The first few weeks of the new U.S. administration have made one issue quite clearPresident Trump is keen to deliver on his campaign promises. One of the cornerstones of his declared policy is to negotiate better trade deals for the U.S. with its neighbors such as Mexico and Canada, as well as with key trade partners in Asia. Where does this approach leave trade-dependent Asia and the other emerging markets (EM), many of which count U.S. as among their top three trading partners? And how should investors play the emerging trend?
To tackle this question, one needs to first examine the backdrop. There are a few factors favoring EMs at the moment. First, EM growth is accelerating relative to developed market (DM) growth for the first time since 2009 and Asia is set to remain the biggest growth driver for the global economy. Second, EM equity market valuations are more attractive than those in DMs after years of underperformance. Third, many EMs, especially outside Asia, are emerging from recessions and/or sharp downturns in their equity, bond and currency markets. Other factors such as increased commodity price stability, greater reform efforts and stability in China are also positives for many EMs. Indeed, these factors arguably contributed to EM equity outperformance over DMs for the first time in four years in 2016.
Against these favorable trends, there are counterbalancing factors. Apart from the likelihood of trade frictions, the most significant risk facing Asia and EMs is that of rising interest rates in the U.S. as Trumps policies could potentially generate faster growth and higher inflation. Historically, higher U.S. rates have tended to be a challenging environment for many EMs, given the possibility of triggering capital outflows.
However, we believe capital outflows are not inevitable. There are three factors to keep in mind. First, that many EMs (including China) have already faced significant capital outflows. This situation suggests the most susceptible components may already have left. Second, the gap between the low U.S. rates today and fairly high rates in many EMs is quite high, which may offer an additional source of support for EMs. Finally, U.S. interest rates would most probably have to rise at a faster pace than what is already expected in order to trigger large-scale capital outflows. Markets are arguably already looking for at least one rate hike from the Fed this year, so an upside surprise from this baseline would likely be needed in order for markets to start worrying about EMs.
There could even be situations where U.S. rates go up, but they are not detrimental to EM assets and currencies. For one, U.S. interest rates could rise, but at a much slower pace than expected. This would imply higher yielding EM currencies (like the rupee or rupiah) may be less vulnerable than lower yielding ones. Second, EM growth could continue to accelerate relative to developed market growth, which would underpin interest in EM equities. Finally, EM currencies may have already priced in a significant portion of the risks, leaving less room for further downside. The Malaysian ringgit is a good example of this, given just how much it has already weakened over the past few years.
On March 30, a group gathered, in the NyuhKuning Panchoran estate in Ubud, for the remembrance of the passing of their beloved friend and social leader Linda Garland, 70, after a long battle with pancreatic cancer. For those who did not have the good fortune to meet Linda, she was truly a larger than life personality. Something out of a fairytale, full of fun and surprisebut she was very real as were her extraordinary achievements in the interior design world, pioneering Bali style homes for a global clientele, including Mick Jagger and Island Records founder Chris Blackwell. Among her achievements, she designed David Bowies holiday home on the Caribbean resort island of Mustique, with a Balinese aesthetic, which is now owned by Richard Branson. More recently, she was known as the Bamboo Queen, an entrepreneur and global environmentalist who championed the use of bamboo as a sustainable building material.
This inspirational and unique person settled in Bali in the 1970s following an early life as Irish privileged gentry, fashion and design autodidact, international explorer and rock and roll party goer in the Londons roaring 1960s. At one point, she even studied bull fighting in Spain. In Indonesia and eventually as an Indonesian citizen in 1974 (naturalized through her marriage to Indonesian Amir Rabik), Linda truly blossomed and became an inspiration to many.
Despite suffering from many severe physical illnesses, Linda travelled widely both worldwide and across Indonesia. She had no qualms in taking a five-hour bumpy car ride to reach a remote village, on the same day after arriving from a global environmental conference. The only luxury she conceded herself was a refitted van where instead of normal seats she carefully piled up layering pillows to cushion herself.
Over the last 30 years, there are many anecdotal stories regarding Lindas early life with the jet set and the famous. My favorite was in the mid 1980s, when David Bowie dressed up as Father Christmas and handed out presents to children and villagers in the old Lotus caf and Ubud Palace courtyard. Her direct and indirect promotion of Bali was without equal. She also developed the Panchoran resort in Ubud, applying her principles of sustainability, making extensive use of bamboo and recycled telephone poles in its construction.
She was among the first to raise global awareness for utilizing bamboo for furniture and home designs as a sustainable, environmentally-friendly and mass market material. One of her designs, a large bamboo sofa, was copied many times over. When I asked her about getting royalties or copyrights on the design, she would just reply: Never mind, the villages are getting some money, and bamboo is making its way into peoples homes. She was once included on the top 100 list of the influential Architectural Digest magazines ranking of the worlds most important designers.
Her deep belief in the potential of bamboo led her to set up the Environmental Bamboo Foundation (EBF) in 1993. Linda met with many other leading experts and organizations, pushing the boundaries of research and community advocacy of bamboo as a substitute to timber. She was very concerned with Indonesias rapid deforestation and preached sustainable development at least a decade before it became a trendy buzzword.
Her work with local communities was recognized with the prestigious Upakarti award in 2000, the first time a naturalized Indonesian had won the award. In 1995, she launched the International Bamboo Conference, considered a pioneering and landmark event by the environmental community, overseeing the annual event for many years. Above all, and most importantly, her generosity, charm and encouragement influenced many to reach for the stars, including her sons, Karim, as a talented artist, and Arief, as promising bamboo entrepreneur. She had a real talent to bring out the best in those around her. For these achievements, and many more, Linda will be missed by many as a dear friend and influential leader, leaving a legacy of seeking a better Indonesia and a more balanced society.
Adam Smith, author of The Wealth of Nations, was opined that the problem with fiat money is that it rewards the minority that can handle money, but fools those that have worked and saved money. Bitcoin is the solution for and antidote to Adam Smiths problem for the global Internet nation. Fiat nation state currencies have unrestricted supply and restricted borders. Bitcoin has the opposite: restricted supply and unrestricted borders.
Bitcoin is MOIP (Money over Internet Protocol), using consensus algorithms and Blockchain technology not controlled by any government, country, company or person. Qualities of sound money include that it is scarce, divisible, portable, durable, recognizable and fungible. Bitcoin is a deflationary asset with a restricted supply, as a maximum limit of 21 million Bitcoins is hardwired into the Blockchain protocol.
For over 5,000 years this definition of sound money was gold and that is why all central banks own gold as reserves. Now with Bitcoins value reaching parity with that of gold, the Bitcoin market cap ($20 billion) expressed as a percentage of gold in circulation ($7 trillion) is currently at about 0.388%. If Bitcoin would reach the market cap of gold, one Bitcoin could be worth more than $1 million.
The price of one Bitcoin surpassed the price of an ounce of gold for the first time in history in early March 2017. For the first time in 5,000 years we have something that is superior to gold but today the Bitcoin space still feels like surfing the Internet in 1995. Bitcoin so far has had returns unlike any asset in history, and the trend is your friend with Bitcoin.
