1INVEST

012014

INFRASTRUCTURESupporting Indonesias Competitiveness and

Future Economic Development

INFRASTRUCTURE PRIORITYThe Iconic Smelter Investment

Reach New HeightsI N V E S T

2 INVEST

3INVEST

www.bkpm.go.id

4 INVEST

Publisher:INDONESIA INVESTMENT COORDINATING BOARD

Redaction:Jalan Jend. Gatot Subroto No. 44 Jakarta 12190 IndonesiaTelephone: +6252880410,52880411www.bkpm.go.id

PREFACE In this edition, the preparedness of Indonesias infrastructure in terms of

facing challenges ahead will be elaborated. Given the new elected Government,

the positive euphoria is expected to have a good impact on the increasing public

service performance in every levels of both central and local government as it has

been mandated by the constitution.

Surely, the new established terms of Maritime Shaft and Sea Toll cannot

be separated from Indonesias cultural root which sees sea as the source of

prosperity. The idea of Indonesia as a marine country is also supported by the

reliefs carved magnificently on Borobudur Temple which portrays the shape of

boat.

The theme Infrastructure Investment: Supporting Indonesia Competitiveness

and Future Economic Development is important since it is the essential

base for a country to develop. Infrastructure improvement has been a focus

of development in every era of government. From 2009 to 2014, under the

coordination of Ministry of Finance of the Republic of Indonesia, the government

made an intense effort by establishing Committee of Infrastructure Priorities

Development Acceleration (KPPIP) and also Indonesia Infrastructure Fund (IIF).

Altogether, the whole structures of government from Bappenas with its

Blue Book or Green Book to the Indonesia Investment Coordinating Board

(BKPM) strive to create a friendly climate for the investors working in the national

infrastructure development sector. To improve and develop the quality of

infrastructure is, of course, the toughest job since it needs a focus on key details.

But the study is already made, thick and complete. What needs to be done is to

execute the study and analysis into the field.

The International World, as well as the citizen itself, is waiting for Indonesia

as The Next Giant in Economy to prove the bright performance in the future.

INDONESIA INVESTMENT COORDINATING BOARD

632

57

69

17

40

65

Indonesia Today

Success Story

Lifestyle

Brand

Infrastructure

AEC 2015

Cigading Habeam

Profiles of Infrastructure Projects

A Piece of Indonesian Beauty

SIEMENS

Geothermal: The Potential worth Exploring

Maritime CountryMonumental Moment

6,000 Trillion Rupiahs

BKPM One Stop Service

All For Infrastructure

Marine Potential

Smelter: The Icon of National InvestmentA Glance on the Indonesian Infrastructure

Negative List of Investment

18

42

66

27

44

67

465354

8

34

58

70

38

62

7274

FROM BRIC TO MINT 12VISTA 14

Indonesian Global BrandWorld-Class Brands

Potentials

Highlights

6 INVEST

Indonesia Today On October 20, 2014, after having the frenetic General Election, the newly elected President Joko Widodo was inaugurated along with his Vice President, Jusuf Kalla. It was a very historic Monday to be remembered as the day when the world witnessed a

humble man being elected as the leader of a great nation with ethnics, cultures and beliefs

diversity. The pair, well-known for their nickname Jokowi-JK, has a huge mandate to be

the helmsmen of the Republic of Indonesia.

The cultural parade thrown after the inauguration was held until midnight showing the

bubbled up euphoria. Speculations arose as the euphoria continued saying that this

leadership might bring a different nuance. How is it different? At least, in terms of the

usurping authority process, it went smoothly. In historians point of view, that was when

the process revolved without the essence of hostility. Hopefully, this positive energy could

be a strong base for the acceleration of Indonesian development in the future.

OutlookThe fate of Indonesian economy cannot be separated from the world economic

performances. In the global market competitiveness era will be even tighter given the

fact that the enforcement of free market everywhere in the world urges each country to

be ready optimally. The trade competition will reach a phase of Face to Face or Head to

Head usually leading to a win or lose situation.

7INVEST

With a new government and the challenging homework to improve infrastructure in the

situation where the budget is tight, it is not an easy work to do. However, Indonesia,

well-known for its perseverance, is believed to be able to cope with the challenges by

working...working...working as it was quoted from President Jokowis first speech in his

inauguration. Even Jokowi JK Cabinet is named Working Cabinet (Kabinet Kerja).

Sri Mulyani, one of Indonesias most prominent name in Economy, in the ministrial meeting

of APEC on October 2014 said (The year) 2014 has been a disappointing year. The US

economic recovery is proceeding, and U.K. economic growth is encouraging, but growth

in Europe is still disappointing. The global growth headwind is stronger than i expected,

and policy responses to neutralize the headwind should be much stronger by many

policymakers. Sri Mulyani now works as a Managing Director of World Bank.

In the next upcoming years, with the condition predicted to be tougher than 2014,

Indonesia needs to precisely walk and maneuver in order to anticipate all of the

possibilities. The market, citizen and all Indonesias joints of life optimism are expected to

be the directed and tough foundation for all economic activities.

8 INVEST

AEC 2015ASEAN (Association of South East Asia

Nations) was established on August 8, 1967

in Bangkok. ASEAN was initiated by 5 (five)

Foreign Affairs Ministers from Southeast

Asia i.e.:

1. Minister of Foreign Affairs of The

Republic of Indonesia: Adam Malik

2. Minister of Foreign Affairs of Malaysia:

Tun Abdul Razak

3. Minister of Foreign Affairs of Thailand:

Thanat Koman

4. Minister of Foreign Affairs of Philippine:

Narcisco Ramos

5. Minister of Foreign Affairs of Singapore:

S. Rajaratnam

Another 5 countries in Asia, later, joined

ASEAN:

1. Brunei Darussalam on January 7, 1984

2. Vietnam on July 28, 1995

3. Myanmar on July 23, 1997

4. Laos on July 23, 1997

5. Cambodia on December 16, 1998

ASEAN CHARTEREDThe year of 2007 has been a historic year

9INVEST

for ASEAN since the territory had a new

feature. The idea of a more structured and

systemized ASEAN was possible. It was even

more visible with the signing of ASEAN

Charter as a joint constitution framework

of ASEAN.

The success of establishing the charter did

not necessarily depict the solid cooperation

among ASEAN members. The challenges

came from within the organization,

especially in terms of implementing the

charter in order to create a more integrated

power.

However, the existence of charter obligating

the members to obey the consensus

decided by ASEAN has inflicted certain

inconvenience among some parties which

tend to oppose the consensus. But the

charter itself has been specially designed

to be not too strict to those members who

could not obey the agreements.

History Of AEC 2015In the 9th ASEAN Summit held in Bali

in 2003, the ASEAN leaders agreed to

establish an ASEAN community on the area

of political security (ASEAN Political-Security

Community), Economy (ASEAN Economic

Community) and Social and Cultural

(ASEAN Socio-Culture Community), also

known as Bali Concord II.

The community was started with the

implementation of ASEAN Economic

Community (AEC). Before, it was agreed

that AEC would be implemented in 2020.

But in January 2007, it was decided that

AEC would be conducted in 2015. There

were 4 (four) pillars of AEC that ensured

single market and production base;

competitive economic region; region of

equitable economic development and

region fully integrated into the global

economy.

The objectives of AEC 2015 is to preserve

political stability and ASEAN regional

security, improve regional competitiveness

in global market and boost economic

growth, eradicate poverty as well as rise the

living standard among ASEAN members.

The 4 (four) pillars of AEC 2015 ensuring

single market and production base is

supported by fundamental elements of

free flow of goods, services, investment,

capital and skilled labor. Given the elements

that allow the flow of imported goods and

skilled labor, it is expected that ASEAN

countries, including Indonesia, will be more

competitive. This can be both opportunity

and also a challenge for Indonesia.

In 2015, ASEAN will be a single market

region of AEC. With the implementation

of it, there will be certain implications

on Indonesian economy. What needs

to be anticipated is that when there is a

single market in one community, the one

providing the best and cheapest products

will be the winner.

When the European Economic Community

(EEC) was established, the members were

being disadvantaged. The unpreparedness,

gap, domestic turmoil, leaders and

business peoples competence of each

country were in stake. Until now, some of

the strongest countries in European Union

have to struggle of becoming a donor

country in order to preserve their territory.

Some other countries even have to deal

with the continuous curse of having to be

assisted. Some have to let go all of their

valuable assets to survive. Learning from

EEC unfortunate experience, ASEAN makes

some adjustment so that the noble goals of

prospering the community will not backfire

disadvantaging each other. In regards

to this matter, Indonesia has a series of

preparation and anticipation.

