the president post 14th

The President PostT H E S P I R I T O F I N D O N E S I A

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Automobile Industry Running in High Gear Despite Traffic JamsAccording to Gaikindo’s projections, car production in Indonesia will continue to soar through 2015

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AUTOMOTIVE

Indonesia, the region and the worldIndonesia’s stategic vision is defined by its geo-political and geo-economic location in Asia and the Pacific, which determines its perennial imperative to keeping track of security trends in regional clusters.

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VIEWPOINT

Garuda Indonesia to Install IT Facilities in Aircraft in 2011The technology will allow passengers to communicate using the short text message service (SMS) and operate laptops on board aircraft.

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BUSINESS

IDR 20,000

THE ECONOMY

President Says No to Nuke Energy, New Budgeting SystemDeveloping nuclear energy needs thorough considerations and proper locations.

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JAKARTA (TPP) – When Susilo Bambang Yudhoyono was last year re-elected for a sec-ond term as president, at the top of the list of ministers he want-ed to retained in his new cabinet was Mari Elka Pangestu—not surprisingly.

Says Sofjan Wanandi, one of Indonesia’s premiere business-men: “Mari Pangestu is the best and the most qualified person to lead the ministry of trade. “

“She is the leader of G-77 rep-resenting Asia, Africa and Latin America in negotiations with the WTO. Mari is also credited for making Indonesia better known overseas.”

He added: “She has played and is expected to play an even greater role in making inroads to bolster trade with Japan, China, Asean and dan Australia. “

Indeed, Mari (54) has all what it takes to be where she is now: the first female Chinese-Indone-sian to hold a cabinet position in Indonesia, impeccable academ-ic credentials and, perhaps more importantly, no linkage to the business world.

Jakarta-born Mari obtained her Bachelor’s and Master’s de-grees from the Australian Na-tional University, and her Doc-torate in economics from the University of California at Davis, US, in 1986.

Prior to becoming Minister of Trade, she had been active in var-

Mari Pangestu: The Championof Free TradeBy Lukman Hakim

ious trade forums such as PECC.As an economist, she is wide-

ly published in national and in-ternational media. She serves on the Board of External Editors of the Asian Journal of Business (University of Michigan) and the Bulletin of Indonesian Econom-ic Studies (Australian National University).

She is also the co-coordinator of the Task Force on Poverty and Development for the United Na-tions Millennium Project.

Things are looking up or her and the nation’s economy as, for example, exports rose 43% in April after surging 47% in March, official data show.

Meanwhile, Bank Indonesia predicts economic growth will accelerate to 6% this year from 4.6% in 2009.

The government estimates gross domestic product (GDP) will expand 6%-6.5% in 2011.

Indonesia’s economy grew at the fastest pace in more than a year last quarter as record-low interest rates boosted consumer spending and exports and invest-ment recovered.

GDP in Southeast Asia’s larg-est economy increased 5.7% in the three months to March 31 from a year earlier.

“We are optimistic that the country can achieve or exceed export growth of 7%-8.5% this year, even as Europe’s debt crisis threatens demand for the region’s

goods,” Mari said recently. “The increase in exports in the

first four months of 2010 sug-gests the government’s target for the year can be met,” Mari add-ed.

“Our exports, which are 26% of the GDP, are not so exposed

JAKARTA (TPP) – The gov-ernment expects Indonesia to have at least five fully-developed special economic zones (KEK) by 2014, a minister said.

“Our priority is to have, by 2014, at least five (developed) special economic zones,” Coor-dinating Minister for Econom-ic Affairs Hatta Rajasa said last month.

The government is currently evaluating five special economic zones and has set their develop-ment strategies, main design, de-velopment framework.

Rajasa declined to name the five special economic zones, only saying that they will be across the country, including eastern Indo-nesia.

“For sure they include areas in East Indonesia such as Papua,” he said.

He explained that the country s regional economic development is divided into economic corridors, within which are special eco-nomic zones (KEK), and within a KEK are a number of clusters.

“So if we say Papua s KEK, it includes clusters such as West Papua, Merauke and Biak. We will encourage them to become fast growing areas,” he said.

He said 48 regions had previ-ously applied to become special economic zones but they had all been turned down.

The current five special eco-nomic zones do not include Batam, Bintan and Karimun.

Hatta: By 2014, RI to Have Five Fully-Developed Economic Zones

Indeed, Mari (54) has all what it takes to be where she is now: the first female Chinese-Indonesian to hold a cabinet position in Indonesia, impeccable academic credentials and, perhaps more importantly, no linkage to the business world.

The five KEKs would boost productions based on, among other things, marine, oilpalm, agriculture, mineral, coal, petro-chemical.

“Eastern Indonesia such as Papua could be an energy and food development hub, Java for manufacturing, and Sumatra for oil-chemical and minerals,” the minister said.

The SEZ is a government-des-ignated area in which companies enjoy various duty-free imports of raw materials and no taxation.

Batam, Bintan and Karimun islands provide a one-stop invest-ment program offering an inte-grated service for business per-mits, immigration issues and tax payments.

to the European market. But as about 12% of it go to Eu-rope, less than the corre-sponding figure for China, you can have secondary ef-fects. If China’s exports slow down, then so do their im-ports.”

China buys about 10% of Indonesia’s exports and is the Southeast Asian nation’s third-largest overseas mar-ket.

Indonesia’s non-oil and non-gas exports to China surged 76.7% from a year earlier to US$4 billion in the

Hatta RajasaCoordinating Minister for Economic Affairs

“Eastern Indonesia such as Papua could be an energy and food development hub, Java for manufacturing, and Sumatra for oil-chemical and minerals.”

On the country’s emerging creative industries

It needs support from banking and non-banking institutions to flourish. The contribution of creative industries to Indonesia`s non-oil/gas exports reached Rp1149 trillion.”

On the government’s “I Love Indonesia” campaign

It is not a form of protectionism but a means to promote domestic consumption.

On intellectual property rights (IPR)

Indonesia remains committed to eradicating violations of IPR to pro-

consumers can maintain their pur-chasing power, including the lower income groups. On the US Senate’s decision to restrict tobacco products, including clove cigarettes

We have voiced our objections. This has been quite a lengthy pro-cess, and it has, unfortunately, passed at the Senate level. We feel this is discriminating against cloves because menthol is not considered flavor.

Cloves, only account for a small percentage of flavored cigarettes but are being discriminated, this is a matter of principle.

Photo: The President Post/Nandi Nanti

Jakarta-born Mari obtained her Bachelor’s and Master’s degrees from the Australian National University, and her Doctorate in economics from the University of California at Davis, US, in 1986.

As Mari sees it...tect the interests of investors engaged in the country’s creative industry.

On US investment in IndonesiaThere’s still a lack of awareness in the

US, a misperception that we have to ad-dress. We have to keep up the momentum to expand cooperation.On Morgan Stanley’s statement that Indonesia should be added to the list of BRIC nations

If we can maintain our current growth rate and continue the policies that we are taking, we hope that we can grow 4.5% this year and be able to recover more next year to grow at around 5-6%.

We are making sure that domestic

first four months of 2010, Dep-uty Trade Minister Mahendra Siregar said last month.

President Susilo Bambang Yudhoyono and his economics ministers met Chinese President Hu Jintao on the sidelines of the Group of 20 meeting in Toronto last month, and discussed a plan to improve strategic economic and trade partnerships, alongside deepening defense cooperation and international affairs under the framework of the UN and the G-20 economies.

The president said: “The two countries have a good relation-ship. China is an important part-ner and a good friend of Indone-sia.”

Xinhua news agency report-ed Hu said China attached much importance to boosting its strate-gic partnership with Indonesia.

He specifically supported Chi-nese companies taking part in major infrastructure develop-ment projects in Indonesia.

Indonesia’s US$514 billion economy needs over $200 billion in investment each year, the bulk of it to overhaul its ailing infra-structure.

The government hopes 70% of infrastructure development in the next five years will be fi-nanced and carried out by the

private sector. Indonesian business leaders

and government officials have hailed a commitment by China to invest more in Indonesia’s in-frastructure, although some ob-servers expressed concern that China might use the investment as an opportunity to increase its influence here to the detriment of local companies.

The head of the land acquisi-tion bureau at the Ministry of Public Works, Wijaya Seta, said Chinese companies were more productive and efficient than their Indonesian counterparts, which should enable infrastruc-ture to be developed cheaply.

“I think from this alone we can gain, seeing more infrastruc-ture built with less money,” Wi-jaya said.

“After the infrastructure has been completed, it will create multiplier effects,” he said.

According to Mari, Chinese investment in Indonesia totaled US$265.5 million over the past four years, while two-way trade between China and Indonesia amounted to US$25.5 billion in 2009,up from US$12.5 billion in 2005.

“Investment and trade between the two countriesw are expected to grow to US$50 billion by the end of 2014,” she said.

ViewpointThe President Post www.thepresidentpost.comJuly 12, 2010A2

By Juwono Sudarsono

Indonesia, the Region and the World

Indonesia is one of the world’s geo-political “regional pivotal states” along with Mexico, Egypt, Nigeria, Paki-stan, Saudi Arabia, Tur-

key, South Africa, Brazil, Argen-tina, Canada and Australia, the latter seven being co-members of the G-20. In diplomatic forums Indonesia participates in the UN system, the Non-Aligned Move-ment (NAM), the Organization of Islamic Conference (OIC), the Association of Southeast Asian Nations (ASEAN), Asia Pacific Economic Cooperation (APEC), Asia Europe Meeting (ASEM), the East Asia Summit (EAS), and, since 2008, in the G-20.

Indonesia’s stategic vision is de-fined by its geo-political and geo-economic location in Asia and the Pacific, which determines its perennial imperative to keeping track of security trends in region-al clusters comprising:

NorthEast Asia—Japan, Chi-•na, South Korea incl. Taiwan (combined: GDP $13 trillion)SouthEast Asia—the 10 mem-•ber states of ASEAN, incl. PNG (combined GDP: $1,3 trillionSouthWest Pacific—Austra-•lia, New Zealand, South Pacif-ic (combined GDP: $ 1.2 trill-lion)

Together with the United States, Canada, Chile and Bra-zil, the Trans Pacific community constitute roughly 76% of world GDP.

As the world’s largest economy

(GDP: $14,8 trillion), the United States military primacy in Asia and the Pacific has long defined the region’s security. Through-out the Cold War (1947-1990) and beyond (1990- present), the US Pacific Command (PACOM) held its role as “main security pro-vider”. American military pri-macy (space-based communica-tions, strategic nuclear, ballastic nuclear and conventional forc-es) provided its treaty allies, Ja-pan, South Korea, Taiwan, to se-cure 80% of energy supplies from the Middle East within a stable Northeast Asia-Southeast Asia-Indian Ocean environment. It also enabled Japan, the Repub-lic of Korea, Taiwan and even-tually China to accumulate to-day’s combined GDP of almost US$13 trillion, whilst at the same time underwriting Ameri-ca’s trade and fiscal deficits.

American strategic primacy secured both intra-regional and trans-regional economic growth. Japan, South Korea and China provided economic, trade and invesment commitments, lead-ing ASEAN to become today a community of 10 nations with a combined GDP of $1,3 trillion. The security, trade and invest-ment complementarities link-ing Northeast, Southeast Asia and the South Pacific were fa-cilitated by the US’ critical role as “regional balancer” securing market-based trans-regional co-operation. Of the annual $167 trillion worldwide financial mar-ket transactions, more than 60% connect key financial hubs in the Asia Pacific region: Tokyo,

Shanghai, Singapore, Seoul and Sydney.

The economic size and polit-ical prominence of Japan (GDP $5 trillion), China ($4.8 trillion) and India ($2,1 trillion) lead to graduated desire of the three Asian powers to enhance their strategic influence within each country’s “core area of inter-ests” as well as beyond. In the

powers, including Russia.Within the ASEAN Security

Community (ASC), Indonesia strives to cooperate and main-tain intra-ASEAN stability with its nine fellow member states in mainland and maritime South-east Asia. The three pillars of the ASC (Political-Security, Eco-nomic and Social-Cultural) re-inforce constructive engagement and maintain balanced “sover-eign space” by accommodat-ing the interests of extra-regional powers (US, Japan, China, India and Russia). Australia and New Zealand both play critical secu-rity supporting roles in sustain-ing this constant “rebalancing engagement” of the major powers in the Asia Pacifice region.

As the largest ASEAN mem-ber-state in terms of geograph-ical size ( more than 5 million sqkm), population (234 million) and economy (GDP $670 bil-lion), Indonesia’s role is to em-phasise collaborative rather than assertive leadership. Effective leadership within the ASC rests on Indonesia’s improved domes-tic political stability, equitable economic development and na-tional security through the provi-sion of good governance and so-cial-economic justice at home. A secure ASEAN environment is in our strategic interest just as a stable Indonesia is in the interest of all our ASEAN partners.

Aside from maintaining “sov-ereign space” with extra region-al powers, Indonesia seeks to sustain “technological parity” among all resident as well as re-gional powers in order that mul-

tilateral cooperation, regional se-curity and economic prosperity reinforce one another. The re-gional security architecure needs to secure 38% of the world’s 90% seaborne trade that passes through the straits of Southeast Asia, including the three sea lines of communications traversing the Indonesian archipelago.

The real challenge for Indo-nesia is to coordinate and syn-chronise ASEAN’s public and private business leaders to har-ness a concerted vision based on each country’s distinct geo-polit-ical location relative to its geo-economic competitive strength. Japan, South Korea, Taiwan and Singapore exemplify suc-cess in utilising “brain power” in order “to live off” the rest of the world precisely because they do not possess natural resourc-es. Indonesia must deftly com-bine “soft”, “hard” and “smart” powers so that leadership groups in government, in the military, in private business and in civl soci-ety will be able to connect, coop-erate and at the same time com-pete with one another as well as with the rest of the world.

What will be the role of tra-ditional “military power” com-pared to the growing impor-tance of “non-military warfare” such as the “battle” over brain-ware, creativity, ideas and inno-vation? What is the optimum mix matching the ability to“deter and destruct” physical targets with the ability to “capture and secure” market share, financial assets and intellectual capital? Countries with sizeable numbers

of population and large territories must adopt comprehensive pol-icy visions simultaneously link-ing the global, the regional, the national, the provincial and the local so that disputes over stra-tegic resources can be resolved through rules-based multilater-al mediation and peaceful nego-tiation.

There is need for more skilled and educationally-trained civil-ian and military officials who are able to interface the planning of “military battles” over physical space with areas where “non-mil-itary battles” of ideas, of techno-logical knowhow and of manage-ment skills become increasingly prominent in determining a na-tion’s ability to survive in a 24/7 competitive world.

In all Asia Pacific countries the “war room”, the “board room” and the “classroom” must inter-face continuously. Only in this way can Indonesia’s future gen-eration of civilian and military leaders, defense managers and diplomats ensure that the com-mon responsibility within ASE-AN to sustain multilateral co-operation, regional security and economic development will just-ly reward our shared vision of planning ahead in maintaining peace and prosperity throughout the Asia Pacific region.

This article is a summary presentation on June 15, 2010, by the writer, who is a professor at the Jakarta-based University of Indonesia and former Defence Minister, to The Royal Institute of Defence Studies, London, at the Shangrila Hotel, Jakarta.

Indonesia’s stategic vision is defined by its geo-political and geo-economic location in Asia and the Pacific, which determines its perennial imperative to

keeping track of security trends in regional clusters.

As the largest ASEAN member-state in terms of geographical size ( more than 5 million sqkm), population (234 million) and economy (GDP $670 billion), Indonesia’s role is to emphasise collaborative rather than assertive leadership.

When we try to comprehend what we mean by “multicul-turalism”, In-donesia im-

mediately springs to mind as one of the most vibrant multicultur-al places on earth, ringed by lots of water, the biggest archipelago as well.

Why so? The Ethnologue Report, which

appeared in print in 2009, au-thored by Paul Lewis, counts 726 languages in Indonesia, with a deaf population of two million people, suggesting that ‘culture’ is more than just speech, and en-compasses those myriad nameless and silent forms of communion.

What of culture, then? Well, I cannot think of a more apt sum-mation than that of Anthony Ap-piah’s, who said that “cultural purity is an oxymoron” [‘foolish’ or ‘incongruent’].

Appiah, it should be noted, is one of the most prominent cul-tural theorists today, with a Chair at Princeton University. Son of a politician and a jurist from Gha-na and a British mother – and a grandfather who was Chancellor of the Exchequer –he is excellent-ly positioned to comment on the glue that binds and defines cul-tures. Let’s think of the ‘glue’ here as honeyed stickiness rather than as some binding points of polari-ty or resistance.

We all know instinctively that we are multivalent agents, elec-tro-magnetic organisms bathed in rivers of energy. Looking at the human brain alone, there are some 100 billion cells which are held together, or more prop-erly said, loosely suspended, by subtle electrochemical currents.

On MulticulturalismBy Dr Walter G Tonetto

in the universe (the brain in this mix is not a big computer, as the old metaphor has it, but rather a “cloud” of millions of small com-puters continuously at work. I cannot go into an exegesis of that idea here, but I think you get the picture.

Although we shift, as we must, from neurobiology to anthropol-ogy or cultural studies, we keep the “cloud computing” metaphor of the human brain in mind, and the apprehension that at the sub-

atomic level everything in the universe is connected to what Dr Rupert Sheldrake calls the “mor-phic field”. Not just connected, but vitally, joyfully and vibrant-ly alive. We are thus constitu-tionally, as cellular beings, cos-mopolitans (or cosmopolites). ‘Cosmopolitan’ means literally ‘citizen of the universe’, which is precisely what we are.

Into this well-rounded, core perception of reality as it is, we cannot drive, try as we might, the square peg of Samuel Hun-

tington’s “clash of civilizations”, which was the skull-and-bones bunting of Huntington’s prima-ry source of conflict in the post-Cold War world, hitched on the worm-eaten mast of Francis Fu-kuyama’s “The End of History and the Last Man”. The parrot of paradise (Psephotus pulcherrimus), whether perched on pirate Silver’s haggard shoulders, or as a meta-phor in this ensemble, has flown the coop, and cannot be found, or heard to sing, in the Fukuy-aman-Huntingtonean aviary!

next 10-15 years ASEAN needs to continuously re-calibrate the deterrence capability of its con-ventional forces in ways that ac-comodate ASEAN’s imperative to “co-determine” the terms and conditions of Asia Pacific secu-rity in sustaining the rebalanc-ing process among all major

The real challenge for Indonesia

is to coordinate and synchronise

ASEAN’s public and private business

leaders to harness a concerted vision

based on each country’s distinct

geo-political location relative to its geo-economic

competitive strength.

Indonesia immediately springs to mind as one of the most vibrant multicultural places on earth, ringed by lots of water, the biggest archipelago as well.

Let’s probe this cosmopolitan-ism a little closer. Appiah is op-posed, of course, to such simple Huntingtonean summary and reductionism; he uses the image of the Weltbürger (cosmopolitan) but he is also not comfortable with the naïve picture of a mul-ticulti-relativism. In his elegant book, Appiah revisits the classical ideal of the Weltbürger and places it in the contemporary context, of a person who straddles traditions and boundaries and revels in the wonderfully regenerative waters of such creative exchange. This positions a cosmopolitan ethos in balance with universal values and a respect for the otherness of non-Western conceptions of the world.

How is this ‘balance’ attained, he asks? Through the act of ‘con-versation’, a term that Appiah in-vests with philosophical dignity. It is for him the sole instrument which helps us gauge national, re-ligious and cultural forms of dif-ferences and allows us to adapt.

Thus it is not consent (persetu-juan) that is important for the Weltbürger, but a shared belief in the commonality of our human-ity in a world of strangers. Appi-ah stresses that Hesperian or oc-cidental philosophy has always been over-insistent on difference; his own African background, and life in Europe and the US show how such Weltbürgertum or cos-mopolitanism can be lived out.

Contemporary beliefs are oc-cidentally premised, even if they have currency in eastern lands, to the effect that all cultures each live in their own different uni-verses, and never shall the twain meet (as Rudyard Kipling had it). King Solomon’s harpist Barzilai knew from the song of birds that the universe (literally means ‘one song’) is perfect harmony, and when Solomon needed to have a respite from the rigours of state-craft, he sojourned to Barzilai’s small village and drew comfort from the mellifluent harp.

I often wonder how many peo-ple in Indonesia really under-stand the meaning of “Bhinneka Tunggal Ika” (“Unity in Diversi-ty”), which is at the heart of joy. Notwithstanding that our song is one — however many tweets or wings the metallic or fleshly bird may have — the notion that one story about the universe must be right and the rest wrong is sclero-sis and death. ; thus the key sym-bol of the cultural or mulicul-tural is an inherent diversity and acceptance of the other that is ul-timately not even someone else’s but our very own, as we are con-tinually bathed in multitudinous and infinite currents of life.

The writer can be contacted at [email protected]

These currents are constantly in flux with no apparent stability or localizability. Think of the brain as a telephone network and take all the phones in the world and all the wires (I am counting 4 bil-lion inhabitants of our Blue Plan-et). The number of connections and the trillions of messages per day would not equal the com-plexity or activity of a single hu-man brain! That is a mammoth! Continuously bathing in this gi-ant river of energy, we are literal-ly connected to all the vibrations

Photo: www.webs.rps205.com

The key symbol of the cultural or mulicultural is an inherent diversity and acceptance of the other that is ultimately not even someone else’s but our very own, as we are continually bathed in multitudinous and infinite currents of life.

The President Postwww.thepresidentpost.com July 12, 2010 A3

Profile

Passion, Concept and Perseverance are three impor-tant factors that are needed to become an entrepreneur,

according to Prita Kemal Gani, the recipient of Enterprise Asia’s 2009 Outstanding Entrepreneur-ship Award for Asia Pacific.

With her strong passion for public relations, she opened a training school on that subject with only 30 students and classes held two or three times a week.

Today, the small PR training school has been transformed into the most credible graduate school of communications, STIKOM London School of Public Rela-tions (LSPR).

She also has a huge passion for education related to her child-hood dream of becoming a teach-er.

“My activities in managing LSPR allow me little time to teach. But my dream is to con-tinue teaching when I retire lat-er,” says Prita.

Prita, whose father hails from Surakarta, Central Java, and mother from Padang, West Su-

PRITA KEMAL GANI:

A Woman Entrepreneurwith a Passion for Education

By Jeannifer Filly Sumayku

matra, was born in Jakarta in 1961.

She was raised mostly by her mother after her father’s death when she was five.

She fell in love with PR when she realized that being a PR per-son is a great profession since she could meet ambassadors and fa-mous and important people.

In the past years PR has un-dergone very advanced develop-ments. The media information era is growing very fast, requiring organizations to become more transparent and communicative with targeted communities.

Therefore, the role of PR is very important, because every organi-zation will have to package the information in presentable, accu-rate and timely ways.

“The duty of a PR person is not just talking to the media or the public, but also designing an overall public relations strategy within an organization, includ-ing evaluating designed and im-plemented programs,” explains Prita.

After graduating from Trisakti Hotel Management School in Ja-karta, she continued her PR stud-

ies at the London City College of Management, Britain, and then earned a Master’s degree in busi-ness administration at the Inter-national Academy of Manage-ment and Economics in Manila, the Philippines. Later, she be-came the PR Director of Clark Hatch International Jakarta for three years, from 1989 to 1992.

It was during this time that she met her future husband, Kemal Effendi Gani, who was then the editor of Swa magazine. To Pri-ta, journalism goes hand in hand with PR and she found she had a lot in common with Kemal. Amid her activities as a profes-sional businesswoman, this wife and mother of three still finds time for her family.

Her background and experi-ence enabled her to understand the concept in starting a PR ed-ucation institution.

She used her networking with Clark Hatch members, who are mostly expats, to become free-lance teachers.

The first three-hour classes were held at Wisma Metropol-itan two or three times a week. Now LSPR has more than 5,000 students in four campuses.

The Bachelor program of LSPR has five majors, namely Public Relations Studies, Mass Communication Studies, Mar-keting Studies, Advertising Stud-ies, and Performing Arts Com-

munication Studies. The Master Program was opened in 2003 of-fering four majors: Corporate Communications, Marketing Communications, Journalism and Media Studies, and Mass Communications.

The curriculum is 60% in-ternational referring to London Chamber of Commerce and In-dustry Examination Board, The City and Guilds of London Insti-tute and University of Cambridge International Examination.

Through March 2010, a total of 10.970 have graduated from LSPR.

Last but not least is persever-ance, as it is needed the most in facing problems.

“I have proven that persever-ance gives good results; when I lose my perseverance I start los-ing my grip,” said Prita.

