and grant Asean-based enter-prises, large and small, access to capital, raw materials, ser-vices, labor and production inputs wherever they estab-lish operations throughout the 10-member bloc.

“This will transform Asean into a single market and pro-duction base, a highly com-petitive economic region, a region of equitable economic development, and a region fully integrated into the global economy,” the association says.

Other observers are also full of praise for the initiative. According to outside econo-mists, this new single market could mean the creation of an additional 14 million jobs and increase the region’s GDP by an extra 7.1% by 2025.

Investors, both foreign and domestic, are watching the im-plantation of the Asean Eco-nomic Community with inter-est, and support the aims on the free flow of investment as spelled out by the association:

“To strengthen, among oth-ers, the following provisions: investor-state dispute settle-ment mechanism; transfer

and repatriation of capital, profits, dividends, etc.; trans-parent coverage on expropria-tion and compensation; full protection and security, and treatment of compensation for losses resulting in strife.”

Other features of the new economic community include the so-called Asean Single Window that will connect and integrate existing initiatives of the member states to expedite cargo clearance and ensure international communications standards for safe and secure data exchange.

These measures will, the as-sociation says, provide a single point for submitting clearance documentation and data, re-duce costs, encourage trade and investment in and with Asean, and result in better transparency.

It is going to be quite an ac-complishment and there have been doubts among some that it will all come together in time.

But the member states are re-porting that everything is on track with solid progress on everything from liberalizing trade to eliminating tariffs to removing investment hurdles.

By one account, the mem-bers have already been able to implement almost 80% of the required measures, while Malaysia alone has put in place almost 90% of the measures on the AEC checklist.

As the governments of the region up their game in prepa-ration for the big event, those in the private sector are also getting ready to be sure that when the AEC is active, their enterprises will be well posi-tioned to benefit from the new, open market.

Asean banks, financial in-stitutions and telecoms are investing outside their bor-ders in the association’s part-ner nations, while company managers are expanding sales networks across the region and integrating their opera-tions to cut costs.

Southeast Asian nations frequently make the head-lines when rattled by tem-blors and tsunamis. Next year another kind of seismic event is coming – the AEC open market – but this economic earthquake will benefit the region and the world.

Asean member countries report that everything is on track for AEC 2015

THE AEC SINGLE MARKET COULD MEAN THE CREATION OF AN ADDITIONAL 14 MILLION JOBS AND INCREASE THE region’s gdp By An exTrA 1 By 2025

Asean is the united states’ fourth-largest e port market and its fth-largest overall trading partner Together, Asean’s 10 countries have an economy valued at 2 trillion

�e return of geopolitics

Over the past four decades, Southeast Asia has evolved from an unstable region of wars, harsh dictatorships and poverty into a region admired for its prosperity, democratic aspirations and peace.

And as the Asia-Pacific grows in global importance, the countries of the Asso-ciation of Southeast Asian Nations (Asean) will play an increasingly pivotal role in the world’s economic and strategic wellbeing.

The United States certainly understands this, and Wash-ington is intensifying its ef-forts to ensure that the region realizes its potential through strengthening economic and defense ties.

“The United States is – al-ways has been and always will be – a Pacific nation (and) we are working to cre-ate and open a transparent economic environment,” U.S. Commerce Secretary Penny Pritzker told business lead-ers on her recent Southeast Asian tour, her third as secre-tary in a year.

“The Asia-Pacific region has become a significant market for American prod-ucts and services, and sales to and investments in the re-gion by U.S. companies serve as the foundation for good jobs here and in the United States,” she said.

According to the U.S. Commerce Department, by 2022 the Asia-Pacific nations will be home to 54% of the world’s middle class and will import nearly $10 trillion worth of goods and services, nearly two-and-a-half times

more than today. “The region will be an engine of global growth over the next decade which will have a profound impact on how – and where – the world does business,” Mrs. Pritzker said.

Washington is enthusiastic about the Asean Economic Community, or AEC, due to be up and running next year and is cheering on the free trade agreement from the sidelines. But the United States’ interest does not just involve economics, finance and trade.

By 2015, the region will also have plans in place to boost political and security cooper-ation in what Asean says will “ensure that countries in the

region live in peace with one another and with the world in a just, democratic and har-monious environment.”

This is to be partly accom-plished through the associa-tion’s Peacekeeping Centers Network that will strive to strengthen regional defense and security cooperation by facilitating collaboration in peacekeeping among mem-bers through joint planning and training.

Asean officials say this cooperation could mean its troops someday would to-gether play a larger role in United Nations peacekeep-ing missions in the world’s

hot spots, as soldiers from the association’s individual mem-bers do now.

The United States, with which many of the Asean countries have defense pacts of varying degrees, is fully supportive of these measures as it watches warily while China moves to play a wider role in the Pacific, long con-sidered “an American lake”.

This interest was made clear when U.S. President Barack Obama announced his administration’s “Pivot to East Asia” policy two years ago designed to refocus Washington’s attention on the region as it began pulling back from the Middle East.

Mr. Obama himself under-lined the importance of this strategy earlier this year when he visited two Asean mem-bers – Malaysia and the Phil-ippines – and signed a new, 10-year defense cooperation agreement with the latter.

“I’ve made clear through-out this trip, the United States is renewing our leadership in the Asia-Pacific and our engagement is rooted in our alliances,” Mr. Obama said in a speech in the Philippines capital.

“As we strengthen our bi-lateral security cooperation, we’re also working together with regional institutions like Asean,” the President said, adding that Washing-ton’s goal is to “promote a common set of rules, found-ed in respect for interna-tional law, that will help the Asia-Pacific remain open and inclusive as the region grows and develops.”

Myanmar has been chair of Asean this year. Next year, it passes on to Malaysia, who will oversee the finalization of the AEC

AseAn Troops could somedAy TogeTher plAy A lArger role in un peAcekeeping MISSIONS

Asean is playing a pivotal role in developing a centrali ed strategic position to maintain regional peace, stability and prosperity


INDONESIAStrategic, progressive

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Our World#Asean

#Indonesia

When Indone-sians elected Joko Widodo to the high-est office in

the land, they were casting their votes for change from politics-as-usual. Jokowi, as most Indonesians refer to their president-elect, is the first modern In-donesian leader without roots in the country’s well- entrenched political, busi-ness and military circles, or ties to the previous authoritarian regime of Su-harto, which ruled Indone-sia from 1967-1998.

Unlike his predecessors, Jokowi is known as a man of the people who seeks out their advice and un-derstands their problems, often because he has been through the same issues himself. And he has shown that he has what it takes to transform Indonesia from a country often characterized as corrupt and poor, into one of transparency, equal-ity and progress.

B o r n i n a s l u m i n Surakarta, East Java, Jokowi studied forestry at universi-ty and eventually built up a successful furniture manu-facturing company. As may-or of Surakarta from 2005-2012 he revamped parks, built markets, introduced a healthcare program for residents, made education more accessible, and, pos-sibly most importantly in a country where cronyism and corruption have long been the order of the day, barred members of his fam-ily from bidding for key pro-jects in the city.

In seven years, Jokowi turned Sura ka rt a , a l s o commonly known as Solo, around from a city known for violence, poor govern-ance, high unemployment, and slack economic growth into a recognized cultural and tourism center. Jokowi eased traffic congestion, cut the red tape businesspeople have to deal with, and im-proved living conditions in Surakarta’s slums.

After seven years at the helm in the city, Jokowi was elected governor of Jakarta, and began working his mag-ic there. The capital has been prone to traffic jams and floods for decades but Jakarta has nonetheless had a string of governors who failed to adequately address these issues. That changed with Jokowi’s governship.

He regularly visited poor parts of the city, where he talked with ordinary resi-dents about issues that mat-ter to them, including food prices, housing, flooding and transport. He instituted a merit-based hiring system for civil servants, published his salary and launched re-forms in the education and finance sectors. And the universal healthcare sys-tem he introduced for resi-dents of the sprawling city proved to be so popular that the plan almost backfired

as hospital and other facili-ties struggled to cope with the sharp uptick in patient numbers.

Jokowi was nominated in March to be the Indonesian D e m o c r a t i c P a r t y o f Struggle (PDI-P) candidate for the presidency, and af-ter winning 53% of the vote in July, will take the oath of office on October 20.

The election of the com-mon-man candidate to the highest office is considered a breakthrough in Indonesia’s still young democracy.

Jokowi’s focus on ordi-nary Indonesians and his “can-do style of leadership” will come as “a breath of fresh air from stifling bu-reaucrat ic ineptness in many state institutions,” Brookings Institution sen-ior fellows Joseph Chinyong Liow and Lex Rieffel wrote in a recent analysis.

In foreign policy, Jokowi wants to use Indonesia’s

unique position as a mari-time axis to spur develop-ment that benefits the peo-ple, Rizal Sukma, head of the defense and foreign affairs working group on Jokowi’s transition team, told The Jakarta Post newspaper.

At home, a $7.7 million order for 72 new Mercedes-Benz sedans for government ministers was cancelled this month after Jokowi said he would prefer that officials stick with the cars they al-ready have.

But Jokowi faces numer-ous challenges as president, the greatest being “to as-semble a working majori-ty of political allies while maintaining his own agen-da,” Liow and Rieffel wrote.

That is because Jokowi’s opponents in parliament vastly outnumber his sup-porters, and are expected to place hurdles in the way of any reforms the new presi-dent might want to intro-duce.

A key reform is the re-duction of fuel subsidies and, more broadly, making the country more energy ef-ficient. Introduced in the final years of Indonesia’s first president, Sukarno, fuel subsidies were intended to protect citizens from the impacts of inflation, which at times was running in the triple digits.

Today they eat a large chunk out of the state’s revenues – $20 billion a year, by some accounts. The subsidies have pushed Indonesia’s current account deficit to above 2% of gross national product in the first quarter of 2014, and some Indonesia-watchers predict the deficit could be as high as 3% at year’s end if the sub-sidies remain in place.

The fuel subsidies mean Indonesians pay some of the lowest prices in Southeast Asia for gasoline – a gallon currently goes for the equiv-alent of around $2.11. This makes the subsidies very popular with the people, and politicians are keenly aware of the fate of those who have gone before them who tried to cut the fuel sub-sidies. The end of Suharto’s 32-year presidency in 1998 was heralded by protests af-ter he tried cutting the fuel subsidies and raised prices.

Fuel prices were last raised in Indonesia in June 2013. During his campaign, Jokowi said he would grad-ually cut fuel subsidies over the next few years. A mem-ber of Jokowi’s econom-ic team, Arif Budimanta, told The Jakarta Globe that the price of fuel could go up as early as October. The Deputy Governor of the Central Bank, Mirza Adityaswara, said the price of gasoline has to go up by around 50% for the subsidy cuts to have a positive im-pact on the current account deficit.

Nevertheless, Jokowi’s administration has stated that it would find ways to prevent higher fuel costs from resulting in sharp ris-es in food prices and from impacting public transpor-tation, and would also de-velop plans to allocate cash for poor people.

A s J o k o w i a n d h i s “crowdsourced” cabinet ( Indonesians were g iv-en the opportunity to cast their votes online) turn a new leaf in Indonesia, opti-mism is high that a new era of growth and social inclu-siveness has begun.

With the rise of a new kind of leadership under the ‘common-man’ president elect, Joko Widodo, the archipelago nation and world’s third-largest

democracy enters a new era filled with optimism

I WARMLY CONGRATULATE indonesiA’s presidenT-elecT joko widodo The people of INDONESIA UNITED ONCE AGAIN TO SHOW THEIR COMMITMENT TO democrAcy Through free And fAir elecTions THE UNITED STATES LOOKS forwArd To working wiTh presidenT-elecT widodo As we deepen our pArTnership, promoTe our shAred oBjecTives gloBAlly, And expAnd people-To-people Ties BeTween our NATIONS”

JOHN KERRY, U.S. Secretary of State

‘A UNITED WORLD SUPPLEMENT PRODUCED BY: Barbara jankovic, pro ect director marko rankovic, pro ect consultant fernando mora, editorial director geoffrey flugge, e ecutive coordinator

o o idodo Indonesia’s president elect will ta e oat of office on ctober 20 2014

Monday, October 13, 2014 Distributed by USA TODAY INDONESIA4


�e region’s largest economy moves forward

Indonesia as t e demo rap ic bonus’ of avin a oun population over alf of t e population is between 1 and 0 ears of a e

maipark reinsurance (pT reasuransi mAipArk indonesia) mitigates the effects of natural disasters in one of the most disaster-prone countries in the world

Managing disaster risk in the ring of fire Indonesia is a country that does not shy away from the fact it sits in one of the most disaster-prone locations in the world. Volcanic erup-tions and earthquakes have had a devastating effect on the Asian nation in the past, but now it is taking the ini-tiative by accepting these disasters occur and prepar-ing for them to ensure the impacts on its economy and

people are not as severe as they once were.

The Indian Ocean Earth-quake of December 2004 provided a stark reminder of the unpredictable nature of Mother Nature but the effects are now being miti-gated by adequate insur-ance protection such as that offered by forward-thinking Maipark Reinsurance, an award-winning reinsurance

company which faced that disaster in its first opera-tional year.

The Jakarta-based rein-surer was shocked at the way disaster insurance was being addressed and has worked to provide an en-gine for economic recovery if and when disasters hit in the future.

“Our message is that we have to realize that we are living in a catastrophe-prone area and we need to embrace that fact and adapt ourselves,” says Dr. Frans Y. Sahusilawane, President Di-rector of Maipark.

Dr. Sahusilawane was shocked at the insurance set-up to deal with disas-ters and the lack of “proper premiums” to help fund recovery. Learning from Japan, which has a similar history of natural disasters, Maipark has set up its own catastrophe modeling and is working on implanting other models, including one to deal with floods in Jakarta.

Maipark is also involved in other activities to mini-mize the impact of natu-ral disasters. Research and

educating the public is also high up on its list, while the company provides natu-ral disaster prevention and mitigation measures free of charge to small communi-ties. Tsunami early warning towers with loudspeakers have been built to aid com-munication.

“We want to educate peo-ple and help protect them from the impacts of earth-

quakes,” says Dr. Sahusila-wane. “We take fellow insur-ers to important geological sites and teach them about risk and the importance of the environment. We are working to elevate Indone-sia’s overall knowledge of earthquake risks.”

Indonesia cannot escape natural disasters but it is working hard to reduce the impact.

Indonesia is ome to some 1 0 active volcanoes

“IMAGINE AROUND 135 MILLION INDONESIANS JOINING THE MIDDLE CLASS… The impAcT on The economy will Be significAnT“

MULIAMAN D. HADAD, Chairman of the Financial Services Aut orit OJK)

“THE U.S. IS STEADILY recovering, SO IT IS TIME TO refocus on The UNITED STATES As An exporT DESTINATION“

MIRZA ADITYASWARA, Senior eput overnor at t e Bank of Indonesia

“There’s A Big gAp in risk proTecTion ThAT needs To Be Borne By sTATe BudgeTs”

DR. FRANS Y. SAHUSILAWANE, President Director of MAIPARK

Co m m o d i t i e s have long been the backbone of Indonesia’s economy, ac-

counting for more than 50% of exports from the 16th larg-est economy in the world. But, warns the World Bank, “Indonesia’s commodity ex-ports are facing significant headwinds”, the strongest be-ing falling global commodi-ties prices.

There is a silver lining, though. Lower commodity prices should help to make Indonesian manufacturing more attractive, the World Bank says.

And there’s room for man-ufacturing to grow. The sec-

tor currently contributes just 24% of Indonesia’s GDP, and, as of 2011, employed 14.4 million Indonesians, around 6% of the population of 248 million. International manu-facturing giants, including General Electric, Korea’s LG and Samsung, and Japan’s Toyota, are already knocking on the archipelago nation’s door, drawn by low wages, abundant resources, and a banking and political system that have remained stable, even as political and eco-nomic ructions have rocked other nations in the region.