AEC is aimed to be a different entity from

European Economic Community (EEC). It

ensures that the decision-making will be

in the hand of each member country. That

makes it a different model of integrated

economic region than EEC. The integration

of EEC model is conducted by giving

the decision in the hands of institution

designated to handle European economic

problems. Thus, the establishment of such

institutions will weaken the sovereignty

of each country. On the other hand, AEC

model places the member countries as the

decision-makers.

On ASEAN level, decisions are made

based on mutual agreement. Hence, each

countrys role to be a decision-maker is

being preserved. One of the processes

of implementing AEC is to develop AEC

blueprint.

Aec BlueprintThe blueprint contains four fundamental

pillars, i.e.:

ASEAN as a single market and production

base with seven core elements of free flow

of goods, services, investment, capital and

skilled labor.

ASEAN as a competitive economic region

with six core elements of competition

policy, consumer protection, intellectual

property rights, infrastructure development,

taxation and e-commerce.

10 INVEST

ASEAN as an equitable economic development with two core elements of SME

development and initiative for ASEAN integration of CMLV (Cambodia, Myanmar, Laos and

Vietnam).

ASEAN as a region fully integrated into the global economy with two core elements of

developing a coherent approach towards external economic relations and enhanced

participation in global supply networks.

ASEANASEAN population is 6% from Worlds total population, while Southeast Asias GDP

contributes 3% to the worlds economy. By 2050, it is estimated that the ASEAN

population will continuously increase 9% of the worlds population.

Indonesias position in ASEAN is very strategic whereas 43% of the ASEAN citizens are

Indonesian (600 million people) and geographically Indonesian territory covers 53% of

ASEAN territory. With these advantages, Indonesia must be able to see and seize AEC with

all of its opportunities and challenges and immediately take necessary actions to utilize the

positive impacts of AEC.

Some of the opportunities that can be utilized are the chance to create new markets. If

not, Indonesia will only be the market of imported products which will have a negative

impact on local products. In the area of financial sector, AEC can be a chance for

Indonesias banking sector to penetrate a new market. This is, of course, not an easy task

since the other ASEAN members might have the same target. The fact that the utilization

of banking services in Indonesia is low makes us vulnerable to be a target of the ASEAN

banks and financial institution.

Indonesian LogisticSuppressing logistic cost is a challenge faced by Indonesia in order to increase

competitiveness. Our recent inefficient logistic cost will make local products losing the

competition while imported products will keep flowing in. Suppressing the cost needs to

be done from both sides of supply and demand.

The high logistic cost is resulted from inadequate logistics infrastructure. Indonesias logistic

cost is 24% of the nation GDP. The number is considered high comparing to that in

developed country like USA, Singapore and developed countries in Europe which is around

11% of their GDP.

11INVEST

9 Industrial SectorsThe government has prioritized nine industrial sectors to be developed in order to fill

ASEAN market towards the upcoming AEC. The nine sectors are agribusiness industries

such as CPO, cacao and rubber; fish processing industry: TPT: footwear industry; leather

and leather goods industry; furniture industry; food and beverage industry; fertilizer and

petrochemical industry and basic metal and machinery industry. The reason why those

sectors are being developed is because they have a relatively better competitiveness

compared to those in other countries of the region.

Other than that, to secure domestic market towards the flow of the similar products from

other ASEAN countries, seven other industrial sectors also needs to be developed. Those

seven sectors are automotive industry, electronic industry, cement industry, textile industry,

footwear industry, food and beverage industry and also furniture industry.

A set of programs and policies for those sectors need to be prepared in order to boost

the competitiveness of each sector. Other things that need to be done are optimization

and socialization of AEC to the industrial stakeholders; proposing the acceleration of the

safeguard enactment and anti-dumping policy for imported products; adding facilities

of research laboratory and increasing the human resource competitiveness of the

industry. The establishment of national standard of working competency in each sector;

reinforcement of Small-Medium Enterprises (SME) and development of new industrial

entrepreneurship also need to be done.

12 INVEST

FROM BRIC TO

MINTJim ONeill, previously served as CEO Goldman Sachs, has been

considered to be an influential economist in the financial world.

He publishes his analysis on four countries that show a remarkable

economic movement.

Brazil, Russia, India and China are predicted to be the upcoming

giants in global economy. The term BRIC, invented by Jim ONeill

in 2001, has been very well-known and welcomed by international

medias. The fact that now China overlaps USA proves the theory.

The table shown above proves how China grows very strong.

Eventhough Chinas current prices GDP is only at second position,

the GDP based on PPP valuation is overlapping USA. The current IMF

data also brings shocking news placing Indonesia at the ninth position

above United Kingdom in terms of GDP based on PPP valuation.

BRICThe global astonishment perishes the shrieking plea of countries

which are excluded because of Chinas economic performance. The

dragon has arisen and ready to pulverize the unprepared. A lot of

countries feel intimidated by the greatness of China.

The maneuver of Chinese businessmen is undeniable since they are

fully supported by the government.

13INVESTJim ONeill

The term BRIC has been phenomenal. Surely, the world will not forget Jim ONeill although

he is no longer serving as Goldman Sachs. Therefore, when Jim ONeill mentioned about

MINT in 2003 as the next giants, the world paid a good attention. MINT is Mexico,

Indonesia, Nigeria and Turkey.

MINTThe advantages of each MINT countries are explained by ONeill as follows: Mexico is

fortunate to be geographically close to USA; Indonesia has the key position in Southeast

Asia as the centre of economic growth in the last couple of years as well as a direct

connectivity with China.

Mexico, Indonesia and Nigeria have strength in natural resources commodities. ONeill

thinks that in the last few years, Mexico and Nigeria had certain concern to reform their

energy market. Indonesia, recently, shares the same concern. In terms of GDP, Mexico and

Turkey reach a point of USD 10 thousand, while Indonesia is around USD 4 thousand and

Nigeria is around USD 1,500.

Compared to Brazil with the GDP of USD 11,300, Russia with the GDP of USD 14 thousand

and China with the GDP of 6,500, Turkey has the chance to have a rapid maneuver

because of its geographical advantages of being close to Europe which is relatively rich and

stable. However, it will be wasted away if Turkey cannot maintain its domestic stability.

Mexico and Nigeria also have the same risky political instability.

Indonesia, on the other hand, is considered to be stable in terms of political and economic

condition. As a country which just claims its place with a mature democracy, Indonesia has

a chance to shine brightly if it can improve the infrastructure condition and work ethic.

14 INVEST

VISTAAs the projections of certain economic condition in a country or region become vary,

the newly invented acronyms trigger people to observe certain study. VISTA (Vietnam,

Indonesia, South Africa, Turkey and Argentina) is one of the acronyms that is considered

to be solid aside from BRIC and MINT. As time goes by, Vietnam and South Africa carve

enormous achievement regarding their economy. Here are the overview and a projection of

VISTA:

Such analysis and projections are legit to support a study of the development of a country.

As a reader, those can enrich our data. For the same reason, other acronyms aside from

BRIC, MINT and VISTA that share similar characteristics of a group of countries such as G7,

G20, The Next Eleven, and APEC is worth to be discussed.

15INVEST

16 INVEST

Brand

Brand

18 INVEST

Strong brands have strategic roles to win over the market. The more extensive the market

is, a stronger position needs to be occupied. It is not an easy task. A settled brand is a

valuable asset for a company to succeed.

In terms of world trade context, settled brands are no longer dominated by developed

countries. Due to its variety of local brands, developing countries, especially Indonesia, are

started to be recognized.

Various brands from various industrial sectors start to benefit beyond their own profit.

From the customers point of view, the settled local brands have their own identity and

have been branded to differ from their competitors similar products. Thus, the consumers

loyalty can be earned. This is definetly an opportunity for the brand-holders to differentiate

their products and obtain a higher bargaining point.

Of all Indonesian global brands, some of them are often thought to be international brand,

while they are actually local-made. Here are some of the compilation of the national pride

brands:

POLYGONPT INSERA Sena has been producing bicycles under the name Polygon since 1989 in

Wadungasih Village, Buduran, Sidoarjo, East Java. Their business grows more than 20%

per year. Sixty percent (60%) of the Polygon bicycles are exported to Europe and the

other 40% are for local market. To strengthen its market, Polygon establishes distribution

centres in Muenchen, Germany; California, USA and in 30 places around Southeast Asia.

For the last 4 years, Polygon has been a frequent exhibitor in Eurobike. It is the world

biggest annual exhibition for bicycles manufacturers. Every year, this event attracts 1,280

participants, 45,200 businessmen from 111 countries and 1,883 journalists from 45

countries. this year, the exhibition will be held in Friedericshafen, Germany.