Like others, LSPR also experi-enced growing pains, facing diffi-cult problems along the way.

“During hard times, I pray, and I always ask God to lead me in everything I do,” she says.

Prita always shares with the teachers and staff members prob-lems related to LSPR.

As a message to Indonesian women entrepreneur, Prita states: “Every woman must have dreams and goals and never be afraid to have any dream; the most im-portant thing is to find the right way and to persevere in achieving those dreams.”

With her strong passion for public relations, she opened a training school on that subject with only 30 students and classes held two or three times a week.

Today, the small PR training school has been transformed into the most credible graduate school of communications, STIKOM London School of Public Relations (LSPR).


The EconomyThe President Post www.thepresidentpost.comJuly 12, 2010A4

BI predicts forex reserves to reach US$81 billion

“Bank Indonesia predicts the foreign exchange reserves would reach US$81 billion by the end of this year following continued improvement in the country`s economic growth,” says the central bank`s governor Darmin Nasution last month.

Darmin said until May Indonesia`s foreign exchange reserves reached US$74 billion and is predicted to continue to rise following the country`s good economic fundamentals compared to those of other countries.

Bank credits up 18.6 pct in June

Bank credits during June 2010 reached a total of Rp1,531.5 trillion which represented an increase of 18.68 percent or Rp241 trillion from the figure in the same month last year, said Director of Economic Research and Monetary Policy (DKM) of Bank Indonesia, Perry Warjiyo, here last month.

He said loans extended in the period January-June 2010 (year-on-year) had increased by Rp101.3 trillion or grew 7.1 percent compared to the end of December 2009 when the figure was Rp1,437.930 trillion.

Trade Minister:RI may take advantage of ACFTA

Minister of Trade Mari Elka Pangestu said Indonesia is currently in a very good condition to take advantage of the implementation of the ASEAN-China Free Trade Agreement (ACFTA).

“I believe we will be able to make adjustments and maked gains,” she said during a discussion on entrepreneurship and ACFTA in Jakarta last month.

She said Indonesia`s imports from China had increased from 10 percent to 17 percent in the last five years, mostly capital goods and intermediate products.

Indonesia, she added, also has a productive work force and creative workers in a big amount with a low movable level which is attractive to foreign investors.

Capital inflow reaches Rp2.36 trillion

Deputy Finance Minister Anny Ratnawati said that net capital inflows into the capital market until June 2010 reached Rp2.36 trillion.

She said that besides the capital inflow, capital outflow also occurred (net capital outflow) through the capital market, which until May 2010 had reached Rp1.65 trillion.

State income from excises reachesRp26.36 trillion

State income from excises up to May 31, 2010 reached a total of Rp26.36 trillion, or 46.01 percent of the target in the 2010 State Budget.

The 2010 State Budget had set a target of an excise revenue amounting to Rp57.29 trillion.

Compared to the excise tax revenue until May 19, 2010, there is an increase of Rp2.66 trillion. Realization of customs tax revenues until May 19, 2010 reached Rp23.70 trillion, or 41.38 percent of the target in the 2010 state budget.

ECONOMIC UPDATES

Darmin Nasution

Mari Elka Pangestu

President Susi-lo Bambang Yud hoyono said the gov-ernment still had no plan

at least in the next five years to develop nuclear energy as an alternative to fossil fuel to generate electricity.

“Under the government s basic energy policy, we are striving for mixed energy, namely the combination of fossil fuel and renewable en-ergy, such as geothermal, wind, and solar energy,” he said at a meeting with jour-nalists at the Cipanas presi-dential palace in West Java last month.

“Developing nuclear ener-gy needs thorough consider-ations and proper locations. I say nuclear power plants are neither banned nor ta-booed but on the other hand we still have to resolve a lot of problems,” he said.

No to new budgeting system

President Yudhoyono also said there was no need to create a new mechanism for development budgeting as the government already had one.

“If House of Representa-tives (DPR) members wish a certain project should be carried out in a region, they can propose it. So it is the idea that will be accommo-dated. It will be complicat-

President Says No to Nuke Energy,New Budgeting System

ed if a new system is used while the old one is still in place. Mem-bers of the Regional Representa-tives Council (DPD) can do the same,” he told newsmen.

He made the statement in re-sponse to a question over the so-called aspiration funds proposal whereby funds would be allocat-ed to DPR members to finance development projects in remote areas.

He said the government was applying two systems with re-

gard to development budgeting, adding that the budget for sec-toral development was prepared by ministers or government insti-tutions while that for regional de-velopment was drawn up by the regions concerned.

Budget planning was done through a number of process-es to formulate a definitive plan for discussion by the government and the DPR in drawing up a de-finitive state budget, he said.

Yudhoyono said the aspiration funds proposal would only dis-

Developing nuclear energy needs thorough considerations and proper locations.

rupt the existing budget making mechanism.

Coordinating Minister for Economic Affairs Hatta Radja-sa earlier said that if DPR mem-bers wish to emphasize the im-portance of channeling funds to remote areas, quick funds need-ed to be made available and for that there would be discussions in House Commissions and the House Budget Committee.

“So it is not a problem for a DPR member to fight for funds

President SBY at a meeting with journalists at the Cipanas presidential palace in West Java last month.

Photo: www.presidenri.go.id

for remote areas in the commis-sions and the Budget Commit-tee. It has worked so far. In the commissions DPR members can also see the problems more clear-ly,” he said.

The Golkar Party recently pro-posed the allocation of “aspira-tion funds” amounting to Rp15 billion to each DPR member to be used for development projects in their respective electoral re-gions. The idea has drawn strong criticism from various quarters.

The House of Representa-tives (DPR) and the govern-ment have agreed to revise Law No. 22 / 2001 on Nat-ural Oil and Gas because a number of clauses in the law are considered no longer rel-evant.

Chairman of the House Commission VI for invest-ment, trade and industry af-fairs Airlangga Hartarto said here last month that one of the clauses no longer rele-vant stipulates the obligation to supply 25 percent domes-tic needs with oil and gas.

House, Govt Agree to Revise Oil, Gas LawBut Yet to Discuss Inalum

“Hartarto said, “a special meet-ing of the special inquiry com-mittee, committee members dis-cussed the adjustment between supply and domestic demand which was seen as no longer rel-evant.

Hartarto said that in the re-vision of Law 22/2001, priority would be given to national inter-est and the refund of cost recov-ery.

The revision, he said, also con-cerned efforts to reinforce the Upstream and Down Stream Oil and Gas Regulating Agency (BP Migas and BPH Migas), as well

the involvement of the House in the approval of oil and gas work contracts, infrastructure avail-ability and the fixing of oil and gas prices.

House, govt yet to discuss Inalum

The House and government have yet to discuss the continu-ation of its almost 30-year coop-eration with Japan regarding PT Inalum which is to end in 2013, a legislator said.

“In the near future we will summon the government to dis-cuss it,” Satya W. Yudha of the

Golkar faction in the House said last month.

Satya said the cooperation be-tween the Indonesian govern-ment and Nippon Asahan Alu-minium (NAA) of Japan should be discussed soon, as the first 30-year cooperation would end in 2013.

He said that there was a strong desire from the public and the re-gions that the cooperation with Japan be terminated.

Last week, Industry Minister MS Hidayat said the government may offer two options to Japan. Firstly, Indonesia will take full

control after 2013, secondly the contract will be extended with some renewed business schemes siding more on Indonesia s inter-est.

He said that the government had basically decided to take over the Asahan-Inalum project in North Sumatra, an Indonesia-Ja-pan joint venture.

“The Japanese has made a business proposal for the exten-sion of the project, and Indonesia will make a counter proposal be-cause our wish is to take over, and the negotiating team will join the negotiations,” said Hidayat.

Finance Minister Agus Mar-towardojo said the national econ-omy was showing steady growth in the first semester this year, strengthening confidence the an-nual growth target of 6.1 to 6.4 percent will be achieved.

“The picture looks good. So there is a shared view that we can grow between 6.1 and 6.4 per-cent. So what we have achieved so far is quite good,” he said af-ter attending a plenary meeting of the House of Representatives here last month.

He said as a member of the G-20 Group Indonesia needs to keep its economy sustainable, strong and balanced in which the ratio between debt and budget deficit must be kept at a sound level.

Apart from that Indonesia also needs to build trust in connec-tion with issues such as how to increase trade and investment, to meet the Millennium Develop-ment Goals and reduce subsidy in the energy sector.

FINANCE MINISTER:

First Semester Growth is Good“We could conduct it dur-

ing the G-20 meeting, as Indo-nesia hopes G-20 countries will not limit inappropriately devel-opment of trade and investment,” he said.

On the national budget, Agus said in terms of state revenue it grew by more than two percent over the same period last year but he admitted that state spending and expenditure had not been done maximally.

“It terms of spending it is a bit worse compared with the same period last year. We are question-ing why spending is slower this year than last year,” he said.

“We will start identifying the problems. As the cabinet is still new, programs of budget use might change. The budget au-thorities have changed. Perhaps there have also been efforts to put ministries in order down to re-gional offices. We also think per-haps there will be new policies with regard to procurement or re-alization,” he said.

“The picture looks good. So there is a

shared view that we can grow between 6.1 and

6.4 percent. So what we have achieved so far is

quite good.”

Finance Minister Agus Martowardojo

Photo: www.matanews.com

New Cargo FacilityPT Angkasa Pura II, which manages Soekarno-Hatta Airport, plans to build a new special cargo terminal with a capacity of 300,000 tons per year at an area covering 70 hectares, making it an international air cargo airport.


The Economy


Difficult Setting

From the outset it will be recognized that it would not be easy for any de-veloping country to make steady prog-

ress in a volatile environment, ex-ternally as well as domestically. Apparently, this is what has hap-pened with countries such as In-donesia, particularly during the last two years as a result of the global recession of 2008-09.

The World Bank quarterly re-port of June 2010 on the Indo-nesian economy is entitled “Con-tinuity amidst volatility”. It analyzes in depth the situation during the first quarter of 2010. It also confirms how the country continued to consolidate its re-covery from the global economic and financial crisis amidst a vola-tile environment.

As is well-known three coun-tries have been mentioned as the prima donnas in overcoming the crisis, namely China, India and Indonesia, which were able to achieve positive growth in the sea of countries around the world suffering contractions in their economies, particularly advanced countries.

In the case of Indonesia, the country was paralyzed as a re-sult of the Asian financial crisis of 1997-98. Since then the country has been facing a most volatile in-

THE INDONESIAN ECONOMY:

Continuity Amidst VolatilityBy Atmono Suryo

ternal environment. The second blow came two years ago with the economic and financial crisis of 2008-09.

Looking at the developments in the past it would not be wrong to assume that Indonesia has al-ways been placed amidst many uncertainties and volatile devel-opments. In fact, its econom-ic and political environment has never been easy, even until today.

Consequently, the country con-tinues to face a myriad of chal-lenges.

On the positive side it helps to develop the high degree of the country’s resilience which has kept the country constantly to be on the move. Maybe too slowly or erratically, especially in the po-litical area, but the country is in a way moving quite solidly.

This is being noticed clearly by

the world community. Indone-sia’s position in the internation-al community has been strength-ened substantially. Indonesia should take advantage of its ex-cellent position in the global po-litical and economic arena.

Entering The Year 2010

In entering the year 2010, In-donesia’s economy grew in the first quarter at a rate of 5.7%

and is expected to continue to rise this year to 5.9% (higher than the government’s estimate) and around 6.2% in 2011 (Fig-ure 1). The government’s goal is to achieve 7% growth in 2014.

During the present crisis the engine of growth for most coun-tries is the consumption factor (government and private con-sumption). Indonesia is present-ly blessed with private demand growth of more than 5%.

Presently, the most obvious growth is in the motorcycle and motor vehicles area. Motor cy-cle sales were nearly 70% high-er than a year earlier. The expec-tation is that it will continue to grow. This motor cycle boom is transforming the country’s eco-nomic pattern in both positive and negative ways.

Another important trend in trade is that imports are now growing faster than exports, nar-rowing the trade and current ac-count surpluses. There is the surge in imports for capital and intermediate inputs which are important for the growth of the economy. A trend to watch is whether the imports of consumer goods will also rise as is the case with imports from China.

As is the case with China with the ASEAN-China Free Trade

Indonesia continued to consolidate its recovery from the global economic and financial crisis amidst a volatile environment.

Agreement, other free trade agreements will come into force. At the present time it is not clear yet what the Indonesian strategy is. For sure these important de-velopments cannot be left to the market forces alone.

With its enormous market po-tentials, there is the danger that Indonesia will become the dump-ing ground for foreign goods, in-cluding cheap consumer goods, as a result of the low competi-tive position of the country. This is also another area which falls in the category of “volatile sectors” which can endanger the coun-try’s economic structure.

An important phenomenon to observe is that there has been im-provement in investment since mid-2009, including the recovery in inflows of FDI (foreign direct investments). This is attributed to the improvements in the invest-ment climate. Much work has still to be done, however, to at-tract foreign direct investments.

Industrial growth is still very inadequate at the rate of 4.3% this year, which may increase to 5.4% in 2011. What is surprising is that services sector is the fastest growth sector.

Short-Term OutlookThe following graph presents

the short-term outlook for the

Indonesian economy (Figure 2). Notwithstanding the possible volatile developments in the in-ternational arena but also in the domestic playing field, Indone-sia can count on the continuous gradual recovery in growth.

Many Indonesian observers with a positive outlook even say in jest that presently Indonesia can count on “auto-pilot”—the economy will grow by itself with-out much ado. The economic fundamentals of the country are now more solid except in the ar-eas of external finance and finan-cial market which are still linked to global finance. According to informal data, in May alone the country suffered a capital out-flow of about US$5.7 billion.

With a commodity-oriented economy, an important factor to watch is the development of com-modity prices which are depen-dent on volatile global commod-ity prices.

The chances are that for the short term or perhaps for the me-dium term Indonesia can count on the continuity of growth. As predicted by the World Bank, Asian Development Bank and IMF, the Indonesian government aims to achieve a growth of 7% by 2014.

It is uncertain, however, how the still volatile developments in the global economy could affect countries in Asia, including Indo-nesia. It is also still uncertain how internal political developments could become an additional hin-drance to the economic growth and developments of Indonesia. The risks factors, therefore, con-tinue to exist for an emerging country like Indonesia.

The writer is a retired career diplomat and former ambassador to the EU.

Annual

2009 2010 2011

1. Main economic indicators

Total Consumption expenditure 6.2 5.1 5.5

Private consumption expenditure 4.9 5.1 5.3

Government consumption 15.7 5.4 6.3

Gross fixed capital formation 3.3 9.6 8.3

Exports of goods and services -9.7 14.9 11.1

Imports of goods and services -15.0 17.4 11.7

Gross Domestic Product 4.5 5.9 6.2

Agriculture 4.3 2.2 4.3

Industry 3.5 4.3 5.4

Services 5.7 8.2 7.9

2. External indicators

Balance of payments (USD bn) 12.5 6.1 5.1

Current account balance (USD bn) 10.5 2.5 0.5

Trade balance (USD bn) 21.0 14.2 13.2

Financial account balance (USD bn) 3.6 2.8 4.6

3. Other economic measures

Consumer price index 4.8 5.1 6.3

Poverty basket index 5.8 6.8 7.2

GDP Deflator 8.5 9.4 12.2

Nominal GDP 13.4 15.9 19.2

4. Economic assumptions

Exchange rate (IDR/USD) 10356 9218 9200

Interest rate (SBI, 1 month) 7.3 6.5 6.5

Indonesian crude price (USD/bl) 61.6 77.7 78.0

Major trading partner growth -0.9 5.0 4.3

Source: World Bank

FIGURE 1: IMPORTANT ECONOMIC INDICATORS FIGURE 2: THE OUTLOOK REMAINS FOR GRADUAL TREND IN GROWTH

2009 2010 2011

Gross domestic product (Annual per cent change) 4.5 5.9 6.2

Consumer price index (Annual per cent change) 4.8 5.1 6.3

Balance of payments (USD bn) 12.5 6.1 5.1

Budget balance (Per cent of GDP) -1.6 -1.0 -0.4

Major trading partner growth

(Annual per cent change) -0.9 5.0 4.3

Source: Ministry of Finance, BPS and other national statistical agencies via CEIC, Consensus Forecasts Inc., and World Nak

The WorldThe President Post www.thepresidentpost.comJuly 12, 2010A6

CLOUDS IN THE SKY

Towards the end of 2009, the world community, in-cluding Asia, ex-pected that the global economy

would be out of the woods and come out of the dark tunnel and be on the road to recovery. It also hoped global recession would re-cede in many parts of the world, especially in Asia, with China and India in the lead.

The expectations for an upturn were quite strong. The world has been warned, however, that the recovery could be a subdued re-covery and risks would remain, that world demand would con-tinue to be weak, and unemploy-ment would remain and inflation rising.

Now that we are in the middle of 2010, somewhere in the west, namely in Europe, the alarm bell is beginning to ring again. In its latest assessment, the World Bank has called for world attention that clouds are gathering in the finan-cial sky on account of Europe’s debt crisis triggered by Greece’s fiscal position.

These events show that serious challenges have remained, as ad-mitted by the recent G20 Toron-to meeting: the world’s financial system needs repair and reform. We must be reminded again that the world financial system is the freest of all systems and that it is still strongly defended by ad-

GLOBAL ECONOMIC PROSPECTS:

Cloud Over Europe’s Debt CrisisBy Atmono Suryo

vanced countries. It is increasing-ly recognized, however, that the liberalization of international fi-nance has gone too far.

The world trade system, which aims at a multilateral free trade system, has become a complex system with its many WTO reg-ulations and standards.

Europe’s Debt CrisisMarket nervousness happened

in Europe as a result of the debt positions of several high income countries as of May 2010. An aid package of nearly $1 trillion

was needed from the European Union and the IMF to cope with the European debt crisis.

As can be seen from afar the Euro financial situation seems to be a complex one. The contagion effect would in the first place af-fect the other soft countries such as Portugal and Spain.

So far the contagion effect has been limited although there has been a sharp decline in stock markets worldwide, affect-ing also Asia, including Indone-sia. The European Central Bank warned that the debt crisis could

2008 2009 2010 2011 2012

Real GDP growth 1.7 -2.1 3.3 3.3 3.6

High income OECD Countries Euro Area Japan United States Non-OECD countries

0.40.30.4-1.20.43.0

-3.3-3.4-4.1-5.2-2.4-1.7

2.32.20.72.53.34.2

2.42.31.32.12.94.2

2.62.61.82.23.04.5

Developing Countries East Asia and Pacific China Indonesia Thailand South Asia India Pakistan Bangladesh Latin America and Caribbean Brazil Mexico Argentina

5.78.59.66.02.54.95.12.06.24.15.11.87.0

1.77.18.74.6-2.36.36.83.75.7-2.3-0.2-6.5-1.2

6.18.79.55.66.27.38.03.05.54.56.44.34.8

5.97.88.56.24.07.88.54.05.84.14.54.03.4

6.18.18.76.05.07.58.04.56.14.24.14.24.4

World Trade Volume (GNFS) 3.2 -11.8 11.2 6.7 7.3

Commodity Prices (USD terms) Non-oil commodities 0.0 -21.6 16.8 -4.0 -5.4

Oil Price (US$ per barrel) Oil price (percent change)

97.036.4

61.8-36.3

78.126.4

74..6-4.5

73.9-0.9

Manufactures 5.9 -4.9 0.0 -3.7 0.0

Source: World Bank

subject the region’s banks to some rounds of losses.

Not only European countries but also many countries around the world have taken various measures to cope with the situa-tion, among others and In partic-ular, by introducing fiscal mea-sures and by cutting spending.

2010 GLOBAL PROSPECTSA World Bank June 10 press

release notes that the global eco-nomic recovery continues to ad-vance. But Europe’s debt cri-sis has created new hurdles on the road to sustainable medium terms growth.

It is predicted that global GDP will increase from minus – 2.1% in 2009 to 3.1% in 2010, 3.3% in 2011 and expand to 3.6% in 2012 (Figure 1).

DEVELOPING COUNTRIESCurrent statistics show that

high income countries (OECD)

will be out of the negative growth (-3.3%) by achieving growth of 2.3% this year. A most signifi-cant development is the growth of developing countries, which is predicted to move from 1.7% growth to 6.1%. This is a most amazing new development in the global economy.

It is not only East Asia which is moving ahead with China, Indo-nesia and Thailand as frontrun-ners and South Asia with India and Bangladesh in the lead, but also Latin America (Brazil, Mex-ico and Argentina) and Sub-Sa-haran Africa (Nigeria, Kenya and South Africa) at the forefront

The developing countries’ growth is responsible for the bulk of global growth. This trend is expected to continue in the years and decades to come.

For many developing coun-tries ODA (official development assistance) is very important to

FIGURE 1: THE GLOBAL OUTLOOK FIGURE 2: INTERNATIONAL CAPITAL FLOWS TO DEVELOPING COUNTRIES

2005 2006 2007 2008 2009 2010 2011 2012

Net private and official inflows 501.8 659.8 1222.8 780.5 523.5

Net private inflows (equity+debt) 573.3 732.1 1223.7 752.4 454.0 589.5 670.2 770.8

Net equity inflowsNet FDI inflowsNet portfolio equity inflows

349.9281.168.8

469.0363.2105.8

663.8528.4135.4

536.5593.6-57.1

445.9358.387.5

497.5438.059.5

564.2501.063.2

652.8575.077.8

As a percent of GDP (%) 2005 2006 2007 2008 2009 2010 2011 2012

Net private and official inflows 5.03 5.59 8.45 4.51 3.09

Net private inflows (equity+debt) 5.74 6.21 8.46 4.35 2.68 3.02 3.05 3.15

Net FDI inflowsNet portfolio equity inflowsPrivate creditors

2.820.691.5

3.080.901.6

3.650.943.9

3.43-0.331.4

2.120.520.5

2.240.300.5

2.280.290.5

2.350.320.5

Source: World Bank

stimulate economic growth. Aid flows, however, have come down considerably. There is some sug-gestion that aid flows have come down as much as 20% to 25% in the current crisis. It could take about a decade for the flows to recover.

Private capital inflows have also declined, from $1223 billion to $454 billion in 2009. It is pro-jected to recover slowly and reach $771 billion by 2012 (Figure 2).

G20 SUMMIT IN TORONTO The G20 summit attention

was mostly focused on glob-al economic issues, especially in the area of banking and finance such as:

Laying the foundation for •strong, sustainable and bal-anced growth.Building a more resilient fi-•nancial system through sec-tor reform which would rest on four pillars.

To cope with international fi-•nancial institutions and devel-opment.

In addition, the Toronto Sum-mit dealt with the launching of the Global Agriculture and Food Program; an issue which is set to become more intense.

It should be realized that the global economy has suffered the sharpest decline of trade in more than 70 years. G20 highlights that it is necessary to keep mar-kets open and to fight protection-ism.

There is the need for the World Bank and other Multilateral De-velopment Banks to step up their capacity to support trade facilita-tion.

Shaken by the European debt crisis, one of the key decisions made at Toronto was to cut def-icits in most industrialized na-tions in half by 2013.

It is remarkable to note that much attention is being given by the G20 on other issues aside from finance, among others the problem of combating corrup-tion.

After Washington, London, Pittsburgh and Toronto, the next G2O summit will be held in an Asian country; namely Seoul, South Korea, on November 11-12, 2010.

The writer is retired career diplomat and former ambassador to the EU.


Focus

The name Poly-tron may not be as well known as Sony, Samsung or Lucky Goldstar in the global electron-

ics arena. However, the Indone-sian indigenous electronics brand has been able to post exports pro-ceeds of millions of dollars in the past few years. In fact, the com-pany aims to increase the exports share from 10% to 15% of its en-tire sales in the next few years.

The electronics industry in Indonesia has been experienc-ing bumper crops in the past few years. Their sales have been growing at a rapid rate, even at a time when the world economy is mired in crisis. Japanese brands like Sony, Sharp or Panasonic have become household names for many years. But Indonesians are increasingly adapting to Ko-rean names such as Samsung and Lucky Goldstar. In fact, in the past few years these two Korean companies have been expanding their operations in Indonesia sev-eral times to meet the growing de-mand of electronic products. Not only that—these companies have also been producing electronic appliances for the export market. Thus, Indonesia has been used as a springboard for their global ex-pansion and forms part of their

The Encouraging Prospects of Indonesian ExportsBy Cyrillus HarinowoHadiwerdoyo

global production network. With this kind of competitive

environment, it is indeed surpris-ing to see more and more Indo-nesian companies with the ca-pacity to build their markets in foreign countries. For companies like Polytron, exports proceeds of million of dollars are certainly a good beginning. Their growth rate is very high in the domestic market. Therefore, an ambition to increase their exports share to 15% of their entire sales requires a strong determination. Based on their previous performance, the Kudus, Central Java-based elec-tronics company soon will be able to realize their goal.