Bitcoin is a geopolitical hedge and a useful addition to traditional global investment portfolios, and, as such, it is becoming popular with family offices. Bitcoin is the best tail-risk optioneither worth zero or a truly outstanding amount of money. With Bitcoin, one should hold on and not get shaken out. While critics call Bitcoin volatile, since 2011 it has had only one down year. With a market cap over $20 billion, Bitcoins risk-reward has changed for the better.
The easiest way to own and trade Bitcoin is to open an account with a reputable Bitcoin exchange. Buying a hardware vault (cold storage), allows you to keep private keys completely offline (to prevent hacking), while enabling the flexibility of an online wallet.
The chances of Bitcoin being worth nothing are now near zerotheres been too much progress in Bitcoin and its Blockchain protocol for that to happen. If the global market grows more turbulent this year (as is likely), investors may swap traditional currencies for Bitcoinsand as demand rises, so will its value. With a potential upside of $1 million, Bitcoin may be the best ever risk-reward in the history of financial markets.
Do you need to become a digital master? The right question is, do you have a choice?
In their recent book, Leading Digital | Turning Technology into Business Transformation, authors George Westerman, Didier Bonnet, Mael Tannou, Patrick Ferraris and Andrew McAfee present an excellent framework to measure the impact on revenue-generating efficiency and profitability of the right way to learn, assimilate and apply digital technology in a variety of organizations. Using four quadrants to distinguish lower and higher combinations of digital capability (the what of technology) and leadership capability (the how of leading change) in the organization, companies were grouped and labeled as Beginners, Fashionistas, Conservatives and Digital Masters.
Beginners have not felt the urgency to face the digital challenge and, even if they did, lack the leadership to make fundamental changes take place. Fashionistas act and invest on their sense of urgency, but, because they lack strong digital leadership and governance, they waste much of what they spend for lack of integration across the enterprise. Conservatives are the opposite; they are extremely prudent in their investment appetite, even if they already have the leadership and governance structure to make fundamental changes. Digital Masters enjoy both capabilities, enabling them to build superior competitive positions in markets where they choose to compete, and they beat the rest in revenue generating efficiency and in profitability.
Here we focus on the x-axis of their framework and overlay their 10 prescribed leadership capability indicators with the three leadership needs of any organization, according to the organizing for business excellence paradigm (see diagram).
Seven of the ten indicators describe what manager-leaders do at the institutional level to satisfy the need for transformational leadership. The authors found that the journey to becoming a Digital Master is a top-down phenomenon marked by a strong vision and disciplined governance, both of which help drive digital investments in a common direction. Two of the indicators describe what manager-leaders do at the technical level, singling out the singular function leadership need satisfied by IT in the digital transformation of any company. Leadership capability indicator #6 describes what manager-leaders and their winning teams create and sustain with transactional leadershipthe capability to execute cross-functional and cross-region digital initiatives.
Do you need to become a Digital Master? The right question is, do you have a choice? You dont, because the sustainability of your business depends on it. Go digitalnow!
Kuala Tanjung International Hub Seaport in north Sumatra is a deep-sea port strategically located in the Straits of Malacca, the second busiest shipping lane in the world. This port has been in the news recently for all the wrong reasons, unnerving investors. Earlier this year, the port was downgraded from an international hub to a domestic hub, and then re-designated as an international hub. These self-inflicted wounds are the last thing we need to encourage infrastructure investors, because Kuala Tanjung port is a key component of President Joko Widodos international maritime axis program. Despite the confusion, port operator Pelindo 1 has hit the ground running, signing in late November last year a JV agreement with the Rotterdam Port Authority to develop Kuala Tanjung as an international hub.
In 2016, the governments priority projects delivery coordination agency, the KPPIP, commissioned an independent study to explore the efficacy of the ports hinterlands for future development as special economic zones. It explored the possibility of developing the whole corridor as a potential economic powerhouse in the Batubara Regency of North Sumatra, leveraging the existing Belawan Port in Medan and incorporating the Sei Mangkei Special Economic Zone.
These studies have identified the potential for the development of over 3,000 hectares of the ports hinterland for industrial zones, expanding eventually to 5,000 hectares. This ambitious plan requires more than ministerial level policy reformsit requires a nationwide strategic decision akin to the decision made by Indonesia with Singapore and Malaysia for the Growth Triangle strategy in the 1990s. This single policy decision resulted in over $9 billion investments into Batam.
I believe Kuala Tanjung has the makings of the next Batam. Firstly, the inland connectivity between the port, Medan, and surrounding areas is improving daily thanks to the Trans Sumatra Highway. In addition, the relatively short distance and strategic positioning of the Kuala Tanjung Port across from Malaysias Klang Valley also presents unique opportunities. The Klang Valley historically has been the center of Malaysias manufacturing base. Its labor intensive factories are increasingly facing labor shortages, providing an opportunity for Kuala Tanjung ports hinterlandsallowing the Klang Valley factories to transfer their operations to Kuala Tanjung.
In addition, the opportunity for growing the roll-on, roll-off (RORO) trade between the ports in Klang Valley and the Kuala Tanjung is another benefit of a bilateral strategy. Therefore, the Kuala Tanjung Port project has the makings of a prime economic growth mover, and coupled with the Trans Sumatra Highway, can be a national growth platform.
Whats needed now is political stewardship to facilitate the strategic and business opportunities between the two countries. Government agencies should craft a funding strategy attractive to the private sector, thus enabling Pelindo 1 to partner with the private sector to develop the port and its hinterlands, and become an international hub seaport.
Constructing one million houses for low-income communities (LIC) is a worthy goal. The home ownership rate in Indonesia is 79% and the rest is either renting or have other arrangements. Some 12 million families do not have homes at all. Therefore, the goal is noble, the need tangible and the problem real.
At the end of 2016, on 29 December, the government promulgated a regulation specifically intended for LIC, in which the government strongly supports real estate developers to create LIC by streamlining and reducing red tape.
Through this regulation, the government strongly facilitates the real estate developers for LIC by eliminating location license.
The new regulation is focused for the land development between 0.5 and not more than five hectares for houses (not condominium). The legal entity should prepare a proposal for all aspects of LIC housing. The proposal should attach a land certificate or other and evidence of payment of relevant taxes. The legal entity, having land ownership, can also apply for a land use license. The integral one-door service (PTSP) should approve the proposal not more than seven business days after receipt of complete documentation.
Location license is no longer required as long as the development site is already stipulated as LIC housing.
The developer will then have to relinquish the land rights (if has not been performed) through deed of relinquishment of land rights before the head of land office. Subsequently, the developer will have to apply for legalization of site plan and registration of undertaking a letter for environmental management and supervision, which has to be issued not more than one business day after receipt of complete documentation.
If the developer does not provide a memorial land for LIC housing, it can provide a separate location for 2% of total areas for the proposed LIC housing or to provide funds for memorial land at the determined location by the local government for 2% of the procurement value of the proposed LIC.
If the developer does not provide land for LIC housing, it can provide a separate location for 2% of total areas for the proposed LIC housing or to provide funds for land at the determined location by the local government for 2% of the procurement value of the proposed LIC. The procured land will have to be measured which must be completed not more than 14 business days from the receipt of complete documentation. The measurement may be conducted by a licensed surveyor, not necessarily from the land office. This is another bold move by the government, as it may help eliminate the land offices internal bureaucracy. After measured, the developer applies for certification of a right to build (hak guna bangunan) which has to be completed no later than three business days after receipt of complete documentation.