Indonesian Global Brand

19INVEST

POLYTRONPolytron is an electronic brand established in May 16, 1975 in Kudus, Central Java under

the name of PT. Indonesia Electronic & Engineering. Later, in September 18, 1976, the

name was changed into PT. Hartono Istana Electronic. After being merged, the name was

changed into PT. Hartono Istana Teknologi. The company produces various products such

as television, radio, refrigerator, mobile phone and many others. Polytron has 70,000 m2

factory in Kudus and 130,000 m2 factory in Sayung, Semarang with 6,000 workers, 11

branches, 5 authorized dealers and 50 service centres throughout Indonesia. Given the

condition that electronic market is continuously growing, Polytron plays an important role

to support Indonesia to host its own country. In 2013, the electronic market increased

14% from IDR 16.2 trillion. The number reaches IDR 18.5 trillion throughout 2014.

EIGERPT. Eksonindo Multi Product owned by Ronny Lukito produces bags such as Eiger, Eksport,

Bodypack, Neosack, XTREME and Nordwand. The products which are manufactured in

Bandung, West Java have been sold not only for Indonesian market but also exported

to many countries such as Lebanon, Singapore, Philippine and Japan. Eiger, named after

a Eiger Mountain in Switzerland, was established in 1993. The bags are designed for

outdoor activities such as hiking, camping, climbing and many others. Started with only

two sewing machine, Eiger, now, employs 800 tailors in Soreang, Bandung. Every year, the

factory produces 2,500,000 bags with 8,000 different designs that are expected to rule the

market.

LEAAlthough the brand and logo of Lea resemble the flag of USA, it is actually made in

Indonesia. PT Lea Sanent, the manufacturer, was established in 1976. The factory is located

in Tangerang, Banten with 34 outlets around the country, 200 counters in department

stores and 100 local jeans stores. Every month, Lea produces 1 million pair of jeans.

Although it still focuses on domestic market, Lea has already had buyers from Dubai, Korea

and Hong Kong.

J.CO DONUTS & COFFEEJ.Co Donuts & Coffee was established in 2001 by Johnny Andrean who has been well

known for his 209 parlors business. Unsatisfied being the sole holder of Breadtalk Franchise

from Singapore, he established a business of original Indonesian donut. It takes only three

years for the business to grow with more than 40 outlets in Indonesia and around Asia:

Singapore, Malaysia, Philippine and China.

ESSENZAMany of us probably think that Essenza is a tile brand from Italy, while it is actually made

in Indonesia and exported to many countries, including Italy. Essenza is manufactured by

PT Intikeramik Alamasri Industri Tbk. which is located in Tangerang, Banten. The company

was established in 2003. In 2013, Indonesian tile industry has a capacity of 1.4 million m2/

day and produced 1.32 million m2/day. Eighty five percent (85%) of the total production

20 INVEST

is allocated for domestic market and the other 15% is exported. The sales figure of tile

industry reaches IDR 30 trillion and is projected to reach IDR 34 trillion in 2014. Currently,

there are 35 companies with 80 factories producing wall and floor tiles. Overall, the

industry absorbs 200,000 workers.

OLYMPIC GROUPOlympic Group is parent company of furniture manufacturer with knock-down features.

Olympic Group has 5 subsidiaries and holds some brands such as Olympic Furniture, Solid

Furniture, Albatros, Procella, Olympia and Jaliteng. The company, headquartered in Bogor,

West Java, has sold its products to more than 100 countries. At the beginning, Indonesian

furniture was only popular among Western European countries such as Greek, United

Kingdom, Spain and Netherland. Recently, the market expands to Eastern Europe, Asia and

South America. This year, its export values reach US$ 1.8 billion, compared to the previous

year which only reach US$ 1.78 billion. By the end of 2014, its export values are predicted

to reach US$ 2 billion.

RADIX GUITARRadix Guitar, a local guitar with international quality, was established by Toien Bernadhie.

Known for its quality, Radix guitars are sold in Sweden, Denmark, United Kingdom,

Greek, Switzerland, Canada, Australia, Singapore and Malaysia. Export values of musical

instruments plays a significant number in Indonesia. Based on the data from Directorate

General Export Development, Ministry of Trade, the number of its export reached US$ 489

million in 2013. The biggest exports came from electrical music instruments, followed by

pianos and keyboards.

ABC BATTERY In the middle of the invasion of foreign branded battery, ABC battery manages to rule

almost half of domestic market. This product, manufactured by PT International Chemical

Industry, has been exported to 50 countries under different brands, except in Australia

and some other countries which still use ABC or Alkaline brand. On its launching in 1980s,

ABC Alkaline has ruled 80% of the battery market in America, Europe and Japan. Based

on AC Nielsen data, ABC Alkaline rules 60.1% of the battery market in Indonesia. The rest

are taken by Duracell and Energizer. The success of leading the market owes to the wide

distribution networks and strategic communication skill.

SRITEXPT Sri Rejeki Isman (Sritex) is one of the biggest textile companies In Southeast Asia. Sritex

was established in 1966 in Solo by Muhammad Lukminto, who used to be a merchant in

Pasar Klewer, Solo, Central Java. Now, Sritex owns three weaving factories, nine spinning

factories, three printing presses and seven garment factories. Employing 16,000 workers,

Sritex supplies military apparels to 26 countries and to North Atlantic Treaty Organization

(NATO) countries as their official partners.

21INVEST

GARBARATA AEROBRIDGEOne of the supporting facilities that we often use in an airport is the aerobridge or jetway.

The Garbarata facility built by PT BUKAKA Teknik Utama helps passengers to board

and disembark from aircraft. Almost all airports in ASEAN countries (even in Asia) use

Bukakas aerobridges. PT Bukaka has developed an innovation of the technology since

1980. Nowadays, the aerobridges are also used by seaports to make passengers more

comfortable and ensure their safety.

KEDAUNGKedaung International Group (KIG) leads a world-class glassware and tableware line. The

products have been sold to 150 countries placing it to be the biggest glassware factory in

the world. Half of the total production is exported to Asian countries, Middle East, Africa

and Australia with several branches in USA, Canada, Hong Kong, Australia and some other

countries and showrooms in Singapore and Malaysia.

TERRY PALMERTerry Palmer towels have been manufactured in Tangerang, Banten by PT Indah Jaya since

1962. Located in 40 hectares factory in Tangerang , PT Indah Jaya employs 5,000 workers.

Its export market is focused in Asia especially Singapore, Malaysia and Australia. In 2013,

Terry Palmer penetrated Chinas market and the outcomes were quite good. Before then,

Chinese towels flew into Indonesia. In terms of production capacity, the company can

produce 1,300 ton a month.

THE EXECUTIVEThe Executive (previously known as Executive 99) brand was established in 1974.

In 1985, the ownership was changed and in 2000, the brand was changed into The

Executive. The brand is also available in Malaysia, Singapore and some countries in

Southeast Asia.

PASEOPaseo is an Indonesian paper tissue manufacturer which exports international standardized

paper tissue to 65 countries in 6 continents. This company was established in 1997.

Made from a 100% virgin pulp without Optical Brightening Agent (OBA), Paseo has a

good reputation in the global market. It is also famous for its interesting packaging with

a animation design such as Hello Kitty, Doraemon and Looney Tunes. Paseo has a bright

future since it is categorized as a pulp and paper industry. Nowadays, only some countries

have the ability and opportunity to develop pulp and paper industry in the world. The

possible competitors are probably coming from Latin America countries. The world paper

demand has reached 349 million ton and it is predicted to reach 490 million ton in 2020.

Based on data from Indonesia Pulp and Paper Association, installed capacity for pulp

industry is 7.9 million ton a year and 12.98 million ton per year for paper industry.

22 INVEST

EDWARD FORREREdward Forrer, Indonesian bag and footwear manufacturer, was named after its founder,

Edward Forrer or Edo. Beginning with producing shoes in 1989 in Bandung, now Edward

Forrer owns more than 50 outlets in Indonesia, Australia, Malaysia and Hawaii. The head

office is located on Jalan Veteran 44, Bandung, West Java. The company and other local

footwear manufacturer have contributed to the domestic revenue. Now, Indonesia has

managed to supply 3% of footwear demands in the world. In 2013, the export number of

the industry reached US$ 3.86 billion compared to that in 2012 which only reached US$

3.6 billion. Beside the high export values, the last five years, the surplus of industrial export

reaches US$ 2 billion.

SILVER QUEEN PT Petra Foods is the manufacturer of chocolate snacks such as Silver Queen, Chunky Bar

and Ceres. In global market, this company competes with M&Ms, American chocolate

manufacturer. The company is managed to export its products to 17 countries such as

Thailand, Japan, Philippine, Hong Kong, Australia and China. In the future, Petra Foods and

similar local manufacturer will have a brighter chance considering that Indonesias target to

be the largest cacao grinding producer in the world by 2015 with the production capacity

of 600 thousand ton per year. The growth of the cacao industry cannot be separated from

governments role. One of the government supports is by imposing an export duty of cacao

seed in 2010. In 2013, cacao contributed US$ 1.1 billion to the national revenue.