All electronics exports, both from foreign-based manufac-turers as well as from indige-nous Indonesian companies, have showed a hefty increase in the past few years. Although in the past the Ministry of Trade focused their attention on labor intensive manufactured prod-ucts such as textiles, garment and footwear, exports of electron-ics have actually overtaken that position. Total exports of elec-tronic products in 2008 reached over US$13 billion. At the same time total exports of textile, gar-ments and yarns amounted to around US$10 billion, while ex-ports of footwear only reached

around US$2 billion. In the first two months of 2009, their per-formance was somewhat affect-ed by the global crisis. Monthly exports in 2008 averaged around US$1.100 million, but in January and February 2009 their month-ly exports dipped to below US$1 billion. However, in March and onwards, monthly exports recov-ered so that total electronic ex-ports in 2009 were not signifi-cantly different than in 2008.

This encouraging performance continued in the first four months of 2010. Exports of electronics from January to April 2010 al-ready reached almost US$5 bil-lion. If this performance contin-ues, we can expect total exports in 2010 to reach around US$15

billion. With the present expan-sion of some firms, we can expect that total exports of electronics will continue to rise in the com-ing years. This rise of Indone-sian exports is just an example of the broad-based progress we have made in the past few years. This illustration also shows that Indo-nesian exports are not limited to commodities but also manufac-tured products, which are grow-ing at a rapid rate.

Electronics are not the only manufactured products that In-donesia exports. Indonesia has also become part of the regional production network of the auto-motive industry. Cars like Toyota Kijang, Daihatsu Terios, Suzuki APV and Swift manufactured in

Indonesia can now be easily found in the United Arab Emirates and ASEAN countries. In fact, Indo-nesia has also become an export-er of significant car components. According to the Indonesian Car Manufacturers Association, In-donesian cars have been exported in the form of CBU (Complete-ly Built Up), CKD (Completely Knocked Down) or in the form of components. In fact, exports of components more than dou-ble the total exports of CBU and CKD cars combined.

In 2008, statistics showed the value of exports of vehicles stood at US$4.4 billion, more than four times the figures of 2004, or an average growth of more than 60% annually. In 2009, howev-

The electronics industry in Indonesia has been experiencing bumper crops in the past few years. Their sales have been growing at a rapid rate, even at a time when the world economy is mired in crisis.

er, the figure dropped to less than US$4 billion. Nevertheless, in the first four months of this year we saw a recovery of these exports. In total vehicle exports in Janu-ary to April 2010 reached around US$1.5 billion. If this perfor-mance can be sustained, we can expect the value of the vehicle ex-ports to reach almost US$5 bil-lion in 2010, exceeding previous records.

In a broader picture, Indone-sian exports have been able to re-cover from last year’s dip. From an annual export of around US$137 billion in 2008, Indonesian ex-ports declined to just US$116 billion last year. However, peo-ple always look at the big picture. Looking into more details, ap-

parently the second half of 2009 saw a kind of recovery. In fact, in the last quarter of 2009, Indone-sian exports have posted a posi-tive growth. This performance continued in the first five months of 2010. Up to May of this year, total cumulative exports reached more than US$60 billion. There-fore we can easily predict that our exports in 2010 may reach over US$140 billion, surpassing our previous record in 2008.

Looking ahead, we can see a strong indication of the resilience of our exports sector. While time may not be on their side, especial-ly with the dim prospects in Eu-rope this year, we can already ob-serve the strong determination of our business people in expand-ing the markets of their products abroad. One prominent business-man recently shared with me his experience with his companies in the overseas market. Having pen-etrated China and India for many years, his companies are now ac-tively expanding to Africa. He said many Indonesian companies are doing the same thing. In fact, they do not only trade but also invest overseas.

Indonesia has done well in the past few years—the domestic economy has been growing sig-nificantly. At the same time, our business people have also expand-ed their business overseas at a rap-id rate. We hope this encouraging development will continue in the coming years so that more Indo-nesian brands may soon be seen in other countries.

The writer is an economist and a columnist for national news media

Electronics are not the only manufactured products that Indonesia exports. Indonesia has also become part of the regional production network of the automotive industry. Cars like Toyota Kijang, Daihatsu Terios, Suzuki APV and Swift manufactured in Indonesia can now be easily found in the United Arab Emirates and ASEAN countries.

Global Warming has become a real problem that we all must be aware of. In short, Global Warming can be interpreted as an increase in the earth’s tem-perature partly due to the rise of CO2 emissions into the earth’s atmosphere caused by human activities.

PT Jababeka Tbk is commit-ted to participate in efforts to reduce CO2 emissions in order to reduce the impact on Global Warming by building a bike zone in Jababeka City.

The Jababeka Bike Zone is ex-pected to help reduce CO2 emis-sions from motor vehicles and to create cleaner and healthier air for Jababeka citizens.

The existence of the Jababeka Bike Zone is the answer to trends in, and the collective awareness of, societies in cities seeking a healthy environment.

Beside useful as a sports facil-ity, Bike Zone is very helpful for residents and employees who live and conduct their activities at Jababeka (B2S - bike to school and B2W - bike to work).

Bicycle users in this zone can enjoy the tree-lined area as it is specially designated for them.

The Jababeka Bike Zone was built in several phases. Phase 1 was inaugurated on April 25, 2010, by the Head of the Depart-ment of Tourism, Culture, Youth and Sports of Bekasi, Edi Rochy-adi, accompanied by Director of Jababeka Hyanto Wihadhi.

In Phase 1 Jababeka built 10 kilometers of a route that con-

nects the Education Park with the golf area, the Veranda Town House, the business area Pecenongan Square, the Botanical Garden, the Tropikana Residence and the Simprug Garden Residence.

A plan is in place for Bike Zone Phase 2 to be constructed facing Ja-babeka’s industrial area.

The Bike Zone Jababeka Develop-ment is completing facilities of which some are already available in Jababe-ka City such as:

Commercial facilities: The Capitol • Business Park, Jababeka Central Business District, Pusat Niaga Sunt-er, Electronics & Spare parts Center, Resto Plaza, Food CourtEducation facilities: President Uni-• versity, President Senior High School (Boarding School), President Junior High School, Academy of Machin-

ery Engineering & Industrial (ATMI), Al Azhar, BPK Penabur, Informatics-Communication Training CenterHousing Facilities: Villa-type • houses, Metropark Condo-minium, and The Veranda Golf View Town HouseEntertainment and other facil-• ities: Jababeka Golf & Country Club, D’Warrior’s Outbound, President Executive Club, Ho-tel Grand Zury, Plaza JB, Metro Hotel and health service cen-ters such as international hos-pitals, clinics and a pharmacyInfrastructure facilities with in-• ternational standards: water treatment plant, waste water treatment plant, the central power plant (Bekasi Power), Dry Port, and other public in-frastructure

The JababekaBIKE ZONE

PT Jababeka Tbk is committed to

participate in efforts to reduce CO2

emissions in order to reduce the impact

on Global Warming by building a bike zone in Jababeka

City.

EducationThe President Post www.thepresidentpost.comJuly 12, 2010A8

The President PostOFFICEMenara Batavia 25th Fl. Jl. K.H. Mas Mansyur Kav. 126Jakarta 10220, IndonesiaPhone : (021) 572 7337Fax : (021) 572 7338Email : [email protected] : www.thepresidentpost.com

PUBLISHED BYPT Sarana Pratama Pengembangan

CEO & EDITOR IN CHIEFAli Basyah Suryo

CONTRIBUTORSAtmono SuryoCyrillus Harinowo HadiwerdoyoTaufik DarusmanThomas W. ShreveJeannifer Filly SumaykuEka Putri

EDITORIAL & CIRCULATION DEPARTMENTEka Galliano

LAYOUT & DESIGNMohamad Akmal

SALES & MARKETINGDetia Rais

PHOTOGRAPHERNandi Nanti

Indonesia has seen its na-tional budget allocation for education increased markedly during the term of President Susilo Bambang Yudhoyono

(SBY). This year’s allocation is Rp221.47 trillion or 20% of the national budget. But here’s a big-ger news: before the end of SBY’s term, the government will have increased the education budget to Rp330 trillion, according to Minister of Education Prof. Mu-hammad Nuh.

The minister made the an-nouncement during a recent hearing with Commission X of the House of Representatives (DPR). This in itself is an indica-tion that President SBY’s govern-ment is very serious about raising people’s welfare through educa-tion and training.

Not long after he had made the announcement, came the news that a year after SBY concludes his second term of office in 2014, the budget allocation for educa-tion will soar to Rp350 trillion—an indication that by then educa-tion will have become, perhaps, the most important sector to be developed in order to upgrade the quality of Indonesia’s human re-sources.

So, education observes say, per-haps one of SBY’s most substan-tial contributions for Indonesia’s academic society is the new tra-dition to make education sector the recipient of the largest alloca-tion of state budget. This had in fact started in 2009, when for the first time in the nation’s history the allocation for education was raised to 20% of the annual state budget.

But the euphoria over budget increase quickly evaporated when it was learned that well over 60$ of this year’s budget allocation for education would go for rou-tine expenditure. This could be unavoidable if indeed the theory is that teachers’ salaries must be increased because they have for a long time been known as low-paid workers.

This year, for example, unless there is a change in budget policy orientation, a great portion of the 2014 budget will be used up for routine spending again and this spending pattern will continue at a time when the real need is qual-ity instead of quantity-oriented education.

This is apparently the reason why Minister Nuh remains com-

Education Budget Up to Rp330 TrillionBefore End of SBY’s Term

Photo: www.presidenri.go.id

By Alci Tamesa

mitted to retaining such fixed costs as BOS—the operational expenses for elementary and ju-nior high schools—despite his well publicized commitment to streamlining spending in order to curb irregularities.

This is considered a crucial is-sue by corruption watchdogs be-cause one thing that has been forgotten for many years is the need to promote budget efficien-cy within the education ministry. Likewise, budget efficiency cam-paigns need to be conducted in other government departments as well. Only in that way can we know how much of the national budget has been well spent and whether budget increase can real-ly contribute to quality improve-ment and promotion of educa-tional equity.

But many critics believe that increasing the budget allocation for education is not a guaran-tee that the quality of education will automatically improve. The problem of education in Indone-sia is so complex that one or two terms of office would be insuffi-cient for a minister of even a pres-ident to provide a comprehensive remedy.

For instance, even as the min-ister is upbeat about budget hike, his vice minister is cautious about school dropouts that are system-atically increasing in number.

Vice Minister for Education Prof. Fasli Jalal was recently quot-ed as recalling an announcement by the World Vision that every year at least one million children aged 7-15 are forced to drop out due to many reasons. One com-mon reason is their families’ in-ability to support them financial-ly.

Another common reason is that junior high schools are too far away from elementary schools so students have difficulty con-tinuing after completing their elementary education. In many parts of the country—except on the island of Java—schools are commonly located very far from students’ homes while transpor-tation is a big problem.

Still another reason cited by Prof Fasli is that in most rural ar-eas, students of that age catego-ry (7-15 years old) are obliged to help their parents earn money in whatever way possible, so those who are comfortable with such early jobs are not encouraged to pursue higher education.

The vice minister explains that on average, some 4% of school-

aged children across Indonesia still have no access to education. The children are not to blame; the government’s inability to reach all of them is the culprit.

To overcome this, however, the Ministry of National Educa-tion (MONE) is intensifying ef-forts to provide greater access to education while gradually raising the quality of teachers through National Teachers’ Certification Program.

Another effort that has been launched is to encourage central-ization of educational institutions in the sense that elementary, ju-nior, and senior high schools are relocated in the same premises so students will no longer complain about distance.

Currently the school participa-tion index—commonly referred to in Indonesia as APK—for ele-mentary school children is 115%, but for junior high school is 70% and on senior high school level, the index is only 60%.

At the university level, the in-dex is more discouraging—only 18%, meaning that the majori-ty of population expected to at-tend university still cannot do so. It also means that most univer-sity-age youths are not pursuing higher education. This is the rea-son why only around 4.5 million of the country’s total population of 240 million are registered on Indonesian campuses.

Real IssuesThis being the case, per-

haps one cannot easily conclude whether or not the increases in education budget are sufficient. The real issue at the moment, ac-cording to education observers, is not just about raising salaries and improving facilities. The real is-sue is actually a lack of compre-hensive strategy for raising the quality of Indonesia’s human re-sources through education and training.

In the first Instance, there must be a good strategy to determine the ratio of general and vocation-al education up to secondary or senior high school level. The gov-ernment is working to alter the current ratio to 70% vocational education and 30% general ed-ucation on the senior high level. If this works well, only those in the 30% group will seek universi-ty education whereas those in the 70% category will be prepared to either enter the job market quick-ly or become job-creators them-selves. So until here, the focus of

education is mainly limited to preparing students to get a job. Holistic education, consequent-ly, is abandoned. Not surprising-ly schools do not produce gradu-ates with strong personality and integrity, observers say.

Another big issue that must be solved is the question of qual-ity disparity. Given the fact that Indonesia is a huge archipelago and only certain major islands are well developed economical-ly, good teachers are concentrated in big cities where they can earn good salaries. As a result, schools in big cities are of much high-er quality than those in remote parts of the country.

Education quality disparity is an issue that cannot be solved by MONE alone. Solution for this needs an integrated approach from many government minis-tries especially the ones in charge of the economy and people’s wel-fare.

Now, given the fact that the government has to spend for oth-er sectors as well, the right thing to do is to encourage private schools to take part of the bur-den. This calls for equal treat-ment in many ways to the extent

that private schools will no longer see discrimination in policy exe-cution.

In recent years, especially dur-ing President SBY’s term, many private schools have begun to see change including higher frequen-cy of visits to private universities by high ranking officials as well as their support for private edu-cational institutions’ cooperation initiatives with provincial gov-ernments. One most recent such example is the cooperation be-tween the government of Papua and Pelita Harapan Education-al Foundation for the establish-ment of Sekolah Papua Harapan, as was recently reported by an ed-ucation and university life maga-zine called CampusAsia.

In order to provide students with greater access to education in a more sophisticated way, First Lady Mrs. Ani Yudhoyono is championing a nation-wide cam-paign called “Smart Indonesia.”

Under this program, the gov-ernment sends out a lot of “ed-ucational cars, educational mo-torcycles and educational boats” to enable students to get reading material on the spot. In this way, the First Lady hopes that students who cannot obtain proper books and learning facilities may get them free of charge from those modes of transportation.

She made the announcement when addressing the general as-sembly of the Forum of Asia Pa-cific Parliamentarians for Ed-ucation (FASPPED) in Jakarta recently. The aim is to promote equal opportunity and better ac-cess to education especially for chuldren from “less fortunate” families.

With all these endeavors go-ing on, more and more people are now saying that SBY deserves be-ing called a “pro-education pres-ident”, a terminology introduced

by presidential spokesman Dr. Dino Patti Djalal.

All the optimism apart, one may ask whether the emphasis on education that has been set in motion by SBY will remain on the government’s agenda when the president leaves offices in Oc-tober 2014.

Indonesia still does not have a truly consistent long-term strate-gy for education, though on pa-per it does. So, perhaps one of the policy priorities MONE needs to put in motion during SBY’s term of office is to draft a long-term strategic plan that will be imple-mented for decades to come.

The President himself has re-peatedly said that the strength of every nation is made by its schol-ars and education sector is the breeding ground of such scholars. This is apparently the reason why he has put so much emphasis on the need to upgrade the quality of education across the country.

Minister of Education Prof. Muhamad Nuh

The President Postwww.thepresidentpost.com

Display until August 12, 2010 /// N0. 14Business B

PT Jababeka Tbk is a company that built the first private-owned industrial estate in Indonesia in 1989. Currently, the industry area which was originally only 560 ha has been developed into Jababeka City with an area of 5600 ha. There are 1500 local and multina-tional companies from 30 countries in Jababeka City.

As an integrated autonomous city, Jababeka City is equipped with com-

Ground Breaking at Simprug Garden, Jababeka City

plete and modern infrastructure, in-cluding water treatment plant, waste water treatment plant, central power plant (Bekasi Power), dry port and other public infrastructure.

Jababeka was designed in such a way as to combine an industrial area, housing, education facilities and en-tertainment venues. The entire infra-structure was built in a harmonious manner and adheres to an environ-

mental friendly concept. So, it is much more appropriate to call Jababeka City an “Integrated Modern City”.

Currently, Jababeka City is develop-ing a new housing cluster called Sim-prug Garden Residence.

The ground-breaking occasion was held on May 19, 2010 at the site and was attended by Jababeka citizens and the management of PT Jababeka

Tbk, one of who m was Sutedja Dar-mono, and Dadi Suprapto from PT CMC, a sub-developer. The event was enlivened by Chinese traditional dance Barongsai, a painting on shirt competition and the performance of young artist.

Simprug Garden Residence was built to fulfill the needs of Jababeka communities and its surroundings for safe and comfortable housing,

Simprug Garden Residence was built to fulfill the needs of Jababeka communities and its surroundings for safe and comfortable housing, with first-class facilities at affordable prices.

with first-class facilities at affordable prices.

The Residence is equipped with a green park, 24 hour security with CCTV cameras and a beautiful and comfortable environment for fami-lies.

Simprug Garden Residence is very strategically located at the center of Jababeka City, which is not far from the Education area where there are schools such as BPK Penabur, Al Azhar, the President University and others. It also takes only minutes to reach the Harapan Keluarga, the Medirossa and the Mitra Keluarga hospitals.

Jababeka City also offers various shopping and business areas such as Plaza JB, Carrefour Express, and Plaza Roxy that could meet all the needs of Jababeka citizens.

Just minutes away from Simprug Garden Residence are the Jababeka Golf & Country Club, where residents can enjoy golf with colleagues and families. Also available is D’Warriors

Outbond where citizens can conduct outbound activities.

Simprug Garden Residence has direct access to the toll booth KM 34.8 that will be built soon. So, the value of investment in Simprug Garden Residence is expected to increase in just over five years.

The development of Jababeka itself is very fast, thanks to sup-port provided by the public and all employees of the Jababeka Group.

Various projects with attrac-tive investment prospects have been launched, such as Indone-sia Movieland, Medical City, Cu-linary Center, Sunter Niaga Mas, Automotive Centre, Sentra Niaga Square and many other projects. It can be said that houses in Ja-babeka City carry a higher value than in other areas because they come with various facilities of in-ternational standard.

Mandala starts daily flights to Singapore

Budget carrier Mandala Air took its maiden flight to Singapore last month, marking the start of daily flights between Jakarta Singapore, and three flights via Balikpapan, East Kalimantan each week.

Mandala uses the 180-seat Airbus A 320 for the first flight which head of Corporate Communication Trisia Megawati says facilitates business and leisure travel between the two countries.

The formerly military business unit was sold to Cardig International in 2006 as the government was unable to buy the airline from the military.

Indigo Partners bought almost half of the company later in the same year.It flies mostly in western Indonesia islands of Sumatra Java, and Kalimantan.

Bakrie, Google to develop data service

PT Bakrie Connectivity (B-Con) signed a memorandum of understanding with Google International to develop data service in Indonesia.

The signing was done here last month by B-Con president director Erik Meijer and Google International s director for Asia Pacific development Emmanuel Sauquet.

“Through the cooperation our data service would be directly integrated with various Google products,” Meijer said.

Sauquet was optimistic his company could develop cooperation with B-Con to produce a unique and innovative distribution service.

“With that the Indonesian community could easily reach web browser Google Chrome and other Google products,” he said.

Saququet said AHA customers could easily access Google Chorme`s newest version that combines speed and power with ease and intelligence which is the trademark of Google.

BCA nets 8.7 million saving accounts

PT Bank Central Asia (BCA) succeeded in recording 8.7 million saving accounts from depositors through its `Tahapan` saving scheme with funds

amounting to Rp108 trillion in the first quarter of 2010, a BCA executive said.“The amount of funds collected increased if compared with that recorded in

the same period a year earlier,” BCA`s head for funds and service development Ina Suwandi said.

She said that the Tahapan scheme was one of the BCA products intended to provide easiness and convenience for customers.

Over 130 million transactions were made in the first quarter of 2010 where the automatic teller machine (ATM) service constituted the most popular transaction means used by customers.

BCA has over 6,700 ATM booths in various strategic locations, she said.

Gudang Garam to pay dividendsof Rp1.25 trillion

PT Gudang Garam Tbk, Indonesia`s largest publicly-listed cigarette maker, has decided to allocate Rp1.25 trillion of its last year`s net profit as dividends.

The dividends, equal with Rp650 per share, would be paid to shareholders put on the company`s list of shareholders until May 20, 2010, PT Gudang Garam President Director Susilo Wonowidjojo said after a general shareholders meeting here last month.

In 2009, Gudang Garam booked a net profit of Rp3.4 trillion, a 83.8% surge compared with the year before.

The meeting also appointed Juni Setiawati Wonowidjojo chief of the board of commissioners with Yudiono Muktiwidjojo, Frank Willem van Gelder, and Lucas Mulia Suhardja as members.

Meanwhile, the board of directors consists of Susilo Wonowidjojo as president director, and Heru Budiman, Edijanto, Herry Susianto, Buana Susilo, and Fajar Semeru as directors.

BUSINESS BRIEFS

Garuda Indone-sia confirmed last month that it would equip its air-craft with in-

flight information tech-nology facilities in 2011 to improve its service to pas-sengers.

“We will do it next year. Passengers can then com-municate through an in-ternet service and also send short text messages,” its pres-ident director, Emirsyah Sa-tar, said after signing a mem-orandum of understanding on T-Cash ticket payment with Telkomsel here last month.

He said all new Garuda planes would be equipped with mobile technology and later all Garuda planes will also be given the capability.

He said the technolo-gy will allow passengers to communicate using the short text message service (SMS) and operate laptops on board aircraft.

“The technology has been developed abroad and does not disrupt the air naviga-tion system. It will not in-clude phone calls,” he said.

Regarding the regula-tion put in Law Number 1 of 2009 that bans passengers from using telecommunica-tion facilities while aboard a plane, Emirsyah said he would discuss the matter with the government.

On the cooperation with Telkomsel he said that it would make it easier for would-be passengers to buy tickets or make Garuda seat reservations by phone.

Garuda Indonesia to Install IT Facilities in Aircraft in 2011

“Telkomsel customers total-ling 86 millions will benefit from the cooperation,” he said.

Telkomsel president di-rector Sarwoto Atmosutarno said he would ex-ploit T-Cash fa-cility to m a k e it eas-ier for Te l k om-sel custom-ers to buy Garu-da tickets.

T-Cash is one of the fa-cilities Telkomsel is devel-oping along with mobile payment and mobile advertis-ing, he said.

Regarding the House of Rep-resentatives (DPR) wish for re-duction in the hajj flight cost, Emirsyah said Garuda would accept whatever the govern-ment and the DPR would de-cide.

He said although it might reduce the company s margin, service to hajj passengers would not decline.

“We will give the best pos-sible service to them. What is important is the flight is smooth and Garuda does not lose,” he said.

He said the hajj flight cost was determined by the world fuel price.

“If the contract with the reli-gious affairs ministry has been signed and at the time the hajj pilgrimage season begins, the fuel price rises, that will be our risk,” he said.

The technology will allow passengers to communicate using the short text message service (SMS) and operate laptops on board aircraft.

All new Garuda planes would be equipped with mobile technology and later all Garuda planes will also be given the capability.

Swiss Bel Hotel Opens in AmbonAmbon Mayor Jopi Papilaja

has welcomed the operation of Swiss Bel Hotel in the city, say-ing it would lift the image of Maluku s provincial capital.

“The presence of Swiss Bel managed by an interantional ho-tel network will boost the im-age of Ambon as a modern city worth visiting,” he said at a cere-mony marking the official open-ing of the hotel dubbed “Pearl of Ambon” here last month.

He admitted the investor had initially hesitated to build the ho-tel in the city in 2005 but after

being persuaded by the local gov-ernment and promised special fa-cilities, they finally agreed to car-ry out the project.

“I once even reminded them to finish it quickly so that it could be launched before I complete my tenure,” he said.

He said the presence for the first time of a five-star hotel in-creased the number of star-rated hotels in the region following the Aston Natsepa a year ago.