Up to now, growth in the manufacturing sector has been fuelled largely by do-mestic demand for goods. Indonesia is the fourth most populous country in the world, after China, India and the United States, and has a growing middle class. In fact, global information and mea-surement company Nielsen expects Indonesia’s middle class to double by 2020, and

says it’s time for the rest of the world to pay attention to Indonesian shoppers.

Mirza Adityaswara, the Se-nior Deputy Governor at the Bank of Indonesia, says that to realize the full potential of the manufacturing sector, Indonesia should look be-yond the domestic market, increase exports of manufac-tured goods, and “diversify our export destinations”.

“The U.S. is steadily recov-ering, so it is time to refocus on the United States as an ex-port destination,” he adds.

Meanwhile, Muliaman D. Hadad, Chairman of Indo-nesia’s Financial Services Au-thority (OJK), says the middle class will have a key role to play in growing the economy, beyond purchasing made-in-Indonesia goods.

“Imagine around 135 mil-lion Indonesians joining the middle class… the impact on the economy will be signifi-cant,” he explains.

As more Indonesians move

into the middle class, more of them will be paying more tax, which will also help to boost the economy – but only if the government does a better job collecting those taxes, offi-cials say.

Only around 0.33% of In-donesia’s 1,000 trillion rupiah

in tax revenues comes from personal tax, Deputy Finance Minister Bambang Brodjone-goro says. The overwhelming portion is from corporate and value added tax.

“We need to tackle this disparity, especially as Indo-nesia has been growing from a low-income country into a low-middle income country,” he adds.

There are other issues to be addressed to drive Indo-nesia’s economy forward, the most sensitive of which are fuel subsidies.

Some say the subsidies put a $20 billion a year hole in the nation’s economy, and Indonesia-watchers are warn-ing that if nothing is done about the subsidies soon, the current account deficit could climb above 3% by year’s end.

Yet removing the subsidies is unpopular with the public because it will bump up gas prices and increase infla-tionary pressure. Hardest hit would be the large portion of Indonesians who live just above the poverty line. None-theless, president-elect Joko Widodo is reportedly mull-ing a 14% hike in the price of a liter of gasoline before the year is out. To soften the blow on the poor, he would also widen the country’s social safety net, improving access to healthcare, transportation and education for the poor.

consistent growth of 5 to 6% per year and a strong nancial system generate strong economic e pansion in indonesia, the world’s 1 th largest economy

fAlling commodiTy prices could help To MAKE INDONESIAN mAnufAcTuring more ATTrAcTive, According To The world BAnk

“GEOTHERMAL is one of The BesT renewABle ENERGY SOURCES BecAuse iT cAn supply A consTAnT BAse LOAD“

RUDY SUPARMAN, President Director of Star Energy

“INDONESIA NEEDS u s supporT And TrAnsfer of KNOWLEDGE from The Technology side, know-how, Their experience, eTc , in renewABles”

SURYA DARMA , Vice Chairman of the Indonesian Renewable ner Societ METI)

Monday, October 13, 2014Distributed by USA TODAY INDONESIA 5


“INCREASING explorATion AcTiviTies is expensive And THERE ARE GREATER CHALLENGES IN finding And UTILIZING OIL fields, As They Are ofTen deep-seA or in foresTed TERRAIN“

PROF. SUBROTO, Founder and Chairman of The Mines and ner Societ imasena and

former Minister of Energy

“if you consider THAT ENERGY REQUIREMENTS in 2025 will Be douBle whAT They Are now, we hAve To develop every opTion we cAn The poTenTiAl of geoThermAl IS CLOSE TO 0,000mw”

DARMOYO DOYOATMOJO, Chairman of Sarulla Operations Ltd.

�e region’s largest economy moves forward

As indonesia works to complement its hydrocarbons base with a mi of renewable sources, innovative companies like star energy have risen to the occasion

Geothermal, a powerful new hopeCreated in 2003, Star En-ergy has achieved sustained growth by combining the best practices of major inter-national energy companies, including technical excel-lence, financial prudence, risk management and good governance, while avoiding high overheads, sprawling organizational structures and bureaucratic inefficiencies.

Star Energy boasts a unique portfolio of hy-drocarbon and renewable assets that spans the In-donesian archipelago and represents a sampling of some of the country’s most promising resources. This includes natural gas fields in the Natuna Sea, home to a massive deposit considered to be the largest untapped natural gas field in Asia, with over 46 trillion cubic feet of reserves. Onshore, Star Energy has several sites in development, having se-cured production sharing contracts in the Tarakan and South Sumatra basins.

“With oil and gas prices as they are, we are very com-mitted to expansion,” says Rudy Suparman, Star Ener-gy’s President Director.

“We have excellent op-portunities in our explo-ration blocks and we are preparing to drill two infill wells this year. In 2016 we will drill three or four wells

for exploration, to prove our additional reserves. Our aim is to confirm an additional 127 million bar-rels in reserves by 2016. This sounds ambitious, but we believe that we have significant existing poten-tial that, when utilized, will meet this target.”

In addition to these ex-ploration and production prospects, Star Energy has successfully branched out into geothermal power. In line with its long-term strat-egy of creating value for all

its stakeholders, the com-pany moved into the sector with the acquisition of its first facility in 2004.

A Joint Operation Con-tract (JOC) with the na-tional oil and gas company, Pertamina, gives Star En-ergy the right to develop up to 400MW of electricity in power hungry West Java. “Star Energy took over the Wayang Windu project in West Java to operate geo-thermal assets,” Mr. Supar-man explains. “We have since worked to develop

this site and in February 2009, we had a major break-through when we built our own additional geothermal power unit. As a result, since this time we are oper-ating two units at Wayang Windu, supplying Indonesia with more electricity gener-ated through clean, green renewable means.”

Although the regulatory environment in Indonesia has created some uncertain-ty, thanks to its foresight, Star Energy has positioned itself for long-term growth.

“The good thing is we have some of the best-proven reserves in Indo-nesia and when conditions improve we will be ready to expand our operations,” Mr. Suparman affirms. “Currently we have Unit 1 producing 110MW, Unit 2 producing 117MW and we are planning to build Unit 3 which will generate 60MW. We anticipate that a fourth unit could be developed for a further 60MW.”

As Indonesia looks for-ward to a new era of politi-cal leadership, Star Energy has engaged with policy-makers to continue devel-oping the country’s energy assets.

“More than anything we want consistency from government,” Mr. Supar-man emphasizes. “Every new piece of legislation comes with positives and negatives. The implemen-tation will be the real test, but we are happy so far be-cause there has been good consultation with all the stakeholders. Geothermal energy is logical for Indo-nesia because in the future we cannot afford to rely on fossil fuels.

“But to get the investment levels required to promote change to renewable en-ergies, there needs to be strong political will.”

Star Energy currently has two units producing a total of 227MW of geothermal power

The history of Indo-nesia as a globally important energy supplier dates back nearly 130 years,

when oil was first discovered in northern Sumatra. Since that time, it has risen to become a world leader in the production and export of various energy products, even as its domestic market grew in size to become the largest in Southeast Asia.

Today, Indonesia continues to forge ahead, with a deeper commitment to infrastructure investments and public-pri-vate partnerships, as it works to expand and diversify its overall energy mix to meet the demands of a rapidly develop-ing economy.

Despite its oil production having declined from more than 1.5 million barrels per day (bpd) in the 1990s, to 834,000 bpd last year, Indonesia has continued to play a vital role in regional and global energy markets. It exports more coal than any country in the world, and is also the world’s fourth-largest exporter of liquid natu-ral gas, its third-largest pro-ducer of geothermal energy, and 24th largest producer of crude oil.

Indonesia’s sizeable and geo-graphically diverse territory

holds significant renewable en-ergy resources, such as hydro-electricity, solar and biomass – assets that it will need to capitalize on in order to meet power demand that is forecast to grow at more than 7% annu-ally in the near-term.

“Indonesia depends too much on fossil fuels,” explains Prof. Subroto, the founder and Chairman of Bimasena, The Mines and Energy Society, who once served as Indone-sia’s Energy Minister and also led OPEC from 1988 to 1994. “We only have 4 billion barrels of proven oil reserves. So if we

do not find new reserves in 10-12 years we will run out of oil entirely.”

Indonesia will only see its energy needs multiply in the years to come, Prof. Subroto points out, as total economic activity expands from $800 bil-lion this year to $4 trillion in little over a decade.

“This is a fourfold expansion of GDP,” he emphasizes. As per capita income more than triples over the same time pe-riod, even as the overall popu-lation approaches 255 million, Indonesia will need multiple streams of energy. “At the mo-ment 10% of our energy is from renewable sources,” he says. “By 2025, it needs to more than double, to 26%.”

To meet this challenge, poli-cymakers and business leaders will look to the country’s abun-dant geothermal resources, the world’s largest, with a total generating capacity of 29GW annually. In June, workers there broke ground on the construc-

tion of what will be the world’s largest geothermal power plant, a $1.6 billion initiative known as the Sarulla Geother-mal Power Project.

“When the Sarulla geother-mal plant, with a capacity of 330MW, is up and running, it can meet today’s current de-mand,” affirms Surya Darma, Vice Chairman of the Indone-sian Renewable Energy Soci-ety (METI). As head of METI, Mr. Darma has argued for in-creased regulatory certainty to help the country secure financ-ing for large-scale renewable energy projects.

Rida Mulyana, Director General for New and Re-newable Energy and Energy Conservation, points out that Indonesia has new legislation regarding geothermal invest-

ment. “We developed this law in consultation with investors and bankers, so return on in-vestment is emphasized in the new regulations,” he says.

The Sarulla project counts on Nevada-based Ormat Tech-nologies among its backers. Ormat will supply more than $250 million of equipment, and hold a 13% stake in the finished power plant.

“Geothermal energy is necessary,” says Darmoyo Doyoatmojo, Chairman of Sarulla Operations Ltd., and a commisioner of PT Medco Power Indonesia, the major-ity partner and operator of the Sarulla Geothermal Power Project. “With this project, we are developing a brand new billion-dollar asset. We have government arrange-ments and partnerships that put us in a different league. In Indonesia, we are the premier geothermal player and we can develop our potential further. Energy needs to evolve with economic growth.”

Mr. Mulyana adds that Indonesia needs “greater technological and financial cooperation, as well as better developed human resources to ensure we become more sustainable” and that the country needs “to change the energy mix in favor of renew-able energy”.

proven oil reserves are diminishing at the same time the economy is growing, so indonesia is turning to renewable sources, especially geothermal, to diversify its energy mi

�e challenge to meet Indonesia’s

energy needs

Indonesia is t e world’s t ird lar est producer of eot ermal ener and 24th largest producer of crude oil

indonesiA’s ToTAl economic AcTiviTy is expecTed To grow from 00 Billion This yeAr To Trillion By 2025 This growTh will, of course, cAuse ENERGY DEMANDS TO mulTiply



Linking the archipelago nation by land and by sea

Connecting In-donesia’s 17,000 islands poses a unique chal-lenge but one

that the government of the archipelago nation is taking seriously to help continue its economic growth.

Well-developed transport infrastructure plays a key role in growth and Indonesia’s geo-graphic location means an inter-modal transport infrastructure is essential, especially through land and sea. The government’s National Connectivity Frame-work aims to improve intra-island and inter-island transport links and turn the nation into a gateway to South East Asia and the Pacific.

The government has acted to accelerate the island nation’s transport system by bringing in new laws to facilitate investment while also investing over $35 billion in projects over the next three years.

“Transport plays an essential role in supporting economic growth,” says Evert Ernest Mangindaan, Minister of Trans-portation. “The availability and efficiency of transportation ser-vices are vital in supporting the production and distribution im-perative for economic growth.”

One of the steps taken to strengthen economic growth is the creation, through the state’s Master Plan for Acceleration and Expansion of Indone-sia’s Economic Development (MP3EI), of six ‘economic cor-ridors’ – in Sumatera, Java, Ka-limantan, Sulawesi, Bali-Nusa Tenggara, and Papua-Maluku – that Mr. Mangindaan says will “alleviate various issues with ter-ritorial expansion”.

According to Luky Eko Wuryanto, Deputy Minister for Infrastructure and Regional Development Coordination, the MP3EI is “designed to shift the focus towards the regional areas and create new economic cen-ters based on their potential and unique competitive advantages.”

“This is how we identified the six economic corridors to expand and modernize eco-nomic centers outside of Java,” he comments.

“This intra- and inter-island connectivity is intended to im-prove regional and global con-nectivity. Additionally, these economic corridors are expected to connect Indonesia with re-

one of The sTeps TAKEN TO STRENGTHEN ECONOMIC GROWTH IS THE CREATION of six economic CORRIDORS IN sumATerA, jAvA, kAlimAnTAn, sulAwesi, BAli-nuTriA, And pApuA-mAluku

ore t an billion as been allocated in 2014 to improvin t e nation’s road capacit

gional economic centers within the Asean region and the world, in an effort to improve national competitiveness,” adds Transpor-tation Minister Mr. Mangindaan, with Mr. Wuryanto pointing out: “We must be mindful of our archipelago-wide perspective.”

Given Indonesia’s island na-ture, sea transport and improve-ment of the country’s ports are key to driving the economy through imports and exports. A National Ports Master Plan,

outlining the planned develop-ment of ports by 2030, includes focus on attracting investment, improving competition and developing human resources. The new port at Tanjung Priok, improvements at the Port of Belawan, and the construction of Makassar New Port, are signs of early success but fresh invest-ment is being sought to continue strides forward.

This year, the Ministry of Public Works has allocated

from sabang in the north-west to jayapura on the island of papua, indonesia aims to boost connectivity across its e pansive territory of over 1 ,000 islands

The construction of the capital’s mass rapid transport system will revolutioni e life in jakarta

Rapid transit to move Jakarta more smoothly and quicklyAs a bustling, energetic and thriving capital that is fast ap-proaching a population of 10 million people, Jakarta is a city that will benefit greatly from the construction of its new un-derground transport network. The Jakarta Mass Rapid Transit (MRT) project, which will cost in excess of $3 billion and be fully completed by 2030, aims to reduce congestion, improve quality of life and boost eco-nomic growth not only in Ja-karta but also across Indonesia.

The influxes of people from other provinces into the coun-try’s capital bring with them an increase in car and motorbike use and a decrease in the qual-ity and efficiency of its current public transport system.

“The MRT project is nec-essary,” says Dono Boestami,

President Director of PT MRT Jakarta. “We cannot increase the size of the city and we can-not widen the roads. Even huge inter-city toll roads will not be enough to accommodate the growing number of cars and motorbikes in Jakarta. The Mass Rapid Transit system will not solve all Jakarta’s traffic problems, but it is the first step in the creation of an efficient commuter network.”

The progress so far has been impressive, especially consider-ing the project is the first of its type in Indonesia in terms of size and overall importance to its economy. It is so huge that MRT Jakarta is expected to be a case study in Indonesian infra-structure project management.

The complete MRT Jakarta project will stretch more than 69 miles and consist of two main lines: a north-south line and an east-west line. Phase one of the north-south line is already under construction and is expected to be operational by 2018. Meanwhile, phase two of the construction is expected to start just before the completion of phase one and is targeted for completion by 2020. The feasibility study for the east-west line is in progress, with construction expected to take place between 2024 and 2027 at the latest.

“Our main objective is to complete the South-North cor-ridor by 2020 and by the first semester of 2018 we would like to have testing completed on the first phase of South-North Line (9.8 miles and 13 stations) and make it enter into com-mercial operation,” says Mr. Boestami. “Our next priority is the East-West line.”

Like all huge projects there

are challenges, but those chal-lenges are being met. Land acquisition is the responsibility of the city and Jakarta officials understand the urgency of the project and are aiding its prog-ress. Japanese technology is also being used owing to a large pro-portion of investment coming from Japan; the integration of Indonesian workers alongside experienced Japanese technol-ogy, however, is so far seamless.

Natural disasters have also been taken into consideration, with station entrances being elevated, airtight station de-signs integrated into develop-ment plans and a number of water pumps which will be installed to alleviate risks posed by flooding. Nothing has been left to chance. “The project is proof that Indonesia can man-age a large-scale infrastructure project prudently,” says Mr. Boestami. “Our management of MRT should give investors confidence in the future of in-

frastructure projects in Indo-nesia.”

