Issue Number 109 - March 2012
Dear AIBC Members and Friends
While my last column was very positive about the Indonesian economy and investment climate, recent policy announcements and subsequent confusion about their application have sowed seeds of doubt in investors’ minds. The recently announced requirement of foreign mining companies to sell down their equity to no more than 49 per cent by the tenth year of production has caught investors by surprise, with some saying that it could affect the viability of their Indonesian investment plans.
While it is understandable that Indonesia wishes to maximise its returns from the extraction of its mineral resources, the sell-down requirement will make Indonesia less attractive to foreign mining investors at a time when other regions and nations are becoming more attractive. As well, the rule could also have a distortive effect on allocation of scarce Indonesian capital, drawing it away from other sectors where it is sorely needed.
While mining investment is rising in Indonesia, it is rising much faster in several competitor countries and regions. In Africa, for example, Australian mining investment has more than doubled in the past four years to reach US$50 billion by 230 companies across 42 countries. In Latin America, Australian mining investment is expanding rapidly.
Indonesia needs around 70 per cent of investment capital across all sectors to come from foreign investors. This is based on the investment record of the past decade and estimates of the future capacity of Indonesian capital markets. There is therefore potential for Indonesian mining investment to undershoot the 51 per cent local equity goal, as well as to suck-in capital from other sectors such as infrastructure, energy and education, leaving these sectors less able to attract investment.
Finally, as the most recent Fraser Institute Mining Survey shows (see below), Indonesia still languishes in the bottom 10 of the rankings of ‘policy potential’, meaning that relative to most other nations, Indonesia is unattractive to investment. This policy will not help investors to view Indonesia as a good place to put their money.
While foreign mining investors may be disappointed at the impact on project viability, they have ample opportunities to take their investment elsewhere. The greatest negative impact of this mining equity policy could be on the economy of Indonesia.
Ian Satchwell with both the Indonesian and Australian Trade Ministers,
Jakarta, March 2012
More positively, in mid-March I had the opportunity to participate in a business delegation to Jakarta accompanying the Australian Ministers for Trade and Agriculture. The delegation met with several Ministers and senior businesspeople. The governments advised that they would support the bilateral Business Partnership Group, which is being set up to advise on the proposed Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA). I will report on the Business Partnership Group and IA-CEPA in the next edition of AIBCnews.
Since the start of December 2011, AIBC has offered an increased number and range of events in all States and Territories, with 15 events attracting an aggregate attendance of more than 650
More events are planned, and we are moving to arrange some multi-state events – including a series of mid- term consultations by Ambassador to Indonesia, Greg Moriarty.
In this month’s IndoView, we present the following multimedia articles:
AIBC Victoria – BKPM Visits Melbourne and New Consul General for Victoria & Tasmania
On 8 March 2012, Ibu Lily Herawati, Director of the Indonesian Investment Coordinating Board (BKPM), visited Melbourne accompanied by four senior trade advisors from BKPM’s Jakarta headquarters. Ibu Lily is developing a comprehensive strategy for Indonesia’s telematics industry and met with representatives of Australian businesses from this sector. BKPM is very keen to work with Australian businesses interested in developing this sector in Indonesia, either through direct investment or partnership with existing Indonesian companies.
This visit was coordinated by AIBC Victoria Chair, Juris Austrums, and Peter Craven, Vice-President of IABC’s Yogyakarta branch. Meetings were hosted by the Australian Industry Group in Melbourne coordinated by Louise McGrath, National Manager – Business & International Advisory Services, and Jon Onley, National Business Development Manager – Industry Sectors. Two industry representatives were also able to join in the discussions – K. Visvanathan from Redflex and C. Black from Intercel.
On 29 February 2012, AIBC Victoria hosted a “Doing Business in Indonesia” event at the Consulate General of the Republic of Indonesia in Melbourne. This was a great opportunity for Members to meet the new Consul General, Bpk Irmawan Emir Wisnandar.
Pak Emir was born in Surabaya and is an economics graduate of Parahyangan Catholic University in Bandung. Amongst his many achievements, he has been the Head of Section for Asia Pacific, Directorate for Economic Cooperation of Developing Countries; Vice-Consul of the Embassy of the Republic of Indonesia in Thailand; Head of Economic Division and Head of Chancery of the Embassy of the Republic of Indonesia in Singapore – and most recently – Director for ASEAN Functional Cooperation.
This event also featured a presentation by Bpk Muhammad Nasir, the new Head Representative of BKPM’s Sydney office. Pak Nasir has already begun to engage with potential Melbourne investors and was available for appointments prior to the AIBC event. Peter Craven of IABC’s Yogyakarta branch also spoke from his experiences during the 15 years he has worked in Yogyakarta. Peter has firsthand experience in managing and operating Indonesian businesses during a period in which the country has undergone tremendous changes both politically and economically.
AIBC New South Wales: February 2012 Update
Lydia Santoso, AIBC NSW Chair, writes… “It has certainly been a very busy time for AIBC NSW over the past few months. We have had four functions with the most recent being a luncheon held on 19 March 2012 at which we were very honoured to host the AIBC National Board. It was a very well-attended lunch with Ian Satchwell providing an informative and thoughtful presentation (AIBC Members can access his presentation here). The lunch provided a fantastic opportunity for members to network and I was also able to meet with a number of new AIBC NSW Members."