“Swiss Bel and Aston will im-prove the image of Ambon as a secure place and worth visiting by both domestic and foreign tour-

ists,” he said.The presence of the hotels

demonstrated the seriousness of investors to boost development of the city after being ravaged by so-cial conflict in 1999.

Papilaja expressed apprecia-tion to the management of the Swess Bel Hotel that had helped promote Ambon and Maluku through the hotel s network.

He hoped it would attract more investors to invest in the region.

“We are ready to provide facil-ities for investors willing to invest in Ambon in the field of hotel business or others,” he said.

Photo: www.swiss-belhotel.com

BusinessThe President Post www.thepresidentpost.comJuly 12, 2010B2

K rakatau Steel is set to hold a 45% stake in a joint venture compa-ny with Pohang Iron

& Steel Corporation (POSCO) with 55% to be controlled by the South Korean company.

State Enterprises Minister Mustafa Abubakar said Kraka-tau Steel was initially only go-ing to hold a 30% stake but both companies later agreed to change the shareownership composition.

Both companies plan to build

KS to Control 45% Stake inJV with POSCO

a steel plant with 2.7 million tons of production capacity per an-num, which is expected to finish in three years.

The construction of the project will start at the end of July 2010 with an investment of between US$500 million and US$1 bil-lion.

The two companies also agreed to set the price of land at US$72-74 per square meter.

Meanwhile, Krakatau Steel re-ported it has sold 600,000 tons

of steel in the first quarter of the year.

Krakatau Steel Marketing Di-rector Irvan K Hakim said sales were sluggish last year due to the global economic crisis.

“This year is expected to be higher than last year, or almost the same as in 2007,” he said.

He added that the company sets a monthly production tar-get of 200,000 tons and that the 600,000 tons sale in the first

three months is in line with the company’s target.

Prices of steel in the first quar-ter of 2010 has improved com-pared to the same period a year earlier. Irvan attributed the price hike to an increase in prices of raw materials, not demand.

Industry players are projecting national steel demand to grow by 10% up until the end of the year to 8.8 million tons from 8 mil-lion tons per year, with the price to rise by more than twofolds.

Industry players are projecting national

steel demand to grow by 10% up

until the end of the year to 8.8 million

tons from 8 million tons per year.

Bakrie & Brothers Tbk (BNBR) has invited strategic in-vestors from South Korea and China to cooperate on three proj-ects, namely gas piping, highway construction and power plants.

BNBR President Director Bob-by Gafur S. Umar said the com-pany has developed strategic part-nerships with two investors from South Korea and China. BNBR has agreed to work on the power plants project with the South Ko-rean investor and other projects with the Chinese investor.

“We control a majority stake in the projects,” he said after the company’s annual meeting of shareholders last month, adding

BNBR, S. Korean and Chinese Investors to Develop Infrastructure Projects

that the total amount of invest-ment for the highway, gas piping and power plant projects is esti-mated at US$300-500 million.

The company is also ready to roll out US$200-300 million funds for both existing and new investment portfolios.

“Investment may come in the form of company acquisition through co-invesment scheme for around US$200-300 million,” he explained, adding that three companies have stated their read-iness to collaborate through co-investment scheme but declined to disclose the names of the com-panies.

BNBR is also planning to

up its stake in Bumi Resources (BUMI) to 23-25% in the sec-ond half of 2010, from the cur-rent 19.5%.

Umar also said the company is still studying the financing possi-bility for the plan, including in-creasing its shares through sec-ondary market or acquiring them from other shareholders.

BNBR also unveiled its plan to develop its subsidiary, Bakrie En-ergy. The company has already brought profits to the company since it was first established ear-lier this year, he said.

“It already reaped profits from selling fuel to plantation and min-ing companies in the first quar-

ter. We are expecting Rp100-150 billion in net profit from Bakrie Energy,” he said.

During the shareholders meet-ing, the company also changed its management lineup.

BNBR previously adopted two types of management called Board of Directors (BOD) and Board of Management (BOM) but decided to dissolve the BOM to prevent dupication.

Top executives Nalinkant A. Rathod, Ari Saptari Hudaya and Dileep Srivastava are now no lon-ger with the company.

The following is the new BOD

lineup:President Director: Bobby •Gafur S. UmarDirector: Eddy Soeparno•Director: Dody Taufiq Wijaya•Director: Siddharta Moersjid•Director: R.A. Sri •Dharmayanti

Board of Commissioners line-up is unchanged:

President Commissioner: •Irwan SjarkawiIndependent Commissioner: •Mohamad IksanCommissioner: Nugroho I •PurbowinotoCommissioner: Armansyah •Yamin

Rukun Raharja’s (RAJA) man-agement is planning to acquire three energy companies for Rp 650 billion after securing ap-proval from shareholders.

The move is part of the com-pany’s strategy to diversify its businesses in the oil and gas sector from upstream to down-stream to tap the growing do-mestic market.

The company has yet to de-cide on the financing scheme.

RAJA will acquire a majority stake in the three companies, 99.98% in Triguna Internusa Pratama, 99.98% in Panji Raya Alamindo and 99.99% in Capital Turbines Indonesia.

Panji Raya through its subsid-iary Energasindo Heksa Karya (EHK) focuses on trade and dis-tribution of natural gas in West Java and Jambi and supplies up

to 50 MMSCF/D (million standard cubic feet per day) gas to state electricity company PLN and other companies.

Panji Raya also has another subsidiary called Suryandra Nusa Bakti (SNB) that tackles transpor-tation and LPG distribution in the Great Jakarta area, West Java and Medan.

Triguna Internusa focuses its business on gas infrastructure pro-curement of piping network for gas distributions in West Java and gas compression equipment for PLN’s power plants with gas flow capacity of 35 MMSCF/D.

Capital Turbines is a power mechanical contractor. In 2008, the company built a steam power plant with 2x22 MW capacity in Bintan Island.

CTI plans to build more power plants with a total capacity of 150 MW in the next three years.

Rukun Raharja to Acquire Three Energy Firmsfor Rp 650 billion

Dayaindo Resources Interna-tional (KARK) revised its rights is-sue price from initially Rp100 per share to Rp105 per share to reap Rp1.984 trillion in proceeds.

KARK is planning to issue 18,904,390,313 in new shares through non pre-emptive rights mechanism. The company has set the rights issue ratio at 2:21, which means that every existing shareholders are entitled to ex-ecute 21 new shares.

The company will use the proceeds to acquire 70% shares in Anugerah Tompira Nikel (ATN) for Rp350 billion, and will set aside Rp600 billion in develop-ment funds for ATN.

It also plans to acquire a 80% stake in Belang Belang Coal Ter-

Dayaindo Raises Rights Issue Price to Rp105 per Share

minal (BBC) for Rp100 billion and will allocate Rp510.955 billion for its development.

KARK said it will use the remain-ing Rp420.815 billion proceeds for working capital.

Manhattan Asset Management Indonesia (MAMI), KARK’s control-ling shareholder, is committed to buy 4,291,741,094 in KARK’s new shares for Rp105 per share or to-taling Rp450.632 billion.

Chungrim Co Ltd, the standby buyer in the rights issue, is ready to absorb 14,612,649,219 in new shares for Rp105 per share and has readied Rp1.534 trillion funds for the purpose.

Chungrim will become the new controlling shareholder if MAMI fails to absorb the remaining shares.

Media Citra Nusantara (MNC) plans to issue US$300-400 mil-lion bonds in the final quarter of this year.

The company has appointed Morgan Stanley and Standard Chartered as underwriters for the bond issuance.

MNC President Director Hary Tanoesoedibjo said the com-pany will issue global bonds and is confident that the market will absorb the bonds despite the ongoing European debt crisis.

“It is (the European debt cri-

MNC Set to Issue US$300-400 million Bonds

sis) starting to subside and is get-ting normal. We remain upbeat about the market condition,” he told reporters during a press con-ference.

Hary said the company will use the proceeds for refinancing its US$143 million global bond which will mature in September 2011.

The company will also use the proceeds to refinance its working capital loan of Rp200 billion, which also expires next year, as well as use the remaining for capital ex-penditure, business expansion and investment.

On June 11, PT Jababeka Tbk held its Annual General Meet-ing of Shareholders (AGMS) at the JW Marriott Hotel in Jakar-ta. The AGMS reached the re-quired quorum and proceeded smoothly.

Due to the global econom-ic crisis, Jababeka’s revenue de-creased 15% to Rp 390 billion in 2009, mainly as a result of a de-cline in real estate sales. A major milestone was reached when Ja-babeka’s wholly owned subsid-iary Bekasi Power commenced operations of its first gas turbine in November 2009, contribut-ing Rp 23 billion in revenue as an emergency sale and purchase agreement was signed with PLN. Jababeka booked a net income of Rp 16 billion in 2009, a vast im-provement from the Rp 62 bil-lion loss in 2008.

The AGMS was followed by the annual Public Expose, where Jababeka elaborated on its key projects and financial perfor-mance. CAPEX requirements for Jababeka’s key projects such as Dry Port, Power Plant, Indonesia Movieland and Medical City, is

Jababeka Becomes a Fully Integrated Enterpriseestimated at Rp 450 billion

In the first quarter of 2010, Ja-babeka booked a total revenue of Rp 158.5 billion, a 103% increase compared to Q1 2009. Sales de-rived from real estate products (land and land with buildings) increased more than 100% to become Rp 59.5 billion, while land area sold over the same pe-riod more than tripled. Revenue is projected to increase from ap-proximately Rp 400 billion in 2009 to Rp 1.5 trillion in 2-3 years. At the same time, recur-ring revenue is estimated to in-crease from 57% in 2009 to reach more than 75%, making Jababe-ka a more stable company. Given the positive economic growth, in-creased investment and consum-er purchasing power, manage-ment is optimistic that Jababeka can take on business opportu-nities of its existing projects and improve its performance in 2010 and succeeding years.

With the new Power Plant and Dry Port projects and their large revenue contributions, Jababeka is gradually transforming into a fully integrated enterprise.

Left-Right: Anton Budidjaja (Commissioner), Bacelius Ruru (President Commissioner), Setyono Djuandi Darmono (President Director), Budianto Liman (Vice President Director), Setiasa Kusuma (Director), Hyanto Wihadhi (Director)


Do you ever notice that your motor vehicle has components that come from several different places?

Each part of a vehicle has passed a production process at its place of origin and was assembled by automo-bile producers.

PT Trimitra Citrahasta is a firm that produces automotive and motorcycle parts. Amidst a growing automotive industry in Indonesia, PT Trimitra Chi-trahasta was founded in 1994 to spe-cialize in Metal Stamping parts, Dies, Jigs, and Fixtures.

Today PT Trimitra Citrahasta has more than 700 competent employees making high-quality products.

Supported by state-of-the-art equipment and well- trained human resources, PT Trimitra Citrahasta strives to deliver high-quality products at reasonable prices on time.

It will continuously improve all as-pects of the company’s operations to guarantee full customer satisfaction.

Its President Director, Johan Tamsir, is the founder of PT Trimitra Citra-

Essential Parts from PT Trimitra Citrahasta

hasta. “It was a bold decision to my set up

my own company,” he said in a recent interview with The President Post.

Tamsir used to be a professional working at one of the biggest auto-motive companies in Indonesia when he decided to start his own business. At the time he had recognized the

momentum caused by the surge in local-made automotive parts in 1994.

PT Trimitra Citrahasta focuses on supplying automotive parts to sole agents (ATPM) such as Suzuki, Yama-ha, Kawasaki, Mitsubishi, Daihatsu, Toyota and others.

The company only produces com-ponents at the request of ATPMs.

In the past 16 years, PT Trimitra

Citrahasta has gone through many troubled times.

During the financial crisis of 1998, PT Trimitra had to trim down their employees, from 350 to 180, in order to cut production costs as its produc-tion level was at the time only 20% of its capacity.

Throughout a period of ups and downs, PT Trimitra Citrahasta has successfully managed to set up four affiliated companies producing plas-tic-based automotive parts, and ma-chining parts.

As an entrepreneur, Johan sees the automotive business still developing in the next five years. He also wishes to see its human resources becom-ing more competent and working ef-ficiently in order to produce products at most competitive prices.

PT Trimitra Citrahasta has already built four factories at the Jababeka Industrial Estate in Cikarang.

Tamsir said that “it was my best de-cision to built factories at Jababeka be-cause it has the best infrastructure.”

PT Trimitra Citrahasta is a firm that

produces automotive and motorcycle parts.

Amidst a growing automotive industry

in Indonesia, PT Trimitra Chitrahasta

was founded in 1994 to specialize in Metal Stamping parts, Dies,

Jigs, and Fixtures.

By Jeannifer Filly Sumayku

A worker of PT Trimitra Citrahasta produces metal stamping parts from press machine at one of the factory at Jababeka industry area, Cikarang.


Johan Tamsir


The President Postwww.thepresidentpost.com July 12, 2010 B3

Investment

First Media announces rights issuefor WiMax network

The multimedia service company and subsidiary of the powerful Lippo Group, PT First Media Tbk, announced its plan for a rights issue to generate up to Rp450 billion, or less than half of its needs this year, for business operations and expansion

which will incude WiMax internet access service.President Director Hengkie Liwanto told Tempo his company is planning to

cover its capital goods spending this year of around Rp1 trillion from shareholders, internal fund sources, and right issue.

Some of the Rp450 billion expected to be obtained from rights issue will be invested in WiMax network.

Hengkie said earnings before tax as of June has exceeded the 2009 annual profit at Rp200 billion, Tempo reported last month.

ANZ seeks to increase its stake in Panin

The Australian and New Zealand Banking Group intend to add its stake in Panin Bank.

“If they want to sell their share, we will buy it,” said President Director of ANZ Indonesia Joseph Abraham here last month.

Right now, ANZ has a 38.5% share in Panin Bank, while the Gunawan family is reported to plan to sell 44% of their shares in Panin.

ANZ and Panin formed the joint venture ANZ Panin Indonesia. About 85% of its shares are owned by ANZ.“We are still awaiting approval from Bank Indonesia,” Abraham said.

Government in talks with Wilmar International

Singapore’s Wilmar International Ltd, a merchandising and agriculture holding firm, plans to step up its investment in Indonesia, especially in the food estate projects in Merauke, Papua this year, the investment regulator BKPM said last month.

Chairman of BKPM Gita Wirjawan said Wilmar, which is in talks with the governemnt, aims to put US$2 billion in Indonesia this year, but he could not determine how much of the investment will go to the food estate project.

The group has long been operating in Indonesia through one of its local units, PT Wilmar Nabati Indonesia, a palm oil company based in Medan, North Sumatra.

Singapore investors to buildNTB convention centre

The West Nusa Tenggara Government has chosen PT Indosinga Invetama as its partner to build an international standard meeting hall, The NTB Convention Centre.

The investor from Singapore outbid several other candidates, Tempo reported.

The meeting hall plans to have 74.000 square meters with a capacity of 5000 people.

The NTB Convention Centre will be built on land belonging to the Mataram provincial government of 3.3 hectares with a fund of Rp384 billion.

The investment is based on built, operate and transfer (BOT) system for 30 years.

Sarinah to enter stock exchange by 2013

PT Sarinah Ltd. has plans to enter the stock exchange by 2013. “After we calculated the figures and our intention to accelerate our business,

it is more realistic if we realize the IPO in 2013,” Sarinah CEO Jimmy Gani told Tempo last month.

Sarinah will release 20 to 30% of its share to add to the company’s investment fund.

This year, it needs Rp 100 billion capital.Besides to repair booths in Jakarta, Yogyakarta, Batam, Semarang, and

Malang, the funds will be required to open new booths and strengthen capital. “With privatization, we aim to obtain Rp 300 billion from the public,” said

Jimmy.

INVESTMENT BRIEFS

The Saudi gov-e r n m e n t has invested around US$8 billion in In-donesia since

the two governments estab-lished cooperation 50 years ago, a spokesman said.

The Saudi government in-vested US$2 billion in Indo-nesia in the early days of the

Saudi Investment in RIReaches $8 billion

cooperation, spokesman for the Saudi Embassy in Indonesia Ah-mad Ali Kattonah said here last month.

“The increase in investment was the result of good bilateral cooperation particularly in the economic field,” he said.

He expressed hope the Sau-di relations with West Sulawesi province, which started this year, would involve all parties particu-

larly stakeholders in the region. “The first phase of cooperation

we will develop with the West Sulawesi provincial government will cover investment in the reli-gious field according to the local government s proposal,” he said.

Saudi Arabia ready to invest on rice development in Indonesia

Meanwhile, the Saudi govern-ment has expressed its interest in investing in the rice develop-ment sector in Indonesia, a cabi-net minister said.

Minister of Agriculture Sus-wono said here on Thursday that in order to meet its domestic need, Saudi Arabia imported one

The Saudi government has expressed its interest in investing in the rice development sector in Indonesia

million tons of rice per annum.Besides, it also imported three

million tons of wheat and seven million tons of barley to meet its need for cattle feeds, he said.

“The Saudi minister for agri-culture expressed the readiness of his country to make investment in Indonesia, particularly in the rice development sector,” the minister said when he explained the results of his visit to Saudi Arabia on June 11-13, 2010.

To follow up the results of his visit to Saudi Arabia, the minis-ter expected that the Indonesian Embassy in Riyadh would orga-nize an investment meeting and

formulate regulations on the in-vestment.

Besides that, the minister also proposed that the holding of a research on the development of `Basmati` type of rice because this rice type had better produc-tivity and taste if planted in Indo-nesia rather than in other coun-tries.

He said that in his meeting with the Saudi Arabian Chamber of Commerce and Industry, Hani Abiras, they agreed the need to increase Saudi investment in the agricultural sector, particularly food, cattle breeding, fowl indus-try, cattle feed and fisheries.

Indonesia and the Europe-an Union will increase com-munication between their businessmen to boost ex-ports and investment to and from the two parties in five priority sectors.

“We wish to identify op-portunities available to in-crease exports and attract in-vestment,” Indonesian trade minister Mari Elka Panges-tu said at the launching of European Union-Indonesia Business Dialogue (EIBD) Forum here on Wednesday.

The forum to be staged in November 2010 is expected to be able to give inputs to the governments of the two

RI, EU to Boost Exports and Investment in Five Sectorsparties to overcome problems hindering economic relations.

The forum has been held once before and in connection with it this time the two parties have formed nine working groups, five of them to focus on priority sec-tors and four others on inter-sec-toral affairs.

The five sectors to be discussed are medical and pharmaceuti-cal sectors, textiles, garment and footwear sectors.

Working groups have also been set up for automotive and ma-chinery sectors, infrastructure and food and beverage sectors.

The inter-sectoral teams mean-while will discuss physical infra-structure, services, law and reg-

ulation as well as urgent issues concerned with growth and trade facilities.

On the occasion the head of the EU delegation for Indone-sia and Brunei Darussalam, Ju-

lian Wilson, said that the forum was very important with regard to hearing voices from Indone-sian businessmen wishing to ex-pand their business to Europe or vice versa.

Trade between the two par-ties have grown stable so far at around US$25 billion a year. In-donesia has so far always enjoyed a surplus with its exports to the region surpassing US$13 billion in value a year.

“We still have a big opportuni-ty to increase our trade,” he said.

The head of the Indonesian-French Chamber of Commerce and Industry (IFCCI), Alain Pierre Mignon, said Indonesia is a potential country for French

companies to invest.So far however French inves-

tors have not yet received correct information about the condition in the country.

He said the interest of French businessmen to conduct partner-ship with Indonesian business-men is high. In view of that he wished to encourage business-men from his country to come to the forum so that they would be able to know Indonesia better.

“For the past 80 years we have been successful here. Now how-ever there are more competitors such as from China, Japan and India. May be we need a new business model. That is what we are going to discuss,” he said.

Trade Minister Mari Elka Pangestu

ADVERTORIAL

Qatar National Bank and Covenant International ManagementEnter into a Sales and Distribution Agreement for the Al Watani Fund II

Doha, Qatar – Qatar National Bank (QNB) and Covenant International Management have entered into a Sales and Distribution Agreement giving Covenant International Man-agement exclusive third-party distri-bution of the Al Watani II fund in Asia. The Al Watani II fund is QNB’s open-end investment fund for resident expatriates of Qatar and non-foreign national and companies. The fund invests in the local Qatari securities market and is a highly efficient way to invest in Qatar’s booming economy and in the Qatar Exchange.

Mr. Ajay Kumar, Assistant General Manager, Investment & Funds Man-

agement, said “The partnership with Covenant International Management broadens our geographic distribution channel for the Al Watani Fund II and gives us greater access to our target markets in Asia. Qatar continues to experience robust growth as a de-veloping economy and international investors can gain access to the Doha Securities Market through the fund.” Anthony Galliano, Chief Executive Of-ficer of Covenant International Man-agement, said “We believe there will be increased interest in the Middle Eastern markets and Qatar is a suc-cess story in the region. The fund will appeal to investors seeking geo-

graphic diversification in the growth markets of the Middle East and we are extremely fortunate to have a partnership with QNB.”

The Al Watani II Fund was estab-lished and managed by QNB under the laws of the State of Qatar. The primary aim of the Al Watani Fund II is to seek, on a best efforts basis, to out-perform the Qatar Exchange returns, and at the same time reduce the risk associated with the investment.

QNBQatar National Bank (QNB), as

established in 1964 as the country’s first Qatari-owned commercial bank

and has an ownership structure split between the Qatar Investment Au-thority (50%) and the private sector (50%). QNB has steadily grown to be among the largest banks in the region and is by far the leading financial insti-tution in Qatar, with a market share approaching 40% of banking sector assets. QNB offers a full range of Re-tail, Corporate, Investment, Treasury, Wealth Management, and Islamic Banking products and services for individuals, corporate institutions, and government entities in Qatar as well as an intermediary. QNB has the largest distribution network in Qatar, comprising 45 branches and offices,

in addition to 11 Islamic branches and offices operated by QNB Al Islami and more than 160 ATMs. QNB has pres-ence in 22 countries.

Covenant International Management

Covenant International Manage-ment was established in 2005 as a pri-vately held foreign owned Indonesian company and has offices in Indonesia and Cambodia. The company has a three pillar product set of Insurance Agency, Wealth Management, and Corporate Finance and serves high-net individuals as well as major corpo-rate and institutions across Asia.

Anthony GallianoPresident DirectorCovenant InternationalManagement

Covenant International ManagementApt. Permata Hijau Tower 2, 9E FloorJl. Raya Permata Hijau Blok B/8Jakarta Selatan, Indonesia 12210

No. 11 Street 7 Chaktomok KhanDaun Penh, Phnom Penh CambodiaPh. +855 1290 2535

Investment Growth

Workers complete a high-rise building in Jakarta, as the National Development Planning Board (Bappenas) expects investment in 2011 to grow by 10 percent to meet the economic growth target of 6-6.3%.


ManagementThe President Post www.thepresidentpost.comJuly 12, 2010B4

RifkiConsultantHay Group Jakarta

Creating High Performing OrganizationConnecting the Hard and Soft

Lina SukriConsultantHay Group Jakarta

CEOs are facing increasing pressure to improve results. Highly complex and sophisticated Performance Management (PM) systems and instruments are in place but are not properly applied; and as a result, employees are not motivated in the expected way. Despite the complexity of systems, a direct link between an organization’s strategy and an individual’s

own set of targets is not given in most of the cases. Another key issue is that many managers just do not manage the consequences of poor performance – giving constructive or even negative feedback still seems to be one of the biggest challenges for managers.

Failing Performance Management: “A Growing Concern”

As business landscape increases in competition intensity and be-comes more complex, sharehold-ers’ demand for more readable, predictable, and sustainable busi-ness and business results conse-quently increases. CEOs, leaders, and managers go through series of management processes1 in order to satisfy these demands. They develop the overarching strate-gies, translate those strategies into specific objectives and initiatives, plan the required operations to achieve the objectives and to ex-ecute the initiatives, monitor the operations, and adapt the strate-gies and their implementations as the results unveil.

To ensure that the objectives are achieved and that the initia-tives are executed as planned, CEOs, leaders, and managers need to move every organization-al member in the same direction. Organizations have put in place highly complex and sophisticat-ed PM systems and instruments to help their CEOs, leaders, and managers with part of the man-agement processes. CEOs, lead-ers, and managers use PM sys-tems and instruments to help them translate the strategy into specific objectives and initiatives for every organizational member, and to help CEOs, leaders, and managers monitor and manage the operations. Yet, PM systems fail to move every organization-al member in the same direction, and therefore the expected per-formance level and the results are not there.