Also important, the regulation stipulates that if the PTSP does not proceed in issuing the requested license, the developer can refer the matter to the mayor or regent. If still unsuccessful, the developer can approach the governor to impose administrative sanctions in accordance with the laws and regulations. If still unsuccessful, the governor can directly grant the license. If the governor does not issue the license, the developer can refer the matter to the minister of domestic affairs to issue the requested license. Thus, there is a way for the developer to protect its interest as long as all requirements are fulfilled. Having ones own house is important. It is good for ones pride and future, and supporting it is a noble cause. Hence, let us support governments move.
In the second round of the gubernatorial race, on April 19, Jakartans will decide whether they want five more years with incumbent Basuki Tjahaja Purnama or have rival Anies Baswedan at the helm of the capital. Two months earlier, in a three-way first round race, Jakartans made clear they were not ready to see Agus Yudhoyono, the eldest son of former president Susilo Bambang Yudhoyono, run the city. The 39-year-old former Army major garnered only 17% of the votes, leaving Purnama (51) and Anies (48) with, respectively, 43% and 40%, to enter the second round as neither had won over 50%, as required by law.
In fact, as the first round figures show, Jakartans had already made their decision: 57% (the combined votes of Agus and Anies) wish to see a new governor. Several polls had Basuki, a Catholic of Chinese descent, leading by 75% until he was accused, in September, of insulting the Koran. He was subsequently brought to court by Muslim firebrands, thanks to an edict by the Council of Muslim Scholars (MUI) that found him guilty of committing blasphemy.
As what is arguably the nations second most important election draws to a close, it has become not so much a portrait of a major political event than a snapshot of Jakartans psyche. The Media Survei Indonesia (Median) rightly put it when it described Jakarta voters as idiosyncratic. A survey conducted by the pollster, in the last week of February, showed that while 54% believed Basuki is the right person to govern Jakartaas opposed to 33% in Anies favorand that over 65% were satisfied with the way he was running the city, only 42% want to see him reelected.
Jakarta is home to the countrys more sophisticated and upscale society50% of the voters are Internet users and 62% are fully employed, according to the University of Indonesia. But when it comes to choosing a governor, as the Median survey showed, over 46% prefer Anies, a Muslim with an Arabic pedigree, because of religious consideration. Again, Jakartans are better educated and seemingly more cosmopolitan than their fellow compatriots throughout the archipelago. Yet bigotry trumps tolerance, as most subscribe to the false notion that Muslims must not be led by a non-Muslim.
A large portion of Agus supporters are likely to throw their weight behind Anies as they share many commonalities with his supporters, one of which is the desire not to see a non-Muslim governor, according to Lingkaran Survei Indonesia (LSI). In the first week of March, the pollster had Anies leading with 50% against Basukis 40% while 10% remain undecided. With LSIs figures as an index, Anies needs only a little over 0.3%, or about 24,000 votes, to clinch the election.
The upside to Jakartans irrational voting behavior, however, is their zeal to take part in deciding the future of the city. The regional election body KPUD noted that nearly 76% of 7.1 million eligible voters cast their votes, a high turnover by any measure. Kudos are also due to Jakartans for the absence of any meaningful disturbances in over 15,000 polling stations.
Behind a faade of modernity, many Jakartans seem to harbor primordial sentiments ways that do not do justice to a society that aspires to enter the next level. In the likelihood that Anies wins on April 19, it will be the first time that post-Independence Jakarta gets a governor it does not deserve.
Ahmad Zamroni / Forbes Indonesia
Mario Kassar, 65, is a living legend in Hollywood. As the co-founder of Carolco Pictures, he produced more than 30 films in the 1980s and early 1990s, including the iconic Rambo franchise, Terminator 2: Judgement Day and Basic Instinct. The 1982 film First Blood, the first Rambo film, cost $14 million but made $125 million, and was Marios first big hit (the Rambo franchise would go on to earn more than $400 million).
Fast forward to 2017. Mario is looking for a similar success in Indonesia, signing up as the executive producer of Foxtrot Six, described as an action-packed sci-fi film set in the near future. With a tagline of mankinds greatest battle will be for its own survival the films summary follows a classic action formula: In three days, Rangga, an ex-military officer, must regroup with his former misfit teammates to stop a mass killing conspiracy and save his wife and daughter while being hunted down as enemies of the state. Mario sum up the plot as: Its like a mini-Expendables.
More importantly, the film will be almost all filmed and produced in Indonesia, with the largest budget ever for an Indonesian film (some scenes will be set in Washington, D.C.). About 95% will be shot in Indonesia, and 5% in Washington, he says. Aside from Mario, his French co-producer Guillaume Catala, and a few others, Mario says almost everyone involved in the project will be Indonesian. The main staras yet unnamedwill be Indonesian. The film should be released sometime next year, after several years of development. I think it is the perfect time to launch this film. This movie will be the pride of Indonesia, says Mario. Making this movie in Indonesia could put the country on the map, cinematically, in a big way.
Although Mario will not confirm the figure, Forbes Indonesia understands the films budget is about $5 millionwith all the funds raised from Indonesian investors (Hollywoods Variety says the budget is $10 million, without naming its source). To be a success, Mario needs to recoup his investment, which, if about $5 million, is a relatively low figure for a high-quality Hollywood-style action film. While Mario praises the quality of his Indonesian partners and staff, the costs for production in Indonesia are also much lower than in the U.S. or other locales. All the guys here are amazing, says Mario.
Ahmad Zamroni / Forbes Indonesia
Alcohol is a very attractive business in Indonesia, yet challenging as well. In fast-growing Southeast Asia, alcohol consumption is low compared to the developed world. Indonesia happens to have the lowest alcohol consumption in the region, coupled with a young population and emerging middle class. The country is certainly a promising market for beer, which is the most affordable type of alcohol. Data compiled by Japan based consulting firm Corporate Directions showed that beer sales by volume in Indonesia is growing at around 6% annually, second to Vietnam. There are only a handful of players in the industry as well, with listed Multi Bintang Indonesia and Delta Djakarta as the market leaders with around 60% and 20% market share. The margin of the industry is also quite promising, ranging at about 25% of revenue.
The consumer products group Orang Tua hopes to tap this potential after launching beer firm PT Beverindo Indah Abadi in 2012 in Semarang. Orang Tuas roots are actually in alcoholit started as herbal wine producer back in 1948 in Semarang, which it still produces today. Orang Tuas beer factory is located right behind the wine factory, built with an investment of $50 million and a production capacity of 373,000 hectoliters. The factory began producing beer last AugustProst for the mass market and Knig Ludwig for the premium market. It started sales the following month, only to face a challenge. Alcohol is a highly regulated business everywhere, and thats especially true in the largest Muslim-majority country in the world. Early last year, the government issued a new regulation that banned alcohol sales in minimarkets, shutting off one of the major retail outlets for beer.