The construction of the MRT system will provide the residents of Jakarta with a fast-er, safer, reliable and convenient mode of mass transportation, while at the same time encour-aging new economic oppor-tunities in and around MRT stations and along the MRT corridors.

This environmentally-friendly mode of transporta-tion will also help reduce air pollution and traffic jams. Fur-thermore, its presence will en-courage better spatial planning, as it encourages transit-urban integration.

In Jakarta, the construc-tion of the MRT will create thousands of new jobs, with this number increasing once the system is operational. At the national level, it will also encourage infrastructure de-velopment across the archi-pelago.

more than $3 billion to improve Indonesia’s road capacity. Proj-ects such as the Jakarta MRT, Monorail and the Transjakarta Busway have also been imple-mented to improve transport infrastructure and alleviate con-gestion in key areas.

The ambitious volume of both land and sea transport and infrastructure projects means there are a number of oppor-tunities for foreign investors to become involved.

Dono Boestami, President Director of PT Mass Rapid Transit Jakarta

“OUR INTENTION IS TO ENHANCE THE LOGISTICS performAnce index of indonesiA By improving service levels in The porT INDUSTRY“

DJARWO SURJANTOManaging Director of Pelindo III

“IN THE LAST five yeArs we hAve only hAd one focus To improve our CONTAINER TERMINAL operATions“

BAMBANG E. CAHYANAPresident Director of Pelindo I

“nATionAlly, we Are numBer one in Terms of The numBer of vessels AND THE ROUTES ThAT we service“

DANANG S. BASKOROPresident Director of PT ASDP Indonesia err ersero

Monday, October 13, 2014Distributed by USA TODAY INDONESIA 7


Central and East Java, Bali, West and East Nusa Teng-gara, and South and Central Kalimantan are the islands that fall under the indonesia port corporation ’s (Pelindo III) jurisdiction for overseeing port operations and improvements

Pelindo III, at the center of the action

With the relatively unde-veloped Eastern Indonesia seen as the future for many of the vast nation’s sectors – including oil and gas, its largest export – it is no surprise that the country is taking logistical services to this part of the country seriously in order to con-tinue its encouraging eco-nomic growth.

The state-owned Indo-nesia Port Corporation (IPC) was established to develop port operations across the nation’s 17,000 islands and Indonesia Port Corporation 3 (Pelindo III), one of four regional ICPs, looks over the lucra-tive Eastern block of is-lands that include Central and East Java, Bali, West and East Nusa Tenggara and South and Central Kalimantan.

The area’s flagship port is Surabaya, the second largest port in Indonesia and a port that is seen as the gateway to Eastern In-donesia. Although behind Jakarta’s Tanjung Priok in terms of size, Surabaya exceeds it in terms of con-nectivity – highlighting the importance of the Pe-lindo III corridor in terms of logistics.

That connectivity is on the rise, with such plans in place to reduce ship waiting times and dedi-cate terminals to particu-lar cargo and particular types of vessel to improve efficiency. “At Pelindo III we’re doing our best to improve accessibility and connectivity throughout Indonesia and the world,” says Djarwo Surjanto,

Managing Director for Pe-lindo III. “To do this we’ll require a lot of support from inside and outside of the country and this is a lucrative opportunity for international investors.”

Improvements are not limited to Surabaya, with ports at Telok Lamong, Belawan and Bali also among the key players in Indonesia’s logistic per-formance and economic growth. Telok Lamong is anticipating large growth and has acted by building a new terminal dedicated to international cargo. New technologies including re-mote crane facilities also aim to improve efficiency, while the expansion of the newest terminals will allow freight capacity to triple and thus cut costs.

Tourism is an important part of the country’s econ-omy and tourists are not being left out. A new aero-bridge serviced passenger terminal has been installed in Belawan, the first of its kind in the country, while Bali is being made into a special ‘turnaround’ port for cruise ships.

And these improve-ments are being carried out with the environment in mind. “Right from the beginning, Pelindo III has planned for all our new terminals to be green ter-minals,” says Mr. Surjanto. “We’re avoiding diesel generators and fossil fuel power in general and moving towards electric-ity. If we do have to use a diesel engine we choose the most environmentally sensitive ones.”

A rede nition of corporate culture has led to a change of fortunes at ferry company pT Asdp indonesia ferry (persero)

‘One team, one spirit, one goal’ at ASDPIn a country like Indonesia, an archipelago of 17,000 is-lands, sea transportation is vital. Ferry companies are tasked with the difficult challenge of transporting tens of millions of passen-gers and vehicles each year across an intricate collection of islands that span three separate time zones.

For more than 40 years, PT ASDP Indonesia Ferry (Per-sero) has been a key player in Indonesia’s maritime trans-portation industry. Ferrying 7 million passengers and 2 million vehicles annually, it is the largest ferry company in terms of fleet size and number of routes. However, for a period up to 2011 it had been going through some difficult times, when its level of success had not matched its size.

A poorly run state-owned enterprise (SOE) facing stiff competition from several smaller but efficiently man-aged private operators, the company was operating at a loss and had not expanded its fleet for more than 30 years.

In 2011, Danang S. Bas-koro was brought in to turn things around and his achievements so far have been nothing short of phe-nomenal. The former presi-dent director of Merpati Nu-santara Airlines and Jakarta

International Container Terminal, Mr. Baskoro in-troduced a new corporate culture to ASDP, as well as a completely new IT system, a $50 million training pro-gram, and an ambitious five-year strategic plan.

Three years since he took the reins, the company is now making profit and turn-over has more than tripled

from $60 million to $200 million. So effective has the turnaround been that ASDP was officially named Indone-sia’s most successful SOE in Indonesia in 2013 and 2014.

There are plans to increase the fleet from 130 to 250 ves-sels by 2019, as the President sets his sights on expansion across the whole the South-east Asia.

Perhaps the most crucial factor in ASDP’s renaissance has been the redefining of corporate culture. “To start with, I assessed the general managers in each branch of each province and decided to reshuffle the personnel in order to change the com-pany culture,” explains Mr. Danang. “The desire to be a more unified company led to the creation of our new slo-gan: ‘One Team, One Spirit, One Goal’.”

He has also introduced tri-monthly performance reviews which he says have “motivated our employees to be more ambitious”.

Ambition is what defines Danang S. Baskoro: not just satisfied with becoming the number one operator in Indonesia, he envisages the company as the leading operator across the entire region of Southeast Asia.

“Indonesia will become a member of the Asean Eco-nomic Community in 2015 and ASDP will focus on regional expansion. By the end of my term as president director, in 2016, I want ASDP to be the largest play-er in the regional and global ferry business. It is an ambi-tious plan, but I believe that we can achieve our goals even ahead of schedule,” says Mr. Danang.

focused on the northwestern part of the archipelago, indonesia port corporation 1 (pelindo i) is engineering the greatest performance upgrade of any Indonesian port in history

�e transformation of Pelindo IPelindo I – one of the four state-owned port companies in Indo-nesia, which manages ports in the west of Indonesia – has made significant improvements in the last five years since Bambang Eka Cahyana was named Commer-cial and Business Development Director in 2009 and took over as President Director (PD) in 2013.

Mr. Bambang has strived to turn the state-owned company, once stifled by bureaucracy, into one that resembles a private firm. In the last five years, the PD says that he has overseen “the greatest performance upgrade of any Indonesian port in history”.

“Coming from the private sector, I made sure to make ‘customer focus’ our first new corporate value. This helps us change the business culture to one of a customer-oriented company,” he says.

Mr. Bambang’s efforts to

change the culture have paid off significantly: profits have sky-rocketed from IDR 138 billion ($ 11.8 million) in 2010 to IDR 489 billion in 2013. This year the PD expects the company to make more than IDR 600 billion.

The PD’s first five-year trans-formation plan, which came to a close last year, had one focus: to improve container terminal op-

erations. The second transfor-mation plan, launched this year, is focused on expanding the existing business (with plans to open facilities in Timor Leste), developing Kuala Tanjung Port as West Indonesia’s hub port and container terminal focused on crude palm oil, as well as plans to expand into new areas. These include entering the bio-

diesel industry in a venture with one of Indonesia’s major power companies to build an indepen-dent power plant, and to add subsidiary companies and pro-vide marine services.

“At the end of this five year period, in 2018, I want to achieve an after tax profit of IDR 1.8 tril-lion, “ says Mr. Bambang.

“It’s time for Pelindo I to grow and expand into the international market. In order to effectively in-tegrate into the 2015 Asean Eco-nomic Community, Indonesia needs to improve the ports sector. Before we can compete with the likes of Singapore and Malaysia we need to catch up with them.”

“if you want to succeed in this industry, you need to think out of the bo ,” says president director of perum damri

Aggressive expansion at Perum DamriWhen Agus Suherman Subrata took over in 2011 as President Director of Perum Damri, Indonesia’s state-owned bus company, “all of my senior managers pushed me to make the best of Damri,” he recalls; and that is certainly what he has done in his first three years.

Mr. Subrata has reinvigo-rated operations, adopting what he calls, an “aggressive expansion policy” at Damri, a public company in a mar-ket where competition is fierce from private firms.

“Innovation and expan-sion is critical to serve this market. If you want to succeed in this industry, you need to think out of the box. Last year we re-placed and reconditioned over 1,000 of our buses and launched 40 of our royal buses. We now have city and inter-city buses, an air-port service, cargo busses, 2,600 total passenger buses and 59 offices across pro-vincial Indonesia.”

The focus in 2014 has been on reaching “aggres-sive strategy targets”, he says. “This year we are drafting a long-term plan. We want to deliver an ex-cellent product and cen-tralize operation control. In 2018 we want to be the leader of land transporta-tion in Indonesia. The po-tential for our business in the future is huge.”

Indeed, better company

performance will be intrin-sically linked to better staff performance. This is why in the last two years the com-pany has sent 63 employees to receive master’s degrees related to the transporta-tion industry.

“I feel now, every year, the business is becoming more complex,” states the Damri boss. “Human re-sources will be critical to helping Damri manage this complexity.”

Increased efficiency of human resources will be coupled with increased ef-ficiency of its buses: moving with the times, the bus firm has plans to change its entire fleet over to much more en-vironmentally friendly gas engines in the long term.

Already, several of its newer buses are running on Korean-made gas engines and Damri is currently con-structing a gas refueling station in partnership with an Indonesian state-owned natural gas company.

Pelindo III is improving efficiency and cutting costs at its ports

elindo I’s new corporate culture as brou t wit it massive financial benefits

A us Su erman Subrata President Director of Perum Damri

AS was officiall named Indonesia’s most successful S in Indonesia in 2013 and 2014

There is a renewed sense of optimism within In-donesia’s defense in-dustry, thanks to the State’s series of pro-

grams to not only modernize the Armed Forces of Indonesia (TNI), but also boost indigenous manu-facturers of military equipment. A 2012 law enacted by President Yudhoyono, a retired three-star army general himself, decreed that TNI must purchase the majority of its weaponry and vehicles from Indonesian companies, who in turn are encouraged to negotiate agree-ments and joint ventures with for-eign defense firms in order to gain access to advanced technology.

Defense Minister Purnomo Yus-giantoro speaks with United World about the evolution of the defense industry over the past several years, and his expectations for making it self-reliant.

What is your strategy to mod-ernize the military and improve the efficiency and overall capac-ity of the defense industry? The economic crisis of 1998 did not only mark a change from an old era into a new era in Indonesia; it was also the time when the old govern-ment was transformed into a newly reformed one. Therefore, the crisis also marked the beginning of the new era of democratization in our country and that is very important.

On the economic side, it took us a while to recover from the 1998 cri-sis. Our priority was to focus on the economy and social welfare and it has only been over the last five to 10 years that our economy grew stron-ger. This was also the time for the defense industry to recover.

Our philosophy is that if we want to have a strong country, we need to have strong armed forces. And if we want to have strong armed forces, we need a strong defense industry to support them. That is why it is necessary to strengthen our armed forces in parallel with pushing the defense industry further. That is a key point.

The overall economy has been gradually improving and the gov-ernment has been able to increase the budget allocation for the defense industry and the armed forces. I be-lieve that in this cabinet we have a very good starting point to boost the industry as we received the highest proportion of the budget so far for defense purposes. Our current bud-get is close to 1% of the GDP. From 2000 until now, the budget has in-creased tenfold.

In the 2010-2014 period, de-fense budget allocation experi-enced significant growth. In 2010 the budget ceiling was Rp. 42.31 trillion (0.71% of GDP), whereas in 2014 it is Rp. 84.42 trillion (0.88% of GDP). However the budget that is provided is still far from what we need to realize defense devel-opment, which is somewhere be-tween 1.8%-2.1% of GDP.

In 2010, the government es-tablished the Defense Indus-try Policy Committee (KKIP). What led to the establishment of this committee and what role does it play together with the Ministry of Defense in optimiz-ing the operations of Indone-sia’s armed forces?

In the past, before we formed this Committee, there were several min-istries taking care of the defense industry – the Ministry of Indus-try, the Ministry of State Owned Enterprises, the State Ministry of Research & Technology, and the Ministry of Defense. There were many fingers in the pie, which was not good as it was slowing things down. So I put forward the idea to the President of forming one body to take care of the defense industry. The President agreed and the Com-mittee was formed under a presi-dential decree.

As a result the work in the defense industry has been synchronized and so far, and it has been working very well. The defense industry is grow-

ing; some of the companies can now supply equipment to the army, the navy and the air force. Some have even started exporting which dem-onstrates great progress.

In 2010, the Ministry of Defense elaborated a 15-Year Strategic Plan under which $15 billion was to be spent during the first phase due to end in 2014. Can you tell us more about this plan and its objectives? The 15-Year Strategic Plan is re-lated to how we can empower and strengthen the defense forces. We

have three components in our con-cept – the first is research and de-velopment (R&D) and we have to develop our capacity in this area; the second is the defense indus-try, which has to be supported by R&D; and third are the armed forces which have to be supported by the defense industry.

We have broken the 15 years down into three five-year plans – we call it strategic planning from 2010-2014, 2015-2019, and 2020-2024.

For 2010-2014, the main compo-nents are to emphasize the princi-pal of zero growth and right sizing, meaning not to add to the number of personnel, but to organize and position all personnel according to their competence, and this goes for

every position in the organization. The armed forces development is directed to strengthen interopera-bility among services, in order to en-hance its joint operation on the field.

For the ground force the main focus will be on developing its ca-pability in the field of maneuver-ability and fire support, along with the transformation of its doctrine, training and leadership education system. The main focus for the sea force will be on changing its organi-zation, while the air force will be fo-cusing on the process of adding new combat squadrons.

For 2015-2019 the main focus will be a continuation of the previ-ous five years. The ground force will focus on the enhancement of its air defense, mobility/counter mobility and utilization of nano-technology in combat intelligence. The navy will continue changing its organization with the development of working units. The air force will continue on the previous five years.

For 2020-2024 the main focus of the ground force will be a continua-tion of the previous years. The navy will be focusing on the completion of specially designed software. The air force will continue on the previ-ous years.

What are your priorities in terms of military modernization? Indonesia covers a wide area on land and sea, with a very large popula-tion and abundant natural riches, so the military has a big responsibility. Therefore, modernization of the In-donesian military (TNI) is necessary in order to ensure the sovereignty and integrity of our country, as well as the safety of our people.

We have a program to empower our armed forces. This govern-ment has allocated a budget of $15 billion to develop the equipment for the army, the navy and the air force. The government seeks to el-evate the independence of the na-tional defense industry, so some of this budget will be directed to local companies. If possible, the equip-ment has to be made in Indonesia, but if not, we will ask local compa-nies to create joint ventures with international defense industries. We have a step-by-step approach to ask state companies to join.

The form of cooperation con-cerns increasing local content, technology transfer, and offsets. Offsets means that if we buy from someone, they also have to buy from us. For example, we are co-operating with the South Koreans to develop fighter planes. We have a 20% share, so if the Korean in-dustry makes 250 units of fighters, then we will get 50 units.