What Makes Performance Management Fail

Our experience from working with clients to create high per-forming organizations reveals, out of the many reasons for the ineffective or event failing PM systems, the same tell-tale sign about what is not working. In the majority of cases there is a gap between organizational member work and how the performance is managed and the business goals the organization are trying to achieve. There is a missing link between the ‘hard’ – the business goals and the strategy – and the ‘soft’ –culture and organizational members’ motivation – of the or-ganization and the PM system.

CEO and leaders, with a view to maximize the value of the company, have devised seeming-ly full proved overarching strat-egies and very well thought stra-tegic goals. However, they, using the PM system, fail to translate these goals into more specific per-formance targets that are mean-ingful and make sense for organi-zational members further down the organization. Individual or team performance targets fail to be meaningful to the organiza-tional members because organi-zational members do not see the direct line of sight between the targets and the strategic goals. Individual or team performance targets also fail to make sense to the organizational members be-cause organizational members do not have substantial degree of control over the targets. There-fore PM system fails to motivate and engage every organizational member.

In addition, over the years many organizations have invest-ed much time and effort to im-plement PM “best practice” as a way to ensure competitive advan-

tage. However they have over-looked the organization culture; a set of shared assumptions that have been learned over time, are taught to new members, and are believed to be the correct way to perceive, think, and feel. Or-ganization’s culture influences the way organizational members work and coordinate their activi-ties to achieve common goals and expectations, and also the way they’re managing performance. Hence, if overlooked, culture of-ten becomes the biggest barri-ers in achieving the desired per-formance through PM systems. This situation is what cause some PM systems fail to deliver the ex-pected innovation in some or-ganizations because of the or-ganizations’ hierarchical work culture. In such work culture, of-ten, organizational members are not enabled with enough degree of authority and flexibility that is needed to drive innovation.

Moreover, some PM systems spoil the ingredients for success because the systems were de-signed without linking the strat-egy and the required culture for success. PM systems, that use force ranking system as a mecha-nism to differentiate performance of each of the employees, tend to drive opportunistic behaviour. This opportunistic behaviour re-sults in a situation where every-one cares only for him or herself, and where everyone will try to perform at the expense of others. This kind of situation will dete-riorate teamwork; the very fabric that bonds every organization-al member and enables them to move in the same direction.

Strategic Performance Management: “Connecting the Hard & Soft”

Strategic Performance Man-agement makes the connection between the strategy and the cul-ture of an organization and the organization’s ability to manage employee’s performance. Stra-tegic Performance Management creates a high performing culture by creating direct line of sight

between strategic goals and in-dividual or team performance objectives, creating alignment between the organization cul-ture and the strategic goals and plans, and creating the alignment between organization needs and employee needs. Strategic Per-formance Management ensures the creation of climate that cul-tivates success and makes PM as part of the culture. Strategic Per-formance Management therefore is more than just a target setting process or enhancing leaders’ ca-pability to give feedback. It is about aligning company strategy to team and individual goals and rewards, and ensuring the whole organisation is pulling together in the right direction.

The key in connecting the ‘hard’ and the ‘soft’ of the orga-nization with the PM system is the performance model (figure 1, Strategic Performance Manage-ment Model). The performance model serves as guiding princi-ples for the PM system. It helps to clearly define the PM princi-ples from a strategic and cultural context. It takes into account not only the organization’s strategic objectives and the plan to achieve them, but also the organization’s culture, which can be observed in the values, assumptions, ar-tefacts and beliefs found in the organization. It provides a clear linkage between the individual and team targets and the compa-ny’s strategic objectives and the plan to achieve them. It also pro-vides guiding principles for the creation of culture that engage and enable every organization-al member toward achieving the individual and team targets that support company’s strategic ob-jectives. By successfully connect-ing people, strategy and cul-ture, organizations can improve their effectiveness, enhance em-ployee effectiveness and produc-tivity, and increase the likelihood of achieving their business objec-tives and delivering more sustain-able business performance (figure 2. Evolutionary stages of perfor-mance management.)

Developing Performance Model The right performance model

will ensure that both strategic in-tent and culture can be hardwired in the design of the PM process-es, tools and practices. This is to make sure that both the strate-gic intent and distinctive culture are reflected in the general prin-ciples of PM in order to cultivate and flourish the expected behav-ior from the people which at the end will drive the end result (fig-ure 3. Performance model).

To develop a performance model, at the beginning, exec-utives need to ask themselves how they actually want to man-age performance in their organi-zation:

tors that need to be considered. Integration with organiza-1. tion objectives. Integration with organization objectives is needed in order to ensure that organization strategy gets ex-ecuted and that the strategy execution is aligned with the company vision and mission. Integration with organiza-tion objectives can create bet-ter alignment between organi-zation’s aspiration and strategic goals and individual or team goals by improving the focus and clarity of the goals, nar-rowing priorities, and making sure that key systems are tight-ly linked and sending the same messages. In order to integrate PM system with organization objectives, organizations need to: a) Make sure that all of the ex-

ecutives are clearly aligned with the vision and ‘must win’ battles of the organiza-tion

b) Identify where value is gen-erated in the organization

c) Optimize the number of goals to increase focus at the organization, team, and in-dividual levels

d) Make sure that the vision, strategy, financial systems, metrics, operating model, organization structure, op-erational systems, and indi-vidual targets send the same messages about what the or-ganization consider as per-formance

e) Help employees to better un-derstand the organization’s goals and know how to fo-cus their time

2. Linkage to organization cul-

ture. Linkage to organization culture is needed to ensure that success can be achieved through the organization cul-ture. Taking culture into ac-count when designing a PM helps to deliver the intended results more quickly and limit the chance of unintended con-sequences, such as re-enforcing negative behaviors. In order to link PM system with organi-zation culture, organizations need to: a) Assess how the key elements

of culture (values, behaviors, organizational habits, sym-bols / levers and brand im-age) affect how performance is understood, evaluated, managed and rewarded

b) Identify how culture has con-tributed to past and current performance of the compa-ny and what impact culture is likely to have on achieving future success

c) Determine which elements of culture hinder and which can be used to enhance fu-ture performance

3. Linkage to Reward. Linkage to reward is needed to deliver and forge the message about the kind of behaviour and per-formance that gets rewarded, or the one that gets punished.

Linkage between PM and re-ward will focus organization on execution excellence in re-wards programs which will motivate employee to go for ex-tra miles, not on sophisticated design. Differentiated rewards can drive the achievement of strategic targets. The key to truly implement a pay for per-formance philosophy is by:a) Ensuring that the perfor-

mance model drives the to-tal rewards mix

b) Using all of the levers in the total rewards framework (salary increases, incentive compensation, equity, bene-fits, promotions, etc.) to cre-ate higher rewards for best performers

c) Monitoring and measuring the return on investment of total rewards investments

d) Making sure that both the right measures and the right targets are in place, includ-ing both the hard and soft measures of performance

e) Reinforcing frequent perfor-mance dialogues to take the pressure off the end¬-of-¬the year performance rating and evaluation process

4. Leadership support. Based

on our research, the main fac-tor that determines the suc-cess of PM system implemen-tation is leaders’ commitment. Starting PM implementation at the top level while in the mean time gaining informa-tion on employee opinion to enrich and ensure the smooth transition is the best approach for PM implementation. Pro-vision of feedback and effec-tive coaching session from the superior will ensure that peo-ple will be putted at the right place, doing the right thing and delivering the right result. To ensure that dominant lead-ership styles are consistent with the Performance Model, orga-nizations need to:a) Equip top leaders to live and

model the habit of giving honest feedback and holding people accountable

b) Include the climate created by the leader as a key con-sideration when it comes to making decisions in the se-lection and recognition of leader

c) Change the mindset of the leader about PM; from PM as a ‘once-a-year’ activity

mindset to PM as a funda-mental and an ongoing pro-cess mindset

d) Embed the PM philosophy into all leadership activities, even beyond the formal PM calendar and routine

e) Ensure that the organization sees the dialogue between managers and employees as key for success.

f) Focus leadership develop-ment efforts on building or-ganizational capability to set stretch goals, give perfor-mance feedback, and hold people accountable

g) Identify and address ele-ments of the culture that prevent open, informal, and candid performance dia-logue

h) Hold leaders accountable on managing performance

5. Competency based. A com-petency based PM is needed to drive the correct behaviours and values through the organ-isation which is align with the organization culture and val-ue.

6. Integration with other HR initiatives including selec-tion and development. PM system needs to be in line with company human capital strate-gy and road map to obtain suc-cess through the people.

7. Continuity and consistency. At last but not least PM sys-tem need to be a continuous and consistent process. To ob-tain a solid PM system, which at the end can have an impact on business performance and able to fulfil what is the as-piration of the organization, PM should not be a “one proj-ect show”, but rather continu-ous improvement and commit-ment.

About Hay GroupHay Group is a global consult-

ing firm that works with lead-ers to turn strategies into reality. We develop talent, organise peo-ple to be more effective, and mo-tivate them to perform at their best. With 86 offices in 47 coun-tries, we work with over 7,000 cli-ents across the world. Our clients are from the public and private sector, across every major indus-try, and represent diverse business challenges. Our focus is on mak-ing change happen and helping organisations realise their poten-tial. Visit www.haygroup.com.

FIGURE 1: STRATEGIC PERFORMANCE MANAGEMENT MODEL (HAY GROUP 2010)

FIGURE 2: EvOLUTIONARY STAGES OF PERFORMANCE MANAGEMENT (HAY GROUP 2010)

FIGURE 3: PERFORMANCE MODEL (HAY GROUP 2010)

Key questions that executives need to answer in developing performance model

What are the key levers in •my business model to drive oragnizational performance?When looking at strategic •targets - what are the key metrics to apply in the measuring systems?Who is in charge of •making it happen? What is the accountability of line management?What is my reward •philosophy around differentiating different performance levels?How do I reward the •performance of my best people in terms of career opportunities?How do I reward the •performance - not just in how that feedback is given but what I need to do about how it is addressed?

By tending to the questions above, the right performance model will support the execution of the “to be” strategy and the transformation towards the de-sired organization culture.

Success Factors in Implementing Performance Management System

Referring to the right perfor-mance model, the next step is to define the PM system and pro-cess. Based our research and ex-periences, there are two main parts that drive success in imple-menting PM system. Those two parts are accounting for perfor-mance and managing for perfor-mance (Figure 5, Performance Management System).

Accounting for performance is about identifying the right metrics to measure and manage. The metrics can be either tangi-ble financial and / or operation-al goals that relates to compa-ny strategic goals, or behavioural competencies that underpin suc-cess. Managing for performance is about CEO, leaders and man-agers having the commitment to spend time with the organiza-tional member to discuss success and setback, to give constructive feedbacks, to reward for success, and, when needed, to tell the bad news. Both accounting and managing for performance need to be done in accordance to the performance model that is de-fined in the context of strategy and culture of the organization. The metrics that are used, the achievements that are reward-ed, the feedbacks that are given, and the rewards or punishments that are given need to be aligned and consistent with the compa-ny strategy and culture. For in-stance in an organization that be-lieves teamwork culture is the key to successfully execute the strate-gy than that organization needs to put heavy emphasize on team performance target, encour-age team achievements, provide feedback and coaching that fos-ter teamwork, and provide team base reward.

Moreover, to cater for the CEO questions about the effectiveness and successfulness of PM imple-mentation, there are several fac-

FIGURE 4: PERFORMANCE MANAGEMENT SYSTEM (HAY GROUP 2010)

OrganizationÕs Strategic Goals OrganizationÕs Culture

Performance Model

Department Goal

Individual/Team Goals

Process/CompetencyOutput/Key PerformanceIndicators

PerformancePlanning

Mid Term ReviewLink with OtherHR Systems

Year End Review

Accounting forPerformance

Managing forPerformance

KPI for Individual JobAligned withDepartment Goals

Link withRemuneration,Training &Development,Career andTalentManagement

Department GoalsTranslated From OverallOrganizationÕs StrategicGoals and OrganizationÕsCulture

Behavioral CompetencyDefined to Achieve OptimalOutput/KPI and Create DesiredCulture

Coaching

Coaching Coaching

Coaching

Strategy

Culture

Performance Model

Principles

Purpose

Philosophy

Key metrics

Performancemanagementsystems

Behaviors Results

Moresustainable

performance

Lesssustainable

performance

1. Focus onperformanceappraisal

2. Focus onperformancemanagement

3. Focus on strategyalignment andperformanceculture

ÒI must meetmy targetsÓ

ÒI need coaching to improve mycompetencies and achieve theobjectives

ÒI ama truly committed tomaximize my own, myteamÕs and my companyÕsperformanceÓObjective is to

maximize value

*Artifacts are the objects or products designed and used by people to meet re-occurring needs or to solve problems and are influenced by organizational culture.

Strategic context

Strategic intent

Business model

Operating model

Culture

Values

Assumptions

Artifacts*

Beliefs

Performancemanagementsystem

Set of targets

Appraisal

Reward

Leadership

Coaching

Promotion

Succession

Performancemodel

Values

Assumptions

Artifacts*

Beliefs

Businessperformance

Aligned metrics

ROI on rewards

Employmentengagement

Employeeenablement

Climate


Leadership

As senior managers running an organi-sation, do we try to control our employ-ees or are we com-mitted to their wel-

fare, success and productivity?Often one hears that a new

electronic finger print recogni-tion machine has replaced the at-tendance register, or new forms of penalties are being imposed on defaulting adult employees; or certain websites are not avail-able to reduce wastage of official work time.

Which comes to the classic question on the bias towards the carrot or the stick. The carrot, a metaphor for reward, and the stick, needs no real explanation.

Douglas McGregor formu-lated Theory X (autocratic) and Theory Y (democratic) to classify management assumptions (Fig-ure 1). It is important to note that McGregor suggested manage-ment assumptions and not man-agement styles or techniques; though in real life there is always profound influence of the former on the latter.

Theory X is finding it more and more difficult to survive in our post modern world. Very much in the spirit of today’s think-ing about the confluence of Su-pervisors and Managers into one wholesome entity called Leader-ship. To illustrate this point lets examine the differences outlined between a Leader and a Manager by Andrew J DuBrin in his book on Leadership. The chart is titled ‘Leaders versus Managers’ (Fig-ure 2).

Management theorists first identified the great qualities of the Supervisor then embarked on bettering that by expound-ing on the virtues of a Manager in surpassing that of the Supervi-sor. The Leader is now positioned to be more blue blooded than the Manager, as attempted above.

To pause for a moment and examine each one of the differ-ences may involve precious time, though looking at some, at ran-dom, may reveal that they could easily be inter-changeable. Let’s take every fourth on the list of

Theory X Theory Y

Most people are lazyMost people need to be controlledMost people need to be motivatedMost people are not very smartMost people need encouragement to do good work

People like to workPeople have self-controlPeople motivate themselvesPeople are smartPeople want to do a good job

eighteen.Visionary versus Rational.

Why wouldn’t a manager want to be a visionary. In fact, a ratio-nal manager who is also a vision-ary would indeed be more suc-cessful than otherwise. Are we saying that Leaders don’t need to be rational?

Innovative versus Analyti-cal. More innovative managers can manage greater efficiencies. Which leader can get away from being analytical?

Independent versus Stabiliz-ing. If leaders are not meant to stabilise, then who are, especial-ly in times when the sea is rocky, which in today’s context is all the time? And how would managers manage without being indepen-dent, both in thought and in ac-tion?

Expresses humility versus Rarely admits to being wrong. The first is a virtue for all, Lead-ers, Managers, Supervisors alike. The latter, more of a misfortune, again, for all concerned.

Yes, there is a hidden message in there that the Leader must al-ready possess what is propound-ed for the Manager. However, the proposal here is that every-one, at any stage of one’s career, would benefit best by imbibing the qualities of the Leader, which under one umbrella would con-tain all the adjectives that support the success of both the organisa-tion and individual.

Very much so also in consider-ing the virtues of Theory X and Theory Y, the latter being a more effective paradigm for overall long term success.

It is well accepted that success-ful Team Leaders are Theory Y managers.

Theory X assumptions allow for blaming, accusing and non-participative behaviours. When we believe that workers are, for example, lazy, we don’t take time to develop them or challenge them. The same is the case if we assume workers are unintelligent (“He won’ be able to cope, he’s a school dropout.”).

Most Theory X assumptions prompt supervisors to create au-dit systems to check subordi-nates, which can hamper their ability and dampen their enthu-siasm and effectiveness. Theory X assumptions often become self-fulfilling prophesies in a kind of a vicious spiral.

Assumptions like Theory X and Theory Y give rise to work and organisational paradigms, which often lead to Paradigm Pa-ralysis.

“I’ll believe it when I see it”, Or “I’ll see it when I believe it”.

A Paradigm is defined as a Model or Pattern of Thinking into which a life experience is

translated. It provides each one of us with our own personal inter-pretation of reality; a sort of spe-cial, individual lens that shows us our own reality. And the par-adigm is formed based on our ex-periences, values and culture.

And often a paradigm does not allow us to see beyond it – desig-nated Paradigm Paralysis by not-ed thinker Joel Barker – a rigidity of thinking that does not let peo-ple see things outside their frames of reference.

Take the experiment with a ste-reoscope – a viewing instrument that allows for two images to be displayed, one for each eye indi-vidually. When loaded with two sports’ images, one of a matador and the other of a baseball player, the American sees the latter and the Spaniard the former, even though both are displayed at the same time in the stereoscope.

Similar situations take place often in management.

Kimball Fisher, author of ‘Leading Self Directed Work Teams’ , suggests that to under-stand SDWTs, one must have, or develop, a SDWT paradigm. And noted Employee Involve-ment Expert Richard Walton contrasts two kinds of paradigms – Control and Commitment (Figure 3).

“Most of us have been heavily influenced by the control man-agement paradigm because it is the most prevalent operating par-adigm of management in mod-ern organizations of all kinds” (Kimball Fisher ).

Even the Titles that are used re-inforce the paradigm (Figure 4).

A collateral element support-ing the way titles are used, is the language that Leaders choose:

Control Paradigm Commitment Paradigm

Elicits complianceBelieves Supervision is necessaryFocuses on HierarchyBiased toward functional organizationsManages by policyFavours audit and enforcement processesBelieves in selective information sharingBelieves bosses should make decisionsEmphasis on meansEncourages hard workRewards conservative improvementEncourages agreement

Engenders CommitmentBelieves education is necessaryFocuses on customersBiased toward cross-functional organizationsManages by principleFavours learning processesBelieves in open information sharingBelieves workers should make decisionsEmphasis on endsEncourages balanced work/personal lifeRewards continuous improvementEncourages thoughtful disagreement

Title Used Insinuation Could be

Supervisor ‘Superior Vision’ / More important (than workers) Team Leader / Advisor

Controller (Finance) ‘Look over’ (The shoulder) Communicator

Auditors Check you / Mistrust Teachers

Director You can’t do it yourself Facilitator

Chief Executive Officer As if execution takes place at the top Chief Learning Officer

ControlParadigm

Commitment Paradigm

“I did this” “We did this” / “The team did this”

“He works for me” / “She reports to me”

“We work together” / “My colleague”

“My employees” “The Team”

Visionary Rational

Passionate Business-like

Creative Persistent

Inspiring Tough minded

Innovative Analytical

Courageous Structured

Imaginative Deliberative

Experimental Authoritative

Independent Stabilising

Shares Knowledge Centralises Knowledge

Trusting Guarded

Warm and radiant Cool and reserved

Expresses humility Rarely admits to being wrong

Initiator Implementer

Acts as Coach, Consultant, Teacher Acts as a boss

Does the right things Does things right

Inspires through great ideas Commands through position

Knows results are achieved through people Focuses on results

Employee MotivationReal Practice or Pure Plain Talk

FIGURE 1. MCGREGOR’S DIFFERENCES IN MANAGEMENT ASSUMPTIONS.

FIGURE 2. LEADER vERSUS MANAGER

FIGURE 3. CONTROL AND COMMITMENT PARADIGM

Dr. Karan Singh MBA, DBA, Organization Development Consultant, is presently Management Development Director at President University, and Managing Consultant of PT King & Singh Consulting. In his seventeenth year in Indonesia, Dr. Singh has wide experience, across a range of multinational companies, in areas like corporate training, market entry strategy, integrated marketing (external and internal marketing), communications, and human performance improvement. With a DBA focus in Cross Cultural Management, Dr. Singh also trains expatriate managers in how to be more effective in Indonesia.

FIGURE 4. THE TITLES REINFORCE THE PARADIGM

Next to language is also the way an organization is described – the organization chart – and that often very strongly depicts the control paradigm.

Very clearly, independent thinking and self-leadership re-quire the commitment paradigm – in getting rid of the top-down-way - and many a learning orga-nization today are shedding those artefacts of culture that are based on the control paradigm.

Of course, one cannot get away from practicality and real time questions like the obvious differ-ences in efficiencies amongst em-ployees, and the eighty-twenty rule, where twenty percent of the people are supposed to be doing eighty percent of the work.

Well, today’s agreed upon system is following the three-step-process. One, categorising employees according to their ef-fectiveness and commitment to the company and its goal. Two, providing training, especially for the laggards, and Three, astutely letting those go who do not wish to change and rise to the chal-lenge in the endeavour to improve upon the eighty-twenty rule.

Dr. Karan Singh MBA, DBA

Today’s agreed upon system is following the three-step-process. One, categorising employees according to their effectiveness and commitment to the company and its goal. Two, providing training, especially for the laggards, and Three, astutely letting those go who do not wish to change and rise to the challenge in the endeavour to improve upon the eighty-twenty rule.

Do we try to control our employees or are we committed to their welfare, success and productivity? Which comes to the classic question on the bias towards the carrot or the stick. The carrot, a metaphor for reward, and the stick, needs no real explanation.

LEADER MANAGER

Executive HighlightsThe President Post www.thepresidentpost.comJuly 12, 2010B6

INTERNATIONAL RESERVESAND TRADE BALANCE

A-09 Jul A S O N D J-10 F Mar

2009 2010

US$ Mn US$ Bn

Trade Balance

Net FX Reserves

May J

3,500

3,000

2,500

2,000

1,500

1,000

500

0

80

76

72

68

64

60

56

52

48

44

40

56.6

1,568

57.4

837

3,048

64.51,669

518

78.6

88

84

Apr

1,960

INTEREST RATES%

Deposit Rate

Interbank Call Rate

SBI

8.0

7.5

7.0

6.5

6.0

5.5

6.5

6.3

6.5

6.1

Jun09

J A Sep O N D J-10 F Mar A

2009 2010

21 -Jun

M

STOCK MARKET INDEXUSA

S&P 500IDX

3,300

3,100

2,900

2,700

2,500

2,300

2,100

1,900

1,700

1,500

1,300

1,200

1,100

1,000

900

IDX - Jakarta

S&P - USA

2,416

1,053

919

2,027

1,113

2,942

Jun09


2009 2010

21 -Jun

M

EXCHANGE RATE 2009 - 2010

16,450

15,800

15,150

14,500

13,850

13,200

12,550

11,900

11,250

10,600

9,950

9,300

8,650

8,000

15,000

14,500

14,000

13,500

13,000

12,500

12,000

11,500

11,000

10,500

10,000

9,500

9000

8,500

8,000

Jun09


2009 2010

21 -Jun

US$ (LHS)

100 YEN (LHS)

EURO (RHS)

10,225

10,659

14,389

9,927

9,015

M

Moody’s Investors Service has raised its outlook on Indonesia’s BA2 credit rating to positive from stable.

The positive outlook means the agency will likely raise the rat-ing, which is two notches below investment grade, within 12-18 months. Moody’s last upgraded Indonesia’s credit rating in Sep-tember 2009. In its statement, the ratings agency said the move reflected Indonesia’s capacity for sustained growth, its effective fis-cal and monetary policies and prospects for further improve-ments in the government’s finan-cial and debt position. Aninda Mitra, Moody’s vice president for Indonesia, said recent instabilities in the European debt markets have had no serious implications on Indonesia’s improving cred-it fundamentals. He noted that the recent appointment of former banker Agus Martowardojo as fi-nance minister and the nomina-tion of Darmin Nasution as Bank Indonesia governor were support-ive of policy continuity and insti-tutional credibility. Mitra also remarked that the central bank’s recent measures to reduce volatil-ity in capital flows were “ratings neutral” as it did not fundamen-tally restrict the servicing of debt obligations.