23INVEST

SOPHIE MARTINSophie Martin was established by a French couple, Bruno Hasson and Sophie Martin.

They had an idea to build the fashion business with the brand Sophie Martin when they

were posted in Indonesia. Starting with producing bags, Sophie Martin MLM network has

gathered more than 1 million members and 250 business centres spreading from Aceh and

Papua since its launching in 1995.

MASPIONThe company has a strong expertise in marketing and manufacturing a various qualified

household products such as kitchen appliances, glassware and home electricity including

PVC and PE pipes. Maspion a settled and wide distribution network both domestically and

internationally through its distributors, agents, retailers and representative offices in big

cities in Indonesia and other developing countries. Maspion is derived from M = Mengajak

(asking), A = Anda (you), S = selalu (always), P = percaya (trust), I = industri (industry), O =

olahan (products), N = nasional (national) or asking you to always trust national products.

The company employs 13,000 people and utilizes production facilities in four industrial

estates in Sidoarjo and Gresik, East Java and one factory in Jakarta and West Java. It will

also expand to Kendal, Central Java very soon.

HOKA HOKA BENTOAlthough Hoka Hoka Bento (Hokben) serves Japanese food, the fastfood restaurant, which

was firstly opened in Kebon Kacang Jakarta, is originated in Indonesia. PT Eka Bogainti

owns Hokben with 147 outlets from Java to Bali. Culinary industry has a strategic role in

contributing domestic revenues and supporting national tourism sector. According to the

data of Ministry of Tourism and Creative Industry, culinary tourism contributed 25% to the

economy in some countries such as USA and Canada. In Indonesia, the sector contributed

IDR 209 trillion to Gross Domestic Regional Product (PDRB) according to the data of 2013.

GT RADIALThis Southeast Asias giant tire company has gone international. PT Gajah Tunggal Tbk.

through GT Radial has exported more than 110 million tires to more than 90 countries

around the world. To sell its products, Gajah Tunggal establishes 76 distributors in 76

countries. In the future, tire industry has a promising aspect with the rapid growth of

motor vehicle industries every year. According to the data of Ministry of Industry of the

Republic of Indonesia, the growth of tire industry has reached 8% considering it to be

one of the backbones to compete in global market. Every year, the growth of the industry

reaches 7 8 percent. Hopefully, the tire industry investment can boost Indonesias

economic growth. Today, there are 13 national tire manufacturers that can produce 75

million tire of a various type and size of tire for passenger car, truck, bus and heavy duty

vehicle and 55 million tires for motorcycles. In 2014, the industry is slightly declining. PT

Gajah Tunggal Tbk. is the only company having the increase on its sales throughout first

quarter in 2014. It is recorded that the company sales increase to 5.3% from IDR 3.04

trillion to IDR 3.2 trillion.

24 INVEST

AlfaLinkAlfalink, electronic language dictionary device, is considered to be an innovative product

made by Indonesian. It was invented by Shian Yu. Now, he has representative offices in

Singapore, Kuala Lumpur, Hong Kong, Taiwan and Los Angeles.

THE SAKThe Sak is a branded bag made by Delia Murwihartini. She promotes her products through

international exhibitions and uses local contents. Sweden is her first export destination. To

penetrate the USA market, Delia patents her bags under the name The Sak with the help

of her USA partner. Now, The Sak is sold in Fifth Avenue, New York.

PT PALKargo Star 50 is a flagship product from PT PAL, a well-known ship manufacturer. This

giant ship of box shape bulk carrier (double hull) has a weight of 50,000 dead weight

tonnage (DWT). Kargo Star 50 has been sold to German, Hong Kong and Turkey. After

manufacturing Fast Missile Ship for Indonesia, PT PAL will also manufacture Landing

Platform Deck (LPD) ships for Philippines military. Myanmar and Turkey are also interested

to purchase the ships from PT PAL. PT PAL Indonesia, now, manufactures trading, cargo,

passengers, chemical tank and oil tank ships, including fast missile ship and box shape bulk

carrier ship. PT PAL is also planning to build submarines. Other than that, PT PAL Indonesia

also manufactures a US$ 43 million worth of EPCI Gas Compressor.

QUICK TRACTORCV. KARYA HIDUP SENTOSA manufactures agricultural appliances such as power tiller

and power thresher under the brand QUICK. Power tiller, especially the type of GT 1000

Boxer, has been used in Namibia and exported to Fiji, Dominican Republic and Timor Leste.

The agricultural appliances industry used to be plunged due to the invasion of imported

products. But with the implementation of Indonesian National Standardization (INS/SNI)

25INVEST

which is compulsory for all agricultural appliances products, the condition changes. As

a result, according to the data of Ministry of Industry, the demand of tractor machine

reaches 200,000 units per year and the industry manages to fulfill 140,000 units.

EQUILEquil is a mineral water purely made in Indonesia under PT Equilindo Lestari owned by

Morgen Sutanto. Equil is produced in Vila DEquilibrium, an Equils packaging factory,

located in the foot of Gunung Salak, Sukabumi, West Java. Morgen started his business

in 1997 due to his concern to the fact that the packaged beverage industry was ruled

by foreign investors, contrary to the fact that Indonesia has abundant qualified water

resource. Due to his hard works, Equil is now available in luxurious restaurant, five star

hotels and important meeting of government officials.

This year, the Indonesia Association of Packaged Beverage (Aspadin), sets a target of 23.9

billion liters or 11% raise of beverage production from 20.3 billion liters in 2013. According

to the data of Aspadin, the production of beverage in Semester I has reached 11.65

billion liters or risen 11% from the same period last year. The highest production value is

on March and April with a rise of 2.1 billion liters each year, only to fall down again to 2

billion liters on June and 1.75 billion liters on July.

COFFEEKopi Luwak is a steeping coffee using coffee bean taken from luwak/palm civets remaining

dirt. The bean is believed to have a unique taste after being eaten and taken out through

luwaks digestion system. The bean is the most expensive in the world.

26 INVEST

Steve Jobs

27INVEST

WORLD-CLASSBRANDS

28 INVEST

Based on the surveys of Best Global Brands and Interbrand, Apple and Google are the

most expensive brands in the world. Both of them are valued more than US$ 100 billion or

equaled to IDR 1,200 trillion. For two years in a row, Apple outperformed Google as the

most expensive brand in the world. The titles are rewarded to them by Interbrand under

three main criterions.

The assessments are based on the performance of the brands, how they influence

customers choices and whether the products can raise their own prices.

Worth US$ 118.9 billion, Apple raises its companys value to 21% than last year, while

Google, a US$ 107.43 billion worth, rises 15% than 2013.

Meanwhile, Facebook is also one of the brands with a stand out value in this years list. Last

year, Facebook grew with more than 1.32 billion active users rising 14% from the previous

year. In the meantime, Huawei, a Chinese brand, represented the first Chinese company in

the rank.

Global BrandApple Inc. is a multinational brand located in Sillicon Valley, Cupertino, California which

design, develop and sell consumers electronic appliances, computer software and

notebook. Apple Inc. was established on April 1, 1976 and being incorporated into Apple

Computer Inc. on January 3, 1977. After the launching of iPhone, the word computer

was omitted on January 9, 2007 to show Apples focus towards consumers electronic

sector.

29INVEST

Apple is well-known for its line of software products such as OS X and iOS operating

system, iTunes music player and also Safari website and its hardware such as iMac desk

computer, MacBook Pro laptop, iPod music player, and also iPhone mobile phone.

Before establishing Apple, Steve Wozniak was an electronic hacker. In 1975, he worked in

Hewlett-Packard and helped his friend, Steve Jobs to design a video game for Atari. Those

two icons settled a foundation for Apple to be a world-class company until now.

GOOGLE INCIn the gadget proliferated time like today, Google is like a walking dictionary to find

information. This USAs multinational company focuses its business on internet products

and services such as searching engine technology, computer web, software and online

advertisement.

Google was established by Larry Page and Sergey Brin on September 4, 1998 when they

were still PhD students at Stanford University. Googles mission is to gather information

around the world and make it accessible as well as useful for everybody. In 2006,

Googles headquarter was moved to Mountain View, California.

The idea of the name Google came from Googol (numeral 1 with a hundred of zero

number behind it). They thought that that huge number might equal to the amount of

information that Google could provide.

MERCEDES BENZMercedes Benz is an automotive company from German which manufactures various

vehicles such as cars, trucks and bus. As a brand, Mercedes Benz becomes the most

famous and oldest car company in the world until now. The key of its success lays on the

developed and innovative technology with a high safety level.

