Indonesia Wordfolio

An independent supplement distributed with the FT Deutschland by Globus Vision who take sole responsibility for its content

Since diplomatic relations were first formed in 1952, Indonesia and Germa-ny have maintained strong ties through both good and turbulent times. Ger-many illustrated its long-term commit-ment to Indonesia by standing along-side it throughout the Asian Financial Crisis. While many companies left the area in a mass exodus driven by specu-lation and fear, German firms, with only a few exceptions, remained true to the Indonesian market.

This solidarity proved prudent. As the Eurozone falters under the weight of domino banking crises, Indonesias financial system has remained robust, rewarding the responsible long-term investor who has learnt the harsh les-son that fast money gained is usually not earned. The story underpinning this 60th anniversary is therefore one of two nations, both regional leaders in an im-portant moment of transition.

Indonesias prudent financial stew-ardship since the 1997-98 crisis is now being rewarded. Called the best performing emerging market in 2011, Indonesia has regained its investment grade status from Fitch and Moody, some 14 years after it was removed.

Indonesias economic success (the archipelagic nation recorded a GDP growth rate of 6.5% in 2011) and stabil-ity come from the fact that it defied the conventional recipe for development and focused predominately on the huge potential within its own population. As a result, domestic consumption com-prises the bulk of GDP with exports only accounting for 26% despite be-ing endowed with incredible forestry, mineral, agricultural and arguably any

other type of natural resource currently in demand on the international market.

Our growth is powered by our home market with 70% of GDP coming from domestic consumption, explained Sofjan Wanandi, Chairman of the Indo-nesian Employers Association (APIN-DO). Additionally, the republic has an export-to-GDP ratio of 25% second only to India within the region and a debt-to-GDP ratio of approximately 26%. Compare the second figure to

85.7% in the UK or 165% in Greece and one can better comprehend Indone-sias relative immunity to international financial forces.

However, Indonesia has witnessed the effects of the global economic downturn to some extent this year. Foreign investors who own a major-ity of free-floating shares on the Indo-nesian Stock Exchange sold a net 4.9 trillion rupiah between January and

June, pushing the Jakarta Composite Index into an overall decline this year despite reaching an all-time high of 4224 on May 3.

Edgar Ekaputra of Bank Danareksa puts this down to speculation and a lack of investor knowledge with regards to Indonesia. We are still penalised by foreign countries, because we are the least understood country. But look at foreign exchange reserves we have 150 billion this is the highest in 30 years. Consider inflation it stands at approximately 5.5% this is the low-est in 30 years. You dont have to sell BMWs to succeed here, just sell soap. When you sell anything to 240 mil-lion people, the multiplier effect is im-mense, he said.

With 50% of the population below the age of 29, and 9.3% aged above 55, 65% of the population base is productive. This, coupled with an unemployment rate as low as 6.5% in 2012, ensures that income outpaces consumption. Add in the low-cost lend-ing environment encouraged by Bank Indonesia (the countrys central bank) and you have the emergence of an im-pressive consumer class.

With rising consumer spending, in-vestment has followed, challenging the liberalisation-first approach advo-cated by most economic development pundits. Indonesia has all the resourc-es that the world needs and is now plac-ing greater emphasis on value addition which will trigger huge investments, if done the right way. The inflow of investment is constantly growing, for-eign investment was at $20 billion last year, explained Jan Ronnfeld, Manag-

ing Director of the German-Indonesian Chamber of Commerce (EKONID).

Such wealth is, however, concentrat-ed in the islands of Java and Sumatra. Undergoing democratisation and de-centralisation simultaneously upon the downfall of the Suharto regime in 1998, the country has significant work to do to improve the level of coordina-tion that occurs between government bodies, as well as between the govern-ment and the private sector.

We are dealing with a scenario in which government entities are unavoida-bly clashing whilst attempting to deliv-er public services within a blossoming democratic framework, justified Professor Kuntoro Mangkusubroto,

who heads the presidential task force UKP4 assigned to improving Indonesias investment climate.

However, the introduction of Presi-dent Susilo Bambang Yudhoyonos Master Plan for the Acceleration and Expansion of Indonesia (MP3EI) and the subsequent establishment of six economic corridors assigning spe-cific roles to each of the six geographi-cal clusters has arguably had a notice-able impact. Investments outside of

Java reached 33.6 trillion rupiah (EUR 2.9 billion) in the first quarter of 2012, which represented 47% of total invest-ment realisation during that period.

Historically an economy based on cheap labour and the export revenue generated from raw materials, Indo-nesias two greatest challenges are to accelerate the expansion of its manu-facturing sector whilst simultaneously investing in the development of inno-vative and creative human capital. The government is ensuring more value- addition occurs at home by placing bans on the export of many unprocessed commodities. While an export ban of any kind will always be frowned upon by the dominant free trade

discourse, Ilham Habibie,

We are developing our SMEs as well as our industrial sector. With Germany we share a strategic partnership on how to deal with joint productions.Eddy Pratomo, the Indonesian Ambassador to Germany

A win-win partnership with Germany A special supplement by GLOBUS VISION

See this report at www.worldfolio.co.uk

monDAY, SEPTEmBER 10 2012 1

Germany and Indonesia celebrate 60 years of friendship and strengthen ties between their complementary markets

INDONESIA

(Continued on page 2)


Chairman of the German Alumni Asso-ciation, reminds us that initiatives such as these are about creating more long-term, quality jobs.

With this goal in mind Indonesia is now aiming to attract investment and trade with partners that will help bolster its industrial base and spur innovation among SMEs. Germany is an obvious partner to help accelerate this process of value-added industrialisation and en-terprise. We are developing our SMEs as well as our industrial sector. With Germany we share a strategic partner-ship on how to deal with joint produc-tions, says Eddy Pratomo, the Indone-sian Ambassador to Germany.

The Director General for National Export Development within the Indo-nesian Ministry of Trade, Gusmardi Bustami explained that in order to be involved in the whole production proc-ess Indonesia needs more advanced technologies. With the products we buy from Germany, we can manufac-ture more products here and sell more value-added goods, he says.

However, while German technology still maintains a strong reputation, Ger-many is now facing increasing compe-tition from countries such as Japan, Ko-rea and China who provide substitutes at lower prices. The Director General for International Industrial Cooperation

within the Ministry of Industry, Agus Tjahajana Wirakusumah, elaborated on this phenomenon. Ten to 15 years ago when you built a manufacturing plant all the machinery was German. How-ever, nowadays the Indonesian entre-preneur is mixing and matching tech-nologies to give cost-saving solutions.

The height of German-Indonesian political and economic relations came at the end of the 1990s when the Ger-man-educated Bacharuddin Jusuf Ha-bibie became president. Despite hold-ing office for only one year, president Habibie helped usher in a new era of representative government follow-ing three decades of authoritarian rule under President Suharto. Under Habi-bies leadership, educational exchange, economic cooperation and political relations with Germany were all pri-oritized, but over time the relationship began to dwindle.