Bank Indonesia (BI) has introduced measures to reduce speculative money flow and encourage investors to keep funds in longer-term rupiah denominated instruments. Most analysts agree the steps tak-en by the central bank are aimed at short-term, speculative capital and are unlikely to discourage foreign investors. The measures include a one month holding peri-od for those investing in its Bank Indonesia bills (SBI). BI also wid-ened the spread between its over-night repo rate and its bench-mark rate to +100 basis points (bp), and the spread between the overnight deposit rate and the benchmark rate to -100 bp, all of which boosts the cost of borrow-ing from the central bank while reducing returns from investing in SBIs. BI will also introduce nine-month and 12-month SBIs in the second half of the year to complement the bank’s shorter-term debt paper. Acting BI gov-ernor Darmin Nasution empha-sized that the new measures were not “capital controls”, but were aimed at helping the central bank improve the effectiveness of its monetary policy and strengthen the country’s resilience to global financial shocks.

The rupiah hit the key level of Rp9,000 to the U.S. Dollar following Moody’s rating outlook revision and China’s decision to allow more flexibility in the yuan. Currency traders expect Bank In-donesia to intervene at this sup-port level to reduce rapid fluc-tuations and prevent further appreciation that could harm the country’s export competitiveness. However, given the strength of Indonesia’s economic fundamen-tals relative to its peers, analysts expect the rupiah to see further strengthening over the medium-term. The rupiah has already ris-en 15% against the U.S. dollar over the past 12 months, the larg-est gainer in Asia.

Parliament has ap-proved a government

plan to raise electrici-ty rates by an average 10% effective 1 July.It is the country’s first tariff in-crease for electricity since 2004 and, despite the sensitivity of the issue, the public outcry over the hike has been modest. In his statement, President Yud-hoyono said the hike was neces-sary to safeguard the economy while protecting the poor. Tar-iffs for households with capacity of 1,300-5,500 volt ampere (VA) will be raised by 18%. Electrici-ty tariffs for users with capacity of between 450 and 900 VA, which are mostly low-income house-holds and accounts for almost half of the number of users, will remain unchanged. Tariffs for businesses and industrial opera-tions with capacity of up to 2,200 VA will be increased by 6%; be-tween 2,200 VA and 200 kiloVA by 9%; and above 200 kiloVA by 15%. The government has allo-cated Rp55.1 trillion for electric-ity subsidies in its revised 2010 state budget, up from its original forecast of Rp37.8 trillion. Bank Indonesia, meanwhile, said it did not expect the increase in electric-ity rates to have a significant im-pact on inflation, and is retain-ing its 2010 inflation projection of 5.1-5.2%.

The government has given the green light to develop the long-delayed US$1.4 Billion Donggi-Senoro LNG project in Central Sulawesi.

This comes after the energy min-istry formally approved the allo-cation of up to 75% of the LNG produced from the planned fa-cility for exports. Last year, then Vice President Yusuf Kalla insist-ed the bulk of the project’s out-put go to the domestic market, prompting Mitsubishi – the ma-jority shareholder in Donggi-Se-noro - to threaten to withdraw from the project and prevent the Japan Bank for International Co-operation (JBIC) from extending low-cost funding to develop the facility. State-owned oil and gas firm Pertamina and local energy company Medco Energi Interna-sional holds 29% and 20% stakes respectively in the project. The LNG facility, which will have a capacity of two million tons per year, is now scheduled to start op-erations in 2014. Japan’s Kyushu Electric Power Co. and South Ko-rea’s Korea Gas Corp. are among the likely buyers of the exported LNG. The Donggi-Senoro facil-ity will get its gas from the Senoro and Matindok fields jointly oper-ated by Medco and Pertamina.

State power utility PLN has given indicative yields of 9.15-10.81% For Rp3 trillion in bonds it plans to float next month.

Proceeds from the issue will be used to fund the firm’s pro-gram to modernize and expand its transmission and distribution network. PLN will issue two se-ries of conventional bonds worth Rp2.5 trillion, a series A with a five year tenor and an indica-tive yield of 9.15-9.9%, and a se-ries B with a 12 year maturity and an indicative yield of 10.08-10.81%. The firm will also issue Rp500 billion in syaria bonds in two series with tenors of five and 12 years respectively. Danareska Sekuritas, Mandiri Sekuritas and Trimegah Securities have been appointed to underwrite the bond issue. Local ratings agency Pe-findo has assigned an AA+ rating with a stable outlook for PLN’s bonds. The Indonesian stock exchange (BEI) is scheduled to list the debt paper with the local bourse on 9 July. As of Q1, PLN posted Rp2.9 trillion in net prof-

its compared to Rp1.6 trillion in losses in the year earlier period. The firm also posted a 14% in-crease in revenue to Rp35.5 tril-lion in the first quarter.

Australia’s Churchill mining has acquired direct ownership of its Ridlatama Tambang coal concession in East Kalimantan. The company said the decision to convert its indirect contractual arrangements in the mine to di-rect equity interest comes follow-ing passage of the 2009 mining law and the recent issuance of the legislation’s implementing regu-lations allowing foreign compa-nies to taka direct equity own-ership in locally incorporated companies holding mining con-cessions. Churchill managing director Paul Mazak said the re-structuring to a simple ownership

structure was a significant mile-stone for the company and would allow it to accelerate development of Ridlatama Tambang and be-come a major coal producer in the region. The concession has an estimated JORC resource of 2.73 billion tons. Churchill said it also converted to a 75% direct ownership in Ridlatama Trade Powerindo, which holds a min-ing license to a 5,386 ha area ad-jacent to Ridlatama Tambang.

The U.S. export-import bank gave preliminary approval for a US$1 billion lending facility to 11 Indonesian banks.

The 11 banks are the Lemba-ga Pembiayaan Ekspor Indone-sia (Indonesia Exim Bank), Bank Mandiri, Bank Negara Indone-sia (BNI), Bank Rakyat Indo-nesia (BRI), Bank Central Asia (BCA), Bank Danamon, Panin

Bank, Bank CIMB-Niaga, Bank OCBC Indonesia, Bank Interna-tional Indonesia and Bank UOB Buana. U.S. Exim Bank pres-ident Fred P. Hochberg said the agreement would enable Indo-nesian firms to access low inter-est rate financing through local banks. He added that the facility offered short, medium and long repayment terms and would be eligible for both public sector and private sector borrowers. Hoch-berg further remarked that In-donesia would offer huge oppor-tunities for U.S. exporters as the country’s diverse economy con-tinues to grow. In fiscal 2009 and 2010, the U.S. Exim Bank authorized nearly US$1 billion in financing to support the export of 30 Boeing 737-8000ER air-craft to Indonesian low-cost car-rier Lion Air.

Standard Chartered Bank subsidiary, Bank Permata, has acquired General Electric Finance Indonesia, the local unit of General Electric Capital.

Financial details were not dis-closed. Bank Permata president director David Fletcher said the acquisition would support the bank’s focus on expanding its consumer and commercial seg-ments, and reflected the com-mitment of the bank’s two major shareholders, Astra International and Standard Chartered Bank, to accelerate Permata’s growth and establish the bank as a pre-mier financial services firm in Indonesia. GE Finance Indo-nesia has 10 branches across the country, administering a range of credit cards servicing more than a million subscribers. The firm also provides automotive financ-ing in ventures with Astra Sedaya Finance and Federal Internation-al Finance. GE Finance Indone-sia posted net profits of Rp93.8 billion in 2009, up 84% from a year earlier.

Bank Mandiri secured a US$100 million loan from France’s Development Agency Agence Francaise de Developpement (AFD).

The funding will have a 7-10 year term and will be used to finance projects in the energy sector fo-cusing on geothermal and re-

newable energy, energy efficiency and the domestic use of gas to re-place fossil fuels. AFD country director Joel Daligault said it was the agency’s first direct loan to a state-owned enterprise in Indone-sia, and reflected AFD’s broader cooperation with the Indonesian government on climate change and efforts to reduce the coun-try’s carbon emissions by up to 40% by 2020. Thomas Arifin, Mandiri’s director of treasury, fi-nancial institutions & special as-set management, said the loan would strengthen the bank’s dol-lar base and meet customer needs as demand for more strict envi-ronmental standards on ener-gy projects grow. He added that the deal reflected AFD’s strong track record on climate change issues and promoting sustainable growth in emerging markets.

The Australia and New Zealand Banking Group (ANZ) has finalized its US$100 million acquisition of the Royal Bank of Scotland’s (RBS) retail, commercial and private banking businesses in Indonesia. Alex Thursby, ANZ’s chief exec-utive of Asia Pacific, Europe and America, said the bank has com-pleted the rebranding of 18 RBS branches and 29 ATMs in Indo-nesia and moved customers and staff to ANZ with minimal dis-ruption. He added that ANZ was now focused on working on it relationship with former RBS customers and instilling confi-dence in ANZ. The acquisition has significantly expanded the scale of ANZ’s operations in In-donesia, which now includes 28 branches in 11 cities serving more than 900,000 customers. Thurs-by remarked that ANZ was now in a very strong position to deliv-er relationship-focused banking for its high-end retail clients. He noted that the bank has recently introduced ANZ Signature Pri-ority Banking which offers afflu-ent customers a dedicated rela-tionship manager and full wealth management services.

Hong Kong-based commodities trader Noble Group has acquired a 51% stake in local palm oil

producer Henrison Inti Persada.

Financial details were not dis-closed, though some analysts es-timate the deal to be worth more than US$80 million given the value of Henrison’s plantation as-sets. Noble’s executive chairman, Richard Elman, asserted that the deal would complement its global agricultural and energy business. It would allow the group, which is a major supplier of agricultural commodities to China, to expand its edible oil supply chain and help ensure a continuous flow of crude palm oil. Noble is slated to develop around 32,500 hectares of land in Sorong, West Papua for palm oil production as part of its investment in Henrison. The lat-est acquisition marks Noble’s first venture in Indonesia’s palm oil sector, though the group already owns several coal and cocoa as-sets in the country. Noble’s local partner in Henrison is Kayu La-pis Indonesia Group, the largest forestry operator in the region.

High-end retailer Mitra Adiperkasa announced a Rp300 billion expansion plan for its international franchises to meet surging demand from high-income consumers. Fetty Kwartati, Mitra’s general man-ager for investor relations, said the firm would be opening 20 new Starbucks Coffee outlets in Jakarta, Surabaya, Denpasar, Bandung, Medan, Yogyakarta, Semarang and Balikpapan over the course of this year. The com-pany also plans to open 10 new Burger King restaurants, 10 new Domino’s Pizza shops and a new SOGO department store in Ja-karta in the second half of the year. Mitra currently operates 74 Starbucks Coffee outlets, 11 Burger King eateries, five Dom-ino’s Pizza shops, and 10 SOGO department stores across Indone-sia. Fetty said the firm was tar-geting a 20% annual increase in sales this year to Rp4.9 trillion on the back of the country’s growing urban, middle and upper-class consumers.

Business Highlights are contributed to The President Post by CASTLEASIA/PT Jasa Cita from information supplied to members of their CEO Forum, the Indonesia Country Program. They are reprinted here with permission. For more information about CASTLEASIA programs, please contact Juliette or Wijayanti at 62 21 572 7321 or email [email protected] subject CEO Forum

Selected Instant Indicators


Markets

While June in-flation num-bers sparked some jitters, May trade data was pos-

itive. The trade surplus widened back towards $2.47bn as exports were slightly up (by 4.06% m-o-m) and imports declined (down by 10.5% m-o-m).

The April trade surplus was also revised upward from $0.5bn to 0.8bn. These improvements somewhat reverse last month’s import surge worries, although the trend for the trade surplus is still for a gradual narrowing go-ing forward.

Oil and gas exports rose again

by 2.97% m-o-m, despite the 10% drop in the Indonesian oil price, suggesting that export vol-umes probably rose in May.

Non-oil & gas exports rose supported by primary commod-ities (e.g. coal, palm oil and iron & ore) while manufacture-based exports (e.g. machinery) were flat

to slightly lower. This still reflects the full year trend of the former growing faster than the latter.

It’s heartening to see non-oil & gas exports to Europe (e.g. Ger-many and France) still holding up despite the economic prob-

By Helmi Arman and Anton Gunawan

lems engulfing the region. Exports to Japan and China

also improved in May, although shipments to Singapore, Malaysia and South Korea declined.

On the import side, oil and gas

May-10 Apr-10 Mar-10 Feb-10

Export Growth (% y-o-y) 37.8 42.4 46.6 56.5

Import Growth (% y-o-y) 53.3 67.5 68.6 59.9

Trade Balance (US$bn) 2.47 0.80 1.58 1.67

Source: CEIC, BPS

2007 2008 2009 2010E* 2011E*

National Accounts

Real GDP (% y-o-y) 6.3 6.1 4.6 5.6 6.2

Domestic demand ex. inventory (% y-o-y) 6.0 7.5 5.4 7.2 7.4

Real Consumption: Private (% y-o-y) 5.0 5.3 4.9 5.0 4.9

Real Gross Fixed Capital Formation (% y-o-y) 9.2 11.7 3.4 9.0 11.9

GDP (US$bn) — nominal 433 507 542 672 775

GDP per capita (US$) — nominal 1,925 2,227 2,350 2,880 3,280

Open Unemployment Rate (%) 9.8 8.6 7.9 7.6 7.1

External Sector

Exports, fob (% y-o-y, US$ bn) 14 18.3 -14.4 17.5 12.5

Imports, fob (% y-o-y, US$ bn) 15.4 36.8 -27.7 24.6 15.7

Trade balance (US$ bn) 32.8 22.9 35.2 35 .3 36.4

Current account (% of GDP) 2.5 0.1 2.0 0.9 0.4

Central government debt (% of GDP) 35.1 32.0 28.8 26.0 24.2

International Reserves –IRFCL (US$ bn) 56.9 52.1 66.1 82.2 93.2

Merchandise import cover (months) 6.2 5.4 9.4 9.4 9.2

Currency/US$ (Year-end) 9,419 10,950 9,403 9,150 9,325

Currency/US$ (Average) 9,163 9,767 10,356 9,175 9,238

Other

BI policy rate (% year end) 8.00 9.25 6.50 6.50 7.50

Consumer prices (% year end) 6.60 11.20 2.78 5.30 6.20

Fiscal balance (% of GDP; FY) -1.3 -0.1 -1.6 -1.7 -1.5

S&P's Rating -FCY BB- BB- BB- BB BB+

Indonesia: Selected Economic Indicators

Source: CEIC, *Danamon Estimates

Jun-10 (Actual)

Jun-10 (Fcast)*

Jun-10 (Cons.) May-10 Apr-10

Headline CPI (% chg y-o-y) 5.05 4.57 4.46 4.16 3.91

Headline CPI (% chg m-o-m) 0.97 0.51 0.40 0.29 0.15

Headline CPI (% chg y-t-d) 2.42 1.90 1.84 1.44 1.15

Core CPI (% chg y-o-y) 3.97 n/a 3.90 3.81 3.70

Source: Bloomberg, CEIC, *Danamon estimates

INDONESIAN FOREIGN TRADE: TRADE SURPLUS FURTHER NARROWS

INDONESIA ECONOMIC BRIEFING

June Inflation Spike: Is it Temporary?

imports receded as we expected (-19.5% m-o-m). However, non-oil & gas imports also declined, especially capital goods (down by 25.2% m-o-m) such as machin-ery, aircraft and ships. Yet again we don’t want to exaggerate the

significance of this, as month-ly trade data is known to be very noisy.

Policy implications

While June inflation rang some bells, we don’t think it

changes the full-year outlook for inflation. BI’s inflation forecast of 5.3% (in-line with ours) still looks conservative enoug. Hence, we don’t expect a build-up of calls to raise rates soon. We think the likelihood is still for rates to be

hiked in early-2011, as we see in-flation creeping up to over 6% next year.

Helmi Arman is Economist, Treasury & Capital Markets PT Bank Danamon Indonesia, Tbk

May-07 Nov-07 May-08 Nov-08 May-09 Nov-09 May-10

14

12

10

8

6

4

2

INDONESIAN CPI INFLATION

Source: BPS, CEIC

% y-o-y, p.a.

BI Rate

Core Inf.

Inflation

Source: BPS, CEIC

INDONESIAN FOREIGN TRADE: MONTHLY

US$mn US$mnExports

Trade Balance (RHS)

May-08 Nov-08 May-09 Nov-09 May-10

14000

12000

10000

8000

6000

4000

4000

3000

2000

1000

0

-1000

Imports

Pictorial EventsThe President Post www.thepresidentpost.comJuly 12, 2010B8

The Financial Club held a Breakfast Dialogue on June 22, featuring Prof Dr Roy Sembel, MBA, professor in finance, Dean of Business School and Director of Graduate Programs UPH, who spoke on “Unconventional Strategy Under Uncertainty”, and Sari Wahyuni, PhD, Editor in Chief of The South East Asian Journal of Management Faculty of Economics, University of Indonesia, who presented “How to Increase Company Competitiveness in a Global Crisis”.

Present on the occasion were prominent businessmen and professionals, among others Pandji Choesin, Krisnaraga Syarfuan, Bunardy Limanto, Leo Tanubrata, Lukman Arief, Irwan Habsjah, Pri Notowidigdo, Mike Nicholson, Karan Singh, and Sujuno Respati.

Breakfast Dialogue atThe Financial Club Jakarta

The CEOReference

Hawaiian StyleGathering

The ASEAN Centre was inaugu-rated in Moscow on June 15, 2010, in a ceremony attended by Minis-ter of Foreign Affairs of the Rus-sian Federation Sergey V. Lavrov, Deputy General Secretary of ASE-AN Sayakane Sisouvong, Rector of the Moscow State Institute of International Relations (MGIMO) Anatoly Torkunov, senior officials of the Russian foreign ministry and ambassadors of ASEAN countries accredited to Russia.

In his address, Lavrov pointed out that the project takes on a spe-cial importance in the context of the upcoming 2nd Russia-ASEAN Summit in Hanoi, Vietnam, this autumn.

He said the Centre is set to be-come a successful platform for wide-ranging discussions on issues of development and multi-dimen-sional cooperation between Rus-sia and the countries of Southeast Asia.

“It will also help our societies

The Opening of ASEAN Centre at MoscowState Institute of International Relations

to learn more about each other,” he said.

The activities of the Centre include organizing and holding joint academic and practical conferences, seminars, lectures and researches, and provid-ing assistance in student exchanges and information work.

Dr. Victor V. Sumsky, a renowned

Sergey V. Lavrov, Minister of Foreign Affairs of the Russian Federation.



Russian specialist in Southeast Asia, was appointed as the Direc-tor of the Centre.

The project is supported by the Russia-ASEAN Dialogue Partner-ship Financial Fund (DPFF), into which Russia makes regular vol-untary payments from the federal state budget.

Dr. Ir. Kuntoro Mangkusubroto, Head of the Presidential Unit on Development Monitoring and Oversight (UKP-PPP), led a stimulting discussion on June 25 at the Aryaduta Hotel Jakarta after he delivered his address “Ushering in Reform in Indonesia” and shared his experiences in instituting change and monitoring the Cabinet, and in ensuring delivery of its far-reaching development goals.

USINDO Event

A farewell party for outgoing Australian Ambassador Bill Farmer and Elannie Farmer was held and attended by Australian Embassy staff members, Indonesian politicians and businessmen and diplomats from several countries.

Indonesia Australia Business Council (IABC)

A Hawaiian-style gathering was held by the Mercantile Athletic Club with the purpose of establishing a rapport among its members.

Dinner, dancing competition, lucky

draw & entertainment were the main features of the event, which was also at-tended by businessmen, representatives of embassies and many other expatriates.

Among those present were Simin Bell,

Sandra Tjahyakusuma, Paul Griffith, Nick Dyer, Sutara Martadisastra, FX Dharmase-tiawan, Lily Leman, Ita Basuki Smith, Tety Artatie, Luc St-amour, Mira Marini, Frank Perry , Arief Faisal, and others.

The TV Program of Intellectual Business Community presented Dr. Mochtar Riady founder of Mochtar Riady Institute for Nanotechnology and Mochtar Riady Comprehensive Cancer Centre with host Dr. Bayu Prawira Hie.

Present at the discussion among others were Ali Basyah Suryo, Alex Ibarat, Johnwei, Bunardy Limanto, Mochtar Riady, Dr. Boenjamin Setiawan, Dr. Bayu Prawira Hie, Sariputra Sumana

The President Post

Automotive CSECTION

www.thepresidentpost.comDisplay until August 12, 2010 /// N0. 14

continued on page C2

Automobile Industry Running in High Gear Despite Traffic Jams

By Alci Tamesa

The history of Indo-nesia’s automobile industry began in 1894 when a deal-er named John C. Potter brought in a

Benz Phaeton car for the Sultan of Solo. Potter was the first car dealer ever recorded in Indone-sian history. After he’d brought the car in, more civilian cars en-tered the country to be used by Dutch and Indonesian public fig-ures.

According to a survey by Au-gustina Kurniasih from Mercu Buana University in Jakarta, all these cars were traded by foreign-ers. Only in 1938 did indigenous businesspersons have a chance to enter the business. RP Soenaryo Gondokoesoemo stepped in as an agent of General Motors in Yogyakarta that year, followed by Hasjim Ning in the 1950s, William Soeryadjaya, Syarnoebi Said and Soebronto Laras in the 1960s, 1970s and 1980s respec-tively.

During those periods, the do-mestic automobile market was dominated by General Motors products under the brand of Chevrolet. Japanese brands en-tered the market in the late 1950s when domestic demand began to soar.

The domestic automobile in-dustry began to flourish in the

late 1970s when the government issued tough restrictions on im-portation of completely built-up cars. By 1976 the manufac-turing industry had begun to thrive when the government en-forced the policy obliging indus-try to use locally-made automo-bile components.

As of late 1990s the govern-ment began to tax knocked-down car imports based on the extent to which locally made components were used. The aim

was to encourage the growth of domestic component industry. This policy has proven useful in the sense that Indonesia is now a good source of such automobile components as storage batter-ies, tires, suspension engines, car window panes, and various oth-er products made by assembling units across the country.

In 1996, then president Soe-harto issued a presidential decree which instructed the Minister of

Industry and Trade, Minister of Finance and Chairman of Invest-ment Coordinating Board to for-mulate a strategy for developing what was later known as Indone-sia’s “National Car.”

The aim was to have a car fac-tory built, run and fully owned by Indonesian business entities which would produce their cars inside Indonesian territory. Un-der this plan, 20% of the na-tional car’s components would be made locally in the first year,

40% in the second year, and 60% in the third year. This decree was strengthened by a government ordinance that exempted import-ers from luxury goods tax.

PT Timor Putra Nasional (TPN) got the privilege to run the show to produce Timor se-dans but this was short-lived as the company—it was owned by Soeharto’s youngest son Hutomo “Tommy” Mandala Putera—went bankrupt after Soeharto’s regime had collapsed.

In 1999, a year after the fall of Soeharto’s New Order, the gov-ernment issued an economic de-regulation package which al-lowed importation of Completely Built-Up (CBU) cars.

This was obligatory given In-donesia’s participation in APEC, AICO, and AFTA which re-quired member countries to lib-eralize trade and curb entry bar-riers. Since then, competition in the automobile industry began to grow wild.

But at the same time, the ap-preciation of the US dollar against the national currency ru-piah as well as high import duties provided ample opportunity for local players to open automobile production companies.

By the year 2006 it was known that more than 200,000 peo-ple had been employed in the in-

dustry which involved at least US$2.2 billion in direct invest-ment. That year saw a national production capacity of 800,000 cars and trucks as well as 3 mil-lion motorcycles per annum. These were produced by more than 50 component producing groups of companies.

Indonesia’s export of com-pletely-built-up (CBU) cars be-gan to soar that year to 30,975 units while that of complete-ly-knocked-down (CKD) cars reached 105,917 units, not to mention 285,124 sets of compo-nents, according to a 2007 report of Gaikindo (the Association of Indonesian Automotive Indus-tries).

In fact, two years earlier Indo-nesia had begun to export Toyo-ta Avanza to Thailand in CBU form and to Malaysia in the form of CKD. So it is not surprising why Toyota is popular in the do-mestic market even to date.

Between 1997 and 2007 at

least 321,543 cars were sold out in the local market annually. Only in 1998, when Indonesia was engulfed in a political tur-moil that saw Soeharto’s depar-ture from politics, did car sales drop by 500%.

But by the year 2000, domes-

In fact, according to Gaikindo’s

projections, car production in Indonesia will

continue to soar through 2015

in tandem with a steadily rising

demand and rapid expansion of the size of middle and upper

class segments of our society.