The new regulation was unexpected and the market dropped. However, we see the demand is still there, consumers have other ways to enjoy beer, as beer gardens are opening up. So now we see a recovery and this year we expect 8% to 10% growth, says Thomas Dosy, chief executive of PT Beverindo Indah Abadi.
Beer producers arent allowed to advertise their products, so they must do other marketing efforts, such as sample tastings. Thus, the company wants to develop word of mouth to gain share. Thomas says Orang Tua did much research before deciding to enter the market, including going to Germany to meet Prince Luitpold of the House of Wittelsbach, the great-grandson of the last King of Bavaria, Ludwig III. The familys Knig Ludwig beer has roots going back to 1260, when the family first started to make beer.
Trumps newest building, in left-leaning Vancouver, has been profitable for its Malaysian partners from the get-go. But they may already regret doing the deal.
Robbie and Jose Antonio are about to open a trump tower in manila. Jose is also the philippines new trade envoy to america. coincidence?
Hary Tanoesoedibjo shares more than luxury resorts with the 45th President. The Indonesian billionaire has turned himself into a full-fledged mini-Trump, down to the beauty pageants, TV shows and incessant tweeting. And hes now laying the groundwork to become president of the worlds fourth-largest country.
A previously little-known batch of billionaires and tycoons from around the world suddenly find themselves in an unprecedented position: how do you cash in on a partnership with the president of the United States of America? From the avaricious dealmakers to the abandoned deals, meet the worlds 36 mini-Trumps.
On the 30th anniversary of our guide to the worlds richest people, we found a record 2,043 billionairesup from 1,810 a year ago.
Ahmad Zamroni / Forbes Indonesia
Last September, the Indonesia Opera Society held a gala dinner and performance for its tenth anniversary celebration at the Dharmawangsa hotel in Jakarta. The event was attended by 600 VIPs from Jakarta social, political and business communities, as well as opera singers who had flown in from 10 countries to perform for the assembled guests.
Many of those attending may not have recognized a connection between three of the four largest partners supporting the event: Fidurhone S.A., a Swiss multi-family office; the Convention of Independent Financial Advisor (CIFA), a NGO for investment advisors; and the Swiss Village, a local Indonesian organization. The final partner was TBM, an airplane firm.
Whats surprising is that those three firms had one man in common: Swiss citizen Jean-Pierre Diserens, 65, who had arrived from Geneva to attend the event. Jean-Pierre clearly enjoys wearing many hats. For his day job, he is the founder and chief executive of Fidurhone S.A. As such, he is a true pioneer in the elite world of Swiss private banking, because his firm was the first multi-family office in Geneva, established in 1976. Back then, we didnt even have the name [multi-family office] for what we did, he says. However, demand has increased globally. (Multi-family offices, as the name implies, work exclusively with high net worth families to manage their assets and investments.)
However, he is more than a just a financial investment advisor. He is also has a role in the nexus of the global economy, financial services and international policies, in his position as the secretary general and one of the founding members of CIFA. This NGO was started in 2001 with a mission to strengthen the role of independent financial advisors (IFAs) at the international level, in order to better represent the interests of investors. Also headquartered in Geneva, CIFAs members include 40 national IFA associations in 24 countries around the globe, whose combined membership is about 300,000 financial advisors. In Indonesia, the CIFA has two partner organizations, the Financial Planner Association Indonesia (FPAI) and Financial Planning Standards Board (FPSB).
While the financial services industry has many trade bodies, the CIFA stands out as more than just another association. It has the rare privilege of having general consultative status with the Economic and Social Council of the United Nations, a status it received in 2015. That is the highest status you can have. Only 137 NGOs out of the thousands around the world have that status, says Jean-Pierre. We are also the only one with that status from the financial intermediation sector. As such, Jean-Pierre works closely with several UN agencies, and he was also invited to speak at a UN-related event in Bali in 2014 in front of 5,000 attendees.
Isabel Wijsen, 14, and Melati Wijsen, 16, are still in their teens but they have already founded a movement against plastic bags that is having a major impact in Bali, and now spreading around the world. Their initiative, called Bye Bye Plastic Bags, is attempting to stop the single use of plastic bags.
The sisters were motivated after seeing growing amounts of garbage in Bali, much of it plastic bags used once or twice and then thrown away. The downside of Balis tourism is the creation of huge piles of garbagewhich can wind up as litter on its beaches, fields and streets. Bali, they note, generates 680 cubic meters of plastic waste a day.
The girls saw it firsthand in their favorite local beach, Seseh, which was, as Melati puts it, swallowed up by garbage. When youre at the beach sunbathing or going for a swim, youre swimming with plastic, youre sunbathing with plastic. Theres no escaping it, says Melati.
Those experiences led them, in April 2013, to start Bye Bye Plastic Bags, when they were just 10 and 12. The two girls attend the Bali Green School, which promotes environmentalism, so their campaign was in keeping with the schools mission. The question became whos going to do something about it? We thought why dont we do something about it? Why dont we stand up for our island?, Melati says.
They decided to focus on plastic bags. The initial strategy was to collect one million signatures in a petition to deliver to the Bali governor, and they wanted him to help pass a law that would ban the use, sale and production of plastic bags on Bali. After trying for a while, the girls changed tactics, saying later that they realized one million was 1,000 times 1,000 (their petition is now up to 72,000 signatures).
Instead, in November 2014, they asked for a meeting with the governor, and after spending a year getting a runaround from officials, decided to go on a hunger strike until the governor agreed to meet themalthough it really a semi-strike because they only fasted from sunrise to sunset. Nonetheless, it took only two days of the strike for Governor I Made Mangku Pastika to change his mind and finally agree to meet them.
At the meeting, the governor signed an MOU that pledged the governor and Bye Bye Plastic Bags and other related organizations hereby agree to work to ask the community of Bali not to use plastic bags by January 1, 2016 and support to minimize the impact of plastic. The governor also agreed to support the use of alternatives to plastic bags.
It was all nonbinding and feel-good, but at least it was a step in the right direction (Bali was still full of plastic bags after January 1, 2016). So, eight months later, the girls managed to secure a second meeting, and got the governor to sign a circular letter (surat edaran) to promote the use of recyclable bags by 2018. Perhaps the biggest step was having the governor acknowledge that plastic waste was a growing problembefore he had said the plastic buildup was a natural phenomenon.
Faye Hasian Simanjuntak, 15, is often misjudged by others because of her young age; plus her grandfather is Luhut Binsar Pandjaitan, the coordinating minister for maritime affairs. Yet Faye has a wisdom beyond her years, irrespective of her family, and at age 13 even gave a TED talk, entitled Am I too young? A few years later, she appearedby herselfas a guest on several talk shows.
Fayes main passion is being the co-founder of Rumah Faye, an organization fighting child sexual abuse and trafficking. I love my grandpa and I know he loves me too. However, at the beginning, he thought Rumah Faye would run out of steam, and he didnt believe that I would keep actively doing this, says Faye.
Launched in 2013 with her mother Paulina Pandjaitan, Rumah Faye grew to the point where it was able to open its own safe house on Batam, at which Luhut gave a speech at the opening ceremony. The name Faye is derived from the word faith, so Faye chose it for her organization, as it is meant to give hope to child victims of trafficking and sexual abuse.