In the past couple of years however, these strong ties are returning as each nation identifies the other as a strate-gic partner, as illustrated by Chancel-lor Merkels visit to Indonesia in July. Celebrating the 60th anniversary of diplomatic relations, Germany and In-donesia have committed to strengthen-ing their cooperation in five key areas: trade, education, health, research & technology and defence. Merkel and Yudhoyono also pledged collaboration in the energy sector; namely, to raise

Indonesias share of renewable energies to 25% by 2015.

An increase in bi-lateral trade be-tween Indonesia and Germany is particularly attractive as each market complements the other perfectly, with Indonesia supplying Germany with ag-ricultural products, textiles, electronic devices, footwear and ores, while im-

porting machinery, chemical products, communication technologies, motor vehicles and pharmaceutical products. I think that what is unique about do-ing business with Europe, as opposed to Asian countries, is that we are com-plementary. What we have, they dont have. And what they have, we have not. We need one another so to speak,

explained the Chairman of the Indone-sian Chamber of Commerce (KADIN), Suryo Sulisto.

This mutually beneficial relationship has prompted an increase in trade, with the total volume of exchange between the two nations growing by approxi-mately 12% to EUR 6.7 billion in 2011. While German exports to Indo-nesia increased by 12% to EUR 3.4 bil-lion, German imports from Indonesia reached EUR 3.3 billion, a year-on-year growth of 9.7%. These figures should only increase in the coming year, as the Indonesian government has prioritised the establishment of a Comprehen-sive Economic Partnership Agree-ment (CEPA) that will help German products gain an additional advantage against their Asian competitors. Jakob Sorensen, Chairman of the European Chamber of Commerce in Indonesia, said that he is excited to see how CEPA is able to bring more European invest-ment into Indonesia as it will lead to capacity building, the transfer of know-how and job creation.

With ASEAN integration planned for 2015, Germanys strengthened ties with Indonesia will be vital to ensure fruit-ful cooperation between the EU and ASEAN. Germany and Indonesia are not two lonely stars, but are connected with large and dynamic regions. The implications of what we do together economically, politically and culturally

can and should have an impact on co-operation between Europe and ASEAN as well, said Dr Norbert Baas, the Ger-man Ambassador to the Republic of In-donesia and Timor-Leste.

Of like mind is Chancellor Merkel, who said during her July visit: I am deeply convinced that Europe has to hurry up in setting up a free trade agree-ment with this region if it wants to be able to compete.

Thus, as Germany starts to recognise the growing power of Asia, it would be well-served to look beyond the lure of China, and towards Indonesia. When you think of Indonesia, think beyond natural resources, and think beyond ex-porting goods and services to Indone-sia. Indonesia should be seen as part of an enlarged ASEAN strategy, recom-mends Ilham Habibie.

As the world strives to find a sus-tainable path for development finan-cially, environmentally and socially strategic partnerships such as that being formed between Indonesia and Germany will be vital to ensuring that lessons learnt and knowledge gained can be shared, so as to maximise the benefits and minimise the risks of glo-bal interconnection. This moment of celebration of 60 years of bi-lateral re-lations therefore serves as a reminder to us all that moments of crisis are, and have always been, opportunities for transformation.

monDAY, SEPTEmBER 10 20122 INDONESIA

German companies are specialists in technology. Forming a strong relationship with Germany will be paramount in our efforts towards value-added industrialisation.

Rahmat Gobel, President Director of PT Panasonic Gobel Indonesia

In Germany, SMEs account for 38% of total business revenues, 78% of the labour force and 48.6% of net value-added. Our figures are much lower. Our SMEs would benefit through greater

linkage with their German counterparts.Anindya Bakrie, President Director of PT Bakrie Telecom

Indonesia has an electrification rate of approximately 65%. This means there are approximately 84 million people without access to power. There is incredible potential here for foreign companies.

Hans-Peter Haesslein, President Director of PT Siemens Indonesia

The Indonesia of today welcomes FDI that will diversify our manufacturing industry and support our ability to be innovative and invent our own

national products.Shanti L. Poesposutjipto, President Commissioner of PT Samudera Indonesia

A paradise for investmentIndonesias huge population of 240 million is the countrys greatest asset, with 70% of GDP attributable to domestic consumption

Arguably the greatest obstacle hindering Indonesias achievement of double-digit GDP growth is insufficient connectivity, caused by inadequate infrastructure de-velopment in recent years. Indonesia is ASEANS largest member by popula-tion and its GDP ranked 59th out of 155 countries in the World Banks Logistics Point Index published in May 2012. Whilst a notable rise from 2010s posi-tion of 75th, this remains below regional neighbours Singapore, Malaysia and Thailand. As a government we have been spending far less on infrastructure than we have on subsidies; this is the sad fact behind the current situation, says Luky Eko Wuryanto, the Deputy for Infrastructure within the Coordinating Ministry of Economic Affairs. How-ever, there has been a noticeable com-mitment on the part of the government to change this in 2012, with President SBY announcing an increase of 19% in government spending on infrastructure development. Additionally, 75% of the 24 trillion rupiah (EUR 2 billion) in un-spent funds remaining from the govern-ments budget from fiscal year 2011 has been assigned to the cause.

The Ministry of National Develop-ment and Planning (BAPPENAS) esti-mated that 1,400 trillion rupiah was re-quired between 2010 and 2014 to fund necessary infrastructure development. Of this, the government was deemed capable of contributing just 30%. The Indonesian Economic Development Committee (KP3EI) recently con-firmed this with its announcement that 84 projects worth 536.3 trillion rupiah

(EUR 4.6 billion) would commence in 2012 of which 15 would be financed by the government, 20 by state-owned enterprises, 35 by private sector entities and the remaining through a Public Pri-vate Partnership (PPP) model.

Dedy Priatna, the Deputy Minister for Infrastructure within BAPPENAS displayed confidence in the longevity of Indonesias transition towards PPPs for future development. Of the 84 projects this year 15-20% will be PPPs. In 2013 I expect PPPs to go to 25% and in 2014 to 35%. BAPPENAS will continue to develop our PPP model and support investors as they enter into such agree-ments, he said.

Such support shall come in the form of government incentives and compen-sation for private investors. Starting next year for example, a Viability Gap Fund shall serve as financial leverage for government-sanctioned projects that are less commercially-attractive.

When you consider toll road develop-ment, one cannot help but compare the 125 kilometres of toll road developed during President SBYs entire first term with the 4,719 kilometres constructed in China during 2009 alone. Toll roads have not served as a sweet investment up until now due to the substantial risks involved, ranging from indeterminate traffic rate outside of Jakarta, unpredict-ability of government regulations, and limited financial support and project guarantees, said Achmad Gani Ghazali Akman, the Head of the Indonesian Toll Road Authority (BPJT).

However, times have changed and

infrastructure development should be seen not as a challenge, but as an op-portunity. China has displayed such an attitude, recently expressing its interest in developing four railway systems in Indonesia, representing an investment of EUR 4 billion. Nusantara Infrastruc-ture an investment holding company with subsidiaries engaged in toll road, sea port, and other infrastructure re-lated business recorded a net profit, for the first time in three years, of 6 billion rupiah in the first quarter of this year. Last year, Thiess Indonesia signed

three toll road concession agreements through subsidiary companies, capital-ising on the government incentives for such projects which include up to 95%

foreign ownership. Indonesia offers po-tential infrastructure projects that could serve as feats worthy of global recogni-tion for confident investors that adopt a long-term approach towards the coun-try, with the Sunda Strait Bridge serving as the perfect example. The feasibility study will commence in 2012 and is expected to take two years, after which time the tender process shall begin. This bridge will connect Indonesias two most populous islands Java and Sumatra and in doing so bring Indone-sias commercial hub into closer contact with a location rich in natural resources.