The idea of Mercedes-Benz came up when Karl Benz invented the first oil-fueled car in the

world which was being patented in January 1886. Mercedes cars were sold for the first

time in 1901 by Daimler Motoren Gessellschaft. The first car using the brand Mercedes

Benz was made in 1926 after Benz Company and Daimler merged into Daimler-Benz

Company.

The interesting part is that Indonesia played an important part in the history of Mercedes-

Benz. There are only 3 countries outside Europe which manufactures GL 500 type of

Mercedes-Benz; India, Indonesia and USA. Mercedes-Benz GL 500 is manufactured in

Wanaherang, Bogor, West Java to fulfill domestic demands.

The reason why Indonesia is chosen to assemble some types of Mercedes-Benz is because

the domestic market is very promising. Other than that, the quality of oil fuel in Indonesia

is good. It becomes one of the considerations because the fuel plays important role in the

quality of the cars. Some of the Mercedes Benz types that are assembled in Indonesia are

ML 400, GL 400, GL 500, E 400 MG and S 400 L Exclusive.

30 INVEST

IKEAIKEA is a Sweden home-furnished retailer. It was established by Ingvar Kamprad in 1943

when he was 17 years old and now he has become one of the richest people in the world.

IKEA is derived from Ingvar, Kamprad, Elmtaryd (his birth place) and Agunnaryd (the village

he lives in).

At the beginning, IKEA sold various things such as pens, wallets, frames and even

wristwatch. The furniture made it to the list in 1947 and then IKEA started to design the

furniture in 1955.

At first, IKEA only went online and then the first flagship store was opened in Almhult and

continued to be the model store. On March 23, 1963, the first IKEA store outside Sweden

was opened in Asker, near Oslo, Norway.

In winter 2004, there were 202 IKEA stores in 32 countries around the world with another

20 more opened in 2005. On October 15, 2014 Hero Supermarket, the sole holder of IKEA

franchise in Indonesia, opened its first store at Alam Sutera, Tangerang, Banten.

One of IKEA commitments when entering Indonesian market was to work with local

furniture partner in Solo and Yogyakarta. Those local products will be sold to global

market.

McDonaldThe most famous brand in the fast-food business until today is McDonalds. People easily

recognize it by its two yellow bows sign that resemble an M alphabet.

Beginning with the first restaurant in 1940 by two brothers, Dick and Mac McDonald, a

series of fast-food restaurants were established serving an authentic set of menu such as

hamburgers, soft-drinks, french fries, chicken fillet and some other local foods based on

the location of each restaurant.

They introduced speedee Service System in 1948, which then became the basic

principle in the modern fast-food restaurants nowadays. It is hard to imagine that in 1940

before the World War, with the age of more than half centuries and its global network,

McDonalds was just an ordinary barbecue restaurant named McDonalds Bar-B-Que at 14th

and E Street, San Bernardino, California State, USA. Its menu is various and it enables the

cars to drive into the parking lot and buy the foods without having to leave the car.

In 1948, McDonalds changed it form into a drive-in restaurant with a simplified menu of

9 items which were hamburgers, cheeseburgers, soft-drinks, milk, coffee, potato chips

and a slice of pie. McDonalds specialty, at that time, was its 15 cents hamburgers. A year

later, they changed the menu from potato chips to french fries and introduced triple thick

milkshakes to the public.

In 1954, a man named Ray Kroc visited McDonalds office intending to sell some multi-

mixers to McDonald brothers, but then, he was interested in working with them after

finding out that the brothers were looking for a franchise agent for USA region. Kroc had a

feeling that he needed to seize the opportunity.

31INVEST

A year after that (1955), Kroc opened his first McDonalds store in Des Plaines, Illinois

on April 15, 1955 (which later is celebrated as McDonalds anniversary). On the first day,

McDonalds sales reached US$ 316.12. A decade later, 700 McDonald restaurants were

established around USA.

On its silver anniversary, McDonalds was even more successful with the opening of its

6,000th restaurant in Munich, Germany. In 1983, McDonald restaurants were opened in

32 countries around the world. With the heavy utilization of internet, McDonald finally

launched its website named McDonalds.com in 1996. In 2001, a new menu, Big N tasty,

was introduced to the customers. In 2003, the famous tagline Im Lovin It was globally

launched in Munich, Germany.

McDonalds proves that aggressiveness is important in the business. Ray Krocs existence in

the business played important part in its history; from just a small restaurant to hundreds

of them around the world. Seeing the wide coverage of McDonalds business expansion,

it is not surprising that the brand is considered to be the icon of modern globalization and

American lifestyle and cultural agent to the world.

SAP AGSAP AG is the biggest software company from German in Europe. SAP was established in

1972 in Mannheim, Germany under the name Systemanalise und Programmentwicklung

by 5 IBMs ex-employees. Its headquarter is located in Walldorf, Germany. The company

which employed 35,873 workers in 2005 also rapidly grows in Indonesia.

SAP Business Suite powered by SAP HANA has become one of the fastest growing

software applications in SAPs history. This software helped many companies of various

sectors to run a real-time business process that enabled them to simulate, plan, run,

analyze and predict their crucial and end-to-end business process.

SAP Business Suite

powered by SAP HANA

is a base for business

innovation to help companies

running their rapid transformation

into real-time companies. Those

companies lead their own industries

by redefining their business process and

implementing what they think to be the impossible

business models.

32 INVEST

Success Story

33INVEST

Success Story

34 INVEST

CigadingHabeam

Heru Pramono President Director

PT Cigading Habeam

Triggered by a strong vision to be a leading manufacturer of steel and steel structure

industry in Indonesia, PT Cigading Habeam Centre (CHC) has shown a rapid and stable

growth every year since its establishment in 1983. A lot of big projects have been

accomplished by CHC: bridges, airport terminals, industrial facilities and special products

such as conventional Pumping Unit for Rig platform and Single Transmission pole.

CHC believes that they are able to develop a long-term factory by utilizing their expertise

and being supported by complete facilities and special attention to each products quality.

They offer efficient products and a qualified system with reliable technology.

Established on November 10, 1983, CHC which is located at Krakatau Industrial Estate,

Cilegon, Banten manufactures H-Beam steel with various combinations of steel based on

JIS, ASTM, BS, DIN, etc. CHC also manufactures welded H-Beam with various section sizes

to obtain economical and optimum design. CHC also provides shot blast and prime coating

facilities to protect the steel from corrosion.

CHC is also equipped with laboratories that can be used for various steel tests including

H-Beam. From the laboratorys result, it is shown that the welded part gets stronger and

the monolith (single pole) with optimum quality can be obtained. The computerized and

integrated management system ensures the accuracy and speed on the implementation of

planning, controlling, data processing functions, etc.

Since its launching on November 1985 by President Soeharto, Cigading has manufactured

more than 11 million welded H-Beam with various sizes for various purposes. CHC

products have been used to build skyscrapers, offices, bridges, warehouses, crane girders

and many more around Indonesia.

1.Construction IronWith fabricated capacity of 1,500 metric ton per month.

2.Manufacture DivisionA.Built-up Beam or H-Beam Section

We are the leader in built-up beams with an output capacity of 5,000 metric tons per

month. We operate with 7 fully automated lines for sections ranging from H200 mm up to

2,800mm of unlimited thickness.

B.Single Pole Transmission

As an alternative for concrete pole and/or steel pipe pole, CHC manufactures an octagon-

shape pole, a single electricity transmission pole from various designs and dimensions

according to the purpose.

35INVEST

Habeam

3.Service DivisionA.Coil Centre

CHC Coil Service Centre serves to cut, recoil and shear from roll to plate with 20,000

metric ton outputs per month. CHCs main client is PT Krakatau Steel and other factories

that need steel plate.

B.Shot Blast and Painting

For shot blasting, CHC uses the sophisticated S360 and G18.

HUMAN RESOURCES

Human resources are important assets for CHC. In order to improve the quality of its

workers, CHC periodically conducts training programs. The workers safety and healthcare

are their main concerns. CHCs commitment is to apply a tight policy to minimize working

accidents in their office, factories and project sites. CHC employs 442 workers.

36 INVEST

FACTORY AREA

1.OPEN SPACE AREA : 28,860 M2

2.INDOOR AREA :

2.1 Production : 22,350 M2

2.2 H-Beam : 14,580 M2

2.3 Shotblasting & painting : 4,140 M2

2.4 COIL CENTER : 8,700 M2

2.5 ELECTRIC POLE : 2,175 M2

2.6 RECOIL : 4,350 M2

2.7 LINES : 2,175 M2

TOTAL AREA : 87,330 M2

The more growing demand of steel bridges in Indonesia urges CHC to focus on the efforts

to improve the bridge quality based on its production abilities. Due to the fact that it is

a promising prospect, CHC recently introduced a new brand: CHC Bridge Indonesia on

October 10, 2012 which also became the anniversary of its first delivery of double track

railway bridge made by CHC for Northern Part Ganda Jawa project.