1400

1200

1000

800

600

400

0

1500

1300

1100

900

700

500

300

200

100

(X 1000 unit)

387

Ô97 Ô98 Ô99 Ô00 Ô01 Ô02 Ô03 Ô04 Ô05 Ô06 Ô07 Ô08 Ô09 Ô10 Ô11 Ô12 Ô13 Ô14 Ô15

94

301 300318

354

483534

433

319

604

483

600

680

780

890

1,050

1,250 OPT

NOR

1,000920

820

700

620560

58

Indonesian Automotive Market & Forecast 1997-2015 by GAIKINDO

Political &Economic Crisis

General Election1999-2004

General Election2004-2009

Domestic FuelPrice Increase inMarch & October

Global EconomicCrisis

General Election2009-2014 New Taxation Policy

AutomotiveThe President Post www.thepresidentpost.comJuly 12, 2010C2

from page C1

The model won the Red Dot Award 2010 for best design quality, and was named the “Best Designed Car of the Year” in the 2010 Auto Bild Design Award.

The Art of Creation: the New BMW 5 Series

PT BMW Indonesia has introduced the sixth generation of the BMW 5 Series with the concept “The Art of Creation”.

The sixth incarnation of this BMW 5 Series is released under three variants: BMW 535i, BMW 528i and BMW 523i Executive. Each is equipped with BMW Efficient Dynamics technologies, including Brake Energy Regeneration, electromechanical steering and low rolling-resistance tires.

“The new BMW 5 Series has been a

Ramesh added, “The traditional strength of the 5 Series in engine, transmission and chassis is now combined in the new 5 Series with increased comfort and space in the rear cabin to create an outstanding product.”

The new BMW 535i is a pure sports executive sedan equipped with high quality HiFi system professional LOGIC7, featuring 16 loudspeakers and 600 W amplifier power, and Dolby Pro Logic. USB Audio interface and Bluetooth interface are also standard in this model.

It is the first to combine a turbocharger and TwinPower technology with High Precision Direct Injection, outputting 306 hp with a torque of 400 Nm at just 1,200 rpm.

The BMW 528i features a rear-seat entertainment system with two 8” high resolution monitors and DVD drive, hi-fi

loudspeaker system with 12 loudspeakers and 205 W digital amplifier, onboard monitor with TV function and 10.2” display, USB Audio interface and electric rear sub-blinds for the side and rear windows. Meanwhile, the BMW 523i is equipped with a hi-fi loudspeaker system with 12 loudspeakers and 205 W digital amplifier, high resolution 7” display monitor and USB Audio interface.

All new BMW 5 Series models have a keyless start and electric glass roof as well as comfort features, cruise control with braking function, Bi Xenon headlight with LED light rings, Servotronic steering assist driven by refined in-line 6-cylinder engines mated to 8-speed automatic transmissions. Safety features which won the model its 5-star crash test rating are provided by front, side, head airbags, an array of advanced electronic stability systems

and Dynamic Brake Lights that flash in emergency hard breaking situations.

The wheelbase of all new BMW 5 series is the longest in its class, at 2,968 mm, 58 mm longer than the outgoing model. The new BMW 5 Series is the first to feature an 8-speed automatic transmission and double-wishbone front suspension and aluminum integral rear-axle.

With its long wheelbase and short overhangs, long bonnet, dynamic lines, athletic body and the coupe-like, sleek roofline, the new model is a distinctive BMW 5 Series – designed and built to ensure the sixth generation retains the legacy created by the first 5 Series.

There are several color options of the exterior such as: Alpine White, Black Sapphire, Imperial Blue, Sophisto Grey, Space Grey, and Titanium Silver. While the interior available in Black, Cinnamon Brown, Beige, and Oyster. (JFS)

hit with customers since it was launched a few months ago in Europe and has won numerous accolades,” said Ramesh Divyanathan, President Director of BMW Indonesia.

The model won the Red Dot Award 2010 for best design quality, and was named the “Best Designed Car of the Year” in the 2010 Auto Bild Design Award. It also received the maximum 5 stars from the stringent Euro-NCAP crash test, achieving more points than its competitors.

tic car market had regained vi-tality—thanks to the robust growth of the consumption side of the economy. The year 2000 saw a drastic sales surge of 68% in rhythm with an increase in the consumption sector.

By the year 2005, Indonesia had seen an unusual surge in do-mestic car sales but the follow-ing year saw a decline resulting from the government’s unpopu-lar move to remove fuel subsidy in October 2005.

The following table shows the growth of domestic cars market between 1995 and 2006:

manufacturing companies. But some have left the market due to their poor grip on the market, in-cluding PT Inremco, which used to import Ford sedans and PT Timor Putra Nusantara, produc-er of Timor sedans.

According to Soebronto Laras, the boss of Indomobil, a natural selection occurs in the domes-tic market in the sense that new players would either be accepted or rejected naturally by the mar-ket depending on the quality of their products and their after-sales services.

This to some extent is also de-termined by how they position themselves in the market against old players which control 90% of the local market. The old players are the manufacturers and or dis-tributors of such popular brands as Toyota, Daihatsu, Suzuki, Mitsubishi, and Isuzu.

Demand for cars fluctuates greatly in Indonesia, depending on the condition of people’s in-come as well as their spending patterns. Cars are still considered a luxury to the majority of popu-lation as most of Indonesia’s 240 million people are from low-in-come layers.

But the opposite assumption is also true: as the size of the middle class continues to expand, the au-tomotive industry has a bright fu-ture in that many more new fam-ilies will buy cars in the future.

Automotive consumers in In-donesia cannot be easily catego-rized in terms of their selection preferences. This is easily visible in car exhibitions. For instance, some people can only afford to buy Daihatsu Xenia which costs around Rp80 million, but oth-ers can buy Bentley cars which cost Rp4.5 billion. The price of a Bentley car is equal to the cost of building 1,000 houses for low-in-come civil servants.

By now dealers know very well

the consumption patterns of local

buyers. For instance, housewives prefer to have small cars they can drive easily such as Suzuki Kar-imun, Hyundai AtoZ, Daewoo Matiz, Kia Visto, Daihatsu Ce-ria, Suzuki Aerio, Hyundai Getz, Chevrolet Aveo Honda Jazz, Kia Sorento, Suzuki Swift or Toyo-ta Yaris.

Those who seek to appear sporty usually buy Nissan Xtrail, Ford Escape or Toyota Land Cruiser. But big families usually buy Toyota Kijang, Toyota Inno-va, Mitsubishi Kuda, APV, Isuzu Panther and so forth.

Toyota, Honda, Suzuki and Daihatsu cars dominate the do-mestic market as they are distrib-uted by what is known as ATPM or agents with exclusive rights to sell certain brands.

For instance, in order to tap the market of families ready to spend no more than Rp100 million to obtain a decent car, Daihatsu and Toyota Astra collaborate to pro-duce Xenia and Avanza city cars. This success story motivated Su-zuki Motor Company to do the same with Indomobil by pro-ducing APV (all-purpose vehi-cle) cars. Now they are preparing to intensify APV production for exports to Latin America, Africa and the Asia-Pacific region.

Honda, meanwhile, pursues a different approach. Instead of es-tablishing its production base in Indonesia, it prefers to build com-ponent manufacturing centers wholly owned by Honda Motor Company.

Ford, meanwhile, has taken a slightly different approach. In the past its sales were done by PT Inremco; it has now been re-turned to Ford under PT Ford Motor Indonesia. Nissan also fol-lows Ford’s strategy; its PT Nis-san Motor Indonesia is doing its best to get a bigger share of the local market by targeting well-to-do families. Its cars are popularly known inside Indonesia as “Japa-nese limousines.”

China’s Great Walls is a new-comer in Indonesia’s automobile market but it is moving on con-fidently. The same is true for In-dia’s Tata Mahindra, Italy’s Fia and Malaysia’s Proton which has been picking up in recent years.

Following are the types of cars the majority of Indonesian fam-ilies prefer to buy, according to data from Gaikindo, the Associ-ation of Indonesian Automotive Industries.

Type Specification Name of Cars

Sedan CC < 1.5 lt (G/D) Suzuki Esteem, Daihatsu Serion, Hyundai Getz

1.5 lt < CC < 3.0 lt (G) /2.5 lt (D) Honda Civic (1/8 AT, 1.8 MT or 2.0 AT) Honda City (i-DSI or VTEC: Facelift AT, Faclift MT) Honda Accord (VTO : AT, MT, or VTIL : AT, MT) Toyota Camry (2400 G AT, 2400 V AT) Mercedes-Benz (B 170, C 23-\0 Elegance, E200 Kompressor, E 280 Elegance)

CC >3.0 lt (G) / 2.5 (D) Toyota Camry (3500 Q AT) Mercedez-Benz S 350L, E 340

MPV 4z2 CC < 1.5 lt (G/D) Suzuki APV, Suzuki Carry, Daihatsu Xenia, Toyota Avanza

1.5 lt ≤ CC < 2.5 lt (G/D) Toyota Alphard (AS 2.4, ASG 2.4), Toyota Kijang, Mitsubishi Kuda, Isuzu Panther, Honda Stream (1700cc AT, 1700cc MT, 2000cc)

2.5 lt < CC < 3.0 lt (G) Toyota Wish, Honda Oddessey

CC > 3.0 lt (G) /2.5 (D) Mercedes ML

SUV 4x4 CC < 1.5 lt Daihatsu Taruna, Hyundai Atoz, Suzuki Karimun

1.5 lt < CC < 3.0 lt (G) /2.5 lt (D) Toyota Fortuner, Honda CR-V (2.0 AT, 2.0 MT, 2.4 AT), Nissan X-Trail, Nissan Terrano, Ford Escape

CC > 3.0 lt (G) / 2.5 (D) Toyota Land Cruiser VX, LandRover Prado, Mercedes Jeep, Ford Everest

Source: GAIKINDO

Despite this encouraging pic-ture of industry growth, one thing remains unsettled—where to drive comfortably. The growth in the number of cars has far ex-ceeded provision of roads. As a result, traffic jam happens in ev-ery corner of big cities, prevent-ing people from quickly reaching their destinations. So many sick people have died on the road be-cause of heavy traffic while Jakar-ta is fast becoming an unpleasant place to live in simply because of

Automobile Industry Running in High Gear Despite Traffic Jams

Year Units Sold Growth (%)

1995 378,704

1996 332,035 -14.06

1997 386,691 14.13

1998 58,303 -563.24

1999 93,843 37.87

2000 300,964 68.82

2001 299,634 -0.44

2002 317,780 5.70

2003 354,208 10.40

2004 483,148 26.60

2005 533,917 9.51

2006 318,904 -67.42

Source: GAIKIDO

The growth of Indonesia’s au-tomobile industry is closely re-lated to the expansion of public transportation, car rental busi-ness, sales of new and second-hand cars as well as school trans-portation needs.

The industry has grown so rapidly over the past 15 years that traffic jams are everywhere in Indonesia’s big cities. Privately owned (passenger) cars comprise more than 80% of the total num-ber of cars in the capital city of Ja-karta alone.

By 2007, the number of Gai-kindo members had reached 39, comprising 29 dealers and 10

this situation.According to Sutiyoso, the for-

mer governor of Jakarta, the cen-tral government must help mu-nicipal authorities continue the development of monorail and subway projects that have were put on hold due to financial dif-ficulties. When completed, these projects will help remove traffic jams from many parts of the city, Sutiyoso says.

But before a solution is found, for the sake of boosting the man-

ufacturing industry which em-ploys a lot of people and con-tributes a great deal to the state’s treasury, the automobile produc-tion show must go on in, yes, high gear!

In fact, according to Gaikin-do’s projections, car production in Indonesia will continue to soar through 2015 in tandem with a steadily rising demand and rap-id expansion of the size of mid-dle and upper class segments of our society.

Environmental-Friendly Tires

A visitor inspects environmental-friendly tires produced by PT Gajah Tunggal in Jakarta. The GT Radial Champiro ECO-type tire was produced using Nanotech Silica Technology, which allows more efficient save fuel consumption, reduce CO2 emission and meet the European regulatory standards on noise level.


AutomotiveThe President Post www.thepresidentpost.comJuly 12, 2010C4

Indonesia’s automakers and distributors are grouped under Gaikindo, an ac-ronym that sounds a bit Japanese but is in fact ac-ronym for “Gabungan In-

dustri Kendaraan Bermotor In-donesia,” literally translated “the association of Indonesia’s motor vehicle industries.”

This association was estab-lished in 1969 as a non-profit or-ganization and now has 16 assem-bling companies, 21 distribution agents, seven spare parts suppli-ers and four companies supply-ing the industry’s primary com-ponents as its members.

The purpose of this associa-tion is to advance the automo-tive industry and, in the process, improve the people’s welfare. In order to realize its vision and mis-sion, Gaikindo has taken a few important steps as follows:

Broaden communication and •disseminate information as well as views regarding devel-opment of the automotive in-dustry, including introduction of new

Gaikindo: Where Automobile Producers and Dealers Unite for a Noble PurposeBy Diana Sasmita

technologiesDevelop programs for trade to •assist member companiesExport and import activities •involving member companies’ productsPromotional activities to at-•tract foreign capitalProvision of spare parts for •member companiesConduct social welfare activi-•ties within the industryEstablish coordination with •government agencies, and Improvement of customer sat-•isfaction in order to extend the reach of after-sales services.

Over the past couple of years, Gaikindo members have report-edly suffered a lot from the im-pact of the global financial crisis. However, in spite of the difficult situation domestic demand for their products has continued to rise.

Appreciation of the US dollar and the Japanese yen against the national currency rupiah, for in-stance, brought an extra burden to component importers because

imports are valued in those major for-

eign currencies.Sole agents

f e l t optimistic about their business prospects. PT Ford Motor In-donesia (FMI), for instance, an-nounced a bold plan to develop its after-sales services to custom-ers. In January 2009 the compa-ny opened a new superstore deal-er in Bekasi, the sixth in the area, confirming Fords’ grab of a size-able portion of the domestic market.

In total, Indonesia will see at least 5,400 luxury cars sold out before the end of 2010, he

predicted after launching three

I f you wish to measure the purchasing ability of Indone-sians, ask PT Mercedes-Benz Indonesia (MBI). In less than

a month after its launch in June, at least 20 of its Rp4.7 billion Mercedes-Benz SLS AMG series sedans have been sold.

In fact, by the end of June, bare-ly two weeks after the new entries came into the local market, 19 of them were already booked. This explains why Deputy Market-ing Director of MBI, Yuniadi H Hartono, says that Indonesians’ purchasing power actually far ex-ceeds their projected quota.

And there is more to it: if you wish to get it next year, you need to place an order today, he says while extolling the virtues of the sporty two-seater sedans with Gullwing doors.

In a related development, pres-ident Director of MBI, Rudi Bor-geinheimer, says that buyers of SLS AMG cars are from the up-per class segments of society who

Sales of Luxury Cars Up,Dealers Optimisticabout RI’s Purchasing AbilityBy Alci Tamesa

won’t mind waiting for months before getting their dream cars. And you want to know why they do so? It is because to this seg-ment of society, luxury cars are not just a symbol of their status; they also comprise part of their luxury and antiques collections. These people believe that invest-ing today in such luxury cars is worthwhile because in the future the prices of such cars will soar as it becomes categorized as an-tiques.

Overall, Mercedes-Benz is op-timistic about being able to reach its sales target of 3,500 units per annum. Even during the first quarter of this year, a total of 997 “Mercy” cars were bought by Indonesians who intended to display the luxury side of their lifestyle. It is this particular de-velopment that motivated MBI to upgrade its sales target, as the Indonesian economy has over the past couple of years performed quite well.

During the first quarter of

2009 alone there was a 55.2% increase in the sales of exclusive-ly luxurious cars which translates into 642 units. Compare this to 997 units sold out during the same period this year. This was apparently the reason MBI re-leased the E-Class Cabriolet se-ries.

Optimistic about this first quarter’s development, the com-pany announced in May this year that it was going to launch 11 new luxury series. According to Roland Staehler, the Market-ing Director of MBI, in total they will launch 21 types of cars but that 11 to be launched first were SLS AMG, M-Class Grand Edi-tion, SLK Grand Edition, E-Class Cabriolet, two V-Class types, R-Class facelift, S-Class Coupe, GL with new diesel engines, G-Class and Smart Fortwo.

SLS and V-Class series will be introduced to the general pub-lic during the Indonesia Interna-tional Motor Show (IIMS) this

month whereas the Smart series will hit the streets in November this year.

News reports say that BMI is also aiming to offer its articulat-ed buses to rejuvenate Transja-karta (busway) which will use gas (CNG) instead of petrol. It also plans to offer busses for suspen-sion Sprinter Midbus dan 20-seat Sprinter Minibus for transport to the Jakarta international airport.

Automakers and dealers are confident about their future busi-ness prospects given the fact that Indonesia has over the past cou-ple of years registered the highest economic growth rate in ASEAN region.

Staehler says that if political stability remains well guaranteed as it is today and economic devel-opment continues uninterrupt-ed, the automotive industry will grow even faster than predict-

ed because Indonesia is a huge market where the size of the up-per class segment of society is ex-panding rapidly.

It is interesting to note that while the sales of Japanese brands are decreasing in Indonesia as of January this year, German-made cars are fast becoming a source of preference to Indonesia’s well-to-do families.

Other BrandsIf we include all the other

brands, the situation is a bit dif-ferent. For instance, during 2009, the total number of cars sold in Indonesia reached 488,912 units. In 2008 a total of 596,166 units were sold. So in 2009 there was a decline of 17.9%.

President Director of Toyo-ta Astra Motor (TAM) John-ny Darmawan says that in 2010 there will be a 20% increase in sales to 550,000 units and that

Toyota cars are expected to domi-nate the market. He predicts that there will be more people buying cars on the retail level than on the wholesale level (from sole agents to dealers).

In 2009 Toyota enjoyed 38.9% of the market share though it suffered a 8.9% decline in to-tal sales target, transacting only 190,471 units compared to the previous year’s transaction fig-ure of 209,130 units. Yet this is still much better than the perfor-mance of other sole agents, ac-cording to Kompas newspaper.

Daihatsu was ranked second last year after having edged Mit-subishi out. Daihatsu sold 75,169 units in 2009, down by 2.9% of its performance in 2008. Mit-subushi came third with 64,334 units sold or a 23.8% decline from its performance in 2008.

Pretty much like Toyota, Hon-da is also making huge fortunes as its market grip strengthened thanks to increased demand. Honda has seen a 37% increase in sales or 5,965 cars during the first five months of this year, and as of June the sales made by PT Honda Prospect Motor reached 28,842 units. The types of Hon-da cars that sold well included Honda Jazz, CR-V, Accord, Civ-ic, and Honda City.

The strangest thing with Indo-nesia’s automotive market is that while these types of cars suffer a decline in sales, Indonesians are buying luxury cars in big num-bers. German-made cars are en-joying a good ride in the local market here, thanks to a surge in public demand for luxury cars. This is why BMW and Mer-cedes-Benz have been harvesting a great deal of fortune in Indone-sia these days.

GAIKINDO MEMBERS

No. COMPANY BRAND S D M

1 PT. ASTRA DAIHATSU MOTOR DAIHATSU x x

2 PT. ASTRA INT’L Tbk - PEUGEOT SALES OPERATION PEUGEOT x

3 PT. ASTRA NISSAN DIESEL INDONESIA NISSAN DIESEL x x

4 PT. AUTO EURO INDONESIA RENAULT x

5 PT. BMW INDONESIA BMW x x

6 PT. CENTRAL SOLE AGENCY VOLVO x

7 PT. FORD MOTORS INDONESIA FORD x

8 PT. FOTON MOBILINDO FOTON x x

9 PT. GARUDA MATARAM MOTOR AUDI/VW x

10 PT. GAYA MOTOR (ASSEMBLER) DAIHATSU, PEUGEOT, BMW, ISUZU, NISSAN DIESEL, FOTON

11 PT. GM. AUTO WORLD INDONE CHEVROLET x

12 PT. GRANDAUTO DINAMIKA JAGUAR x

13 PT. HINO MOTORS MANUFACTURING INDONESIA HINO x

14 PT. HINO MOTORS SALES INDONESIA HINO x

15 PT. HONDA PROSPECT MOTOR HONDA x x

16 PT. HYUNDAI INDONESIA MOTOR HYUNDAI x x

17 PT. ISUZU ASTRA MOTOR INDONESIA ISUZU x x

18 PT. JAVA MOTORS LAND ROVER x

19 PT. KIA MOBIL INDONESIA KIA x x

20 PT. KRAMA YUDHA RATU MOTORS MITSUBISHI x

21 PT. KRAMA YUDHA TIGA BERLIAN MOTORS MITSUBISHI x x

22 PT. MAZDA MOTOR INDONESIA MAZDA x

23 PT. MERCEDES-BENZ DISTRIBUTION INDONESIA MERCEDES-BENZ x

24 PT. MERCEDES-BENZ INDONESIA MERCEDES-BENZ x

25 PT. MESIN ISUZU INDONESIA ISUZU x

26 PT. MITSUBISHI KRAMA YUDHA MOTOR & MANUFACTURING MITSUBISHI x

27 PT. NISSAN MOTOR DISTRIBUTOR INDONESIA NISSAN x

28 PT. NISSAN MOTOR INDONESIA NISSAN x

29 PT. PROTON EDAR INDONESIA PROTON x

30 PT. SUZUKI INDOMOBIL MOTOR SUZUKI x x

31 PT. TC. SUBARU SUBARU x

32 PT. TJAHJA SAKTI MOTOR BMW x

33 PT. TOYOTA ASTRA MOTOR TOYOTA x

34 PT. TOYOTA MOTOR MANUFACTURING INDONESIA TOYOTA x x

35 PT. TRIJAYA UNION MITSUBISHI x

36 PT. UNICOR PRIMA MOTOR CHERY x x

Note : (S) Sole Agent, (D) Distributor, (M) Manufacturer

NON-GAIKINDO MEMBERS

No. COMPANY BRAND S D M

1 PT. KORINDO MOTORS HYUNDAI (TRUCK & BUS) x

2 PT. KORINDO HEAVY INDUSTRY HYUDAI TRUCK (TRUCK & BUS) x

3 PT. NATIONAL ASSEMBLER SUZUKI PICK UP, KIA, CHERY x

Note : (S) Sole Agent, (D) Distributor, (M) Manufacturer

This association was established in 1969 as a non-profit organization and now has 16 assembling companies, 21 distribution agents, seven spare parts suppliers and four companies supplying the industry’s primary components as its members.

newest models, namely C300 Avantgarde, E300 Avantgrade, and E36 AMG.

Of the 5,400 luxury cars, MBI expects to sell 3,700 units repre-senting a 28.2% increase from last year’s performance with 2,884 cars delivered to custom-ers.

All through last year MBI con-trolled 69% of luxury cars’ mar-ket share in Indonesia. Between January and April 2010 MBI sold 1,170 units or 40% of last year’s performance.

Photo: www.gustomobil.wordpress.com

Photo: www.km77.com

Automakers and dealers are confident about their future business prospects given the fact that Indonesia has over the past couple of years registered the highest economic growth rate in ASEAN region.

Photo: www.ausmotive.com

The President Postwww.thepresidentpost.com July 12, 2010 C5

Travel

The Bali that was, long-time Bali-based expat residents insist, can still be found lying a two-hour leisurely drive from Kuta.

A calm and peaceful place, Amed has in recent times rose to discrete prominence, a much-de-served status arrested in the past by bad roads and lack of power and communications, which ac-tually complements its irresistible quietness.

Every bay, some sandy, others rocky, appears to be lined with double-outrigger traditional fish-ing boats (jukung).

The horizon almost invariably is rife with literally hundreds of the boats’ colorful triangular sails heading off to the fishing grounds morning and afternoon.

Amed is a near-perfect destina-tion for the more mature (read: above 50 years of age) travelers

Quite, Peaceful

Text and photos by Taufik Darusman

Few places in Bali allow you to enjoy a simple coconut oil massage while lying on a bamboo bed in the shade of a fishermen’s hut as Amed.

though younger people like it too as it offers them a daily fix of peace and tranquility.

The locals lead a quite lifestyle, making Amed an ideal place for you to spend time either writing your bio, taking stock of your life or doing just nothing and relax.

This relatively undeveloped north-eastern coastal strip in the Karangasem Regency of East Bali, where Amed is located, fea-tures some of the island’s best snorkeling amidst spectacular sunrises over the neighboring is-land of Lombok.

On any given time you are apt to come across tourists stroll-ing slowly along the road or the beach. Or elderly couples walk-ing holding hands, rekindling their love for each other in their own special way, Amed-style.

And almost everywhere there you can hop on a traditional fish-ing boat for a sunset tour, again to reignite the proverbial fire that

simmers inside you.