The fulfillment of the needs for defense equipment should be sought in the national defense indus-try and our dependency of products from abroad should be minimized. The government gives guarantees to banks and financial institutions that support the funding of the de-velopment and the utilization of the defense industry.

With military modernization, de-velopment of infrastructure is also required. Currently, ship builder PT PAL and Indonesian Aerospace (PT DI) are pioneering the development of infrastructure by manufacturing submarines and jet fighters respec-tively. It is expected, that within two or three years, Indonesia will have its own infrastructure for manufactur-ing submarines and jet fighters with advanced technology.

If possible, we will sign govern-ment-to-government agreements, under the government’s umbrella. We have had a past experience when our country was under an embargo when we had a problem obtaining spare parts. As a result our fighter planes could not fly. Therefore, now we are looking for company-to-company and government-to-gov-ernment cooperation to ensure this does not happen again.


Self-reliant defense�e government’s strategy to create a strong and self-sufficient defense industry has Indonesian companies increasing production, improving technology and acquiring expertise


Since the declaration of independence of the Republic of In-donesia on August 17, 1945, establishing

and maintaining an effective armed forces for the country has been a key priority for successive governments. The Armed Forces of Indonesia (collectively called Tentara Nasional Indonesia – TNI) was born from local revolu-tionaries who joined the anti-colonial struggle, a conflict which ended in 1949.

Following this period, TNI underwent a series of trans-formations that saw it transit from an organization made up of irregular militia units to a professional, integrated regular military. This shift demanded the importation of vehicles, weapon systems and technology not produced in the country at the time. Additionally the subsequent establishment of the Indo-nesian Air Force (TNI–AU) and Navy (TNI-AL) required the acquisition of aircraft and ships from abroad.

However, dependence on military equipment manu-factured in other countries has twice created debilitating shortages of spare parts dur-ing the last 50 years. This has rendered sections of the mili-tary inoperable and subse-quently reduced TNI’s ability to carry out its core mandate of providing national defense.

Such a situation first oc-curred during the mid-1960s, when the Soviet Union stopped supplying spare parts needed for Russian-made aircraft and naval ves-sels operated by Indonesia. Without these parts, the national air force, could not maintain serviceable aircraft. This same issue affected the navy, which became unable to deploy units as its ships broke down. A similar situa-tion was repeated during the 1990s when a U.S. military embargo and refusal to sup-ply replacement parts led to the grounding of certain air-craft belonging to the nation’s air force.

A tactical turnaroundDue to these lessons of histo-ry, Indonesian governments have worked to establish a local industry capable of sustaining TNI’s operational requirements. By building sophisticated equipment and vehicles locally, the country could mitigate the effect of any external sanctions. Be-fore becoming President, B.J.

A sector is being reborn after recent history has

taught Indonesia that self-reliance in defense is the most strategic way to

ensure its armed forces are well-e uipped, while

driving growth in local industry

indonesiA’s seven sTrATegic defense projecTs

kf-x if-x fighter jet This is a project to research, develop and produce a generation 4.5 fighter jet in cooperation with South Korea.

20 dsme submarines This project will see the construction of three new submarines in partnership with South Korea. One of these will be wholly built in Indonesia.

c- 05 Anti-ship missile A new missile will be procured for the Indonesian navy and then subsequently built in the country through Chinese transfer of technology.

r-han 122mm rocket An R&D consortium has been formed to create this new weapon system for the Indonesian military.

Propellant Production This project will see the production of a propellant factory to support national munitions manufacturing.

medium Tank The country will produce a new medium tank within the framework of Indonesian-Turkish defense partnership arrangements.

national radar This calls for the upgrading of Indonesia’s national radar network for air defense.

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T e Anoa armored ve icle prepared for UN service

T e 2 car o plane a T I desi ned and e ported product

‘if possiBle, The equipmenT hAs To Be mAde in indonesiA, BuT if noT, we will Ask locAl compAnies To creATe joinT venTures wiTh inTernATionAl defense indusTries our defense indusTry should Be self-sufficienT By 202 ”

PURNOMO YUSGIANTORO, Minister of Defense

Habibie was a key figure in leading the development of this industry as long-serving Minister of Research and Technology. His own back-ground as an engineer for German aviation companies naturally suited the task.

However, efforts by B.J. Habibie under the New Order government of President Su-harto, which included the es-tablishment of effective state-owned defense companies, were devastated by the Asian Financial Crisis of 1998. In order to comply with Interna-tional Monetary Fund (IMF) conditions, defense spending was reduced and Indonesia’s state-owned defense com-panies were downsized. This situation resulted in a massive brain-drain which affected the sector for years to come.

Indonesia’s subsequent transition to democracy fol-lowing the crisis saw a strong focus on areas unrelated to defense, as successive govern-ments worked to build new systems and focused on social and economic issues. It was not until the second term of President Susilo Bambang Yudhoyono, from 2010 on-wards, that a strategic focus was placed on revitalizing the Indonesian defense sector.

As a career officer and for-mer TNI general, President Yudhoyono long understood the country’s strategic vulner-ability due to its dependence on imported military equip-ment. Undoubtedly this in-fluenced his decision to reha-bilitate the sector. This policy has since been spearheaded by Dr. Purnomo Yusgiantoro, Minister of Defense, a distin-guished professor of econom-ics who had served as Minis-ter of Energy and as Secretary General of OPEC.

The core goal of this drive is to achieve minimum essential force by 2024. This effectively means that Indonesia will be able to domestically supply itself with equipment, tech-nology and other products needed to sustain its military. The Defense Industry Policy Committee (KKIP), which is made up of various stake-holders including government ministries, agencies, defense companies and universities, works to realize this policy through a cross-cutting, multi-organizational approach.

Ultimately underpinning the realization of the minimal essential force policy has been a series of significant budget increases and the introduction of legislation aimed at boost-

Monday, October 13, 2014 Distributed by USA TODAY INDONESIA 9


�e resurgence of Indonesia’s defense industry

“BAsed on our cApABiliTies And compeTencies, our oBjecTive is To Become one of The leAding inTegrATors for rAdAr producTs in The defense indusTry”

TIKNO SUTISNA, President Director of PT INTI

“our ulTimATe goAl in The fuTure is To Become independenT in supporTing The nATionAl defense indusTry for exAmple, we Are Building The propellAnT in order To Be ABle To mAnufAcTure our own rockeTs here in indonesiA”

F. HARRY SAMPURNO, resident and of T a ana

“in 2010, The minisTry of defense signed A conTrAcT wiTh souTh koreA To Build four lAnding plATform dock ships (lpd) This gAve our engineers The opporTuniTy To leArn ABouT producTion procedures And gAin vAluABle experience”

FIRMANSYAH ARIFIN, President of PT PAL Indonesia

propellant production. Cur-rently the country is depen-dent on imported propellant, which has a wide degree of military applications, includ-ing use in rocket and muni-tions manufacturing. If PT Dahana can establish its own propellant factory, it can guar-antee a domestic supply of this strategic chemical to other de-fense manufacturers.

The construction of a me-dium tank is the sixth project. In this case, the lead integra-tor, Indonesian armaments and vehicle manufacturer PT Pindad is working with FNSS, a leading Turkish defense contractor. The two compa-nies are designing a complete-ly new medium tank, in line with TNI requirements. Al-though PT Pindad currently produces an array of wheeled, armored vehicles, this will be the first time that a tracked armored vehicle is manufac-tured in-country. Once again, this lessens dependence on foreign suppliers.

The final strategic project is designed to enhance, expand and strengthen national radar coverage. Current coverage has been deemed inadequate, due to Indonesia’s extensive land and sea territory. The Ground Control Intercept Ra-dar (GCIR) system used in In-donesia’s air defense will also be dramatically improved by the realization of this project. Neither an international part-ner, nor an integrator from the Indonesian side has been cho-sen yet. However, Indonesia boasts an array of private and public sector companies suit-able for contributing to such a

project, including PT LEN, PT INTI, PT CMI Teknologi and PT Infra RCS Indonesia.

Although the defense re-vival is primarily focused on meeting Indonesia’s defense requirements, there is every expectation that it will eventu-ally lead to a boost in defense exports, as the sector becomes active and innovative again. This is nothing new for the country, which has a history of exporting defense products. PT DI-manufactured CN-235 transport aircraft have been sold to air forces all over the world, and recently PT PAL won a contract to supply the Philippine Navy with Strate-gic Sealift Vessels (SSV). Even Indonesia’s PT Sritex, the larg-est textile company in South East Asia, supplies military uniforms to over 30 countries around the world, including Germany.

A host of private sector companies are coming into being on the heels of Indo-nesia’s defense revival, dem-onstrating innovation, hiring specialists and expanding production lines. These in-clude the Batam-based ship builder PT Palindo Marine, the newly established military vehicle battery producer Gar-da Persada, and the parachute maker, CV Maju Mapan, to name a few.

Ultimately, Indonesia’s min-imal essential force policy is set to not only bolster defense capabilities but also establish a new generation of world class managers, engineers and spe-cialists capable of carrying out sophisticated and complex, large-scale industrial projects.

T e L vessel an Indonesian built e port

Indonesian made patrol s ip

T e ead uarters of T a ana a center of researc and tec nolo development

‘The fulfillmenT of The needs for defense equipmenT should Be soughT in The nATionAl defense indusTry And our dependency of producTs from ABroAd should Be minimi ed”

DR. PURNOMO YUSGIANTORO, Minister of Defense

ing both TNI’s capabilities and the technical capacity of Indo-nesia’s defense companies. As a result, recent years have seen the emergence of exciting new developments in the sector.

The magnificent sevenAt the core of these are seven strategic projects, which are set to significantly upgrade In-donesia’s military capabilities while also initiating technol-ogy transfer and developing local R&D and manufacturing ability. These projects are be-ing carried out in partnership

with leading international firms to ensure the delivery of world-class equipment. Such a practice also works to promote the transfer of skills, knowledge and practices that Indonesian defense compa-nies and engineers must emu-late in order to meet interna-tional standards.

First and foremost of the strategic projects is the KF-X/ IF-X Fighter Jet Project. This is a joint venture be-tween Indonesia and South Korea, working to develop a next generation fighter for both countries to utilize for national defense. As Dr. Tim-bul Siahaan, Director Gen-eral for Defense Potential of Indonesia’s Ministry of De-fense explains, “This is a gen-eration 4.5 fighter jet which is equivalent to the F-16++. It is a three-phase project consist-ing of: technology develop-ment, engineering and manu-facturing development, and finally, production”.

Indonesian Aerospace (PT DI) is the lead integrator working to carry out this proj-ect from the Indonesian side. The move to sophisticated fighter jets from its tradition-al manufacturing base of both fixed wing aircraft and heli-copters will require extensive investment in both physical infrastructure and personnel. Such a great technological

leap forward, though chal-lenging, will certainly set a new standard for regional aviation production.

Also conducted in collabo-ration with South Korea is the second strategic project, the procurement of three new submarines from Dae-woo Shipbuilding & Marine Engineering (DSME). The first two 209 DSME subma-rines will be constructed in South Korea. Engineers from state-owned Indonesian ship builder, PT PAL, will observe and participate in this process.

The third submarine will then be constructed by these engi-neers in PT PAL’s shipyard in Suarabaya, East Java. New in-frastructure will also be built in Surabaya to accommodate this. This will be the first time that a submarine has been built in the country.

Working with China, In-donesia is also developing the C-705 Anti-Ship Missile, its third strategic project. This subsonic, long-range missile will be utilized by Indonesia’s navy when completed. A pro-duction facility will be estab-lished in Indonesia, following training of local specialists in China. PT DI will be the lead integrator for this project, making use of its aerospace experience.

The design, development and manufacturing of the R-Han, 122mm rocket is the fourth strategic project. An R&D consortium consisting of the Ministry of Research and Technology (Ristek), the Min-istry of Defense’s Research and Development Agency (Balit-bang Kemhan) and the Na-tional Institute of Aeronautics and Space (LAPAN), is work-ing on this aspect of project. PT DI will also be involved in production once the initial phases are completed.

PT Dahana, best known for producing explosives, is lead-ing the fifth project, related to

Even as it approaches the one-year anni-versary of Typhoon Haiyan, one of the most devastating

natural disasters in its history, the Philippines has good rea-son to look forward with hope and optimism. Thanks in large part to the stable and demo-cratic political system led by President Benigno S. Aquino III and his ruling Liberal Party, the Southeast Asian nation of 108 million has emerged as a leader and an example of robust economic growth and sound fiscal management.

A revitalized private sec-tor and improving govern-ment performance propelled the Philippines into one of the strongest economic expan-sions in Asia, with its 7.3% GDP growth in 2013 surpassing eve-ry country in the region except China. The progress has been exceptional by the Philippines’ own historical standards as well. During the last quarter of 2013, the country capped its strongest two years of growth since the 1950s, while also benefitting

from declining unemployment, rising exports and significant gains in foreign direct invest-ment, private consumption and government revenues, accord-ing to International Monetary Fund and World Bank figures.

In July of this year, Jim Yong Kim, the President of the World Bank, declared: “The Philippines can be the next economic mira-cle in Asia”. Meanwhile analysts at top credit ratings including Standard & Poor’s, Moody’s and the Japan Credit Rating Agency all upgraded the country’s debt further into investment grade territory, a distinction that sets it apart from emerging markets like Brazil and India. Leaders at the East Asian World Economic Forum 2014, held in Manila, expressed optimism that the Philippines would become a trillion-dollar economy by 2030.“The Philippines continues to gain momentum as good gov-ernance invigorates our institu-tions and deepens public trust,” President Aquino affirmed in an exclusive statement to United World. “Our government has seen our campaign for reform bear fruit in our burgeoning

economy, in the prom-ise of lasting peace in the once turbulent southern region, and in our steady rise as an emerging mar-ket in the Asia-Pacific.” President Aquino

made rooting out corruption and im-proving governance the top priorities of his presidency, tak-

ing important steps that have helped to fa-

cilitate greater econom-ic development. Thanks

in part to this leadership, the government has not

run a single deficit in the past 11 years, while its economy has tripled in size during the same time period.

In April of this year, U.S. President Barack Obama made a historic visit to Manila, the first by a U.S. head of state in more than a decade. The two lead-ers celebrated the signing of the Enhanced Defense Cooperation Agreement (EDCA), a pact that advances the protection of Philippine sovereignty while promoting U.S. interests in the region. The EDCA marks the most substantial defense coop-eration between the two coun-tries in decades, and will re-open key military bases in the Philippines to U.S. forces for the first time since the 1990s, while building mutual defense capacities and delivering eco-nomic benefits to the host coun-try, leaders on both sides argue.

President Aquino has af-firmed that the two countries are continuing to strengthen its links: “Our nations share the goal of achieving greater stabil-ity and prosperity in our regions, and hold freedom and the rule of law in the highest regard. We each commit to contributing to a harmonious world, which is the bedrock of true and mean-ingful development for our peo-ples. Our friendship can only thrive as we uphold the princi-ples of democracy and leverage our citizens’ potential through capacity-building efforts.”

“The United States is re-newing our leadership in the Asia Pacific, and our engage-ment is rooted in our allianc-es,” President Obama declared during the April visit. “That in-cludes the Philippines, which is the oldest security treaty alliance that we have in Asia. As a vibrant

democracy, the Philippines re-flects the desire of citizens in this region to live in freedom and to have their universal rights upheld.”

Under President Aquino’s leadership, the Philippines has fostered closer cooperation with the United States at all levels. Total trade in goods between the two nations approached $18 billion in 2013, in addition to the more than $25 billion that Filipinos living in the United

States sent home to friends and family members in their coun-try of birth that year. Almost 4 million Filipinos currently live in the United States, making it the number one foreign destination for Filipinos and a country with which they share strong histor-ical and cultural ties. Overall, foreign direct investment in the Philippines has tripled since 2010, with the United States cur-rently holding a stock of invest-ments in the country worth more than $5 billion.