The idea of Rumah Faye was sparked when Faye, who was only nine at that time, learned about the problem of underage sexual exploitation. Between 40,000 and 70,000 Indonesian children are victims of sexual exploitation. About 30% of the women involved in prostitution in Indonesia are below 18 years old. Can you imagine, many are at the same age as me, says Faye.
According to UNICEF, Indonesia is not only a major source of victims for trafficking and prostitution, but also a destination and transit country for foreign victims from neighboring countries. More than two-thirds of the provinces in Indonesia suffer from internal trafficking. Children are trafficked for the purpose of sexual exploitation, but also to become domestic workers, child brides, and child laborers. Moreover, babies are trafficked for illegal adoption and organs.
In addition to that, Indonesian women and girls are trafficked to Malaysia and Singapore for forced prostitution and throughout Indonesia for both forced prostitution and forced labor. Those facts relentlessly stayed at the back of Fayes mind for two years. I told my mom that I wanted to help those girls. My mom was like: Are you sure? It wasnt because she didnt believe in me, but because it is a very heavy issue, Faye remembers.
Operating under the umbrella of the DEL Foundation, founded by her grandfather Luhut, Rumah Faye aims to save children from sexual abuse and trafficking, and restore their joy and future. Her organization has a three-pronged strategy of prevention, rescue and recovery.
Destry Damayanti, 54, is a rare woman who has reached the upper heights of the financial services industry. She is so highly respected that President Joko Jokowi Widodo handpicked her to be the chairwoman of the selection committee for the Corruption Eradication Committee (KPK) in May 2015, leading a group of eight women who chose the new leaders of the KPK.
After finishing her KPK role in December 2015, she moved on to become a commissioner at the Indonesian Deposit Insurance (LPS), an independent state institution set up to encourage stability in the national finance sector. She is also recently been appointed as an independent commissioner at Bank Mandiri.
She hopes she can be a role model. I want to encourage women, because we are not less capable than men. As long as we are fully committed and ready to accept the consequences, we should have the same chance to be successful in our careers, she says.
Destry has blazed a trail as a female economist in Indonesia. After earning her master degree from Cornell University, Destry was in charge of fiscal and monetary analysis at the Finance Ministry for five years, before becoming an economist at Citibank in 1997. As the only economist in the Indonesian office at the time, during the financial crisis, she had a high workload, which she said was not easy as she also had three children at home.
Eventually she had to make a personal choice, so she took a less stressful job as an economic advisor to the British Embassy in Jakarta in 2000. After three years, she took a sabbatical, and stopped working altogether for 1.5 years to help one of her children go on tour and play in competitive tennis matches, a stepping-stone to becoming a professional tennis player. As Destry was also a serious tennis player in her youth, she wanted to give her child the same opportunity.
However, when her childs tennis ambitions ended, she started to teach and to research again and then she landed a high-profile job as chief economist at PT Mandiri Sekuritas in 2005. In 2011, she got an even higher profile job at Bank Mandiri with the same title, which gave her wide exposure and public recognition. In late 2014, she was asked to head the Economic Resilience Task Force for the State Owned Enterprises Ministry.
Right before she finished her role on the task force in May 2015, she got a call from Teten Masduki, a member of the presidential staff, who told her the president wanted her to head the KPK selection committee, an extremely high-profile and politically sensitive post. I hesitated at first, but Teten convinced me that President Jokowi wanted me to be the chairwoman of the selection committee. Realizing that it was an honor and blessing for me to be handpicked directly by the president, I accepted the role, she recalls.
Anniesa Desvitasari Hasibuan, 30, is on this list because she is the first designer to present a Muslim-wear collection at the prestigious New York Fashion Week (NYFW). She did this last September in New York, and received a standing ovation after her presentation to the 1,500 attendees. She followed up that achievement in February, with another presentation of Muslim wear and used only immigrant models to wear them, making a political statement against the anti-immigrant rhetoric of the Trump administration.
Fashion is universal. It is for peace, for fun, and for everyone. Despite our differences in race, culture, and religion, wherever we come from, we have equal rights, says Anniesa, in an email interview. She adds that New York is popular as a melting pot where people from every part of the world can interact.
Her journey to the NYFW stage is a long one. To gain recognition, she first joined the New York Couture Fashion Week in September 2015 and February 2016. Then she actively participated in other events, such as the Istanbul Modest Fashion week and Cannes Fashion and Global Short Film Awards Gala in May 2016, where she earned Best Fashion Designer Award for her Pearl Asia collection. The NYFW committee noticed Anniesas efforts, and she was registered to join NYFW. The committee was very excited because it was the first time Muslim-wear hijab would be shown at NYFW.
She presented 48 pieces under the DJakarta collection, with 38 ready-to-wear pieces and 10 couture pieces, inspired by Indonesian fashion trends. She took six months to prepare for the show, and was assisted by around 20 staff. After the show, she received many positive responses and wide coverage from international media. They dont see my collection from a religious aspect, but as fashion pieces, says Anniesa.
Anniesa surprisingly has no background in fashion design, except for a short course in design she took in London. Her path into the fashion industry came from her passion for drawing. She was studying accounting at the Universitas Indonesia when her father passed away, so she had to quit her studies and get a job to earn money to help her family. For eight years, she sold hamburgers and mobile phone credits.
In 2008, Anniesa and her husband Andika Surachman set up an umrah travel agent company, First Travel. By 2015, the business managed to earn $40 million in annual revenue. Then she had a miscarriage, so her husband let her take some time off, and she began to explore fashion design. Anniesas first client was her own husband, and then she started to design clothes for her friends. Finally, she felt confident enough to open her own boutique.
Ahmad Zamroni / Forbes Indonesia
Mercedes-Benz Indonesias sales last year was in full gear, following positive results in the last three years as it increased its sales by 3% to 3,374 units in 2016. This favorable result was inline with the three-pointed stars performance last year where it was able to sell for the first time more than two million units of cars around the world. One driving force was the popularity of its SUVs, of which the brand sold more than 700,000 units globally, an increase of 34% over last year. The positive trend could also be seen in Indonesia, where Mercedes-Benz Indonesia was also able to record a growth of more than 30% in its SUV sales last year.
The positive trend is not only in the Unites States or Europe, where we are strong, but also in Indonesia where SUVs outperformed our traditional segment, says Roelof Lamberts, the president director and chief executive of PT Mercedes-Benz Distribution Indonesia.
Currently the brand offers a wide variety of SUV models: the GLA, GLC, GLE, and GLS, the latter three being locally assembled in Bogor. SUVs have been evolving in the recent yearsno longer are they the huge gas-guzzlers of a decade ago. Now SUVs are segmented to cater to different types of customers, such as the GLE, which is comparable to the E-Class, and competes with the likes of the BMW X5 and Lexus RX. According to Roelof, the GLE now contributes half of all SUV sales, followed by the GLC and the GLA. The introduction of the small SUV has contributed significantly to the segment, Roelof says.