Whilst projects of this scale would have been previously unthinkable, the momentous Land Acquisition Law passed by the House of Repre-sentatives (DPR-RI) on December 16 brings a long-awaited sense of reality. The law which has been subject to substantial discussion shall reduce the time and cost needed to expropri-ate land, and establishes a 436 day deadline for the entire land acquisi-tion process. However, a Presiden-tial Decree is required to support the laws implementation. Such a decree will be fundamental to its suc-

cess in streamlining the development process. With protests surrounding potential fuel subsidy removal and recent toll road construction, correct enforcement will be required, says Dedy Priatna.

Crucial to Indonesias competitive-ness come ASEAN 2015 and greater regional integration is the spread of physical development towards the east of Indonesia. The pricing of goods in more developed areas is sig-nificantly more affordable than in the less developed eastern parts. For in-stance, the price of cement in Papua is 20 times higher than in Java, said Dr Hermanto Dardak, Deputy Minister for Public Works. The government shall subsidise build-operate-transfer (BOT) models in less developed areas to bring in foreign investors and im-prove the archipelagos connectivity.

With approximately 17,000 islands, the need for maritime infrastructure is significant. The regulatory frame-work is being fine-tuned, financial as-sistance is there, and the government is displaying the necessary political will. The time is now to invest in In-donesian infrastructure.

Indonesias quest for connectivityDespite a welcome 19% increase in government spending on infrastructure, further investment is required

Strengthening German-Indonesian ties resulted in the total volume of trade between the two nations increasing by 12% in 2011

A typical day in Jakarta (Photograph courtesy of the Ministry of Communication and Information Technology, Indonesia)

PRojEcT TEAm:

Stuart West, Amanda janoo and mark cassidy

GLOBUS VISION Albert Buildings, 49 Queen Victoria Street,London Ec4n 4SA Tel: +44 (0) 20 7409 2354

[email protected], www.globusvision.com

SPECIAL THANKS Special thanks would

like to be paid to nurcholish mA Basyari for

his constant support throughout this campaign.

(Continued from page 1)


monDAY, SEPTEmBER 10 2012 3INDONESIA

Few would now deny that our current economic model is unsustainable; financially, socially or environmen-tally. The most powerful counter-movement to business as usual has been that of the Green Economy. However, whilst this has had a real impact on particular niche markets such as fair trade tea and coffee, it has not materialised as a compre-hensive alternative to the current orthodox model of development and growth. The primary downfall of the Green Economy model is that it re-quires companies to invest and cus-tomers to pay more for socially and environmentally responsible prod-ucts. As Gunter Pauli persuasively argues in his UNEP report titled The Blue Economy, this model is valid and justified when an economy is expanding and unemployment is falling, but becomes less appealing when demand drops, liquidity dries up and poverty presents itself as a real threat to the population.

Yet this years Rio +20 event held in Rio de Janeiro, Brazil, symbolised the international communitys unwa-vering commitment to a more sustain-able development track. Within this forum Indonesia officially introduced the concept of the Blue Economy, arguing for a global paradigm shift that recognises that our planet is both green and blue. The Secretary Gen-eral of the Ministry for Maritime Af-fairs and Fisheries, Dr Gelyn Yusuf, explains that the Blue Economy is still an evolving discourse but at its core is the argument that the almost-exclusive emphasis on the devel-opment of land-based economies has distracted us from the maritime economic potential, which is able to support sustainable development and mitigate the impact of climate change.

We are not saying there is a green economy for the inland and a blue

economy for the ocean. Fundamen-tally, the conditions are the same, clarifies Dr Yusuf. Oceans cover ap-proximately 71% of the worlds sur-face and contain 97% of the earths water supply. Land and sea ecosys-tems are inherently interconnected. Oceans moderate the earths tempera-ture by absorbing solar radiation, with currents distributing this heat energy around the globe thereby regulating

temperature and weather by heating the land and air in winter, and cool-ing it during the summer. For these vital reasons, maritime concerns can no longer afford to be placed as a footnote in sustainable development initiatives.

Like the world itself, more than 70% of Indonesia is comprised of oceans. Indonesia wants to there-fore be a pioneering example for the world of what a Blue Economy would really look like when theory meets implementation. The Minis-

try of Communication and Informa-tion Technology (MCIT) has taken a lead in educating the Indonesian and international community about the Blue Economy concept.

For Indonesia the Blue Economy consists of three mutually reinforcing facets. The first concerns the incred-ible revenue-generating potential of marine economic activities. The sec-ond relates to the vital importance of

conservation and protection of ocean ecosystems for secure and sustainable development. The final aspect relates to an appreciation of the unique social and cultural characteristics of com-munities connected to the sea.

According to a recent report pub-lished by the Indonesian Ministry of Marine Affairs and Fisheries, In-donesias total maritime economic potential amounts to approximately EUR 975.6 billion per year, which is equivalent to 10 times the countrys state budget in 2012. Freddy Tulung,

the Director General for Information and Public Communication within the Ministry of Information and Public Communication, explains: The po-tential of our seas in terms of fisheries and natural resources is huge, but not well-managed as of yet. In the case of fisheries, most of the small ports are not equipped with ice storage to be able to export fish. Secondly, there has not been any value addition to

raw fish; for example filleting. In addition, Indonesias geographic

advantages have been under-utilised to date. 70% of all sea trade passes through Indonesia via the Strait of Malacca and the Strait of Timor, says Mr Tulung. With 90% of all interna-tional trade still occurring by sea, In-donesia stands to gain huge revenues from developing its port and shipping capacities. When you add the eco-nomic potential of increased coastal tourism, sea energy, underwater min-eral deposits and telecommunications

cables, the untapped economic poten-tial is astounding.

Indonesia fully recognises that this strategy for faster economic devel-opment must be balanced with more intensive programmes for the pres-ervation of the oceanic ecosystem. Indonesia is already experiencing the adverse impacts of climate change, such as rising sea-levels, increased sea-surface temperatures, intensified

storm activity and coral reef deterio-ration due to increasing ocean acidifi-cation. The study by the Ministry of Maritime Affairs and Fisheries esti-mates that if fully optimised, marine resources could help to mitigate up to 80% of global overheating while at the same time providing a source of alternative sea energy. Germany has been a long-standing partner for In-donesia in the area of marine research and will be increasing its level of sup-port in September 2012 by launching the Spice III project focusing on

marine biodiversity, climate change and coral reef and mangrove ecology.

With more than half of Indonesians living in coastal communities, the In-donesian government recognises the importance of maintaining the carry-ing capacity and quality of its marine resources, for both its people and its culture. We are not a land-based society, but an ocean-based society. When we talk about Indonesia as an archipelago the most important thing is that the inherent culture is funda-mentally connected with the sea, says Mr Tulung.