“The U.S. is one of the two stra-tegic partners of the Philippines, a major trading partner, and a nation with which we have a shared history and common set of values,” says Manuel L. Quezon III, Undersecretary for

Presidential Communications Development and Strategic Planning. “Deeper cooperation with them, as reaffirmed by the visit of President Obama to our country in April, only strength-ens the many aspects of our re-lationship.”

President Obama outlined some of the important issues discussed during his visit, which included significant bilateral trade negotiations. “We agreed to keep deepening our econom-

ic cooperation,” he said. “I con-gratulated President Aquino on the reforms that he’s pur-sued to make the Philippines more competitive. Through our Partnership for Growth and our Millennium Challenge Corporation compact, we’re go-ing to keep working together to support these efforts so that more Filipinos can share in this nation’s economic progress – because growth has to be broad-based and it has to be inclusive.”

According to the Philippine Development Plan, the cur-rent government has com-mitted to the goal of inclusive growth through improving gender equality, reducing pov-erty, achieving universal pri-mary education and improving

child and maternal health, while promoting equal access to development opportunities through better education, pri-mary healthcare and nutrition, and other basic social services. Its leaders have worked hand in hand with counterparts in the private sector from across the globe.

“The role of the private sec-tor is very important in sustain-ing our growth momentum. The public sector cannot do it alone,” says Jose L. Cuisia Jr., Ambassador of the Republic of the Philippines to the United States. “That is why aside from improving overall business en-vironment and competitiveness, the Philippine government is seeking greater private sector involvement through the coun-try’s public-private partnership (PPP) program. The World Bank considers the Philippine PPP center as one of the most globally active in the world.”

The United States has proved to be an indispensable partner in this effort, according to the Ambassador. “We hope to ex-pand our engagement with the U.S. in other aspects of our economic relations,” he says. “There is the Partnership for Growth program that will bring an estimated $139 million over five years, mostly from the U.S. Agency for International Development.”

Like many leaders across the public and private sectors, Mr. Cuisia regards a cooperative relationship with the United States as essential to both coun-tries’ growth, prosperity and se-curity. “I see the opportunities to expand economic relations with the United States in the long run arising first, from the continued high growth performance of the Philippine economy, since noth-ing attracts foreign investment more than high growth; and sec-ondly, from a smart response to the Trans-Pacific Partnership (TPP) initiative, which from the U.S. point of view is the econom-ic equivalent of its pivot to Asia.”


PHILIPPINESToward a trillion-dollar

economyThis supplement to USA TODAY was produced by United World Ltd., Suite 179, 34 Buckingham Palace Road, London SW1W 0RH – Tel: +44 20 7305 5678 – [email protected] – www.unitedworld-usa.com


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Our World#Asean

#Philippines

One of Asia’s best economic performers, the Philippines is on its way to becoming a trillion-dollar economy

by 2030 due to a revitalized private sector, better governance and strong, sustained growth

‘OUR NATIONS SHARE THE GOAL OF ACHIEVING GREATER STABILITY AND PROSPERITY IN OUR REGIONS, AND HOLD FREEDOM AND THE RULE OF LAW IN THE HIGHEST REGARD. OUR FRIENDSHIP CAN ONLY THRIVE AS WE UPHOLD THE PRINCIPLES OF DEMOCRACY AND leverAge our ciTi ens’ poTenTiAl”

BENIGNO SIMEON AQUINO III, President of the Republic of the Philippines

In April 2014, U.S. President Barack Obama made a historic visit to Manila, the first by a U.S. head of state in more than a decade, during which he signed the Enhanced Defense Cooperation Agreement with Philippine President Benigno Aquino III

Jose L. Cuisia Jr., Ambassador of the Philippines to the U.S.

Monday, October 13, 2014 Distributed by USA TODAY PHILIPPINES12


APEC 2015 host targets expansion across the board

Next year, the P h i l i p p i n e s will host one of the world’s most impor-

tant gathering of key deci-sion makers from across the globe: the Asia-Pacific Eco-nomic Cooperation (APEC) 2015 summit. Focusing on inclusive growth, APEC 2015 will be the first such gathering held in the Phil-ippines in nearly two dec-ades, bringing together the leaders of the world’s most dynamic economies, which together account for 40% of the world’s population, 44% of global trade, and 53% of the world’s real GDP.

“Our major vote of con-fidence is being selected to host APEC 2015, where 21 countries will come together to participate in 18 different meetings,” says Ambassador Marciano A. Paynor Jr., Director General of the APEC 2015 National Organizing Council. “It used to be only trade and foreign affairs. Now we have finance, agriculture, natural resources, energy, and

higher education, among oth-ers. Many of the things be-ing discussed are econom-ic, related to stimulus, and this is an indication that the Philippines and the member economies are working to-gether again. Hosting APEC is a huge honor; it shows that there is confidence in the Philippines at this time. And there should be, with 17 infra-structure projects set for the next two years, the economy and growth will be stronger than ever in the Philippines.”

Because of these unique factors, the Philippines has a special role to play in pro-moting APEC’s goals of in-

creasing trade and invest-ment, as well as facilitating business and economic and technical cooperation.

“APEC’s intention has been to create free trade among members,” says Guillermo “Bill” Luz, Private Sector Co-Chairman at the Philippines National Competitiveness Council. “We want to gain from that, so we will place it high on APEC’s agenda.”

Focusing on its role in the regional and the global economy, the Philippines has worked to spread prosperity among its citizens by engag-ing with its partners world-wide. “By 2016, we want to be able to move the coun-try into the top third in glob-al rankings for competitive-ness,” Mr. Luz adds. “We used to be in the bottom third, and are now in the middle. I want to see the country in the top 20% of the world. That is just a ranking. The tangible ben-

efit is as you become more competitive, you can attract investment and create jobs. The visible outcome is that poverty drops. It is currently about 26%, and we want it to drop below 15%.”

Deepening the Philippines’ unique competitive advantag-es for more inclusive growth will require close cooperation with the private sector. “The private sector is involved through the APEC Business Advisory Council (ABAC),” Mr. Paynor adds. “In ABAC,

the leaders are invited to many of the meetings that are con-ducted by government. Their ideas are taken into account and we have asked for their help and support in the or-ganizing council.” The ABAC includes executives represent-ing some of the Philippines’ leading private businesses. Chief executives from Ayala Corp., Magsaysay Group of Companies, and Jollibee Corp. all have seats on the council.

Despite the complexity of the task, leaders involved in organizing APEC 2015 say that they have not lost sight of its most important goal: to foster inclusive growth, thereby reducing poverty and spreading opportunity and prosperity to all corners of society. “We plan to cre-ate high quality jobs by re-vitalizing the manufactur-ing sector, expanding tour-ism into new areas, linking small agriculture producers

with the value chain, and cre-ating a sound environment for massive investment in infrastructure and logistics,” says Arsenio M. Balisacan, Economic Planning Secretary of the National Economic and Development Authority (NEDA).

“My idea of inclusive growth is that if I grow, oth-ers must grow with me,” adds Mr. Paynor. “If I grow to the detriment of others, that is exclusive growth. I think that this idea can be translated in-to business. More and more, people are realizing that there is a different way of doing business. We are able to do business our way, as hospita-ble Asians. When we grow, we have to be able to bring Cambodia, Laos, etc. We will not forget them. Now is the time for inclusive growth, which must be the prevail-ing factor in the decisions we have to make.”

THE 2015 APEC SUMMIT WILL BE HELD IN VARIOUS VENUES ACROSS THE COUNTRY FROM FEBRUARY TO OCTOBER AND IS EXPECTED TO PIQUE THE INTERESTS OF INVESTORS AROUND THE WORLD

According to the Central Bank FDI inflows in the first half of 2014 reached $3.57 billion, 76.9% higher than the $2.01 billion posted in the same period last year, creating an impressive outlook

The philippines will host the 2015 Apec summit and showcase both the public and private sector’s long-term commitment to its theme of inclusive growth

“WE PLAN TO CREATE HIGH QUALITY JOBS BY REVITALIZING MANUFACTURING, TOURISM, AGRICULTURE, INFRASTRUCTURE AND LOGISTICS“

ARSENIO M. BALISACAN, Economic Planning Secretary of NEDA

A UNITED WORLD SUPPLEMENT PRODUCED BY: Gimena Solari, Project DirectorFabricio Sordoni, Editorial Directorgeoffrey flugge, market Analystvirginia Towers, coordinator gemma guti rre , regional director

Women lead the wayOFW support

Cynthia Villar, Senator of the 16th Congress of the Philippines and Managing Director and co-founder of the Villar Foundation, a non-profit organization that helps empower Filipi-nos trapped in poverty at home and abroad, discusses helping overseas Filipino workers (OFWs), the bank-ing sector, and encouraging social advancement.

How are you providing as-sistance to OFWs? I a t tended entrepre-neurial training for re-patriated OFWs. The Overseas Workers Welfare A d m i n i s t r a t i o n , t h e Department of Labor and Employment, the National Capital Region, and Villar SIPAG (Social Institute for Poverty Alleviation & Governance) are doing it right now. I am telling them that we have to do this na-tionwide. Our plan is to do it all over the country because overseas Filipinos are from all over the country. In our foundation, we do repatria-tion, medical and livelihood assistance, and training. We are trying to help them to put up a business with their sav-ings, so they have something to go back to after working hard abroad.

Could you give us some details about the Senate Bill you co-authored to

liberalize the banking sec-tor?There are two provisions in the law. First, the Philippines will allow 100% foreign own-ership of banks, in one en-try mode provided that the aggregate ownership of the banking system will be 60% Filipinos. The second pro-vision is the ownership of real estate properties of for-eign banks in the Philippines. Foreign ownership of land is not allowed under the Philippine Constitution. But under this law, foreign banks can take possession of real estate properties for-

feited from real estate mort-gages for five years, where-in they have to transfer the properties to Filipino nation-als. Otherwise, the foreign bank will pay a fine every year. This will enable banks to engage in real estate mort-gaging, which is very popular in the Philippines.

What is the real impact that the government’s fi-nancial literacy program is having on farmers? If you provide scholarships, the farmers will use them. We need to give more budg-et to agricultural training and I am now promoting it all over in the Philippines. We will produce better farm-ers. They will learn how to be more productive, how to manage finances, and how to mechanize. We can also create a more productive ag-ricultural sector in the pro-cess. I think it is a matter of imagining what you can do with the resources of gov-ernment.

How do you get the pri-vate sector involved in these types of projects? The government should pro-vide the direction for the pri-vate sector, especially the foundations of companies doing CSR projects, and oth-er NGOs. We can show them the models that work and ask them to replicate them around the country.

one of the nation’s most prominent fililpinas, senator cynthia villar is behind one of its most active foundations helping overseas filipino workers

prominent filipinas and business leaders are helping to promote the role of women, and in particular those working overseas, in building the economy back home

Skills in demand

“WE DO REPATRIATION, MEDICAL AND LIVELIHOOD ASSISTANCE, AND TRAINING [FOR OFWS]“

CYNTHIA VILLAR, Senator and Co-founder of the Villar Foundation

The Philippines has always counted a highly skilled workforce among its great-est strengths, with women playing a vital role. Filipino workers are among the most sought after in the world, earning a reputa-tion for high performance in increasingly essential jobs in healthcare, IT, tel-ecommunications and en-gineering.

Taking a look at Filipino workers in the United States provides an overview of this important national asset. As a group, immigrants from the Philippines have strong-er English language skills and higher levels of edu-cation, particularly in sci-ence-related and techni-cal fields. Thanks in part to these skills, Filipino house-holds in the United States earn a median income of $74,000, or $24,000 above the median for all U.S. households, while nearly one-fifth of Filipino house-holds place in the top 10% of U.S. household incomes, according to data from the Migration Policy Institute. Women have in large part enabled this success.

As a group they account for 64% of all Filipino im-migrants living in the U.S.

One way the Philippines is helping overseas work-ers like these contribute to the home economy is by pairing them up with lo-cal business leaders. “One of our major programs is Diaspora for Development, or D2D,” says Imelda M. N i c o l a s , C h a i r p e r s o n of the Commission on Filipinos Overseas (CFO). “Currently, the diaspora re-mits money, but the use of

those funds are consump-tion driven, that is going to-wards food, education and health. These are good by themselves but there is very little multiplier effect. So we are trying to channel those remittances into invest-ment and business.”

Together, the CFO and prominent Filipino busi-ness leaders Cynthia Villar, Senator and co-founder of the Villar Foundation, D o r i s M a g s a y s a y - H o , Chief Executive Officer of the Magsaysay Group of Companies, and Teresita Sy-Coson, Vice-Chairperson of SM Investments Corp. (SMIC), are helping to pro-mote the role of women, and in particular overseas women workers, in building the economy back home.

Next year’s APEC summit will be yet another oppor-tunity to show how wom-en are leading the coun-try’s momentum toward more inclusive and equita-ble development. “At least one representative among the three representatives of the Asia-Pacific Business Council (or ABAC) from each of the economies should be a woman,” Ms. Nicolas continues.

“I was the first wom-an representative of the Philippines in ABAC. From that time on, the Philippines always had a woman repre-sentative.”

“WE ARE TRYING TO CHANNEL The diAsporA’s

REMITTANCES INTO INVESTMENT AND BUSINESS“

IMELDA M. NICOLAS, Chairperson of the Commission on Filipinos Overseas (CFO)

FILIPINO WORKERS ARE AMONG THE MOST SOUGHT AFTER IN THE WORLD, EARNING A REPUTATION FOR HIGH PERFORMANCE IN VITAL AREAS SUCH AS HEALTHCARE, IT, TELECOMS AND ENGINEERING

Monday, October 13, 2014Distributed by USA TODAY PHILIPPINES 13


Infrastructure and real estate in huge demand

With its econo-my forecast to expand more than 6% an-nually over

the next five years, Philippine leaders in the government and private industry have a pipe-line of infrastructure and real estate projects in mind that will provide the country with unprecedented opportunities for the future. Since launching its public-private partnership (PPP) scheme in late 2010, the Philippine government has a series of at least 15 infrastruc-ture projects to be awarded by 2016. The country needs at least $20 billion annually in infrastructure investment to sustain economic growth, at-tract direct investment, and alleviate poverty, according to government estimates.

The government has a to-tal of 57 infrastructure projects planned, raising its total infra-structure spending to nearly $13 billion next year, around 4% of GDP, rising to $18 billion in 2016. Successful bids on major contracts which were recently sealed include the $850 mil-lion Cavite-Laguna Expressway project, which was awarded to a consortium of Ayala and Aboitiz companies, and the Light Rail Transit-Line 1 (LRT-1) Cavite extension project, to an MPIC-Ayala-Macquarie joint venture, worth $1.5 bil-lion. A chorus of leaders in the government and private sector attest to the importance of these undertakings to the country’s ability to compete globally.

“We must invest in new roads, ports and airports as well as in mass transport sys-

tems in order to increase the connectivity, reduce logistics costs and increase the overall competitiveness of the coun-try,” says President Gregorio S. Navarro of the Management Association of the Philippines.

Increasing the Philippines’ outcomes in global com-merce and trade will help to increase job creation and prosperity, particularly out-side the major cities, accord-ing to Undersecretary Cecilia Alba of the Housing and Urban Development Coordinating Council (HUDCC). “There is a need to provide for livelihoods, income generating activities, and infrastructure develop-ment that create more jobs in rural areas,” the Secretary says.

“Infrastructure is a key issue

that needs to be addressed,” adds Executive Director Ebb Hinchliffe of the American Chamber of Commerce. “There are many investment oppor-tunities that can modernize the country.” Leaders like Mr. Hinchliffe from across the globe are increasingly recognizing the Philippines’ progress.

“Five PPP projects in the Philippines were listed among the Strategic Top 100 Global projects,” says Jose L. Cuisia Jr., Ambassador of the Republic of the Philippines to the United States. “The Mactan Cebu International Airport, the Metro Rail Transit Project, Light Rail Transit Extension, the Global Logistics City at the Clark Free Port and Bulacan Bulk Water.”