CHC started to run the manufacturing business since its first establishment and continued

to penetrate the market all over Indonesia. The projects were followed by the invention of

superior type bridges with various designs such as girder-bridge, truss-bridge, girder-block

bridges, moving-bridges and arch-bridge. Some of the popular bridges in Indonesia such

as Pawan-V bridge, Tanah Grogot bridge and Anggana bridge in Kalimantan are made by

CHC.

The new high-voltage electricity transmission (SUTET) located in East Jakarta Canal (BKT) is

the new innovation. The two single-pole tower was the first tower used to distribute high

voltage electricity in Indonesia. With the diameter of 3 meters, each pole consists of three

segments joined together to form a 72.5 meters pole.

37INVEST

This 500KV high voltage SUTET is located at Jalan Kolonel Soegiono, Bambu Duri, Duren

Sawit Timur, Jakarta. Steel poles number 30A and 30B bear 500 KV of high voltage

transmission cable to distribute to Bekasi Cawang Muara Tawar Cawang Line.

Indonesian Record Museum (MURI) records PT CIGADING HABEAM CENTRE success

placing it to be the first steel mill to produce the biggest pole and the highest steel tower

in Indonesia.

Marine Industry

Caputra Group has pursued the biggest dream in marine industry since the business started

in 1971. Supported by a good management, the business develops and diversifies from a

bridge to dry dock and marine tourism.

We see Indonesia as a maritime country which needs a lot of infrastructures. That is why

we try to do something for this country said Heru Pramono, founder of Caputra Group

and director of Cigading Habeam Centre (CHC).

To help developing the marine industry in Indonesia, CHC works together with other

companies under Caputra Group such as Caputra Mitra Sejati, Batavia Marina, Quicksilver

Day Cruises and Odyssey Submarine Bali.

With the skill in ship design and maritime architecture, Caputra Mitra Sejati is aimed to

expand to other sectors including oil and gas sector. The company has manufactured many

ships for China National Offshore Oil Corporation and PetroChina and barges for Total E &

P Indonesia. Those ships are certified by Lloyd Register.

Caputra Mitra Sejati also builds catamaran for Quicksilver Day Cruises along with Odyssey

Submarine Bali and Batavia Kelautan, Quicksilver Day Cruises. Those achievements show

a different side of Caputra Group passion to build ships and marine tourism. By building

Marina, we can show the world that we can be proud to be a maritime country.

By building Marina, we can show the world that we can be proud to be a maritime country

38 INVEST

Josef Winter

1855Siemenss activities in Indonesia could be traced from 1855 when the company installed

10 telegraph systems in Indonesia for the first time for Dutch Colonial Ministry. Siemens

opened its first office in Surabaya, East Java in 1909. Since the beginning of Indonesias

development, Siemens has been a key partner by taking part in Javas electrification and

providing a system to light up the Sultans palace in Yogyakarta. Today, the company is still

the main investor and player in the technical sector such as electronical, biomedical and

manufactures technology in Indonesia.

Siemens Indonesia offers a various solutions and services through its divisions: Power &

Gas, Power Services Generation; Energy Management; Building Technologies; Mobility;

Digital Fabrication; Industrial and Mobility Process; and Healthcare. Siemens employs 1,800

workers in Indonesia.

Siemens has played an integral part in the development of Indonesian technology and

economy for more than 150 years. In the last 20 years, Siemens investment reached 200

million euro from its expansion and modernization of production capacity and also human

resources development.

Siemens manufactured power plant components in Cilegon, Banten and low and medium

voltage switchgear in Pulomas, Jakarta and also develop a hearing-aid in Batam. Siemens

factories are well-known as the manufacturers of high qualified products not only for

domestic market but also global market. Siemens preserves its commitment to always

improve their technology and human resources.

In 2014, Siemens celebrated its 25th Siemens Cilegon Factory anniversary. At the

beginning, it was built in 1989 as a fixing and maintenance place for steam and gas

turbines. For years, Siemens has invested in technology development proven by its

competitive position in the market. The Cilegon factory kept developing from a fabricated

steel facility to big scaled condenser manufacturer for power plant and turbine assembler.

Siemens turbines have produced more than 5,000 MW in Indonesia. Siemens was also

involved in the modernization of railway network in Java.

39INVEST

Siemens and InfrastructureSiemens works together with Cikarang Listrindo (the biggest independent electricity

provider in Indonesia) using Siemens Steam Turbine technology. In order to improve the

electricity performance in Sumatera Islands, National Electricity Company (PT PLN Persero)

works together with Siemens to build 275-KV main station in Padang Sidempuan and

Payakumbuh, Sumatera.

Siemens Remote Services (SRS) develops a diagnostic remote system to sustain an optimum

system with high productivity and lower operational cost. The system has been applied in

more than 100 appliances in some national hospitals, including Siloam hospitals, Ramsey

International hospitals and Gatot Soebroto hospital.

In cement industry, Siemens get projects to upgrade a process controlling system of PT

Indocement Tunggal Prakarsa.

160 YearsIn its 160 years presence in Indonesia, Siemens is committed to be one of loyal investors

and will always be there for Indonesia. Siemens is also committed to maintain a high

standard, work ethic and integrity in order to face challenges ahead.

40 INVEST

Infrast ructure

41INVEST

Infrast ructure

42 INVEST

6,000TRILLION RUPIAHS

Presidential Working Unit on Overseeing & Controlling Development

(UKP4) evaluated that many of Public Private Partnership projects were

unsuccesfull.

I can say that there are few PPP projects succeded due to our

governments work ethic which has not been adjusted with the needs

to a well-implemented PPP, said Kuntoro Mangkusubroto, head of

UKP4in Jakarta, Tuesday (7/10/2014).

Some of the challenges faced by PPP are not just the legal certainty problem. Kuntoro also

mentioned about land issues, a main obstacle of the projects, and also the fact that the

process of decision making was often clashed between DPRD and Regional Government.

Kuntoro did not mention specific projects, but he stated that there was only one successful

project out of five. Whereas, the PPP scheme can be a good alternative to support projects

fund.

He estimated that Joko Widodos government with its target of 7percents economic

growth would need IDR 6,000 trillion infrastructure investment for the next 5 years, which

would be impossible to be solely funded by the country.

UKP4 calculated that at least 50% from the budget need obtained from private sectors

under PPP scheme. Kuntoro affirmed that Government held the key to ensure the PPP

projects to be implemented.

I can say that there

are few PPP projects

succeded due to our

governments work ethic

which has not been

adjusted with the needs to

a well-implemented PPP

43INVEST

It is a matter of remodelling PPP and making it more effective and also the coordination,

preparation and decision-making, said Kuntoro. The PPP scheme of partnership is a legal

model to build infrastructure projects in Indonesia. The scheme needs to be encouraged by

the government. The scheme has been running in a while, but there is still a loophole to be

fixed.

As a complex organization mandated to fulfill citizens needs, governments agenda to do

its duty and function is being demanded to be real in the field. It takes a lot of resources

in the partnerships management because the scale and complexity of the governments

programs are a lot bigger that private sector.

Different interest is one of the problems in implementing PPP scheme. In the same time,

the private and public sector are demanded to work together to overcome the challenges

emerging from the different interest. Public sector tries to minimize the whole budget and

ensures a high qualified service, while private sector tries to maximize the profits.

Kuntoro Mangkusubroto affirmed that if PPP was not well-managed, the different interest

would trigger a big problem just like what happened in Latin America. Using the same

legal scheme like PPP, the allocated public budget got even swollen because a lot of PPP

schemed projects were renegotiated. In United Kingdom, the PPP initiative was harshly

criticized since it was failed to provide the value that equaled to the budget being flown

into it. Kuntoro said in Jakarta, the (PPP) scheme needs to be well-strengthened and well-

managed.

Kuntoro continued that the main problem on the implementation was the weak

collaboration inter-institution inside PPP. The issue needs to be fixed through the

development of partnership between government institution in both local-central or inter-

regional government. He said to the potential partner in private sector, government needs

to change paradigm and start to realize that the partnership is a scheme worth to develop,

market and sell to the potential partner in private sector.

Deputy for Infrastructure of Coordinating Ministry for Economy, Luky Eko Wuryanto

admitted that there is a lot of gaps between publics expectation and governments

realization. To cover them, PPP is expected to play a role especially in terms of accessing

fund resource and expertise of big-scaled facilities. There is still a lot of gaps between

publics expectations (towards facilities development) with what government has been

working on.

In PPP scheme, private sectors also need to play roles to develop, control and operate

facility projects under the governments regulation and supervision. Through an effective

management, PPP will create a strong discipline in the overall process beginning from

choosing, preparing, funding, constructing to operating the projects.