Professor Firmanzah, Dean of the Faculty of Economics at the Uni-versity of Indonesia, discusses the importance that water has played in shaping Indonesian culture. The culture of Indonesians was devel-oped at the ports. Maritime people are different from agricultural peo-ple; they are more open as a society. When religions such as Hinduism and Buddhism came from India into Indonesia, we absorbed their values. When Islam came from the Arabic countries we embraced it. When Christians came through the trade from Portugal and the Netherlands, we were open to it.

Even though we have more than 500 tribes and 600 different dialects, our relationship with the water binds us socially. So, you could say it is in our genes to be a very open society, a warm society and an outward-looking society, says professor Firmanzah. In an era of increasing instability, inequal-ity and environmental degradation, the world would be well suited to follow Indonesias example of open-mindedness as illustrated by its willingness to follow a new, in-novative economic model that may well become the blueprint for the better world we envision.

The Blue Economy Indonesia pioneers a new path for economic development, environmental preservation and cultural empowerment

The Blue Economy aims to harness the potential of the worlds oceans in a responsible, sustainable manner (photos courtesy of the Indonesian Ministry of Communication and Information Technology)



Over the past few decades, Indofood has progressively been transformed into a total food solutions company, with operations in all stages of food manufacturing, from the production

and processing of raw materials to the sale of consumer products in supermarkets.

Indofood capitalizes on its resilient business model with four complementary strategic business units.

AGRIBUSINESSA vertically integrated and diversified agribusiness group with activities spanning the entire supply chain

BOGASARIIndonesias largest wheat

flour mill with leading positions in several markets

DISTRIBUTIONIndonesias most extensive distribution network penetrating every corner of the archipelago

CONSUMERBRANDED PRODUCTS

A leading producer of packaged food with a diverse range of

products offering everyday solutions for consumers of all ages

The conventional wisdom in In-donesia attributes the nations resilience to global economic fluctuations to the high levels of consumer spending, which accounted for between 60-70% of GDP last year. According to Credit Suisse Group AG, from 1999 to December 2011, the av-erage wealth per adult increased fivefold, to over $12,000. This booming group of middle-class consumers can be viewed as the engine of Indonesias current eco-nomic stability and prosperity.

Indonesia has not followed the export-oriented growth model adopted by many of its neigh-bors, which in times of global economic stability has kept its

GDP growth rate at a relatively modest level. However, during these times of global volatility, Indonesias voracious domes-tic demand has kept the country largely insulated from the mar-ket-crushing forces falling upon its once-booming neighbours.

While many would interpret Indonesias present situation as an example of Keynes empha-sis on aggregate demand, it is also necessary to remember his emphasis on the psychological nature of economic interactions. Precautionary savings occur when a population does not feel that their livelihoods are secure. It is for this reason that the In-ternational Labour Organization

argues that social security plays an important role in times of cri-sis to stabilise aggregate demand and increase resilience against economic shocks.

The extension of social and health insurance to a population of 240 million is a challenge, particularly when approximate-ly 60% of the population works in the informal sector. Howev-er, Indonesia has been making huge strides in reducing the fear of poverty through the work of state-owned company Jamsostek. Under the leadership of Hotbo-nar Sinaga, Jamsostek has revo-lutionised social security by es-tablishing a business model that constantly improves benefits for

Fighting the fear of poverty

jamsostek aims to match the growth of the new middle-class with a corresponding increase in social security coverage

Indofoods success indicative of increase in local purchasing powerA bouyant domestic market fuelled by a young population leads to double-digit growth rates for the food giant

its members through its sound fi-nancial management.

In 2010, our net profit was 1.513 trillion rupiah (EUR 128 million) and according to the estimates from our accounting team our net profit for 2011 was 2.043 trillion. This is an increase of more than 30%, says Mr Si-naga.

With these increased prof-its, Jamsostek has increased the death benefit for its members by 25%, and expanded their healthcare coverage. Before, we didnt cover heart attacks, we didnt cover haemodialysis and we didnt cover cancer, but as of December 1 2011 we now cover all of these critical illnesses.

These improvements in ben-efits have resulted in more than a 20% increase in health insurance subscribers, but Mr Sinaga will not rest there. The CEO wants to provide social security for sec-tors of the population that have historically been excluded: in-formal sector workers, youth and women.

Looking at our future mar-ket, firstly they are young and secondly they are female. Why? Because the most important de-cisions made in a family and a community are usually done by women, argues Mr Sinaga.

These ambitious targets seem more than plausible for this thriv-ing company. Two years ago, Si-naga established the Jamsostek Investment Company (JIC) as the subsidiary in charge of manag-ing investments in employment- generating industries such as infrastructure, agribusiness and mining. Mr Sinaga explains that the JIC also buys bonds and shares issued by public compa-nies. Our capital provides them with liquidity with which they can invest more, expand and set up more factories, thereby hav-ing a multiplier effect, creat-ing employment and ultimately creating more members of Jam-sostek.

The medium to long-term strat-egy for Jamsosteks investments have allowed them to take advan-tage of the current volatility in capital markets recently buy-ing assets at reduced prices. This has prompted them to set their year-end target at Rp 125 trillion (EUR 10.5 billion), up 9% from last year.

The financial success of Jam-sostek illustrates a model for so-cial security that others would be well-served to emulate. Their long-term investment strategy serves as a catalyst for sustain-able growth of businesses while simultaneously supporting em-ployment creation. The com-panys benefit enhancement and expanding membership functions to reduce risk for workers, sup-porting aggregate demand in a country that is now being driven by consumer spending.

While the country as a whole clearly benefits from the resil-ience that comes with a popu-lation of 240 million, so too does its most recognisable total food solutions company, Indo-food Sukses Makmur. Indofood has grown steadily throughout the global financial downturn, boasting a compound annual growth rate of 12.9% from 2007 to 2011. The company also exports its products as far afield as the Netherlands due to the size of the Indonesian di-aspora there.

Indofood is active through-out all stages of food manu-facturing from the produc-tion of raw materials and their processing, through to the packaging and distribution of the finished consumer goods with its consumer branded products arm responsible for 44% of revenue attained during the first quarter of 2012. We have very strong brand equity, says Werianty Setiawan, Direc-tor and Corporate Secretary of Indofood. Our portfolio consists of consumer-branded products as well as commodi-ties that provide a balance in terms of earning quality, and resistance to the volatility of international commodity pric-es.

With 50% of the population below the age of 29 and only 9.3% above the age of 55, In-donesia has a young popula-tion. Coupled with indications that GDP per capita will break the $4,000 threshold in 2012, these facts help to explain why 14.5 billion packages of instant noodles were consumed in the country in 2011. As the worlds largest instant noodle-maker with 15 factories in Indonesia and one in Malaysia Indofood is perfectly positioned to profit from the countrys economic growth. A pack of instant noo-dles sells for between 1500 and 2000 rupiah (approximately 27 euro cents) which ensures that the companys sales success is fairly immune from inflation, and due to the comprehensive production and distribution network maintained by the company, logistics costs re-main low compared to those of competitors.