Amed is actually not just one village but a string of smaller vil-lages, starting with the village Amed in the north followed by Congkang, Jemeluk, Bunutan, Lipah, Selang, Banyuning and ending with Aas.

At present Amed is mostly a quiet place with stunning ocean vistas as well as one of the best places in Bali for scuba diving.

The landscape comprises a se-ries of headlands overlooking bays, lined with fishing boats.

From the top of the hill, one cannot but marvel at the serene scenery and feel grateful that the long tracts of land have no given way to tacky opulence in the way of star-rated hotels.

Located on the dry side of the mountains Agung and Saraya, Amed is short in rain throughout the year. The landscape is very arid and the slopes of the moun-

tain look bare.The sleepy village still remains

untouched by the effects of tour-ism, but as developments, albeit at a snail’s pace, take place along this strip, Amed is likely to be-come one of the island’s major tourist areas, a gain for local peo-ple in search of a decent liveli-hood but a pain to advocates of the environment.

In the meantime, many locals subsist by producing salt thanks

to their proximity to the sea.To reach Amed is an exhaust-

ing trip but is an experience in it-self: it is rich in curves and very steep ups-and-downs.

From Amed the road south via Jemeluk, Lipah, Bunutan and Selang is narrow but moderate-ly paved, offering stunning views of mountains on one side and the Lombok Strait on the other.

“Jemuluk, which is a protect-ed bay, is an ideal place to be-gin snorkeling. Four kilometres

further south along the coast is Banyuning, where there’s a small Japanese wreck and beautiful cor-al gardens,” said the driver.

“The corals are alive and beau-tiful, but you have to travel a cou-ple of meters to find the most viv-id colors.”

Diving schools are available in the area, and readily point you out the best dive spots.

Snorkeling and diving off the black-sand beaches here is excep-tional for the variety and num-bers of fish. But just to be any-where along the coast or sit in one of the seaside restaurants and observe dolphins playing in the waves is just as enthralling.

To fly from Jakarta to Bali in a 90-minute journey only to set-tle down in undeveloped Amed might be an uncool thing to do—it is even more uncool if you’re there and cannot manage to visit the site even for a few hours.

To get to Amed from Kuta, head for the Bypass towards Sa-nur and exit to take the road on your right that leads into the coastal highway heading east.

The coastal road was complet-ed a couple of years ago; it now al-lows you to drive all the way from Tirtagangga in a clockwise man-ner.

Reprinted by permission from Garuda Inflight magazine

Amed

LivingThe President Post www.thepresidentpost.comJuly 12, 2010C6

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BeautifulYouthful

A new study from Ohio State University shows just how physically harmful it can be to argue the wrong way. In the study, 37 mar-

ried couples were brought into a hospital research lab, and a tiny vacuum device gave them eight 8-mm blisters on their forearms. Each couple was then videotaped while having conversations, and researchers graded them on their communication skills, noting who had distressing or hostile styles of communicating.

After 12 days, the researchers noticed that the blisters healed faster on the couples who had more positive communication styles, and the blisters healed the slowest on the couples with more negative styles.

Why would physical wounds heal more quickly among the better communicators? The re-searchers at Ohio State who did the study think it might have something to do with oxytocin.

“Oxytocin is a protective hor-

Is Your MarriageMaking You Sick?By Elizabeth Cohen

mone,” says Janice Kiecolt-Gla-ser, the lead author of the study, who noted that the better com-municators in her study -- the ones whose wounds healed the fastest -- had the highest levels of oxytocin in their blood.

There are certainly many ex-amples of high-profile trou-bled marriages. For example, ac-tor Charlie Sheen was arrested in connection with an argument he had with his wife last Christ-mas Day; a court hearing on the case was delayed Monday. But husbands and wives don’t always make the connection that stress-ful marriages can actually harm your physical health.

“People get very surprised when they hear that marital stress is actually worse for your health than workplace stress,” says Tara Parker-Pope, author of “For Bet-ter: The Science of a Good Mar-riage.”

Overall, couples with more marital stress have worse im-mune function and higher blood pressure and heart rates, accord-

ing to Debra Umberson, a profes-sor of sociology at the Universi-ty of Texas, who studies couples and stress.

“Marital stress is so pernicious because it’s chronic, long-term, and you can’t get away from it,” she says

“You’re having these problems day in and day out year after year, decade after decade.”

While both sexes suffer, some, but not all, studies show women suffer more physical effects from a bad marriage than men, Um-berson adds.

Of course, having a happy marriage or relationship is easi-er said than done. Here are some tips for limiting marital stress to make you happier and physical-ly healthier.

Argue well“We tend to focus on how of-

ten we fight -- as in, ‘we’ve been fighting a lot lately’ or ‘we’ve haven’t fought much lately,’” Parker-Pope says. “But that’s ac-tually pretty meaningless. What really matters is the quality of your arguments.”

Let’s say, for example, your house is messy. You have a choice: you could say something like “This house such a mess, and you never help me clean it up” or you could say “I want us to learn how to be neater.”

The latter, marriage experts say, is better not just for your marriage but for your and your

partner’s physical health.“Any elements of criticism or

demand make your words stress-ful,” Umberson says.

Here’s another example. Let’s say your partner has just baked cookies and the kitchen looks like a hurricane hit it.

“You could walk into the kitch-en and notice the mess but not the cookies,” she says.

“Or you could say, ‘It smells great in here, and I can’t wait to have one of those cookies, but wow, it’s messy in here.”

If you think style doesn’t mat-ter, think back to that Ohio State study, Parker-Pope adds.

“Think about those blisters, and how slow they were to heal after a nasty comment,” she says. “This should make everyone stop and realize, ‘I need to think about what I’m doing to my health and my partner’s health and make sure I’m fighting well to stay well.’”

Your spouse is annoying -- accept it!

Umberson noticed something interesting in her studies of hap-py couples.

“It’s always been striking to me that when people get along, they just accept something annoying about their partner. They don’t try to alter it,” she says.

Case in point: The wife in one of her happy couples had the hab-it of stacking up books in var-ious places around the house, including doorways. Her hus-band wasn’t thrilled with it, but he learned to live with it -- and more.

“He saw her as a creative, inter-esting, quirky person,” she says.

“He just saw it as a reflection of why he’d fallen in love with her in the first place.”

Here are more tips on how to have a happy marriage from the National Healthy Marriage Re-source Center.

Don’t yell at a yellerIf you’re married to a yell-

er, don’t yell right back, advis-es William Doherty, a marriage and family therapist and profes-sor in the Family Social Science Department at the University of Minnesota.

“Be strong without shouting,” he says. For example, if you’re dealing with a chronic yeller, you could respond by saying in a calm voice: “This behavior that you’re doing now I will not accept in this relationship, and if you con-tinue it, I’m leaving.”

Limit the Greek chorusDoherty says he’s noticed that

women who are unhappy in their marriages will often confide in their girlfriends, and the typi-cal response tends to be, “What a jerk!”

While it’s fine to seek support from your social circle, it’s also important to go to a counselor, who will do more than commis-erate, and actually help you find a

solution to your problems, which might include identifying the role you’ve played in your marital dif-ficulties.

The website for the Ameri-can Association of Marriage and Family Therapy can help you find a therapist near you.

Recall the happy timesEven in stressed-out marriage,

there are often moments of hap-piness. Tracy Todd, a licensed marriage and family therapist in Virginia, and spokesperson for the American Association for Marriage and Family Therapy, recommends analyzing them.

“Think of some recent times that were OK to positive. How did they occur? What did you do to help create the situation? What can you do to recreate a more pos-itive environment?” he says. “Re-call exceptions to the bitterness.”

Assess your sex driveIf you’re not interested in sex—

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Reduced blood flow: Diabe-tes and high blood pressure are among the health problems that can restrict genital blood flow.

Hormonal issues: Menopause, breast-feeding, birth control pills, and thyroid problems can damp-en sexual desire.

Medication side effects: Anti-depressants and chemotherapy agents such as tamoxifen are fre-quently to blame.

You eat right. You exercise. You get an annual physical. You probably think you’re doing everything you can to stay healthy. But here’s one more thing you need to do: Learn how to argue well with your spouse.

Photo: www.weddingcaketoppers.blogspot.com

Overall, couples with more marital stress have worse immune function and higher blood pressure and heart rates.

Living

The President Postwww.thepresidentpost.com July 12, 2010 C7

Sages going back to Socrates have offered advice on how to be happy, but only now are sci-entists beginning to address this question with systematic, con-trolled research. Although many of the new studies reaffirm time-honored wisdom (“Do what you love,” “To thine own self be true”), they also add a number of fresh twists and insights. We canvassed the leading experts on what happy people have in com-mon—and why it’s worth trying to become one of them.

1 They find their most golden self

Picture happiness. What do you see? A peaceful soul sitting in a field of daisies appreciating the moment? That kind of pas-sive, pleasure-oriented—hedon-ic—contentment is definitely a component of overall happiness. But researchers now believe that eudaimonic well-being may be more important. Cobbled from the Greek eu (“good”) and dai-mon (“spirit” or “deity”), eudai-monia means striving toward ex-cellence based on one’s unique talents and potential—Aristo-tle considered it to be the no-blest goal in life. In his time, the Greeks believed that each child was blessed at birth with a per-sonal daimon embodying the highest possible expression of his or her nature. One way they envi-sioned the daimon was as a gold-en figurine that would be re-vealed by cracking away an outer layer of cheap pottery (the per-son’s baser exterior). The effort to

Things HappyPeople DoBy Gabrielle LeBlanc

(O—The Oprah Magazine)

know and realize one’s most gold-en self—”personal growth,” in to-day’s lingo—is now the central concept of eudaimonia, which has also come to include contin-ually taking on new challenges and fulfilling one’s sense of pur-pose in life.

“Eudaimonic well-being is much more robust and satisfy-ing than hedonic happiness, and it engages different parts of the brain,” says Richard J. Davidson, PhD, of the University of Wis-consin-Madison.

“The positive emotion accom-panying thoughts that are direct-ed toward meaningful goals is one of the most enduring compo-nents of well-being.” Eudaimonia is also good for the body. Wom-en who scored high on psycho-logical tests for it (they were pur-posefully engaged in life, pursued self-development) weighed less, slept better, and had fewer stress hormones and markers for heart disease than others—including those reporting hedonic happi-ness—according to a study led by Carol Ryff, PhD, a professor of psychology at the University of Wisconsin-Madison.

2 They design their lives to bring in joy

It may seem obvious, but “peo-ple don’t devote enough time to thinking seriously about how they spend their life and how much of it they actually enjoy,” says Da-vid Schkade, PhD, a psychologist and professor of management at the University of California San

Diego. In a recent study, Schkade and colleagues asked more than 900 working women to write down everything they’d done the day before. Afterward, they re-viewed their diaries and evalu-ated how they felt at each point. When the women saw how much time they spent on activities they didn’t like, “some people had tears in their eyes,” Schkade says.

“They didn’t realize their hap-piness was something they could design and have control over.”

Analyzing one’s life isn’t neces-sarily easy and may require ques-tioning long-held assumptions. A high-powered career might, in fact, turn out to be unfulfill-ing; a committed relationship once longed for could end up be-ing irritating with all the compro-mising that comes with having a partner. Dreams can be hard to abandon, even when they’ve turned sour.

3 They allow themselves to be happy

As much as we all think we want it, many of us are convinced, deep down, that it’s wrong to be happy (or too happy). Whether the be-lief comes from religion, culture, or the family you were raised in, it usually leaves you feeling guilty if you’re having fun.

“Some people would say you shouldn’t strive for personal hap-piness until you’ve taken care of everyone in the world who is starving or doesn’t have adequate medical care,” says Howard Cut-ler, MD, coauthor with the Dalai

Lama of The Art of Happiness in a Troubled World.

“The Dalai Lama believes you should pursue both simultane-ously. For one thing, there is clear research showing that happy peo-ple tend to be more open to help-ing others. They also make better spouses and parents.” And in one famous study, nuns whose auto-biographies expressed positive emotions (such as gratitude and optimism) lived seven to 10-and-a-half years longer than other nuns. So, for any die-hard pessi-mist who still needs persuading, just think of how much more you can help the world if you allow a little happiness into your life.

Fortunately, changes don’t have to be big ones to tip the joy in your favor. Schkade says that if you transfer even an hour of your day from an activity you hate (commuting, scrubbing the bathroom) to one you like (read-ing, spending time with friends),

5

The fact that you keep coming back to Facebook makes it easier for Facebook to sell more ads -- and make more money.

Millions of Facebook addicts worldwide worry that someday soon they’ll have to pay to use the site.

If you go to Facebook.com and search for the terms “Facebook free” or “Facebook charge,” you’ll find hundreds of groups with names like, “If 1 Million People Join Before 9th July 2010 Face-book Will Stay Free!” or “If Fa-cebook Charges A Fee We Will Discontinue Using It.”

Some of these groups have doz-ens of users, others have thou-sands.

During a recent press con-ference, Facebook CEO Mark Zuckerberg said while Facebook users do care about privacy, the question of whether or not Face-book will eventually charge for its service is actually a much bigger concern among the site’s 500 mil-lion users.

But are these fears justified?No! Facebook will never charge

you to be a member and use the site.

Don’t take it from me. Here’s Facebook spokesman Larry Yu on the issue:

“We have absolutely no plans to charge for the basic service of using Facebook.”

He continues: “Last year we saw a similar rumor circulating that Facebook was going to begin charging $1.99 to use the site, but this year we’re hearing that fee in-creased to $14.99 with the spread of this rumor. We look forward to hearing what Facebook might be rumored to cost for use next

Why You’ll Never Have to Pay for FacebookBy Nicholas Carlson

year.”

If you press Facebook employ-ees on this, they will tell you the reason they will never charge for access is that putting up a pay-wall runs counter to the compa-ny’s mission to make the world more open and connected.

But even if you don’t buy that idealistic hoopla, you should un-derstand Facebook has a deep profit motive to never charge you for access.

Why?Because Facebook makes its

money bringing together as big of an audience as possible and then selling that audience’s attention to advertisers. It’s a business that works. Facebook should bring in as much as $2 billion in revenue this year. That’s more than twice as much as Facebook brought in last year. If Facebook started charging users, its membership would start shrinking fast -- and so would its revenues.

So while Facebook may charge you for certain bonus features, such as gifts for your friends, or credits to play games like Farm-ville, it will never charge for basic access to the site.

Why then do people worry Facebook might start charging

soon? Probably because Face-book users feel like they’re get-ting something valuable for free, and everybody knows there’s no such thing as a free lunch.

Just remember: The fact that you keep coming back to Facebook makes it easier for Facebook to sell more ads -- and make more money.

Your lunch isn’t free, it’s sponsored.

Photo: www.canhcung.com

Photo: www.toploadboards.com

you should see a significant im-provement in your overall happi-ness. Taking action is key. Anoth-er recent study, at the University of Missouri, compared college students who made intentional changes (joining a club, upgrad-ing their study habits) with others who passively experienced posi-tive turns in their circumstanc-es (receiving a scholarship, being relieved of a bad roommate). All the students were happier in the short term, but only the group who made deliberate changes stayed that way.

4 They avoid “if only” fantasies

If only I get a better job...find a man...lose the weight...life will be perfect. Happy people don’t buy into this kind of thinking.

The latest research shows that we’re surprisingly bad at pre-dicting what will make us hap-py. People also tend to misjudge

their contentment when zero-ing in on a single aspect of their life—it’s called the focusing illu-sion. In one study, single subjects were asked, “How happy are you with your life in general?” and “How many dates did you have last month?” When the dating question was asked first, their ro-mantic life weighed more heavily into how they rated their overall happiness than when the ques-tions were reversed.

The other argument against “if only” fantasies has to do with “he-donic adaptation”—the brain’s natural dimming effect, which guarantees that a new house won’t generate the same plea-sure a year after its purchase and the thrill of having a boyfriend will ebb as you get used to be-ing part of a couple. Happy peo-ple are wise to this, which is why they keep their lives full of novel-ty, even if it’s just trying a new ac-tivity (diving, yoga) or putting a new spin on an old favorite (kun-

dalini instead of vinyasa).

5 They put best friends first

It’s no surprise that social en-gagement is one of the most im-portant contributors to happi-ness. What’s news is that the nature of the relationship counts. Compared with dashing around chatting with acquaintances, you get more joy from spending lon-ger periods of time with a close friend, according to research by Meliksah Demir, PhD, assistant professor of psychology at North-ern Arizona University. And the best-friend benefit doesn’t nec-essarily come from delving into heavy discussions. One of the most essential pleasures of close friendship, Demir found, is sim-ple companionship, “just hang-ing out,” as he says, hitting the mall or going to the movies to-gether and eating popcorn in the dark.

Facebook CEO Mark Zuckerberg

Millions of Facebook addicts worldwide worry that someday soon they’ll have to pay to use the site.

During a recent press conference, Facebook CEO Mark Zuckerberg said while Facebook users do care about privacy, the question of whether or not Facebook will eventually charge for its service is actually a much bigger concern among the site’s 500 million users.

“

HealthThe President Post www.thepresidentpost.comJuly 12, 2010C8

P eople who have low lev-els of the so-called good cholesterol have long been known to be at higher risk

of heart attacks and heart disease. Now, a new study suggests they may have a higher risk of cancer, too.

Each 10-point increase in good cholesterol—known as high-density lipoprotein (HDL)—cor-responds to a 36% decrease in a person’s risk of developing cancer, the study found.

Guidelines say that men and women should keep their HDL over 40 and 50 mg/dL, respec-tively, though everyone should shoot to maintain levels above 60 mg/dL.

The study doesn’t prove that low HDL actually causes can-cer. Nor does it prove that boost-ing your HDL — exercise and healthy eating are two ways to do it — will reduce the risk of can-cer, as it has been shown to do with heart disease.

Cholesterol levels — both good and bad — tend to plum-met in people with cancer, so low HDL “might just be a marker of people who are about to die from cancer” rather than a contribut-ing factor, says the lead author of the study, Richard Karas, MD, executive director of the Molec-ular Cardiology Research Insti-tute at Tufts Medical Center, in Boston.

Low HDL might also simply be a sign of an unhealthy lifestyle that may itself up cancer risk, since people who exercise regular-ly, have a healthy diet, and don’t smoke tend to have higher levels of HDL. Although the research-ers controlled for health factors such as age, body mass index, and smoking in order to zero in on the effect of cholesterol, other unidentified lifestyle factors may have shaped the results.

In the study, which appears in the June 22 issue of the Journal of the American College of Car-diology, Dr. Karas and his col-

leagues re-analyzed data from 24 clinical trials that included near-ly 150,000 generally healthy peo-ple. The trials were originally de-signed to test the effectiveness of statin medications, which lower bad cholesterol (known as LDL).

How HDL may affect cancer risk is still a mystery. HDL may boost the immune system’s abil-ity to fight precancerous lesions and cancerous tumors lurking in the body, Dr. Karas says.

Another possibility is that HDL has antioxidant properties that neutralize chemical com-pounds in the body that contrib-ute to cancer by damaging cells. A third explanation is that HDL may reduce inflammation, which is associated with both heart dis-ease and cancer.

The study should bring some long overdue attention to HDL, which has been unjustly over-shadowed by its evil twin, LDL, says Peter Alagona Jr., MD, the director of general cardiology at the Penn State Heart and Vascu-lar Institute, in Hershey.

Part of the reason is that block-buster statin medications can

low-er bad

cholester-ol, but can’t

do much to raise HDL, says Dr. Alag-

ona, who was not in-volved in the new re-

search.

Raising HDL with medi-cation is indeed trickier, says Jennifer Robinson, MD, pro-gram director of the Lipid Research Clinic at the Uni-versity of Iowa, in Iowa City. Prescription niacin pills can help raise HDL slightly, she says, but there are few effec-tive prescription drugs avail-able.

“We don’t know that giv-ing someone a drug to raise HDL will prevent cancer, or even heart disease,” says Dr. Robinson, who wrote an ed-itorial accompanying Dr. Karas’s study.

For now, the best prescrip-tion for raising HDL is an old-fashioned one: Eat right, stay fit, and quit smoking.

“Do everything you can in terms of weight control [and] quitting smoking,” says Jay Brooks, MD, chair-man of the hematology and oncology department at the Ochsner Clinic Foundation in Baton Rouge, La.

“We don’t have any good pharmacologic means of raising HDL really well at this point, so concentrate on the things you can do the best.”

Low “Good” Cholesterol Linked to Cancer Risk

Study: Anxiety in Youth Linked to Heart Attacks Later on

By Amanda Gardner

By Amanda Gardner

Men diagnosed with anxiety in their late teens or early 20s are more than twice as likely to have heart disease

or a heart attack later in life than their more laid-back peers, ac-cording to a new Swedish study.

As many as 28 percent of peo-ple are diagnosed with anxiety at some point in their lives, accord-ing to an editorial accompanying the study in the Journal of the American College of Cardiology.

Anxiety is more than feeling stressed out. People with anxiety disorders feel excessive or irratio-nal worry and can have anxiety-related physical symptoms, such as fatigue, headaches, trembling, sweating, panic, and nausea.

Experts have a number of hy-potheses as to why anxiety and heart disease may be linked, though the new research can’t confirm that anxiety -- not some other factor -- is the cause of heart disease and heart attacks in the study.

“Anxiety increases adrenaline; stress and anxiety trigger an ad-verse response,” says Dr. Tracy Stevens, M.D., a spokesperson for the American Heart Associa-tion and a cardiologist with Saint

Luke’s Mid America Heart Insti-tute, in Kansas City, Missouri. This stress could affect the fatty plaque lining coronary arteries; if the plaque ruptures, it can lead to clots and heart attacks.

However, that’s just a theory at the moment, says Stevens, who was not involved in the research. Although it’s known that anxi-ety can affect blood pressure and heart disease-related chest pain in the short term, the long-term ef-fects are unknown.

“It’s a very provocative observa-tion to say that one’s state of anx-iety at a fixed point in time can in some way foretell an increased risk of cardiovascular disease 20 years down the road,” says Dr. Gregory Dehmer, M.D., profes-sor of internal medicine at Tex-as A&M Health Science Center College of Medicine and director of the cardiology division at Scott & White, in Temple.

“It would be terribly premature to base any kind of therapeutic decision on this,” he says. “If a pa-tient says they’re anxious and the doctor puts them on an anti-anx-iety drug for 25 years to prevent a heart attack, that’s a huge leap of faith.”

There is, however, already a fairly well-established link be-

tween depression and a height-ened risk for heart disease.

The new study involved al-most 50,000 Swedish men born between 1949 and 1951 who were undergoing medical exam-inations for military service. A research team, led by Dr.Imre Janszky, M.D., Ph.D., of the Karolinska Institute, in Stock-holm, looked at the men for the next 37 years, a feat made possi-ble by the fact that Sweden has universal health coverage and maintains detailed records on pa-tients.

Unlike previous researchers, these authors found no link be-tween depression and heart dis-ease or heart attack. But they did find that people with anxiety had more than double the risk of heart disease and two-and-a-half times the risk of suffering a heart attack.

All the men classified as hav-ing anxiety or depression had been diagnosed by a psychiatrist, a big plus for the study. Howev-er, the authors admit, certain risk factors for heart disease, such as cholesterol, were not fully taken into account.

In a second report in the same issue of the journal, researchers

combined data from 20 stud-ies, including a total of almost 250,000 healthy people from Norway, the Netherlands, Rus-sia, Sweden, Japan, and Britain. The participants were followed for an average of about 11 years by a team led by Annelieke Roest of Tilburg University, in the Netherlands.

In this study, people with anx-iety had a 26 percent increase in the risk of heart disease and a 48 percent increase in the risk of dy-ing of heart-related causes.

There was also a hint of an as-sociation between anxiety and nonfatal heart attacks, but this information was based only on five studies and was not statisti-cally significant.

Still, there may be something physicians and their patients can do, which they probably should be doing anyway.

“If a person has a diagnosis of an anxiety disorder, such as panic disorder or phobia -- not if they’re just nervous or tense -- I would be more likely to tighten up on lip-id levels and blood pressure,” says Lawrence Hergot, M.D., profes-sor of medicine and director of general cardiology, University of Colorado Health Sciences Cen-ter, in Denver.

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As many as 28 percent of people are diagnosed with anxiety at some point in their lives

““Anxiety increases adrenaline; stress and anxiety trigger an adverse response,” says Dr. Tracy Stevens,

M.D., a spokesperson for the American Heart Association. This stress could affect the fatty plaque lining coronary arteries; if the plaque ruptures, it can

lead to clots and heart attacks.

For now, the best prescription for raising HDL is an old-fashioned one: Eat right, stay fit, and quit smoking.

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