Roelof, 49, studied international marketing management in the Netherlands before joining Mercedes-Benz 27 years ago. For the first seven years there, he held various sales and marketing positions in the companys headquarters in Stuttgart. In 1998, Roelof became the Southeast Asia regional manager, based in Singapore, followed by being the general manager for marketing in Thailand in 2002. From 2006, he held various positions in Europe before returning to Asia to become sales and marketing director of Mercedes-Benz Indonesia in 2015, and then taking the helm of the Mercedes-Benz Distribution Indonesia last year.
Another sales driver, according to Roelof, was giving the cars a more contemporary look. The first transformation was done to the S-Class in 2013, giving it a sleeker design. These new designs were applied since then across the brand portfolio, including the SUVs. Design plays a major role in purchase decisions, as a car is a reflection of ones personality, says Roelof.
Ahmad Zamroni / Forbes Indonesia
Forbes Indonesia: What are the priority areas for the KPPU?
Syarkawi Rauf: We mainly monitor five strategic sectors: food commodities, manufacturing and logistics, financial services, education and health. Food commodities is the most crucial one, because prices constantly fluctuate. For example, the price of birds eye chili is currently around Rp 160,000 per kilogram. Its normal price is Rp 25,000. Why is this? There are allegations of cartel practices in the distribution chain, so customers have to pay more because of these cartel practices.
President Joko Jokowi Widodo has repeatedly said the KPPU must focus on this sector and in early March we signed an MoU with Finance Minister Sri Mulyani Indrawati to tackle cartel practices in beef and chicken. Later, we will expand to 11 other food commodities. We will also touch other sectors, but for short-term we are focusing on the agricultural sector.
FI: What are the biggest challenges for the KPPU?
SR: In Indonesia, the cartels sometimes originate from regulation, as some of the government policies facilitate anti-competition practices. Therefore, we urgently need to have market reform. First, we should do a review of policies that are anti-competition in nature. Second, we should shift the market structure to encourage new players, because now all the strategic commodities are highly concentrated in the hands of a few. Third, we need to create a pro-competition culture in the market, although this needs a long time to cultivate.
FI: What should be done to improve Indonesias anti-competition regulation?
SR: The fines for anti-competition violations are too small, with the maximum amount only Rp 25 billion. Meanwhile, the profit gained from violations is much bigger. We want to revise the regulation. In U.S., the fines are based on the profit. They count how much profit the company made from the cartel, and use that to calculate the violation. But its impossible to apply that rule in Indonesia because we lack the data related to the profit, especially for privately held companies. Hence, we believe the fine should be a maximum of 30% of sales during the cartel period. We plan to finish the amendment of the regulations by mid-year.
FI: What else will be included in the amendment?
SR: We want to be an independent state institution with stronger authority. KPPU currently has four areas of regulation: policy advocacy, law enforcement, merger notification, and partnership monitoring. In policy advocacy, we give the government policy suggestions, and hence the KPPU should be equal with other institutions. In law enforcement, our authority is weak. We cannot do wiretapping. So all the evidence we get is leaked. For example, in the Honda-Yamaha case, we got leaked emails. We will fix that in the amendment.
Courtesy of BMGF
Melinda shapes the focus of the foundation as it evolves and expands. Initially the William H. Gates Foundation (named after Bills father), that later became the BMGF, focused on putting laptops in every classroom in the U.S. before expanding the goal to reforming the education system.
Melinda initiated global health as the foundations priority soon after their wedding in 1994, when she read a front page of the New York Times story about children in developing countries dying of diseases that most Americans never experience, such as rotavirus, malaria and tuberculosis. Melinda also has a personal interest in women issues around the globe, with programs to empower women as part of a significant solution to address general problems.
When we started the foundation, I underestimated the power of contraceptives to lift families out of poverty. I began to see it because Melinda is a great storytellerand that includes getting the story. When I was still full-time at Microsoft, shed go out in the field and come back and tell me what she saw, Bill Gates wrote in the foundations 2017 annual letter on how his wife motivated him to tackle global health issues.
Last year, Melinda announced a new mission: tackling women inequality in technology. This new goal seems to be personal. Melinda herself has a huge interest in computers and technology, as she graduated from Duke University with a computer science degree as well as an MBA and a BA in economics. She spent a decade working at Microsoft, where she met Bill. She quit that job to take care of their family and the foundation. So when Melinda learned that the percentage of woman with a computer degree is going down, it concerned her. The gap between men and women in technology would create a bias that could affect many things as technology becomes even more ubiquitous.
Forbes Indonesia had a rare opportunity to ask a few questions to Melinda when she visited Indonesia at the end of March. A follow up to Bills visit in 2014, she went to Yogyakarta to see the progress of the Eliminate Dengue Project at Gadjah Mada University and then to Jakarta the next day to meet President Joko Widodo and his cabinet. During her visit, she also checked up on the women and family planning program in the country. The following is an edited excerpt of an email interview done during her visit:
Forbes Indonesia: Can you share your agenda in Indonesia?
Melinda Gates: Im here because Indonesia is poised to transform its economy into a global powerhouse. Women and girls are essential participants in that transformationand I want to make sure they have the tools they need to drive Indonesia toward a bright future.
That means broadening access to family planning resources. When women have the tools they need to plan and space their pregnancies, its better for them, better for their children, better for families, and better for the entire economy. Parents can invest more resources in each child they have. They can better ensure their kids get a good education. Women can participate more fully in the workforce. Familiesand entire communitiesstart realizing their economic potential. People in Indonesia know this better than anyone; for years, youve had one of the most successful family planning programs in the world.
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Ahmad Zamroni / Forbes Indonesia
The new chief executive of Standard Chartered Bank Indonesia Rino Donny Donosepoetro has made history as the first Indonesian to head the banks Indonesian operations since it opened over 150 years ago in the country. He replaced Singaporean Tse Koon Shee in July when Koon Shee moved to competitor DBS. Donny inherits the position during a challenging time. In 2015, the bank booked a loss of Rp 285 billion from Rp 620 billion profit the previous year, and nearly a 9% drop in loans.
A veteran banker who has been with the bank for two decades, Donny has a strong background in internal audit. He was Standard Chartereds regional head of audit for ASEAN, South Asia, Greater China and North East Asia based in Singapore, and was chief executive in Brunei and Falkland Islands. His appointment reflects Standard Chartereds seriousness in securing a key market with someone who really understands the market.
When we talk about Asia in the future, we talk about growth. Indonesia has the fastest GDP growth after China and India. For us, Indonesia is an extremely important market. I think it is hard to find another that can beat its potential, Donny says. Likewise, restructuring efforts have been taken. Donny admits that the past couple of years have been tough, but last year the bank moved back to its growth trajectory. The banks unaudited figures as of September showed Rp 553 billion profits despite loan growth remaining flat, and gross nonperforming loans (NPLs) soaring to 5.7%, which required a higher provision. Donny says the restructuring effort means this year Standard Chartered Indonesia can aim to have about 9% growth.
I am a big believer in culture, its a basic foundation for success. For the first time, we have Standard Chartered Bank Indonesia culture, he says. To compete with others that offer similar products and service, Donny says he gathered the banks top and second tier management to set a culture focused on the root of the banking business: trust. He says trust comes mainly from two things, first is good communication with clients and between employees. Second is setting a high standard for professional behavior, including cooperating with the regulators. Unlike other banks that have been cutting back on some sectors or companies, Donny prefers to focus on each client, and provide for their needs.