Indofood Sukses Makmur is in sound financial form, with a cash position of 13.05 trillion rupiah at the end of 2011 (EUR 1.09 billion), and has increased its dividend pay-out ratio in 2012 to 175 rupiah per share 50% of 2011 net income. The company has assigned 6.4 tril-lion rupiah (EUR 530 million) for capital expenditure this year.

Half of this has been allo-cated for agribusiness, says Ms

Setiawan, as we aim to plant 15,000-20,000 hectares of crude palm oil, rubber and sugarcane a year.

Indofood has historically pre-ferred to raise capital through the capital markets, and has per-formed a number of stock splits since incorporation. At the time of writing, Indofood Sukses Makmur was in the process of issuing Bond VI. Where else can we get five years mon-ey with an indicated rate of 7.75%? asks Ms Setiawan.

Indofood is always open to new joint ventures. We want to capture the rising middle-in-come market with products we call affordable premium. Any opportunity that will allow us to do that we are more than happy to look into, she says.

Indofood enjoyed a compound annual growth rate of 12.9%

from 2007 to 2011

Our portfolio consists of consumer-branded products as well as commodities that provide a balance in terms of earning quality, and resistance to the volatility of international commodity prices.Werianty Setiawan, Director and Corporate Secretary of Indofood



Reach for the starsThe sustainability of Indonesias cur-rent economic growth will depend on the country increasing its capacity to educate its youth while simultane-ously encouraging research and de-velopment initiatives and PT Astra International is fully committed to the pursuit of both goals. The 165 com-panies that make up Astra employ 176,436 people, and have provided financial support to 120,000 students and 10,000 teachers. Through the six core business lines we operate within, Astra is present across the archipela-go. It is therefore our duty to dedicate ourselves whole-heartedly to nation building, expressed the President Director, Prijono Sugiarto.

As Indonesias most valuable publicly-traded company report-ing 2011 revenues of Rp 162.6 tril-lion (EUR 13.75 billion) and as a group boasting 14% share of the IDXs around Rp 280 trillion mar-ket capitalisation Astra under-stands the importance of innovative human capital. Mr Sugiarto lived in Germany for eight years, during which he time he earned two di-plomas and worked as a trainee at Mercedes-Benz. Astra is one of the best universities I have attended, he said. In my 22 years with the company I have learnt what works and what doesnt; who succeeds and who fails.

The calibre of those associated with Astra speaks for itself, with former board members including Minister for Tourism Mari Pangestu, Head of the Investment Coordinating Board (BKPM) Chatib Basri, and Sri Muly-

ani Indrawati known for roles such as Managing Director of the World Bank Group, Indonesian Minister of Finance, and Head of BAPPENAS.

I put our success down to three factors. We are blessed with good people who are young and profes-

sional. We have always established the right partnerships the most obvi-ous being with Toyota in the 4W seg-ment, Honda in the 2W segment, and Komatsu in the field of heavy equip-ment. Finally, we have managed to diversify in the right directions, Mr Sugiarto explains.

The Astra Group encourages sub-stantial foreign investment, with Toyota and Daihatsu alone investing EUR 1.6 billion in Indonesia. Recent-ly ranked first place in the category of Indonesias Best Public Compa-nies based on Stern Stewart & Cos Wealth Added Index (WAI), Astra places great emphasis on efficient management and maximising qual-ity. The original co-founder, William Soeryadjaya, brought the infamous Toyota Production System to Indo-nesia. Adapted over time, such proc-esses have enabled the company to reach a stage where a Honda motor-cycle rolls off the production line eve-ry three seconds, and the group will soon be producing 450,000 Daihatsu vehicles annually. The President Di-rector is confident that in six years time, Astra will be capable of produc-ing its own cars. At that point we will truly be the pride of the nation; as Samsung is to South Korea and TATA to India, he said.

Astra is currently engaged in the automotive, financial services, heavy equipment & mining, agribusiness, infrastructure & logistics, and infor-mation technology sectors. We are intrigued by the potential for a Ger-man partner in the area of coal-up-grade technology, said Mr Sugiarto.

Astra, the countrys biggest publicly-traded company, aims to be the pride of the nation

Investing in Indonesias greatest resource

In terms of [economic] sustain-ability, talent attracts money more effectively than money attracts tal-ent and that is where the challenge lies for Indonesia, observes Dr Irene Jansen, Director of the Ger-man Academic Exchange Service (DAAD) in Jakarta. According to the World Bank, Indonesia cur-rently has a youth unemployment rate that is five times higher than that of the national average while simultaneously lacking 2 million skilled laborers.

We know that well-educated

people tend to be out of work far less than not so well educated peo-ple. Indonesias ability to with-stand the global economic crisis will depend on its ability to edu-cate people and to improve out-put in terms of education and re-search, says Dr Jansen

To increase Indonesias capacity to invest in the education and re-search capabilities needed to tran-scend the middle-income trap, the German government has estab-lished a debt for equity agreement, whereby a part of Indonesian debt will be transformed into fellow-ships allowing Indonesians to study in Germany.

The Debt Swap aims at improv-ing the quality of higher education in Indonesia. Under this Agree-ment substantial funds are being invested in staff upgrading for young scientists to get their PhD in Germany, comments Dr Jansen.

DAAD is a joint organisation of German higher education institu-

tions that is committed to the inter-nationalisation of German Univer-sities. The DAAD Jakarta office is responsible for facilitating these fellowships with the objective of upgrading Indonesian lecturers and promoting greater research in such vital subjects as poverty al-leviation, renewable energy, food security and marine science.

The institutional collaboration, research and scholarship opportu-nities being offered by DAAD rep-resent an important investment in Indonesias bourgeoning populat-ing. In the words of Dr Jansen, if we talk about innovation and the future we will have to talk about universities and research. Unless Indonesia leap-frogs into research output and innovation, it will be very difficult to sustain wealth.

Investment in human capital gets a boost through DAADs higher education collaboration initiatives

Regulatory shift needed for better returns on renewables

Indonesia is home to approximately 40% of the worlds geo-thermal energy reserves, possesses 75,500 megawatts of es-timated hydropower resources and boasts 4.80 kWh per m2 per day in solar power potential. In light of this, the govern-ment target of achieving 6.7 gigawatts of installed renewable energy capacity by 2025 seems realistic.

However, Indonesias transition towards renewables is not currently occurring at the rate required to meet this tar-get. This underperformance is due to the insufficient extent to which the government has attempted to incentivise invest-ment in the countrys renewable resources. Rahmat Gobel, the Chairman of the Indonesian Renewable Energy Society (METI), put it down to a lack of awareness. Political will is required in order for Indonesia to benefit from its abun-dant renewable energy potential. The government must un-derstand the importance of renewable energy and undergo a paradigm shift in mindset away from its current focus on oil.

While progress has been slow, efforts have been made to transform the regulatory framework. Law no.30/2007, for example, was initiated in an attempt to reduce Indonesias dependence on imported refined oil whilst boosting the use of alternative en-ergy sources, including renewables. Regarding geothermal in particular, Finance Minister Agus Martowardojo signed a decree in August last year that guaranteed state electricity company PLNs financial ability to fulfil its obligations relating to power purchase agreements with pri-vate power plants, with the price set at 9.7 cents per kWh. This gesture was bolstered in April of this year by the establishment of a geothermal fund facility for regional administrations and mining license holders, as well as an announce-ment made by the government committing EUR 299 million to finance the construction of geothermal power plants.