44 INVEST

ALL FORINFRASTRUCTURE

The soaring name of Indonesia

in 2004 was unfortunately

owing to the national tragedy of

earthquake followed by tsunami

in Sumatera Island. Thousands

of people died and went

missing. The world was stunned

and moved.

45INVEST

It did not take a long time for the help

from many countries to flow into Indonesia.

The damages caused forced Indonesia

to develop infrastucture programs and

projects. And then the term Infrastructure

Summit came up which was always

related with the generated product of

the 2004 Aceh Tragedy until now.

SMI, IIF and PIIIn order to reach the acceleration of

national infrastructure development, the

government works as hard as possible.

All study has been done including the

infrastructure funding which is considered

to be the main obstacle.

In a publics point of view, infrastructure

projects is often described as: expensive,

capital intensive, controversial and prone

to fluctuation (related to land acquisition).

And the most important thing is that

using a formula of business theory is very

inappropriate to conduct in infrastructure

projects.

This logic intrigued the government to

establish various institutions, entities or

even companies to have special duties

regarding the improvement of national

infrastructure. In 2009, PT Sarana Multi

Infrastruktur (SMI) was established.

It has been 5 years since the establishment

and the company has reached capital

revenues of almost IDR 4 trillion from the

government. According to the accounting

report, it has been utilized to fund the

infrastructures project by December 31,

2013. It means that the it has been fully

absorbed. Since there would not be any

additional fund from the government

through government capital inclusion

(PMN), SMI was obligated to find its own

resource of fund.

For the downward leveraging, SMI invested

in its subsidiary, PT Indonesia Infrastructure

Finance (IIF) as a part of government

strategy to expedite funding flow. By

investing to the subsidiary, IIF is expected to

attract equity partner.

Bankings Role In InfrastructureBanking sectors tend to choose senior loans

while SMI products are larger than that

covering senior loan, mezzanine, junior loan

or even equity. Banking sectors cannot fit

into infrastructur funding given the possible

situation where a spesific regulation

applied to certain cases. This is when an

institution like SMI is needed for a financial

close, usually through a club-deal scheme.

Another form of partnership with banking

sectors is project financing. The procedure

is to wait for SMI to bid on a project and

then when the project is being constructed

and operated, the contractor starts to do

the refinancing step through banks.

After the establishment of SMI and IIF, the

government established PT Penjaminan

Infrastruktur Indonesia (Persero) or PII. The

company was established in response to

the need of insurance to the political risk

attached to infrastructure investment. By

giving the collateral, private sectors are

expected to play along in the development

of infrastructure especially through PPP

scheme.

PII was established on December 30,

2009 as one of governments efforts to

support the acceleration of infrastructure

development in Indonesia through an

accountable, transparent and credible

process of collateral provision. Moreover,

the establishment of PII is also expected

to attract private sectors to fund the

infrastructure sector through the

improvement of PPP credit-worthiness

which resulted on the decreasing cost of

fund of the infrastructure projects.

The Objectives of PIIs Establishment:

Toincreasecredit-worthinessonPPP

infrastructure projects by granting

collateral on infrastructure risks.

Toimprovethemanagementprocess

to be more transparent on giving a

collateral for the risk of infrastructur

projects which is related to the

governments act or absence of act.

Tofacilitatethesuccessoftransaction

for PJPK (Ministries, State-owned

Companies, Regional Government)

through collateral provision for a well-

structured PPP Projects.

Tosetaring-fenceofgovernments

contingency obligation and minimize a

sudden shock towards National Budget.

PII acts as insurer for private sectors to

deal with the risk that might occur due to

governments acts such as license process

delay, licensing, changes in regulations, the

absence of tarrif adjustment, the failure of

integrated network/facility and other risks

allocated or beared in PPP contract.

46 INVESTASI

SMELTERTHE ICON OF NATIONAL INVESTMENT

47INVEST

After the enactment of Mineral and Coal Laws in 2009, the

term SMELTER became very familiar among national business

people. To build a smelter is a must requirement for business

people if they want to invest in mining sector in Indonesia. The

abundant mineral resources needs to be protected and utilized

for the nations greater interest which is to build a prosperous

community around the mining site as well as contribute revenues

for the country from its tax.

Hundreds of national and multinational companies altogether filed for proposals to get

exploitation and management license of mineral resources all over Indonesia. The fact that

to build a smelter needs at least IDR 60 trillion capital, the business requires a big player.

PT Aneka Tambang Tbk. (Indonesia), Mitsubishi Corporation (Japan) and Eramet Group

(France) establish a joint venture company under the name PT Weda Bay Nikel located in

Halmahera-Maluku. The accumulated value of the mine reaches US$ 5 billion or equals to

IDR 60,000 trillion (kurs IDR 12,000/US$).

SmelterThe message of building smelter is to elevate an added value meaning that the value is

being elevated through processing and/or refining activities in order to provide economical,

social and cultural benefits. Added Value is minerals value which increases as a result of

processing and/or refining process.

The processes are done based on the following considerations:

a. To have a big number of resources and Ores reserves;

b. To boost the production capacity of metal production in the country;

c. The processing and/or refining technology is already tested;

d. The end products of the process are used as industrial raw materials for domestic

market;

e. The remaining products of the process are used as raw materials for domestic

chemical and fertilizer industry;

f. As raw materials for mineral-based strategic industry in the country;

g. To give multiplier effects for the country both economically, socially and culturally;

h. To increase nationals revenues.

The huge amount of money allocated to build smelter requires the involvement of may

institutions. A good coordination between central and local government has to be

improved. The fact that the companies which file for a smelter proposal tend to increase

despite its challenges shows that Indonesian resources potentials are still attractive.

48 INVEST

49INVEST

MILLION OF SKILLED WORKERS IN MINING SECTORIn terms of the utilization of mineral

resources in Indonesia, we are still lack

in tecnology. Some of mineral products

were exported in a form of ores such as

nickel, bauxite and concentrate and also

copper. Nickel, bauxite and Copper will be

discussed more in this article because they

are the main minerals which smelters are

started to be developed.

The model of the study is based on

Harmonized Commodity Description and

Coding System or Harmonized System (HS).

HS Code, often used in the trace of rules

of origin, is an international standard or

naming and coding system used to classify

trade products or its derivatives owned by

World Customs Organization (WCO).

CopperCopper resources in Indonesia reaches

4,925 million ton ore. PT Smelting is

the only company processing copper

consentrate into copper catode. The

company is located in Gresik, East Java with

total capacity of 300,000 ton per year.

Copper products are divided into

unwrought copper, copper bar, copper

sheet and other copper forms. Copper

concentrates are exported to three big

countries; Japan, South Korea and India.

NickelIndonesian nickel resources are estimated

to reach 2,633 million ton ore with 577

million ton ore reserves located in Sulawesi,

Kalimantan, Maluku and Papua with

nickel substance of 1.45% ton each. The

commodities are grouped into three: nickel

ores, ferronickel and rough nickel which

almost all of them are used to fulfill export

demands.

50 INVEST

BauxiteIndonesian bauxite resources are estimated

to reach 349.61 million ton ores and

134.65 million ton metal with 97.40million

ton reserved ores and 34.88 million ton

reserved metal. The content of AI203 of

each is aroun 27 55 percent. Indonesia

exports bauxite to China, Japan, Taiwan

and Venezuela.

The Importance Of SmelterIn general, the results of the study indicated

that the potential value-added mineral

ores and concentrated should be able to

be processed inside the country. Added

Value can be calculated from the margin

between import values of raw materials

and export values of ores and concentrates.

The increase of added value derived from

mineral products processed in Indonesia

will certainly increase state revenues from

income tax, export tax, local government

retribution and many others. A more

employment opportunities of approximately

2,402,600 people will also resulted from

the process. It does not include workforce

absorption in the downstream industry

and the multiplier effects resulted from

upstream mineral industrial processing in

Indonesia.

As mandated by Chapter 103 and 170 Laws

Number 4/2009 on Minerals and Coal, the

holders of IUP and Contract of Work are

required to increase the value of minerals

through smelting and refining process in

Indonesia.

To follow up the mandate, particularly in

terms of processing and refining minerals,

the government issued Government

Regulation No. 1/2014 on Second Revision

of Government Regulation No. 23/2010 on

Minerals and Coal Mining Enterprises on

January 11, 2014.

Government Regulation No.1/2014 has

been followed up by the issuance of:

a. Mining and Natural Resources

Ministerial Decree No. 1/2014 on

Increasing Added Value of Minerals

through Processing and Smelting in

Indonesia;

b. Trade Ministerial Decree No. 4/2014 on

Export of Processed and Refined Mining

Products;

c. Finance Ministerial Decree No.6/2014

on Second Amendment of Ministerial

Decree No.75/2912 on Classifications of

Export Commodities to be subjected to

Export Tariff and Export Duty.

