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Transcript of 2 Population: 241 million Land area: 1.9 million square kilometers (the size of Mexico, almost 2/3...
Indonesia Forum Auckland, September 28, 2012
NOKE KIROYAN
Doing Business in Indonesia:
An Introduction and Overview
2
The World’s Largest Archipelago• Population: 241 million• Land area: 1.9 million square
kilometers (the size of Mexico, almost 2/3 of India)
• 17,500 islands• 300 ethnic groups
Population: 140 million, thereof approx. 90 million ethnic Javanese (largest ethnic group in Southeast Asia).
Size: 126.700 km2 (almost 1/2 the size of New Zealand). 1000-km northern route (great post road/groote postweg) constructed by Governor General
Herman Daendels in 1808 – 1810 in the service of France the island’s main artery to date. Center of power and economy since colonial times. Javanese culture dominant, and pre-eminently dominant during President Soeharto’s 32-year
reign.
Center of the Indonesian Universe
3
4
Faces of Indonesia
5
Cultural Diversity in Indonesia
“Ask anyone in Indonesia about the country’s future and most likely you will get an optimistic answer. This is no surprise. The third largest democracy and fourth most populous country in the world has transformed itself from a low-income country in the 1960s into a fast-growing emerging market.”
“Doing Business in Indonesia 2010” – The World Bank and IMF 6
Perennial Optimists
National Policy-making Process
Perception of Good of Community
Public Opinion
Ideology
Economic, Social and Political
Circumstances
Governments
Political Attitude
POLITICAL WILL
GOAL: GOOD OF
COMMUNITY
Policies and Strategies
7(“Negotiating Mining Agreements: Past, Present and Future Trends,” Danièle Barberis, 1998)
Year Era Economy
1945-1950 Revolution (War against the Dutch)
Non-existent
1950-1957 Proto-democracy In shambles
1957-1966 Guided Democracy (Revolution Ch. 2)
In ruins – inflation 650%
1966-1998 New OrderExcellent: 7- 8% growth
1998-2005 Reformation – seeds of democracy In the Doldrums
2005- now Nascent DemocracyRespectable: 6% + growth
Political and Economic Overview
8
Article 33 of Indonesian 1945 Constitution
1. The economy shall be organized as a common
endeavor based upon the principles of the family
system
2. Sectors of production that are important for the country and affect the life
of the People shall be controlled by the State
3. The land, the waters and the natural riches
contained therein shall be controlled by the State and
exploited to the greatest benefit of the people
9
7
Economic Nationalism is not a new phenomenon
It is enshrined in the Constitution
Only during a very brief period in its history did Indonesia ideologically deviate from economic nationalism (1950 – 1957)
Economic nationalism was the driving force even in the reign of President Soeharto that was hailed as the era of economic
developmentThe Contract of Work is a legal construct to accommodate foreign
participation within a nationalistic framework (Article 33 of Constitution)
Economic growth will strengthen, rather than weaken economic nationalism, at least in the medium term
Economic nationalism mainly affects the resources industries, in other sectors many foreign companies are doing very well
Outside mining, many foreign companies are doing well
BANKINGANZ, HSBC, CIMB,
Commonwealth
INSURANCECIGNA, Prudential,
Manulife, Allianz
FMCGUnilever, Arnott’s, Phillip Morris, BAT
LOGISTICSSchenker, DHL,
Maersk
TECHNOLOGYAxiata, RIM, Siemens, GE
TRAVELAir Asia, Accor
Group
AUTOMOTIVEToyota (market share
> 50%), Honda, Mercedes
It definitely is, but you can do (good) business in Indonesia without promoting and resorting to bribery or being otherwise involved in corruption.
Is Corruption an Issue?