International investors have been hesitant to fully immerse themselves in Indonesia due to a plethora of factors ranging from high initial investment costs to conflicting government jurisdictions an example of the latter being that 60% of In-donesias geothermal reserves sit below land protected by the Ministry for Forestry. METI argue that this caution will be significantly reduced when a feed in tariff (FiT) policy is more effectively implemented for renewables. Such a policy, which theoretically involves setting a guaranteed price at which power producers may sell their renewably-generated electricity to the grid, would ensure investors receive guar-anteed grid access, long-term contract stability and purchase prices that are both logical and fair. Due to the fact that the cost of electricity production varies region by region, the tar-iff must be decentralised, and assessed in line with the scale of individual projects to incentivise smaller projects that are less economical.

Germany could be seen as both an example and a partner for the realisation of this policy. Due to the support shown

for renewables in the electricity feed-in law of 1991 and the subsequent Renewable Energy Sources Act (EEG) passed in 2000, the share of domestic electricity usage held by green solutions has been impressive. Contribu-tions from wind energy grew from 1.3% in 2000 to 6.3% in 2008. As part of Chancellor Merkels recent push to fill the nuclear void, a further 895 wind turbines were installed in 2011 with a collective capacity of 2,007 megawatts. This represented a 30% year-on-year growth in wind energy-related installation.

As regards solar power an area of clear potential for In-donesia due to the nature of its climate Germany obtained 0.6% of its electricity from PV technology in 2008, which has increased to an estimated 4% this year. Whats more, a world record was established on May 25 2012 when 22.15 gigawatts of electricity were passed onto the grid, meeting almost one third of the countrys electricity demand at that precise moment. While the feed-in tariff is the subject of live-ly debate with opposing parties suggesting the FiT policy

for solar power adds an extra 2 euro cents per kWh to German electricity prices one cannot deny its success in supporting the use of renew-able energy sources, with approximately 20% of electricity generated through such means in 2011 (DECC 2012).

I hope that we are able to strengthen our bi-lateral relationship with Germany within the sphere of renewable energy, says Mr Gobel. The transfer of technology from Germany could be central to our future economic growth.

The German Federal Ministry for Economic Cooperation and Development has already displayed its commitment to strengthening

ties in this area, commissioning a joint project between the Directorate General for Electricity and Energy Utilisation within the Indonesian Ministry of Energy and Mineral Re-sources, and the German Society for International Coopera-tion (GIZ). The Mini Hydro Power Project for Capacity Development (MHPP) seeks to implement micro hydro-power technology as a means of bringing electrification to rural communities remote from the national power grid. Furthermore, the three-day German Indonesian Renewable Energy Days programme was jointly organised by EKO-NID and GIZ in October last year as part of the JERIN celebrations, to bring public and private players together for a discussion regarding potential solutions to current policy and finance-related issues.

With the introduction of more consistent policies within the real sector and greater collaboration with the German govern-ment and energy sector, Indonesia has the potential to develop strategic industries in the fields of renewable energy and ener-gy efficiency technologies that could seek to emulate German quality and challenge Chinese price competitiveness, while making renewable energy more financially viable.

Political action is needed to harness huge green energy potential

Our dream is to establish Astra as the pride of the nation. Astra will personify Indonesia.Prijono Sugiarto, President Director of PT Astra International

Alumni and friends of DAAD gather for DAAD Quarterly. SCIENCE talks IN DAAD, a lecture series held in DAADs Jakarta office



German-Indonesian strategic resource partnership provides for a win-win situation

In May 2011 Germany announced that it would phase out nuclear power pro-duction entirely by 2022. Currently the worlds fourth largest consumer of coal with approximately 50% of its electric-ity consumption coming from bitumi-nous coal and lignite, Germanys im-mediate solution has been to increase its coal-fired electricity production with the ultimate objective being to fill the nuclear gap with a reliable supply of energy from renewable sources.

In order to manufacture the equip-ment needed to harness renewable energy, such as wind turbines, solar panels, electric car batteries and energy-efficient light bulbs, various rare earth elements (REEs) of which 17 are known to date are re-quired. In March of this year, the Obama Admin-istration announced the filing of a World Trade Organization case against China, citing un-

fair trade practices in REEs of which they produce approximately 97% of global supply. The German govern-ment thus signed intergovernmental strategic partnership agreements with Mongolia (October 2011) and Kaza-khstan (February 2012) in the fields of raw materials, industry and technol-ogy to mitigate the impact of Chinas REE monopoly on the development of renewable energy technologies in Germany.

Regarding Indonesia, Dr Lars Schernikau co-founder, shareholder and supervisory board member of

Ichor Coal NV in Germany and of its subsidiary PT HMS

Bergbau Indonesia ar-gues that whilst Indonesia must move on from the large-scale use of oil for electricity generation, renewable energy initia-tives are far from ready

for signifi-cant re-

liance upon them. Coal is therefore going to re-emerge and be the main source of electricity, especially in the Asian region for at least the next 50 years, explains Dr Schernikau an ar-gument expanded upon in his book The Renaissance of Steam Coal (Springer 2010). Indonesia serves as the worlds fifth largest producer of coal and the largest exporter, with 371 million tons produced in 2011 of which 289 million tons were exported.

The Indonesian government launched a 10,000 MW steam coal-powered electricity generation pro-gramme in June 2006 in anticipa-tion of the inevitable domestic and regional increase in energy demand. President Director of state-owned electricity company PT PLN Nur Pamudji expressed that this year will mark the point where 50% of our elec-tricity is generated from coal. How-ever, Dr Schernikau points out that of the worlds total cumu-lative energy invest-ments between 2001 and 2030, coal will receive only about 5% relative to oil and gas.

This is applicable to Indonesia, which has main-

tained a historic government subsidy on oil to the quite obvious detriment of the sub-sectors of coal, natural gas and renewable energy resources, of which Indonesia possesses immense poten-tial. Subsequently, Indonesia received 65.5 trillion rupiah in state revenue from coal compared with 177.31 tril-lion rupiah from oil; despite the fact that Indonesia exported 361,000 bar-rels of oil per day (MBOPD) in 2011 compared with 2400 MBOPD of coal, according to Professor Widjajono Par-towidagdo, the late Vice-Minister for Energy and Mineral Resources.

Dr Schernikau and Dr Ilham Ha-bibie, President Director of Ilthabi Rekatama, therefore both argue pas-sionately for a strategic resource

partnership agreement to be signed between Chancel-

lor Angela Merkel and President Susilo Bam-bang Yudhoyono. Such an agreement would be a win-win situation, as secure access to Indonesias burgeoning mining economy specifi-cally its coal would

contribute to the German governments efforts to support na-

tional firms in gaining access to the raw

materials necessary to meet indus-trial production demand. The Febru-ary 2012 agreement with Kazakhstan, for example, encompasses all phases: from feasibility studies, to asset ac-quisition, to the use and export rights of end products. Such a strategic partnership between our two nations would support educational exchange in the field of energy and natural re-sources, as well as the transfer of much needed technology from Germany to Indonesia, says Dr Habibie.