"I would like to remind AIBC NSW female members that on 19 April 2012, Perpetual has kindly extended an invitation for us to attend their Women’s Forum, which features Mia Freedman as guest speaker. Places are strictly limited and I encourage you to register as soon as possible. AIBC NSW is also coordinating an inter-state event with AIBC National Corporate Member Norton Rose about the new changes to the Indonesian Mining Laws. For more information about this event, which will be linked by video conference to a simultaneous event hosted in Melbourne, please click here”.
AIBC Western Australia Members Sundowner
On Thursday 8 March 2012, the Consulate General of the Republic of Indonesia in Perth once again kindly hosted a Members Sundowner for over 60 AIBC WA Members and guests.
A keynote presentation was made by Garry Johnson, CEO of Steel Blue, a company which has operated in Indonesia for over 13 years. Steel Blue’s manufacturing is spread between three factories, employing over 2,000 local staff. Wieke Gur, Marketing Consultant and Strategist, also presented to Members, and spoke of the significance of both language and cultural awareness when doing business in Indonesia. As a case study, Wieke highlighted the work she is currently undertaking with Steel Blue to train their executive team. Jason Turner from Garuda Indonesia’s Perth office provided an update on Garuda’s current television advertising campaign in Australia and the recent Roy Morgan (Australia) survey which returned Garuda as "Best International Airline".
AIBC Western Australia: Student Networking Event, Murdoch University
On 14 March 2012, a Student Networking Event was hosted at Murdoch University’s Pendopo as a means to bring together students, AIBC WA Members, University staff and members of the broader community to forge links and provide students with valuable contacts and insights into future business opportunities.
This event was attended by members of PPIA, AIYA, ACICIS and BBIP, along with students from Murdoch University, the University of Western Australia and Curtin University. Catering was provided by the Consulate General of the Republic of Indonesia in Perth and other sponsors included Murdoch University; Garuda Indonesia; Kings Hotel Perth; Bir Bintang; and Windshaker Ridge Wines.
Professor David Hill of Murdoch University said that it was a “fabulous evening, with students, staff, AIBC Members and community supporters all enjoying the atmosphere, the music of the gamelan, and the chance to make contacts with a wider Indonesia-related network; a real benefit for our students”.
A launch event was recently held in the picturesque Council House Gardens for Pertamina WA. Pertamina is Indonesia's most profitable State Owned Enterprise, with a record profit of USD 1.73 Billion in 2010/11. Through Pertamina WA (Harvest Time Enterprises), Pertamina is now extending its market reach for its world class engine lubricants into the growing Western Australian market, after taking initial steps into the Australian market via NSW in 2009.
With international stamps of approval from world class reputable institutions such as API, BMW, Daimler Chrysler, Mercedes-Benz, Volvo, MAN B&W, European Automobile Manufacturer Association, Japan Automobile Standard Organisation, Caterpillar, Komatsu, Wartsila, Niigata and others, combined with competitive pricing, world class modern manufacturing facilities and close geographical proximity between Java and WA, Pertamina Lubricants has arrived in WA with a focus to build a strategic entrance into the mining, industrial, marine and automotive markets and to capitalise on the WA mining boom.
This World Bank report compares regulation for domestic firms in 20 cities and with 183 economies, analysing indicators on business regulations for Balikpapan, Banda Aceh, Bandung, Denpasar, Jakarta, Makassar, Manado, Palangka Raya, Palembang, Pekanbaru, Semarang, Surabaya, Surakarta, Yogyakarta, Batam, Gorontalo, Jambi, Mataram, Medan, and Pontianak.
The report’s key findings include:
To read the full report, please click here.
On 3 March 2012, Canada's leading public policy think-tank, the Fraser Institute, released its annual survey of International Mining Companies. The survey results are based on responses gathered from more than 800 international mining and mining-related companies and ranks 93 of the world’s mining jurisdictions (including Indonesia) on a range of policy-related and other factors that contribute to the attractiveness for investment. This year Indonesia has ranked in the bottom 10 (85th position) in the composite Policy Potential Index, which is a "report card" to governments on the attractiveness of their mining policies.
To read the report, please click here.
The Visit Indonesia Tourism Office has recently provided data which shows that Australia delivered a recorded total of 886,495 visitors to Indonesia in 2011. This represents a 21 per cent increase from 2010, placing Australia as the third most important tourism market for Indonesia behind Singapore and Malaysia both of which delivered a greater number of tourists but only experienced marginal growth.
Expansion of Bali’s Ngurah Rai International Airport started in February 2012, beginning with a project to relieve traffic congestion, according to a senior airport official. State-owned airport management company PT Angkasa Pura I, which manages Ngurah Rai, is ready to start the first part of a four phase expansion project that will cost an estimated Rp 1.9 trillion (approximately US$211 million), according to company director Mr Tommy Soetomo.
For more information, please click here.
ToggleText is a small expert company specialising in computational translation tools. It has provided Kataku (translating Indonesian < > English) for more than ten years and was a pioneering firm in this space. Kataku’s free website offers small translations and dictionary look-ups for free, and records around 5 million hits per month. Kataku has a long record of acceptance and usage in the Indonesian speaking community.
ToggleText’s advantage over Google Translation is that Kataku can be licenced as a separate stand-alone piece of software. For example, Kataku can be licenced to government, academic and commercial groups, and hence is not reliant upon internet access. There are many other options for delivery, including a webservice or OTS software which could be considered and analysed for appropriateness in the Indonesian marketplace.