Included in the raft of ini-tiatives taking place across the country are symbolic projects like Ciudad de Victoria, which features the Philippines Arena, the world’s largest indoor arena. It was constructed by Iglesia Ni Cristo (INC) as part of a 120-acre complex marking the church’s centennial celebration this year. “The INC is in the process of completing the entire complex,” says Brother Edwil Zabala, the church’s spokesperson.

Private sector businesses in the domestic market have also benefitted from the building boom. “The Philippine govern-ment is gearing towards more infrastructure projects and DMCI is preparing to take part in the construction and engi-neering of these initiatives,” says Chairman David M. Consunji of DMCI Holdings Inc. “Public-private partnership projects will boost the Philippines’ in-frastructure.”

An important add-on effect of the unprecedented levels of spending and investment can be seen in the country’s finan-cial sector, which has also un-dergone important reforms aimed at increasing participa-tion. “There are many small banks in the Philippines and only a few big banks – about five,” says Cynthia Villar, Senator and co-founder of the Villar Foundation. “These five big banks are not enough to

bring the Philippine economy forward. This is the reason why we are allowing the entry of for-eign banks through legislation, with the passage of the liber-alization of the entry of foreign banks in the Philippines.”

Finally, the country will need to build up its energy capacity in order to fuel the major develop-ments taking place, spurring de-velopment in the power sector as well. “I am confident that the pri-vate sector will build new pow-er plants,” says Secretary Carlos Jericho Petilla of the Department of Energy. “We are addressing the problem of power by putting more capacity as we are trying to avoid power interruptions. It is of utmost importance to finish the power plants that are be-ing built.”

The philippines is seeing a fast rollout of ma or infrastructure pro ects as the sector seeks at least 20bn annually to grow

The devastation caused by last year’s super typhoon haiyan was met by an e traordinary public-private response

A whirlwind recoveryTyphoon Haiyan made land-fall in the Philippines on No-vember 8, 2013. A category 5 cyclone, it brought sustained winds of 195 mph, making it the most powerful tropi-cal storm ever recorded over land. The event brought a 20-foot storm surge and massive amounts of rain that together left more than 6,000 people dead and 4 million displaced, affecting a total of more than 16 million people overall. More than a million homes reported at least some dam-ages, about half of which were completely destroyed.

Even more extraordinary than this catastrophic storm has been the response in its wake. Thanks to an unprece-dented outpouring of support from the government and pri-vate sector, as well as inter-national organizations, the Philippines quickly united, de-termined to ensure a quick and comprehensive recovery.

“Our countrymen endured a test of spirit when super ty-phoon Haiyan wrought hav-oc on the Visayas,” President Benigno S. Aquino III wrote in an exclusive letter to United World. Mr. Aquino has called on the international commu-nity to act together to confront

the threat that these natural disasters pose.

“The magnitude of the dis-aster altered global discourse on growth and underscored the need for consensus among nations to redesign with an eye on international progress,” the President continued. “Climate risk is one of the realities our peoples contend with in our mi-lieu, and move our countries in unison to mitigate and address humanity’s vulnerabilities.”

The country’s remarkable turnaround in less than one year is a testament to the resil-

ience of its people, and high-lighted the strong working rela-tionship between government entities and their private sector counterparts.

“Right now, we have the help of the private sector,” says Secretary Panfilo M. Lacson, Presidential Assistant for Rehabilitation and Recovery. “We engaged the CEOs of top corporations, divided the 171 cities and municipalities across the corridor in 22 clusters, and offered them to take their pick and be a pioneer in one area. They did, and right on that day,

when we engaged them.”The rebuilding effort has al-

so given planners the oppor-tunity to take a fresh look at affected infrastructure, with an eye toward making it more robust in the event of similar natural disasters. “The typhoon was a very sad experience,” says Secretary Carlos Jericho Petilla of the Department of Energy. “We have learned many lessons from the typhoon; but we are going towards the direction of managing all our efforts in re-building what will be disaster resilient power infrastructure.”

T e centerpiece of t e iudad de ictoria comple t e ilippines Arena b I lesia i risto is considered t e world’s lar est indoor arena

Brother Eduardo V. Manalo, Executive Minister of the Iglesia Ni Cristo

The immense destruction caused by one of the most powerful tropical storms on record affected some 16 million Filipinos and prompted a massive international aid effort to help the nation recover

THE GOVERNMENT HAS A TOTAL OF 57 INFRASTRUCTURE PROJECTS PLANNED, RAISING ITS TOTAL INFRASTRUCTURE SPENDING TO NEARLY 1 Billion nexT yeAr,

OR AROUND 4% OF GDP

Monday, October 13, 2014 Distributed by USA TODAY PHILIPPINES14


Unprecedented support pushes tourism to the fore

With nearly 5 million inter-national visi-tors each year, the Philippines

is no longer a niche tourist market. In fact, the number of foreign travelers entering the country has doubled since 2004, and tourism now di-rectly accounts for more than 6% of all economic activity, while supporting about 4.3 million jobs, according to the Philippine government and the World Travel and Tour-ism Council. Despite this rising popularity, the Philip-pines sets itself apart from mass-market destinations, offering visitors a “more fun” experience through its truly breathtaking beauty and the genuine warmth and friendli-ness of its people.

An archipelago of more than 7,000 islands, the Philippines’ many white-sand shores rank among the world’s most beau-tiful beaches, but it is not just the stunning blue water and the fiestas that make it such a memorable place to vis-it. The Philippine people have earned a reputa-tion for their viva-ciousness, gener-osity, and most of all their

openness toward visitors. The Philippines was chosen as the second friendliest country in the world by readers of the Rough Guide travel books in 2014. It also ranks among the most welcoming countries in the world to foreign travelers

in the 2014 World Economic Forum (WEF) Travel and Tourism Competitiveness report, with a more favorable environment than Australia and the United Kingdom and placing far ahead of countries such as Mexico, France, Italy and the United States.

The WEF also commended the Philippines’ progress in its report, calling it the most im-proved country in Asia in terms of the competitiveness of its tourism industry. It cited spe-cifically the strong backing of the government, which invested

more in the sector as a percent-age of GDP than any other coun-try in the world. This welcom-ing attitude and optimism has helped make it a favorite des-tination for many Americans who, despite the length of the journey, make up the second largest group of foreign visitors in the Philippines, with nearly 675,000 stays in 2013 alone.

Also paramount to its emer-gence as a top global destination will be important advances in the openness of the Philippines’ aviation sector. In April of this year, the U.S. Federal Aviation Administration upgraded the civil aviation status of the Philippines, expressing re-newed confidence in its safety and performance, and open-ing the door to direct flights be-tween the two countries.

“What has more impact to trade, investment, and tourism is the aviation rating upgrade,” says Director General Lt. Gen. William Hotchkiss III of the Civil Aviation Authority of the Philippines. “This will open up our skies. Air transportation is the favorite mode of intercon-nectivity among countries and people. We are still in the early stages of this development. We are also working to develop the Asean single aviation market.”

THE ARCHIPELAGO OF MORE THAN 7,000 ISLANDS rAnks Among The world’s friendliesT counTries And As AsiA’s mosT improved in TERMS OF TOURISM COMPETITIVENESS

T e s ilippine tarsier rows to be no lar er t an an adult person’s and

The department of Tourism’s latest campaign declares 2015 as visit The philippines year’ and invites domestic and foreign tourists to e perience the philippines for both business and pleasure as part of its plan to double visitor numbers by 201

While most visitors to the Philippines come for the pleas-ure of the experience, its ad-vanced healthcare industry continues to be a draw for peo-ple seeking top-notch medical care and personal treatment at affordable prices. Currently, 21 premier hospitals nation-wide take part in the Philippine Medical Tourism Program (PMTP), which aims to organ-ize and promote critical medi-cal services on an international level. While the sector has ex-panded consistently over the past decade, work needs to be done to reach its full potential as one of the most promising businesses in the country, organizers say. That’s why healthcare profes-sionals have teamed up with the tourism ministry to promote in-dividual and family health pack-ages to entice tourists from all over the world.

Going forward, these trends make the Philippines an im-portant country to watch in the global tourism market. The WEF forecasts that overall in-dustry growth will surpass 6% annually until 2022, while the current administration expects to hit a target of 10 million for-eign travelers by 2016, which would represent yet another doubling of its foreign visitors. The government aims to make tourism an important generator of job growth. According to its forecasts, the industry will ac-count for nearly one-tenth of the nation’s GDP and create mil-lions of additional jobs by 2016.

In January the Department of Tourism announced the lat-est push to highlight the coun-try’s attractions, declaring 2015 as ‘Visit The Philippines Year’. Secretary of the Department of Tourism Ramon R. Jimenez Jr., and his counterparts in the pri-vate sector have been working to feature the archipelago’s unique cultural and geographic assets in a variety of public activities as part of this latest initiative. “The Philippine tourism industry has received levels of support from the national government, from local governments and the pri-vate sector on an unprecedented scale,” said Mr. Jimenez at the launch of the campaign.

Next year, the Philippines will also host the Asia-Pacific Economic Cooperation (APEC) summit, giving it a global spot-light to promote the tourism in-dustry. In typical fashion, organ-izers plan to create many memo-rable experiences, beginning in January and lasting throughout the year.

“Visit The Philippines Year will feature a calendar of events and activities that are an excit-ing mix of all the outstanding work of the Filipino people in painting and the graphic arts, cinema, performance art to in-clude music, dance and theater arts, as well as the unveiling of many more historic treasures, natural wonders and unforget-table adventures,” the Tourism Secretary affirmed.

T e islands’ ric c arm includes colonial arc itecture and cultural monuments

El Nido, Palawan, is protected for its natural splendor and extraordinary ecosystem

The incredible white-sand beaches of Bohol Island are typical of the archipelago

The Chocolate Hills in Bohol Province form one of t e countr ’s most spectacular landscapes

Thailand, one of the most active and central players in the Association of Southeast Asian

Nations (Asean) alliance is committed to cultivating a ro-bust business environment.

Paiboon Nalinthrangkurn, Chairman of the Federation of Thai Capital Market Organizations (FETCO), notes that Thailand’s economy has ral-lied back from the financial crisis of 1997 when the country vir-tually went bankrupt with the shutdown of 50 financial insti-tutions, leaving only the stron-gest to survive. Its GDP growth rate plummeted from 9% in 1996 to -10% in 1998. Since then, the Thai economy has weathered global slowdowns and growth has been steady, ranging from nearly 4% to 7%.

The Asean link project is one of the initiatives that Mr. Nalinthrangkurn is taking on to facilitate retail investment. The project currently connects the markets of Thailand, Malaysia and Singapore.

“These are the major markets in Asean, and we hope that once we have fully integrated or con-nected the markets, everything can be done a lot easier,” he says.

“The priority is to take care of domestic infrastructure first, and then think about link-ing with the other markets like the Philippines, Indonesia and Vietnam later. It’s a work in prog-ress and at least three markets are willing to work together now. In terms of full integration and hav-ing the same tax regimes etc., it is going to be a long-term process.”

Another work in progress is the AEC or Asean Economic

Community, created with the aim of reducing the economic and development gap between Asean member countries and strengthening the Asean com-munity as a whole. Thailand is taking a lead role in conducting development cooperation and opportunities in bilateral and tri-lateral forms. Once the AEC goes into effect in 2015, the region is expected to become a hub for the free flow of goods and services.

“The AEC will create the free flow of goods as well as investment and skilled labor,” says Udom Wongviwatchai, Secretary General of Thailand’s Board of Investment. “It will cre-ate a lot of opportunities for busi-ness with China. The opportu-nity is market expansion, as the market increases from 60 million to 600 million across the Asean countries. We will have the op-portunity to get cheaper raw ma-terials from other countries.”

Other advantages for Thailand include supplement-ing its skilled labor force and creating growth opportunities for Thai companies to sell their goods to huge domestic markets like Indonesia, which has a popu-lation of 280 million.

Exports currently account for 70% of Thailand’s GDP. About half of the country’s workforce is in the agriculture sector. It is the world’s top exporter of rice; while automotive and electronics are other major contributors, mak-ing up 19% of the nation’s exports.

Although the AEC is expect-ed to create opportunities for Thailand, it will also bring chal-lenges as it will increase com-petition for foreign investment.

“There are still some differ-ences between Asean countries

especially in terms of market be-havior,” says Mr. Udom. “Right now the countries Thailand trades with appreciate Thai prod-ucts. They believe Thai products are high quality. That is why it is a very good way for us to convince foreign investors to invest here.”

Foreign investment has prac-tically doubled since 2010 under the chairman’s watch, which he explains was due to a number of factors.

“Economic growth has been over 5% for many years,” says Mr. Udom. “That will increase confi-dence among foreign investors. We will launch a megaproject infrastructure development to build logistics capabilities, espe-cially in the rail system and wa-

ter management. That is very important for foreign investors.”

Proof lies in the Thailand Foreign Investors’ Confidence Survey 2014, which has found that 98% of foreign investors re-main confident in Thailand, with 24% of them planning to expand their investment.

“This corresponds to the improving investment cli-mate after the BOI approved 18 project applications worth 122,837 million baht ($3.8 bil-lion) and continues to approve projects and to conduct week-ly project application screen-ings,” adds Mr. Udom.

Also important is corporate social responsibility and sus-tainability, which the govern-

ment is addressing, according to Dr. Chaiyawat Wibulswasdi, Chairman of the Executive Board for CSRI, the Corporate Social Responsibility Institute of Thailand.

“We try to instill awareness amongst leaders of the com-panies, regarding things that need to be done and push them to world standards,” says Dr. Wibulswasdi, whose organiza-tion is tasked with raising CSR standards in the Thai business community, particularly among small and medium-sized en-terprises, which traditionally have not viewed CSR as an in-ternal issue.

“We try to make them aware that CSR is good for business,

because stakeholders want to do business with a good company,” adds Dr. Wibulswasdi.

As an incentive to inspire companies to become good corporate citizens, the CSRI is working toward creating a Sustainability Index that will rate firms based on their CSR performance. Companies in different sectors will compete against their counterparts in oth-er emerging countries to achieve international status.

“It will list top performing companies in terms of sustain-ability in one basket,” says Dr. Wibulswasdi. “When U.S. com-panies or companies in Asean countries want to come into Thailand it can serve as a guide

for them to look for good compa-nies to do business with.”

Raising the CSR quotient is one way to combat corruption, a formidable issue in Thailand, concedes the MIT graduate.

“Right now there is a group of institutional investors in Thailand, the largest one being the government pension fund for civil servants. In the future they will only invest in compa-nies with strong CSR policies; they will not engage in corrupt business,” says Dr. Wibulswasdi.

Social media reaction to bad business practices is also having an effect on changing corporate attitudes, he adds.

CSR is also one of the key mis-sions for the American Chamber of Commerce in Thailand (AmCham), where it provides social and business networking support to its 700 members.

While big multinationals like Ford Motor Co. already incorpo-rate transparency, accountabil-ity and corporate governance into their businesses, the same themes may be new for local partnerships.

AmCham’s Vice-President Matt Bradley suggests that the role Thailand plays in the Asean bloc and globally will be critical, and key to that role is continued transparency, and consistency in policy formulation.

“The ability of the private sec-tor to have an input in govern-ment policy formulation, wheth-er it is just for Thailand or for trade beyond Thailand, is impor-tant,” says Mr. Bradley.

The land that is known for happiness and smiles is one that promises growth, says Mr. Nalinthrangkurn of FETCO.

“Despite the political issues I am confident that the Thai cor-porate sector and financial sec-tor will continue to grow. We are determined to be a major force, first in Asean, then Asia. You can see Thailand as the gateway to China and India.”