Germany is a global technology leader in the fields of power generation and mining equipment, and technolo-gies such as Flue Gas Desulphurisa-tion (FGD), Carbon Capture and Stor-age (CCS) and Coal-to-Liquid (CTL) would all arguably be well received in Indonesia. An inter-governmental

strategic partnership agreement would lead to a stronger relationship between Indonesia and Germanys private sectors, as was seen in Ka-zakhstan, with 50 contracts imme-diately resulting from the agreement totalling a value of almost $4 billion. Such contracts and potential joint ventures would ensure a transfer of strategic scientific expertise and technology to Indonesian companies.

Dr Schernikau pleads that Ger-many should dispel the negative connotations of coal, proclaiming that Germany must stop fighting coal, and instead work with coal to minimise its environmental im-pact. Berlin-based Ichor Coal and its Indonesian subsidiary PT HMS Bergbau Indonesia wishes to support Indonesia in maximising the benefits of its coal reserves. We are ready to invest here; we are ready to bring German technology here for more

efficient production. If required we will also invest in the neces-sary infrastructure, which may include access roads, conveyor belt systems, ports and so on.

A resource cooperation be-tween Germany and Indo-nesia would not only reduce

investment risks and as a result make investments cheaper for

Indonesia, but also bolster the exchange of knowledge. With the long-term support of industry leaders such as Ichor Coal and HMS, In-donesia could significantly increase the energy secu-rity its coal reserves ensure as well as the state revenue they provide, whilst simul-taneously reducing their environmental impact.

The re-emergence of coal as a viable source of energy is good news for Indonesia

community-minded and environmentally-conscious

The governments Economic De-velopment Expansion Accelera-tion Master Plan (MP3EI) seeks to reduce Indonesias greenhouse gas emissions by 26% from the current business as usual level. Improving the multifaceted regu-latory framework surrounding renewable energy is therefore a priority, with 17% of domestic energy consumption in 2025 to be met by new and renewable en-ergy resources. There is currently 75,670 MW of estimated hydro-power potential of which just 7.54% represents installed capac-ity (EMR 2011).

PT Ilthabi Energia (IE) is a dy-namic renewable power develop-

er that places great emphasis on building strategic partnerships with local institutions and last-ing relationships with investors, in order to navigate the complex-ities of Indonesias regulatory framework. IE is currently devel-oping three hydropower projects

in cooperation with a French concession developer and has already completed the feasibil-ity study for the companys first mini hydropower plant with construction scheduled to begin in the fourth quarter of 2012 in the Bener Meriah regency, Aceh province.

We are an emerging country and thus we must adhere to the global standard rather than the local standard, says Ilham Habi-bie, Chairman of PT Ilthabi En-ergia. We are interested in hy-dropower and biomass ventures and are open to collaboration with German Mittelstand compa-nies to fulfil our ambitions.

Ilthabi Energia is capitalising on local and international networks to develop Indonesias renewable energy potential

Investing in Indonesias energy securityWith 335 trillion cubic feet (tcf) of estimated natural gas reserves of which 112 tcf is proven, In-donesia will be fundamental for future energy security within the Asia Pacific, with natural gas de-mand in the region increasing at an annual average growth rate of 13.4% between 2000 and 2011. However, despite Indonesias status as the worlds second larg-est exporter of LNG after Qatar, oil and gas industry regulator BP Migas recently expressed that it would seek to import overseas cargoes of LNG to meet growing domestic demand.

This situation has occurred due to the fact that it simply has not been financially viable for do-mestic players to invest in low-to-

medium scale LNG liquefaction plants, explained Wachid Hasim, Operations Director of ISARGAS Indonesias largest private gas trading entity by volume.

ISARGAS has successfully se-cured more than 120 BBTUD in contracts with industry leaders including Pertamina, Kangean Energy and Husky Oil, and has enjoyed lasting relationships with domestic and multi-national companies in Indonesia includ-ing Bayer and Mitsubishi. We want to be the first to enter into this kind of business, and are open to strategic partners or sim-ply project financing, he said. ISARGAS are interested in Ger-man-manufactured critical equip-ment for their LNG plant.

ISARGAS seeks to revolutionise the use of natural gas domestically

Wachid Hasim, Operations Director of ISARGAS

ISARGAS HOLDING COMPANYPlaza ASIA Floor 12 Suite A & BJl. Jenderal Sudirman 59 kav. Jakarta 12190Tel: +62-21-5155858, Fax: +62-21-51401373

Indonesias largest private natural gas trading company, ISARGAS provides the nation with an efficient and clean alternative source of energy.

Dr Ilham Habibie, President Director of Ilthabi Rekatama

Professor Widjajono Par-towidagdo, the late Vice-Minister for Energy and

Mineral Resources

Dr Lars Schernikau, cshareholder and su-pervisory board mem-ber of Ichor Coal NV and PT HMS Bergbau Indonesia


Coal traded below $90 per ton in June 2012 for the first time since August 2010. Harry Su, Head of Research at Bahana Securities, has predicted that this will fall further to an average of $88 per ton for the second half of the year. The industry is chang-ing, having undergone a transi-tion away from long-term contractual agree-ments and towards on the spot con-sumerism allow-ing for repeated bargaining and in-dex referencing.

However, traders are well aware of the inherent volatility within their business, as they must quickly become accustomed to the fluctuations relating to logistics costs that far surpass the price vola-tility of the commodities they trade. Whilst specula-tors may point at the immi-nent development of Chinas railway infrastructure or the introduction of advanced technologies such as High-Voltage Direct Current (HVDC) as a threat to players within Indonesias coal sector, the situation remains coal is available in abundance, trans-ported easier than any of power-re-lated resource, and is both easier and less expensive to produce.

Indonesia is experiencing an ener-gy-intensive period of development, and with more than 50% of electric-ity generated from coal in 2012, has initiated a long-awaited shift away from oil as its main source for en-ergy; a popular occurrence for coal companies. Last year, general mining

companies listed on the Indonesian Stock Exchange (IDX) ranked first in terms of transaction volume and fre-quency, of which coal mining com-panies constituted 70%. However,

there has been significant confusion this year in relation to the govern-ments policies regarding coal. Min-isterial Decree no.7/2012 which requires miners to apply for a clean and clear status in order to obtain a specific export permit and a 20% ex-port tax was believed by many to be applied to coal as well as the other 65 mineral commodities. While this was dispelled recently to a great sigh of relief from the coal industry, a looming export ban on coal of low

calorific value is still a grave concern.

Considering the extent to which Chi-nese and Indian com-

panies are buying coal falling within the 5,100 kcal/kg and 5,700 kcal/kg category cur-rently, and the fact that they have recently begun to pur-chase coal with a calorific value

lower than 4,000 kcal/kg, such a ban

could receive strong opposition.Despite such uncer-

tainty, Apple Coal has force-fully continued its expan-

sion in Indonesia since commencing opera-

tions in April 2009. Operating as a sub-sidiary of Apple

Commodities Ltd in Hong Kong, Apple Coal provides mining

support and commod-ity trading services to

its parent companys nine mines six of which are 100% owned by Apple Commodities.