12
Middle class group: 50 million +
27th biggest exporter in 2010
Inflation 5.4% (2011)
Economic growth in 2011 6.5% - 2012 revised downward to 6.3%
Size of economy : US$ 846 billion in 2011, projected to be a trillion dollar economy in 2014
16th largest economy in the world
Some Stats ………
13
A few Snippets
Growth of air travel in 2011
22%
National flag carrier Garuda flew 4.6 million passengers in Q1/2012 (up 25% YOY)
Jakarta Airport served 52.4
million passengers in
2011
New car sales in 2012
projected at 1 million units
Mobile telephone
subscriptions in Q1/2012 255
million numbers
Accor to double number of
hotels to 100 by end 2015
14
1200 air traffic
controllers needed
Aston Hotels to add 73 new hotels (20
thereof this year) to
existing 45
800 new pilots
needed annually
US$ 2 billion commuter line from airport –
Jakarta operational
2014
Challenge # 1: Unfamiliarity breeds disinterest
Indonesians don’t know much about New Zealand
Kiwis don’t know much about Indonesia
Ergo – stereotypes prevail
15
Challenge # 2: Hardly Any Commonality
We don’t play cricket
We don’t play rugby
Our legal system is based on the
Napoleonic code
Directness is not usually a
virtue
Indonesians are city-dwellers
16
Challenge # 3: Australia far ahead in bilateral relations
Cooperation exists in all sectors and areas: economy, security, education,
counter-terrorism
Negotiations on Indonesia – Australia Comprehensive Economic Partnership
Agreement (IA-CEPA) commenced in September 2012
May be turned into an advantage if linked to Australia – New Zealand Closer Economic
Relations (CER)17
IA-CEPA initial work will focus on four areas
Agriculture
Minerals
Services
Green economy
18
19(“The archipelago economy: Unleashing Indonesia’s Potential – Executive Summary” – McKinsey Global Institute, September 2012)
• 16th-largest economy in the world• 45 million members of the
consuming class• 53% of the population in cities
producing 74% of GDP• 55 million skilled workers in
the Indonesian Economy• $0.5 trillion market opportunity
in consumer services, agriculture and fisheries, resources, and education
• 7th-largest economy in the world
• 135 million members of the consuming class
• 71% of the population in cities producing 86% of GDP
• 113 million skilled workers needed
• $1.8 trillion market opportunity in consumer services, agriculture and fisheries, resources, and education
Indonesia Today …..and in 2030
The Archipelago Economy: unleashing Indonesia’s Potential
20(“The archipelago economy: Unleashing Indonesia’s Potential – Executive Summary” – McKinsey Global Institute, September 2012)
Misperceptions about Indonesian economic performance
The Indonesian economy has performed strongly over the past decade and is more diverse and stable than many realize. Indonesia had the lowest volatility in economic growth compar-ed to OECD and BRIC countries.
Another mis-perception is that Indonesia’s economic growth centers on Jakarta. The fastest growing urban centers are large and mid-sized cities with more than 2 million people, incl. Medan, Bandung, Bogor and Surabaya.
Indonesia is not an Asian manufacturing exporter driven by its growing workforce or a commodity exporter driven by its natural resources. The main drivers of growth are domestic consumption and services.
The majority of Indonesia’s productivity gain has come not from a shift of workers from lower-productivity agriculture into more productive sectors, but from product-ivity improve-ment within sectors and not at the expense of employment.
Opportunities abound for NZ companies – but diligence and patience required
Agriculture
Aviation
Consumer Products
Infrastructure
Natural Resources
Education
21
What could be done to accelerate and expand business relations
22
New Zealand as a source of invention and technology
Spearheaded by rebranding – introducing other areas of expertise in addition to agriculture
Multi-year investment by NZ Government in bilateral relations
A final note: find the right partner!
23
Unless you are very big, you don’t enter the Indonesian market by yourself, but in partnership with a local individual or company. Finding the right one takes time
and effort Don’t enter into a partnership
without due diligence
THANK YOU
PT KOMUNIKASI KINERJA
Menara Karya, 10th Floor Suite HJl. HR Rasuna Said Blok X-5 Kav.
1-2Jakarta 12950 – INDONESIA
T: +6221 5794 4694F: +6221 5794 4696