1. Starting on January 12, 2014, exporting

raw materials/ores abroad is prohibited.

2. Holders of mining contracts are

required to refine minerals in Indonesia.

3. IUP holders are obligated to conduct

processing and refining activities in

Indonesia.

4. Holders of Contract of Work operating

mineral mining and conducting refining

activities may export non ore/raw

materials in limited quantity.

5. Holders of IUP for Production

Operations for metal minerals which

conduct refining operations may export

the products in limited quantity.

6. Further procedures for processing and

refining operations and also the limit

of refined quantity will be regulated by

Ministerial Decree.

51INVEST

PROGRESS OF CONSTRUCTION OF PROCESSING

AND REFGINING FACILIES

NO

1.

2.

3.

4.

5.

6.

PROGRESS (%)

0 5

6 10

11 - 30

31-50

51-80

81-100

ACHIEVEMENT

Feasibility Study

AMDAL

Initial Plant Construction

Progress

Progress in Achieving

mid-term Construction

Progress

Progress in Achieving

Final Stage of

Construction

Commissioning/

Production

TOTAL IUP

112

16

15

10

0

25

NO

1.

2.

3.

4.

5.

6.

7.

COMMODITY

Nickel

Bauxite

Iron

Manganese

Zircon

Lead and Zinc

Kaolin and Zeolite

TOTAL

TOTAL

29

8

8

3

13

1

4

66

CONSTRUCTION PLAN FOR PROCESSING AND REFINING

FACILITY BY COMMODITY (PROGRESS: 6% - 100%)

Metal MineralProcessing

Non-metal Mineral

Refining

Ores

Processing

1. Mineral processing is an effort to

improve the quality of minerals and ores

which produce specific physical and

chemical characteristics similar to the

original minerals or ores such as mineral

condensate and basted ores.

2. Mineral refining is an effort to

improve metal minerals quality

through extraction process and further

refining process to produce products

with different physical and chemical

characteristics from the original minerals

such as metal and mixed metal.

3. The processed metal minerals which can

be exported are copper concentrates,

iron concentrates, iron ores,

manganese, lead concentrate and zinc

concentrate.

4. Tin, nickel, bauxite, gold, silver and

chrome may only be exported after

being refined.

5. Minimum level of processing and

refining are stipulated in ESDM

Ministerial Decree No.1/2014

(Attachment 1: metal mining

commodities, Attachment 2: Non-metal

minerals; Attachment 3: Rock Mining

Commodities).

6. KK and IP holders for metal minerals are

only allowed to export their products

after being refined three years after the

promulgation of the ministerial decree

due to the minimum quantity required.

Millions Of Potential Human ResourcesBased on information above, it can be

concluded that millions of workers can be

absorbed by the mining sector. In terms

of workforce opportunities, dozens or

even hundreds of potential smelters being

created will certainly create positive effects.

Moreover, the smelters will be located in

all areas of the country which means that

each region will have the same potential to

develop and improve their welfare through

smelters. It is now up to the related parties

to make sure that the activities will improve

the peoples welfare and, at the same time,

minimize the destructive impact to the

environments.

52 INVEST

53INVEST

General Information of Infrastructure and Facilities in Indonesia

Road Networks : 437,759 km of which 258,744 km has

been concreted

Railway Track : 5,042 km of which 565 km is supported

by power grid

Airports : 684 airports, 13 international

64 helipads

Maritime : 21,579 navigable water lane

Piping Line : 8,183 km of natural gas

7,429 km of crude oil

1,329 km of other refinery products

The information mentioned above indicates trillions of Rupiah

worth investment opportunities. The opportunities are there; now,

it is up to the government and related parties to respond in order

to improve the infrastructure.

Maritime ShaftBefore the General Election 2014 and being promoted by one

of the presidential candidates, the term Sea Toll was already

familiar. Many people picture it to be a toll road built above the

sea connecting one island to another. But then the campaigning

team of the candidate (now President of Republic of Indonesia)

explained that the concept of Sea Toll is to optimize the

improvement of sea harbors to enable any size of ships to moor. If

the capacity is improved, the cost can automatically be reduced as

well as the economic cost that is hard to avoid nowadays.

The idea, then, was packaged into a form of Maritime Shaft

inspired by the background of Indonesian culture which was

strongly related to the ocean. Maritime Country was the basis

to develop Maritime Shaft. The great idea is reasonable due to

Indonesias strategic geographical position between two continents

and two oceans.

Indonesia consists of thousand of islands across the equator

and is located between Pacific and Indian oceans with a large

sea territory of 2.7 million km2 or around 70% of total area of

Indonesia while the land territory is only 1.9 million km2. The

sea territory under Indonesian jurisdiction is increased by the

Indonesian Exclusive Economic Zone from 3.1 km2 to 5.8 million

km2.

Many articles indicate that Indonesia lost its marine potentials up

to trillion of Rupiahs due to illegal fishing. Illegal fishing committed

by sophisticated trawlers from several foreign countries have

exploited the Indonesian sea. Therefore, the idea of Maritime Shaft

needs to be supported and strived for by the entire nation in order

to guard the vast area of the sea.

A Glance

InfrastructureOn The Indonesian

54 INVESTASI

of Investment

NegativeList

In the effort to increase investment in

Indonesia and to execute the ASEAN

Economic Community (AEC), the

Government of Indonesia had done

amendments to the provision list of

business fields closed and open with certain

requirements in the field of investment

(Investment Negative List /DNI). These

amendments are stipulated in Presidential

Decree (Perpres) No. 39 in 2014 on List of

Business Fields Closed and Business Fields

Open with Conditions to Investment, that

was signed by President Susilo Bambang

Yudhoyono on April 23, 2014.

Quoted from Cabinet Secretary Website on May 2014, the

government divides businesses into three categories in the

Presidential Decree; Business Fields Closed and Business Fields

Open with Conditions to Investment: Business fields closed

for investment; Business fields open with the requirements of

the business, reserved for Small and Medium Enterprises and

Cooperatives, required partnerships, and business fields that are

required certain conditions, such as the ownership of capital,

specific location and specific licensing and Business fields open for

investment.

The regulation stipulates that investment in the business fields open

with the requirements must fulfill the location requirements as

stipulated in spatial and environmental regulations.

As stated in Article 4 Clause 2 of the Presidential Regulation, in

terms of investment licenses, the investors have to fulfill location

requirements if they want to expand their business outside the

location mentioned in the license.

To fulfill the requirements, the investors are not required to

establish a new company or obtain a new license.

It is stated in Article 5 that the regulation does not apply to

indirect investor or portfolio of which the transactions are done

through domestic stock market.

According to the regulation, the presidential decree does

not reduce investors obligation to obey the regulations and

requirements for business activities issued by: a. Ministerial/

non-ministerial institution that have technical authority in capital

investment and b. regional governments.

55INVESTASI

The regulation is effective on the date of issuance that is on April

24, 2014.

Closed Business For InvestmentPresidential Decree No. 39/2014 stipulates types of business that

are closed for capital investments:

1. Chemical material industry as regulated in the Attachment

1 of Law No,9/2008 on Utilization of Chemical as Chemical

Weapon;

2. Alcoholic Drinks

3. Operations of Land Transportation Terminals;

4. Operations of Motor Vehicles Scaling Facilities;

5. Telecommunications/Navigational Equipment;

6. Air Traffic Control Operations;

7. Motor Vehicle Testing;

8. Management and Operations of Spectrum Monitoring System

for Radio Frequency and Satellite Orbits;

9. National Museums;

10. Historical heritage and ancient inscriptions (temple, palace,

ancient structures) and;

11. Gambling/casino.

According to the attachment 1 of Presidential Decree No. 39/2014,

closed business investments are utilized for non-commercial

purposes such as research and development after obtaining

approvals from the institutions responsible for the area.

General PerspectiveZaldy Ilham Masita, Chairman of the Indonesian Logistics

Association: the latest DNI reflects the fact that the

government wants to protect the logistic sector more by

cutting the maximum foreign investment from 100% to 33%

for business services such as warehouse, distributors, and cold

storage. With this condition, local players should improve their

ability to fund and their human resources in order to develop

national logistics business volumes including infrastructure

development of its logistics.

Yukki Nugrahawan Hanafi, Chairman of Indonesia Forwarder

& Logistics Association (ALFI): The issuance of Presidential

Decree No. 39/2014 can support the further development

of the logistic business in the country. We strongly support

this since it aims to protect national entrepreneurs. Most of

the logistics businesses in the country are controlled by local

entrepreneurs.

Setijadi, Chairman of Indonesian Supply Chain (SCI): The

issuance of the negative list of investment will strengthen the

logistics connectivity. DNI also regulates the investment in

transportation sector which is closely related to the mobility

of the logistics