We traded 2.8 million tons in 2011 and target as much as 4.5 million tons this year, explained Chairman Nis-chal Jain. Apple Coal is aggressively expanding the services it offers. Cur-rently operating in Indonesia under Free On Board terms, the company shall commence Cost & Freight in October of this year.

Our plan is to be a company that operates right from the pit of the mine to the boiler of the power plant, says Mr Jain.

While personally dedicated to establishing a long-term presence in Indonesia, Mr Jain sympathises with those disappointed with the current regulatory framework. The government is attempting to encourage investment in power generation while simultaneously limiting foreign ownership of the necessary resources. If I want to erect a power plant, I want to have control over the feedstock. How-ever, the removal of PLNs monop-oly over power production clashes with another government policy re-lating to a required time-frame for

the divestment of ownership within the mining sector, he says.

In light of the passing of the long-awaited land acquisition act, Apple Coal is particularly keen to invest in physical infrastructure, and has al-ready commenced the groundwork for what will be an impressive coal logistics facility in Sumatra.

By the end of next year we will have something that provides a uni-versal service to others as well as for our own captive use, says the Chair-man. However, whilst wishing to de-velop the areas in which Apple Coal operates for commercial reasons, the company places importance on giv-ing back to the local communities. Currently doing so through educa-tion-based initiatives for children and the provision of medicine for the eld-erly, in the future Nischal Jain hopes to add value to the land on which it operates giving it back with the addition of schools and hospitals.

Apple Coal is an innovative pres-ence within the Indonesian coal in-dustry, and envisions entering the renewable and alternative energy sectors in the future. Right now, we are in advanced talks with an Asian company concerning coal gasifica-tion. We are planning to be partners on their feedstock, and they will be investing in Indonesia in the coal gasification technology, explains Mr Jain. Furthermore, we are assessing potential solar power ventures in Su-matra and Kalimantan because that is where the power is needed the most.

Currently obtaining its capital expenditure budget through pro-moter capital and equity partner participation, Apple Coal will cer-tainly be undergoing an IPO most likely in 2013.


Planting the seeds for Indonesias futureThe young and dynamic PT Apple coal (Indonesia) is committed to investing substantially in Indonesia despite the current turbulence of the sector. Trading 2.8 million tons in 2011, Apple coal is set to grow into a fully-integrated coal trader targeting 10 million ton per annum capacity, offering pit-to-power plant solutions

Last year a BBC survey indicated that Indonesia was the best country in the world for an entrepreneur to start a business. Surveying more than 24,000 people across 24 countries, the BBC asked how highly innova-tion was valued in their country, how difficult it was to start a business, how highly valued entrepreneurs are in society and whether people with good ideas were generally able to put them into practice. When these an-swers were analysed, Indonesia beat out the US as the most supportive country for entrepreneurs.

Despite this positive indicator, the current level of entrepreneurship con-cerns many prominent leaders within Indonesia. The number of entrepre-neurs in Indonesia is so low: 0.18% of the population, said Suryo Su-listo, the Chairman of the Indonesian Chamber of Commerce (KADIN). Es-

timates hold that at least 2% of a na-tional population should be entrepre-neurs in order for a country to evolve into an advanced economy.

The Coordinating Minister for Economic Affairs, Hatta Rajasa, ex-plained during a speech to the Stekpi School of Business and Management in Jakarta that Indonesia needs more entrepreneurs. Entrepreneurs want to give added value to anything they touch and see.

At the young age of 29, Nischal Jain fits this definition of an entrepreneur perfectly. When speaking about his motivations for setting up his busi-ness in a foreign and complex busi-ness environment, he explains: It is as rewarding as it is challenging but I am driven by my passion for creating value. When I see an opportunity, my first instinct is to see how I can create value from it. Indonesia is an incred-

ible land of opportunity and when I look at the value we have created for the country, I am very satisfied.

As arguably the youngest interna-tional entrepreneur operating in Indo-nesia, the Chairman of Apple Coal has a clear strategy for long-term success and expansion. For me personally it is very important to keep on learning. I am 29 years old; I got into the game very early into my career. I dont con-sider myself as a born leader, but I am somebody who is eager to lead and I am willing to learn.

Mr Jain sees the worth in the state-ment made by his professor at Har-vard, Robert Steven Kaplan, ex-Vice Chairman of Goldman Sachs: Great leadership is not about knowing all

the answers; it is more often about asking the critical questions.

The critical question today for Indo-nesia is how to encourage innovation, establish new businesses and create greater employment. Chris Kanter, the President Director of the Sigma Sem-bada Group, responded to the need for an estimated 4 million entrepre-neurs by establishing the Global En-trepreneurship Programme Indonesia (GEPI). GEPI aims to place entrepre-neurship as a key pillar of Indonesian economic development through rais-ing awareness, improving the regula-tory framework surrounding start-ups and helping to ensure that emerging entrepreneurs have access to finance and investors.

Members include such notable businessman and entrepreneurs as Rachmat Gobel of PT Panasonic Go-bel Indonesia, Shinta Widjaja Kam-dani of Sintesa Group, and Guiseppe Nicolosi of Ernst & Young Indonesia. We are working together to provide what we might call the right ecosys-tems for emerging entrepreneurs, says Mr Kanter.

Whilst there is certainly still work to be done in creating a supportive ecosystem for entrepreneurs here in Indonesia, Nischal Jains success and long-term commitment to Indo-nesia is indicative of the incredible potential here for other entrepre-neurs, and supports the conclusion of the BBCs survey.

Mr Jain feels that Indonesia is a rapidly growing and evolving nation and therefore needs business lead-ers who are willing to change and grow along with it. A leader needs to know where he is going and how he is going to get there, but he also needs to be open to feedback and bring in the necessary changes. You should not be stubborn about change, as it will always happen, whether you

like it or not. A successful entrepre-neur needs to adapt to his environ-ment and instigate change within his company and within himself in order to succeed. It is for this reason that he has made the motto of Apple Coal be courageous.

Being courageous does not mean to be fearless. For me, courage means to be scared to death, but to still do the right thing, says Mr Jain.

As Indonesia moves forward, a strong entrepreneurial sector will be vital as a source of employment and opportunities for the largest youth population in the world. This will re-quire a commitment from the private sector to invest in technical training and human resource development, the government to ensure educational opportunities for all its children and young adults, and for individuals to have the courage to venture into new economic areas currently untouched.

Mr Jains advice to this bourgeon-ing entrepreneurial population is to never give up. Entrepreneurship is about chasing your dreams. Some-times you fail, at other times you suc-ceed, but just keep on trying.

Encouraging entrepreneurial endeavourA strong entrepreneurial sector is vital as a source of employment and opportunities for the largest youth population in the world

Our plan is to be a company that operates right from the pit of the mine to the boiler of the power plant. Nischal Jain, Chairman of Apple Coal

Mining companies rank first in transaction volume and frequency on the Indonesian Stock Exchange



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