A bank is about risk management, but you implement it in a way to focus on the client. Clients are different, and during this challenging situation, we should stand with them. It might be tough now, but we know it will rebound, which is better than taking a conservative view and cutting the whole thing, he says. Donny sees international investors wanting to invest in Indonesia, such as clients in South Korea and China. For our Korean clients, we help them deal with the licenses and authorities. They have interests across the board, in consumer products, automotive, extraction businesses, retail, and manufacturing, Donny says.
Ahmad Zamroni / Forbes Indonesia
Millions of people in Indonesia arent bankable, since it is not easy for financial institutions like banks to set up branches or expand their business due to capital expenses, says Aida Sutanto, co-founder and chairwoman of PT Investree Radhika Jaya, a peer-to-peer lending fintech. Of Indonesias 260 million population, just 60 million, or 23%, have a bank account.
Financial technology (fintech) is seen as a potential savior to improve financial inclusion. One of the booming categories is peer-to-peer lending, in which the money doesnt come from financial institutions, but from individuals.
In Indonesia, peer-to-peer lending fintech is still in its early stages compared its development in places such as China, the U.S. or U.K. However, the market reaction has been robust, as the peer-to-peer lending fintech companies have been growing at more than 100% per year. Investrees business has grown almost 200% since the firm was started in May 2016. As of the second week of February, Investree disbursed a total of Rp 73 billion, with an average yield of 18%. From that amount, about Rp 52 billion in funds have been paid and the rest are still ongoing, says Adrian Gunadi, co-founder and chairman of Investree.
Investree is a marketplace that matches lenders and borrowers online through peer-to-peer lending. It focuses on two major products: invoice financing for SMEs and employee loans. Why? We operate on focused segments and have reasonable risks, says Andi Andries, chief of risk and operations at Investree. Invoice financing is a well established financial service. After providing a good or service, SMEs normally have to wait weeks or months to get paid by a client. Investree will give them a loan using the invoice as collateral, so the SMEs can better manage their cash flow.
How does it work? The SME applies on the Investree site by submitting the invoice and other related documents. Then Investrees risk management officers analyze the application. When the SME is approved for financing, Investree puts the details on the platform to find lenders. It usually takes about three days for the SME to get the funds.
Investree will only fund 80% of the total invoice (the rest is for reserve). For the loan, Investree charges the SME anywhere from 14% to 20% (annualized), plus a 4% fee on average, of the loan amount. Once the client gets pay for the invoice, lenders get their principal back, along the interest. Adrian says the risk of default is relatively low, since the SMEs usually have large, blue-chip firms as clients, who are reliable in paying their bills. Moreover, Investree is careful in selecting the SMEs for the platformthe sector is important. Today, we are very selective when it comes to companies that operate in commodity or energy sectors, due to the economic slowdown, he says. Currently, 30% of Investree borrowers for invoice financing come from the creative industry, such as media outlets, event organizers and digital agencies. The rest are in sectors such as outsourcing, food & beverage, construction and consumer goods.
Ahmad Zamroni / Forbes Indonesia
One of the main obstacles to the growth of e-commerce remains the payment bottleneck. Even though about 72 million people shop online now, some 60% still pay via bank transfer, and 30% by conventional cash on delivery. Now, new financial technology (fintech) firms are springing up to change that situation.
Ryu Kawano Suliawan, 33, started PT Midtrans in 2012 to provide a gateway to simplify online payments. The firm is a joint venture between the Midplaza group, owned by Ryus father Rudy Suliawan, Japan e-commerce firm Netprice and Japans largest payment gateway Veritrans. The company integrates various payment methods such as e-money, direct debit and credit cards. Its main service is to authorize online payments, and provide secure transactions that protect customer data such as credit card numbers.
The company started with 15 people and 30 merchant partners but now Midtrans employs 170 people has more than 2,000 merchant partners, including big ones such as Garuda Indonesia and e-commerce firms Traveloka, Tokopedia, and Mataharimall. It has also just signed to handle Go-Jeks online payment system Go-Pay. By offering 18 payment methods and having partnerships with many large banks including BNI, BCA, and Mandiri, Midtrans is now the biggest player in the payment getaway industry, ahead of rivals such as Doku, which started earlier in 2007.
The competition in the payment gateway space right now is concentratedMidtrans is only one of four main firms in the sector. Ryu says he would actually prefer to have more competitors. We believe that with more players in the market, the easier it is to educate the target market, Ryu says.
Ryu was already familiar with the financial industry before he decided to build Midtrans. After graduating with a Harvard MBA, he worked as an analyst at the San Francisco office of Lazard Freres and then at the Texas Pacific Group in Tokyo. Seeing the trend of e-commerce and the payment getaway industry around the world, he decided to launch Midtrans, betting that Indonesia would follow the same trends. He now admits, however, that Indonesians may be slower to adapt to e-payments than he expectedyet he remains confident. As long as Indonesian e-commerce is growing, we believe we will grow, he says.
The company earns revenue from a service fee per transaction set between Rp 2,500 to Rp 5,000. Midtrans declines to share its annual transaction value and market share except that its revenue is tripling every year. However, Forbes Indonesia estimates the company might have handled about $7.5 billion in transactions last year.
Financial inclusion in Indonesia is underdeveloped. Only 22% of the population has a bank account, 17% an insurance policy and 0.2% a brokerage account. In comparison, half of all U.S. citizens are invested in stocks, either directly or through mutual funds or other vehicles.
Hopes are running high that the emerging financial technology (fintech) industry can encourage more financial inclusion and increase the use of financial services. Secretary General of the Indonesia Fintech Association Karaniya Dharmasaputra, who is also the founder and chief executive of fintech site Bareksa, explains that fintech companies can use the Internet to help encourage more financial inclusion. On the Internet, everything is transparent, so people can learn by themselves what are mutual funds and how investments work, he says. Bareksa, for example, allows users to buy mutual funds from local e-commerce company Bukalapak, with every step now available online and with an initial investment as low as Rp 10,000.
The associations mission is to support and encourage the fintech industry, on issues such as regulation and transparency. The value of fintech transactions in 2016 was estimated at $14.5 billion, according to Bank Indonesia (BI) data. Currently there are 156 fintech companies in Indonesia classified into four categories: market provisioning such as Cekaja and Cermati; deposit, lending, and capital raising such as Uangteman and Investree; investment and risk management such as Bareksa and Stockbit; and payment, clearing, and settlement such as Midtrans and Doku.
These startups are now disrupting the financial services industry. These companies are overtaking the role of banks, which used to pioneer new technology in retail financial services, such as ATMs and Internet banking, says Junanto Herdiawan, the BIs acting head of the Financial Technology Office in Payment System Policy and Supervision Department (DKSP). Therefore, banks are now playing catch-up, and beginning to develop their own fintech. Major banks, such as BCA and Bank Mandiri, already have electronic payment servicesand electronic payments have reached Rp 750 billion per month in December 2016. Banks and other traditional financial services firms are also setting up venture capital firms to invest in fintech startups.