THAILANDTaking center stage in AseanThis supplement to USA TODAY was produced by United World Ltd., Suite 179, 34 Buckingham Palace Road, London SW1W 0RH – Tel: +44 20 7305 5678 – [email protected] – www.unitedworld-usa.com


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Our World#Asean

#Thailand

Resolute and poised, Thailand is performing like a true Asean tiger and stands ready to take a leading role in supporting and coordinating

the development of the upcoming Asean Economic Community

‘THE PRIORITY IS TO TAKE CARE OF DOMESTIC INFRASTRUCTURE FIRST, AND THEN THINK ABOUT LINKING WITH THE OTHER MARKETS LIKE THE PHILIPPINES, INDONESIA AND VIETNAM LATER”

PAIBOON NALINTHRANGKURN, Chairman of the Federation of Thai Capital Market Organizations (FETCO)

“THERE ARE A LOT OF GROWTH OPPORTUNITIES HERE IN THAILAND, BOTH IN THE REAL SECTOR AND THE FINANCIAL SECTOR“

Paiboon Nalinthrangkum, Chairman of FETCO

“THE THAI GOVERNMENT EXPECTS THAT AFTER THE AEC WE WILL INCREASE INTRA-ASEAN TRADE BY UP TO 40%“

UDOM WONGVIWATCHAI, Secretary General of the Board of Investment (BOI)

A UNITED WORLD SUPPLEMENT PRODUCED BY: Egle Starkeviciute, Project Director Andrew Machaj, Editorial DirectorAndrea Gomez, Project AssistantSilvia de Miguel, Customer Relations

At the center of the Asean bloc lies Thailand, and with near-ly 1,900 miles

of coastline and more than 2,400 miles of waterways, it is poised to become the in-ternational gateway to Asia, and potentially, Europe.

In order to capitalize on its strategic position and strengthen its economy the country is looking to im-prove connectivity not just within Thailand but with its Asean neighbors as well.

As part of the country’s efforts in attracting foreign investment, a massive over-haul of its transport infra-structure is being proposed. The ambitious $75 billion project would incorporate improvements to roads, rails and waterways. The project would also include high-speed train connections from Thailand to China.

A significant part of the discussions have been cen-tered on moving goods more efficiently through the region. Sea shipping re-mains the most popular op-tion for trading among the Southeast nations, making Thailand’s two largest ports among the busiest in the world. The Port Authority of Thailand (PAT), is play-ing a key role in ensuring the country’s ports can keep up with steadily growing traffic demand, and preparing for a potential swell once the Ase-an Economic Community

(AEC) comes into effect.“As a core organization

on waterway transport, PAT has carried out its mission in conformance with the gov-ernment’s strategy as well as developing the country’s logistics system in the over-all scheme in preparation for responding to any change which will occur in the fu-

ture, particularly, in join-ing AEC in 2015,” says Lt. Ittichai Supanakoon, RTN, Managing Director of PAT.

Bangkok PortThe second-largest port in the country, Bangkok Port – also known as Klong Toey – handles more than a quar-ter of Thailand’s container

volume. The port’s depth, which ranges from 8.5 to 11 meters, accommodates ships up to 12,000 tons and 172 meters in length. Located on the west side of the Chao Phraya River at the entrance to Prakanong Canal, in the Klongtoey District of Bang-kok, operations are divided into two areas: the west quay, which handles conventional bulk cargo, and the east quay for container cargo.

More than 80% of the cargo that comes through the port is in containers. There is plenty of space to accommodate them as the port has a total capacity of 1.34 million TEU, according to Bangkok Port’s Manag-ing Director, Lt. Songtham Chantaprasit, RTN.

Bangkok Port is undergo-ing security and hardware upgrades; over 70% of the port’s equipment systems are new, says Lt. Chantaprasit, and attention has turned to upgrading the port’s IT sys-tems to improve efficiency.

“We are checking cargo coming in and out of the customs area and there is also a container terminal management system, where we use enhanced technology to keep track of the contain-ers in the port area,” he adds.

While Laem Chabang port has knocked Bangkok out of the top spot in terms of the volume it handles, the port remains a vital fixture for lo-cal businesses in the area.

“Bangkok Port is centrally located and it serves a lot of


Monday, October 13, 2014 Distributed by USA TODAY THAILAND16

Full speed ahead for �ai ports at Bangkok and Laem ChabangThe country’s two most important ports, Bangkok and Laem Chabang, are undergoing upgrades and modernization programs to improve efficiency and raise their competitiveness

“WE ARE OPEN TO PUBLIC-PRIVATE PARTNERSHIPS IN THE PORT“

LT. SUTTHINAN HATTHAWONG, RTN, Managing Director of Laem Chabang Port

“BANGKOK PORT IS IMPORTANT FOR FACTORIES IN THIS AREA“

LT. SONGTHAM CHANTAPRASIT, RTN, Managing Director of Bangkok Port

LT. ITTICHAI SUPANAKOON, RTN, Managing Director of Port Authority of Thailand

“AS A CORE ORGANIZATION ON WATERWAY TRANSPORT, PAT HAS CARRIED OUT ITS MISSION IN conformAnce wiTh The governmenT’s sTrATegy As well As developing The counTry’s logisTics SYSTEM IN THE OVERALL SCHEME IN PREPARATION FOR RESPONDING TO ANY CHANGE WHICH WILL OCCUR IN THE FUTURE, PARTICULARLY, IN JOINING THE ASEAN ECONOMIC COMMUNITY IN 2015”

LT. ITTICHAI SUPANAKOON, RTN Managing Director of the Port Authority of Thailand (PAT)


Monday, October 13, 2014Distributed by USA TODAY THAILAND 17

With properties in Bangkok, India and New Zealand, the CEO of Lebua Hotels & Resorts has plans to take his recipe for hospitality success to Myanmar, and for Thai cuisine to the U.S.

Lebua’s ‘wow’ factor combines the exceptional and the exclusive “Wow” is the word Deepak Ohri chooses when asked to sum up the experience offered by Lebua hotels in Bangkok.

You would expect that, since he’s the CEO of Lebua Hotels and Resorts, a chain of luxury hotels that started in Bangkok and expanded to include locations in India and New Zealand.

Now a new hotel is be-ing planned in neighbor-ing Myanmar; the location was inspired by President Barack Obama’s visit to the region in November 2012, which included a stop in Myanmar, the first visit to that country by a sitting American president.

“The bilateral relationship between Thailand and the U.S. is very strong and wher-ever the U.S. goes, Thailand will always follow,” says Mr. Ohri. “That is why Thailand as a country is doing very well in all sectors, especially the tourism sector.”

The Myanmar project will likely be a difficult chal-lenge, concedes Mr. Ohri, who notes that the country is still an emerging econo-my and infrastructure will be an issue.

Tourism is a major con-tributor to Thailand’s econ-omy, accounting for about 7% of its GDP and attract-ing 22 million visitors last year. It remains one of the top destinations for Ameri-can tourists, a credit to the long friendship that the two countries have shared for 180 years, says Mr. Ohri.

“Thailand is number two in the Asean region in terms of inbound tourists and we hope that we will be number one very soon.”

The AEC, or Asean Eco-nomic Community, agree-ment to open up the free

flow of goods and services among member countries is expected to increase regional tourism by 10 to 15% over the next few years, prompt-ing the hotel executive to add another 100 rooms to his Bangkok location and ex-pand facilities abroad.

“I think our ambition

would be to spread our wings and one day be in the U.S., where we want to be. We want to expand and we want to be an ambassador by opening Lebua in more stra-tegic locations,” he adds.

Mr. Ohri hopes that the Asean alliance will boost tourism numbers by making it easier for people to travel through the region without visas. “Thailand should take

a leading role because of its strategic location and how well we understand the tour-ism business. I think Asean is the key,” says Mr. Ohri.

When asked about the road to his success, Mr. Ohri candidly reveals, “It has been a struggle. If people think I am successful, it’s because I’ve turned my mistakes into learning experiences. I made a lot of mistakes, like every-one has, but I’ve learned from them.”

The hospitality expert also hopes to explore a new busi-ness in the United States – fast food.

If he draws from his earlier experience in creating The Dome at Lebua, fast food will never be the same.

He started The Dome as a lone entrepreneur in 2004, a collection of rooftop bars and restaurants offering breathtaking views of the city. It has become a popular destination for tourists and its website boasts unique and luxurious food experi-ences from master chefs in the region.

Mr. Ohri will likely tackle

this restaurant venture much the way he does his hotel business, by bringing an au-thentic Thai experience to the customer.

“It is a well-known world-wide fact that if you are very genuine, people will like you,” he says. “As long as our customers are happy, they will continue to return.”

Lebua State Tower made TripAdvisor’s 10 Incredible Hotel Rooftops list in 2014

FEATURED IN hAngover 2’, The

TOWER CLUB AT LEBUA BOASTS ACCLAIMED RESTAURANTS AND BARS AND TRUE 5-STAR LUXURY ROOMS AND SUITES

small factories around the city. Transportation costs associated with Laem Chabang port are higher and 90% of cargo is trans-ported by road,” says Lt. Chantaprasit.

Its central location makes it an attractive site for developers and a study is under way to examine the potential for turning the land around the port into shopping malls and hotels.

Laem Chabang Port Currently Thailand’s busi-est port, Laem Chabang handles more than 7 mil-lion TEUs a year, but can handle up to 10.8 million and plans are underway to increase that capacity to 18 million TEUs.

The port, with a depth of 12 meters, is located in the Chon Buri Province, covering an area of around 2,536 acres.

Expansion plans for Laem Chabang will make it the most modern and active port in Thailand, says the port’s Managing Director, Lt. Sutthinan Hatthawong, RTN. “We continue to focus and em-phasize quality service as well as efficiency,” he says. “Less time in the port can reduce transport costs.”

Another notable fea-ture about Laem Cha-bang is security, the best in Asia, says Lt. Hattha-wong. “We have a lot of stringent and certified se-curity systems within the port. To maintain secu-rity, we support training courses in neighboring countries and we invite them to learn from us,” he comments. “We worked with the U.S. Embassy and Homeland Security for many years to become the best port in Asia.”

It is expertise that Lt. Hatthawong hopes to share with neighboring countries in order to standardize shipping protocols across the Asean bloc, a task that becomes all the more vital once the Asean Economic

Community (AEC) agree-ment allowing for the free flow of goods and services among the Asean bloc, goes into effect.

“All ports in the AEC should be operating on the same standards,” says Lt. Hatthawong. “We try to use our knowledge and expertise to help other ports to improve their policies and regulations.”

Some of the standards being implemented by the Port Authority of Thai-land at both the Bangkok and Laem Chabang are green, aimed at minimiz-ing the ports’ impact on the environment. This in-cludes changing the type of vessel fuels used from traditional fuels that emit greenhouse gases and pollutants, to cleaner and more cost-effective alter-natives. The vehicles used in and around the ports run on compressed gas, in an effort to reduce fuel emissions.

Expansion plans for Laem Chabang are aimed at turning it into a gateway port for the Greater Me-kong Sub Region, which would mean competing with Singapore for ship-ping business.

According to the Thai Board of Investment, the port currently handles 54% of Thailand’s over-all exports and imports; however, Lt. Hatthawong claims it could handle more than 90% of the country’s volume. The expansion would include a new deeper wharf that would directly serve large vessels.

To help mitigate the high cost of fuel associ-ated with road trans-port, the plan includes the construction of twin railway tracks that would provide a direct rail link to the port from the Northeast, and in an ef-fort to relieve traffic con-gestion, roads to the port and a mass public transit system are also proposed for development.

“THERE IS A PHRASE ThAT The guesT is god’ we Are TAKING THIS THAI HOSPITALITY EVERYWHERE“

DEEPAK OHRI, CEO of Lebua Hotel and Resorts


To the directors of Thai Beverage PLC, being a good friend means staying by their side and always being

there with them not only in famil-iar places and when convenient, but in all places, no matter how far they may be. And for Thailand’s largest beverage company, this translates into making its products available across Thailand as well as expanding its international foot-print – a task that entails enlarging its distribution network, imple-menting the use of cutting-edge logistics management technology, and investing in upgrading its em-ployees’ skills.

Indeed, since its origins more than three decades ago, ThaiBev’s business activities have grown be-yond just beverage production, especially after it became a holding company 10 years ago.

“Thai Beverage was incorpo-rated back in 2003, and the vision is to combine every related busi-ness, from sourcing, procurement, production, sales and marketing

to all the support functions that are under ThaiBev,” says Thapana Sirivadhanabhakdi, President and CEO, and son of original founder Charoen Sirivadhanabhakdi.

ThaiBev is one of the region’s largest beverage manufactur-ers, originally having started with spirits then moving on to beer. Non-alcoholic drinks came along post-2006, the year ThaiBev listed on the Singapore Exchange. The latter business line is expanding even further now, thanks to part-ner company TCC Assets’ acquisi-tion of Fraser and Neave (F&N), a Singaporean drinks, food, publish-ing and property conglomerate, in January 2013.

For its line of spirits – which in-clude rum and both blended and single malt Scotch whisky, among others – ThaiBev owns distilleries both at home in Thailand and abroad in Scotland, Poland, Ire-land, China and France.

The firm’s entire product line, alcoholic and non-alcoholic alike, are geared to making uniting con-sumers thanks to the great taste.

ThaiBev’s awards also attest to the company’s endeavors to please shareholders and partners through high standards of corporate gover-nance and transparency. As proof, in recent years Corporate Gover-nance Asia has awarded ThaiBev with “Best Investor Relations” and “The Best of Asia”, and named Thapana Sirivadhanabhakdi “Asia’s Best CEO (Investor Relations)”.

No doubt investors were also pleased by the group’s outstanding financial results in 2012. Total rev-enues grew by 21.8% to THB161 billion ($254.4 billion) from 2011, while net profit soared by 140.3% to THB28.8 billion. While the 2013 results were less impressive, given the expenditure of the F&N buy-out, the Sirivadhanabhakdi family views the expensive move (the larg-est ever acquisition in Singapore’s corporate history in fact) as a smart long-term investment.

“Some might say this is an acquisition deal, but F&N is our partner and we would like to work together. It is not about just connect-ing; but about how we can collaborate and work together,” says the President and CEO.

Whereas ThaiBev’s origins were solely based on the distillation and distribution of liquor, its product offering has expanded exponentially to include a vast list of beers, white spirits, brown spir-its, bottled water and flavoured soda water, soft drinks, electrolyte drinks, green tea, Scotch whisky, vodka, gin, Chinese spirits, and brandy, among others.

The company’s long list has just got longer, however, thanks to the acquisition of Singapor-ean conglomerate Fraser and Neave.

“As of now, I can proudly say to you that we manage quite an extensive portfolio, because we cater from soya drinks to single malts, and from the F&N port-folio, because they have fruit

juices, Asian drinks, chrysan-themum tea, jelly, and dairy prod-ucts,” highlights CEO and President Thapana Sirivad-hanabhakdi.

Such a diverse of-fering allows ThaiBev to perform well in many markets, not just Thailand. Yet even at home, tastes and trends change.

“We make sure that we add value together with our trade partners,” says Mr. Sirivad-hanabhakdi. “We aim for a qual-ity product so we can respond to the changing environment or consumer behaviors. We plan to make non-alcoholic beverages account for 30% of total annual sales from 2015 onwards.”

ThaiBev concentrates mostly on the Southeast Asian markets. Yet, while Chang Beer along with several brands of whisky are ThaiBev’s biggest ambas-sadors abroad, the company has recently launched a special product – Pacific rum – in the U.S., starting in California.

Many of ThaiBev’s spirits are award winners. Hankey Bannister 40-year old blended whisky, Speyburn 25-year old single malt, Speyburn Bradan

Orach sin-gle malt, Phraya rum and Caorunn gin all garnered medals from international com-petitions in 2012. Yet it is Old Pulteney that seems to be ThaiBev’s golden boy, the 12, 17, 21 and 30 year old single malt varieties having all garnered numerous medals. Just recent-ly, Jim Murray’s 2012 Whisky Bible crowned Old Pulteney 21 World Whisky of the Year.

Eschewing the temptation often felt by multinational corporations to focus obsessively on short-term returns, ThaiBev is commit-ted to ensuring corporate social responsibility (CSR) is an integral component of its activities. Its determination to be “a company with business growth and social

accountability” is evidenced by a drive to achieve effective long-term socioeconomic gains through a variety of social, cul-tural, educational, sporting and public health-related projects.

Business, economic, social and environmental sustainabil-ity forms the basis of all new ventures at the company and its research and development department is kept busy by leveraging the use of cutting-edge technology to devise eco-friendly processes and optimize precious resources. Its annual

corporate governance report and sustainability report pro-vide transparent insights into the group’s ability to harmonize its operations, achievements and goals with its ethics and en-vironmental awareness.

Among the raft of commen-dations the company has to its credit, Corporate Governance Asia has awarded ThaiBev’s President and CEO Thapana Sirivadhanabhakdi as Asia’s Best CEO (Investor Relations) for three consecutive years (2011-2013). Mr. Sirivadhanabhakdi believes

that taking CSR seriously is part and parcel of carrying out busi-ness with the utmost profession-alism and credibility.

“Obviously there are many best practices, rules and regula-tions that we need to understand and follow, to allow us to become a better team,” says Mr. Sirivad-hanabhakdi. “However, being one of the listed companies that are changing the platform against the other players we are dealing with, we have been very committed, not just to social re-sponsibilities and activities we

have been carrying out all along, but looking at more of a profes-sional way of doing business, talking about how to deliver the top line and the bottom line, and to be able to share our per-spective and direction together with other shareholders who might be interested in working together with us.”

ThaiBev wants to “Be With You”

Thirsty? ThaiBevhas a drink forevery occasion

A long-term heart-touching approachto sustainability and responsibilityshapes effective CSR policies

Thailand’s largest beverage company, ThaiBev owns and distributes several brands of leading alcoholic and non-alcoholic beverages in an effort to bring people throughout the region closer together

The company’s growing product line has something to satisfy everyone, old and young alike

ThaiBev looks beyond commercial success alone to ensure the effects of its business are in harmony with society and the environment

As ThAiBev enTers iTs nexT phAse of growTh, The compAny is deTermined To conTinue upholding iTs sTrong TrAck record of AvAilABiliTy And reliABiliTy of producTs designed To delighT And uniTe consumers

susTAinABiliTy underpins All new venTures AT The compAny And iTs r&d depArTmenT uses cuTTing-edge Technology To devise eco-friendly processes And preserve resources


Be With You


Owned by Charoen Sirivad-hanabhakdi, Thailand’s wealthi-est citizen and case study exam-ple of rags-to-riches, ThaiBev is listed in Forbes’ Global 2000 list at spot 1,080. In other words, ThaiBev plays an enormous role in both the Thai and the Asean region’s economy. And luckily for everyone else, the company has a friendly and inclusive atti-tude towards business, helping its partners grow along with it.

This includes a healthy and humble attitude towards private sector involvement not only in business but also in community initiatives all over Southeast Asia.

“We have been develop-ing C-ASEAN together with large Thai and multinational conglomerates, as we see it is not just about Thailand – it is about the Asean community,” explains Thapana Sirivad-hanabhakdi, President and CEO. “We cannot say that we will still be going strong for years to come; we are looking across to the region and the Asean country members. We are talking about the free flow of goods, services, capital and

human resources the business gets and enhances.”

By integrating the region’s 10 economies into a power-ful block, this union will give ThaiBev easier access to the more than 700 million consum-ers, trade partners and tourists in the AEC.

Yet another aspect of the initia-tive is sociocultural integration, and Mr. Sirivadhanabhakdi sees

the private sector taking on ever more importance. “We and other large corporations are not just talking about the business side – we are also looking at the soft side, like cultural programs, arts and music, for us to understand each other even better. On the soft side, those are values that can blend in. We believe that we can help Asean and the community to understand each other faster.”

For several years, the Sirivad-hanabhakdi family business concentrated on the distilla-tion of spirits. Beer was the first game changer for the company. It first started brewing Chang Beer in 1994 and one year later successfully launched it on the market to wide acclaim.

However, getting the beer out and about posed a new chal-lenge, and it was the distribu-tion process that forced the beverage giant to reformat its logistics chain.

“Getting into beer trans-formed our organization to en-abling the distribution system to go down deeper, to another level,” explains Mr. Sirivad-hanabhakdi. “Spirits do not have a shelf life, so the older the spirit is, the more valuable it be-comes. It is not like beer, where we sell freshness.”

Years later, after the family

business became incorporated and thus effectively placing its myriad subsidiaries under one holding company, ThaiBev con-tinued expanding its logistics network through organic and nonorganic growth.

One of the biggest leaps ahead happened in 2011, when the Thai giant acquired Serm-suk Plc, the beverage company with the heretofore furthest-reaching distribution network in Thailand.

The company now attributes its resounding success in part to the network, as well as to the strong relationship it has built up with agents, distributors, trade partners, retailers and res-taurants.

Abroad, it is wholly-owned subsidiary International Bever-age Holdings Ltd. (IBHL) at the helm. With offices in Singapore, Cambodia, Malaysia, the U.K., the U.S. and China, IBHL dis-tributes ThaiBev products to more than 80 countries.

It is no wonder that such a huge number of subsidiaries has created over 30,000 jobs at ThaiBev and taking into con-sideration the indirect jobs the group is responsible for creating or supporting would more than double that figure.

Tasteful branding excels

The AEC to facilitate an even greater role for ThaiBev

Products travelfar and wide

ThaiBev brings the taste of Thailand to markets worldwide through its wholly owned subsidiary international Beverage holdings ltd (iBhl)

come 2015, when the Asean economic community kicks off, ThaiBev will have easier access to a larger market and more partners with whom to carry out social initiatives

Thanks to an enormous distribution network, ThaiBev’s products can be seen on shelves throughout not only Thailand, but the region as well

Building core brands with global footprints, International Bever-age Holdings Ltd (IBHL) is turn-ing ThaiBev’s portfolio of spirits, beers and non-alcoholic bever-ages into widely recognised, highly regarded international products. Headquartered in Hong Kong and with regional offices in Singa-pore, Cambodia, Malaysia, China,

the UK and the USA, IBHL distributes to more than 80

countries and is enjoy-ing buotant growth

in the group’s

brands’ international exposure. The company’s sales and market-ing techniques and investment levels are aligned with the appro-priate brand strategies, market opportunities and existing route-to-market capabilities.

For example, in 2004 ThaiBev’s sponsorship deal with Everton FC saw the group’s renowned Chang Beer become the first Thai brand to be sported on an English Pre-mier League club’s soccer shirt. ThaiBev is also involved in spon-sorship deals with Real Madrid and FC Barcelona in Spain’s La Liga. The company has been able to cre-ate impactful marketing programs and raise both brand awareness and demand, thereby increasing Chang Beer sales and driving fur-ther distribution across the region.

“How to showcase and intro-duce our products to the right economies across the world is

part of the important process of brand development,” says

Thapana Sirivadhanabhakdi, President and CEO. “Yet,

this process is still at very early stage, as the beer industry is highly com-

petitive. Nonetheless, let me tell you that even in the Western mar-kets, Asian trends are becoming in vogue and Westerners are in-terested in how the Thai or Asian beer market is evolving.”

For the brand itself, Chang’s logo depicts two white elephants, which are among Thailand’s most rep-resentative symbols. The two el-ephants face each other and come towards a fountain that represents prosperity. “The brand distinguish-es itself from the rest, as Chang translates into ‘elephant’, which is

also a great tool to communicate a Thai word to the international community. It is true that Chang promotes the ‘Thainess’ as people easily relate the brand to Thailand,” says Mr. Sirivadhanabhakdi.

In 2012, Chang Beer’s inter-national sales in Asean showed exceptional growth of 78% and ThaiBev attributes a large propor-tion of this expansion to the suc-cessful launch of its FC Barcelona soccer platform across Southeast Asia, where European soccer is a highly popular sport.

mAjor sponsorship deAls wiTh reAl mAdrid And fc BArcelonA in spAin’s lA ligA hAs rAised ThAiBev’s gloBAl profile And iTs sponsorship of everTon fc mAde The group’s chAng Beer The firsT ThAi BrAnd To AppeAr on An english premier leAgue cluB’s shirT

“we hAve Been developing c-AseAn TogeTher wiTh lArge ThAi And mulTinATionAl conglomerATes, As we see iT is noT jusT ABouT ThAilAnd – iT is ABouT The AseAn communiTy”

one of ThAiBev’s BiggesT logisTicAl leAps cAme in 2011 wiTh The AcquisiTion of sermsuk plc And iTs fAr-reAching disTriBuTion neTwork

* Dividend policy: payout ratio not less than 50% of net profit. In 2013, the ratio was 64%.

* Net profit: in 2013, growth of 18.2%.

Solid growth, real strength.These are the attributes that make us proud. Attributes that have been developed fromthe commitment to our core values of creativity, devotion and trust. It is this commitment and these values that have enabled us to consistently deliver highdividend yields and awards for goodcorporate governance and business ethics.At ThaiBev, it’s important that we always go beyond expectations for all our stakeholders. To find out more log on to www.thaibev.com

Monday, October 13, 2014Distributed by USA TODAY THAILAND 19



Back at the dawn of the new millen-nium, Bill Clinton – then President of the United States – opti-

mistically challenged members of the Asia-Pacific Economic Cooperation (APEC) forum to “turn the digital divide among and within our nations into digi-tal opportunities”.

Fourteen years later, while the “digital divide” that Mr. Clinton referred to still very much exists, bearing in mind the surprising fact that three out of five people in the world still do not enjoy ac-cess to the Internet, the state of international connectivity has undoubtedly improved.

Today, with only a few ex-ceptions, nearly every devel-oping country now has some form of competitive market for broadband services. How-ever, amongst global problems such as certain cultural barri-ers and high costs that impede Internet access, the difficulty of laying the infrastructure necessary for greater connec-tivity – especially in remote ar-eas – remains one the greatest hindrances to Internet devel-opment over the world.

So when President Clinton posed his challenge to APEC fo-rum members in the year 2000, little did he know that almost a decade earlier, the forward-thinking nation of Thailand had already begun laying the foun-dations for a future solution.

In 1991, with the digital revo-lution by then in full swing, the newly formed public company of Thaicom was bestowed its name by King Bhumibol Adu-lyadej of Thailand as a symbol of the linkage between Thailand and modern communications technology, and was swiftly awarded a 30-year concession by the government to operate the national satellite project.

While the company at first became most well known for its satellite television broad-casting services, of which to-day it hosts approximately 600 channels available throughout the region, in 2005 Thaicom broke new ground. With the launch of its fourth satellite, Thaicom 4 (or IPSTAR) be-came one of the largest com-mercial satellites and the first ever broadband satellite in Asia-Pacific, facilitating two-way broadband connectivity and cost-effective solutions for communities and businesses lacking access to terrestrial line infrastructure.

“IPSTAR was the first hy-brid Ku-/Ka-band satellite of its kind in the world,” explains Suphajee Suthumpun, CEO of Thaicom. “At that time, nobody actually believed that a small country like Thailand could produce this sort of new tech-nology.

“Today Thaicom plays an important role in the national and regional ICT sector. We are present in all countries in Asia, including Australia and New Zealand. We have ex-tended our coverage to Africa, as well.”

Indeed the breadth of IP-STAR’s geographical reach, covering an area inhabited by 3.2 billion people, is stagger-ing. In the process, through the complex technological ad-vancement of a two-way satel-lite system, it has been able to bring the joy and enlighten-ment of broadband Internet to millions of people who may never have had the chance.

In fact, thanks to the lead-ing role of Thaicom, as well as a major effort by the Ministry of Information and Commu-nications Technology (MICT) to promote broadband ser-vices, people in Thailand are

now more connected than ever before.

The Thai Internet mar-ket has been on a significant growth path over the last num-ber of years, with the demand for Internet and Internet-relat-ed services finally beginning to increase. For example, when Thaicom launched its IPSTAR satellite in 2005, overall broad-band penetration in Thailand stood at a measly 0.75% (cal-culated by the National Broad-casting and Telecommunica-

tions Commission). At the last count in 2014, this had grown exponentially to 7.63%.

While this is an impressive growth rate, the development of high-speed access has really only just begun in Thailand, and it is clear that the surge in ser-vices has been occurring from a relatively low base. How-ever, with demand expected to continue its rise throughout Thailand and the whole region, Thaicom is carefully planning its growth strategy.

Having recently restructured the company to make it more “customer-centric”, says Mrs. Suthumpun, as well as offering a broader range of solutions across its satellite services, a ma-jor part of Thaicom’s expansion will be in its fleet number.

The company has already successfully launched two more satellites this year from Cape Canaveral in Florida. Thaicom 6 was launched in January (hav-ing already sold almost all of its capacity to Indochina with some quota for Africa), while Thaicom 7, which started its journey into orbit and sold out on its launch date in Septem-ber, will further help expand the company’s broadcasting service platform and a full range of me-dia and data services tailored to the communication needs of the entertainment industry and telecom operators across Asia and Australasia.

“Our new bird will help fulfill the increasing demand in satel-lite capacity in Thailand and in the Asia Pacific region, help strengthen the company’s ser-vicing capacity, as well as allow it to expand into new markets overseas,” says the CEO.

She also reveals that Thaicom is today working on its eighth satellite. “If things go well, it should be launched by the first half of 2016. We are also build-ing a case for IPSTAR 2.”

In the meantime, the com-pany’s main objectives are profitability and sustainability. “Transparency and accountabil-ity are key to this goal,” explains Mrs. Suthumpun. “Since I joined Thaicom in August 2011, we have managed to maintain a proven performance of 12 con-secutive profitable quarters.” Also during this time, Thaicom has managed to regain its spot as the number one provider for broadband satellite in Asia in terms of market share.

Such fantastic financial per-formance has not only led to the company scoring a 100% satisfaction rate from its share-holders at the recent Annual General Meeting, but also being

on the receiving end of interna-tional recognition. For example, Finance Asia recently granted Thaicom with Thailand’s ‘Best Mid-Cap Company’ and ‘Best CEO’ awards.

While recognition for its business success is a further boost to Thaicom’s brand, the company – most widely known for its pioneering his-tory – went one step further this year to ensuring that Thai-com will continue to be one of the most talked about firms in Asia’s ICT industry.

That is because in June, Thai-land’s leading satellite operator struck a deal with the country’s number one low-cost airline – Nok Air – to become the first in the Asia Pacific region to introduce commercial In-Flight broadband connectiv-ity. The announcement came at the same time that Thaicom launched its New Frontiers campaign, which will see it ex-pand its focus to include end-to-end satcom mobility services for air, land, and sea vehicles.

From New Frontiers to the forefront of ‘disaster manage-ment’, Thaicom has also won universal praise for its vital role in Asia at times of natural ca-lamities. Evidence of this was seen when a huge earthquake and tsunami hit Japan in 2011. Thaicom’s IPSTAR satellite – designed to put communica-tion networks back online in the event of such disasters – imme-diately became a key enabler for emergency response and hu-manitarian aid operations dur-ing the aftermath, resulting in the company being awarded by the Japanese government for its services rendered during those trying times.

Already one of Asia’s most well known and successful companies thanks to its innova-tion, profitability, and work to bridge the world’s digital divide, such an invaluable contribution to society as saving lives, on top of brightening minds with the power of information, can only help Thaicom’s great reputation grow even stronger.

�aicom helps to bridge Asia’s digital divide

Through its pioneering technology, Thaicom has brought broadband Internet and satellite television to millions of homes and businesses around Asia, setting a benchmark with its innovative solutions and contributing to industry and society at a global scale

“THAICOM PLAYS AN IMPORTANT ROLE IN THE NATIONAL AND REGIONAL ICT SECTOR. WE ARE PRESENT IN ALL COUNTRIES IN ASIA, INCLUDING AUSTRALIA AND NEW ZEALAND. WE HAVE EXTENDED OUR COVERAGE TO AFRICA, AS WELL”SUPHAJEE SUTHUMPUN, CEO of Thaicom

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ASEAN 2015 - United World · in Southeast Asia now constitute one of the most peaceful, stable and prosperous re-gions in the world,” he says. “I don’t think this would have