However, there is a risk that fintech can be used to cheat investors. Investment scams are nothing newCharles Ponzi was cheating investors in the U.S. in the 1920s. However, now these scams have been going online. In China, fintech firm Ezubao cheated more than 900,000 investors out of $7.6 billion in 2015. A Xinhua article quotes a senior manager at the company saying that 95% of its investment were fake, making it one of the biggest scams in the Chinese fintech industry.
Toto Santiko Budi/ Forbes Indonesia
The Indonesian banking sector is experiencing a challenging time. The commodity boom has ended and the same goes for the banking sector. The days of 20% annual loan growth are no more. For the last two years, annual loan growth for the entire sector was barely above 10%. Nonperforming loans (NPLs) have slow- ly but surely been go- ing up, now at 4%, just below the 5% threshold set by Bank Indonesia (BI). In this tough situa- tion, the new president director of PT Bank Mandiri (Persero), Kar- tika Wirjoatmodjo, has a signi cant challenge on his hands: leading the countrys largest lend- erin terms of loansin a major transformation, which among its goals includes more than doubling Bank Mandiris market capitalization to $55 billon by 2020 (as of early February, it was roughly $20 billion).
Kartika, known as Tiko, now 43, is the youngest ever head of the bank, appointed on March 21, 2016. While young, he has built a good resume. After earning his MBA from the Rotterdam School of Management at Erasmus Huis University, Tiko moved up fast, starting as a tax and accounting consultant in consultancy RSM AAJ in 1995. His last post before becoming president director was as the banks chief financial officer for one year.
So why was a relative newcomer picked for such a big role? The world is changing drastically, each month there are new issues to deal with, and which cannot be solved in conventional ways. So we need to be able to digest and bring a new point of view to endure and grow in this uncertain situationwe need a fresh perspective, says Tiko.
At Bank Mandiri, the last couple years have been tough. In 2015, the lender booked a relatively flat growth of 2.3% in net profit to Rp 20.3 trillion. The banks NPLs climbed from 2.6% in 2015 to 4% last year, so the bank set aside a bigger provision, which hit the bottom line. At the end of 2016, Bank Mandiris profit was down 32% from the same period in 2015 to Rp 13.8 trillion despite booking an annual loan growth of 11.2% . Bank Mandiris stock reflects investor sentimentin the last three years it is up 20%, but its largest rival, Bank Central Asia, has seen its stock rise 40%. But, when the cost of provisions is excluded, pre-provision operating profit in 2016 was Rp 43.2 trillion, representing annual growth of 12.7%.
To deal with the situation, Tiko says Bank Mandiri has to make some adjustments on its priorities, especially the short-term ones, to improve its balance sheet and raise the banks performance. Tiko notes that Indonesia tends to have a crisis every eight years: the 1997 Asian financial crisis, followed by the 2006 global crisis, and now the current one. He feels that the cycle is different from the previous ones, as it is a long-term slowdown, and has an incremental rather than sudden impact.
Therefore we are responding to this situation with moderate steps, since our NPLs are increasing gradually in line with the market conditions, he says. During boom years, almost all the sectors do well, he says, but now the bank needs to carefully analyze its portfolio. Segments such as commercial property and SMEs are vulnerable, as they tend to have high leverage and fewer resources to survive a downturn and pay off their loans.
As an immediate step, Bank Mandiri has formed a special assessment unit to deal with the emerging new NPLs and develop solutions to minimize them, including not just restructuring them, but also recovery and collection on severely impaired assets. Over the longer term, Bank Mandiri has started to reallocate its loan portfolio away from vulnerable sectors.
Asok Kumar became president director of DB Schenker Indonesia in April 2014. He had a big task ahead of himthe previous two years had been subpar. In 2012 we unfortunately hit a speed bump and had a terrible year. Profit and revenue declined substantially. We saw some recovery in 2013 but it was not spectacular. Being assigned this role in 2014, my mission was to bring Schenker Indonesia back into a strong growth momentum, with a compounded annual growth rate [CAGR] of 10%, says Asok.
Asok rolled up his sleeves and got to work. Last year he surpassed his 10% goalin 2016, the firms profits rose 14% to $7 million on revenues that grew 18% to about $100 million last year. His target for this year? It remains 10% CAGR, at a minimum. The results are concrete proof of his favorite saying: Failure is not an option.
While Asok may make his job look easy, it is anything but. The firm specializes in logistics in Indonesia, and it is known formally at PT Schenker Petrolog Utama. It is the Indonesian subsidiary of German logistics giant DB Schenker (which in turn is part of the Deutsche Bahn group, hence the DB in the name). Being in logistics, Indonesias poor infrastructure remains one of the firms biggest issues in delivering its services.
One of the biggest challenges the company faces in Indonesia is the lack of adequate infrastructure support. This, coupled with excessive government regulations, as well as inadequate policies to facilitate the efficient movement of goods, makes the Indonesian logistics landscape a truly complicated one, says Asok. For example, regulations about sprinklers in warehouses. That may sound like a simple issue but unfortunately adds 35% to the cost of warehouses. In conclusion, there is still work to be done to make Indonesia a key logistics hub in Southeast Asia.
Statistics support Asoks view. Poor infrastructure is the key reason why 27% of GDP is absorbed by logistics costs, according to Kadin, while in Singapore, it is only 10%. On the Logistics Performance Index (LPI), Indonesia actually fell to 63 out of the 160 countries surveyed by the World Bank, down from 53 in 2015. Other ASEAN countries did better, with Singapore in fifth position, Malaysia at 22 and Thailand at 55.
However, Asok sees things moving in the right direction. We appreciate the actions taken by the current government in relation to creating more business friendly regulations for logistics. Simplifying regulations to reduce the dwelling time [at Tanjung Priok port] has been taken seriously by President Joko Widodo, who has already expressed his target to cut the dwelling time further to 2.5 days, which will make Tanjung Priok port able to compete better with the likes of Singapore [1.5 days] and Hong Kong port [two days], he says.
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The election of Donald John Trump as the 45th U.S. President has ushered in a new investment world for investors in Indonesia and worldwide. When fundamentals mattered, central bank quantitative easing and growth differentials used to move markets. Now fears of protectionism and concerns about a post-liberal world are becoming more real.
Single stocks and even whole country stock markets can now move because of a tweet from the White House. The consensus view still forecasts a benign to positive outlook for U.S. and global stocks if the Trump administration follows the Republican agenda to cut U.S. taxes and regulation, and focus on fiscal stimulus. Significant downside risks exists, however, if Trump veers into protectionism and sparks a global trade war.
The key to investment success this year will be to balance probabilities. Investors increasingly are adopting a wait and see attitude before committing more capital. After a stellar 2016 performance for Indonesian equities, the market has gone sideways with about a 1% return year-to-date.
In stark contrast to rhetoric from Washington, Finance Minister Sri Mulyani made much sense when she opined that Indonesias economic fundamentals must be strengthened but not with protectionist or counterproductive policies. Indonesia must focus on strengthening the domestic economy, and investors should do the same but focus on valuations and a possible rerating of country risk.
Given the headwinds surrounding global trade, the Indonesian government will likely attribute more importance to supporting growth in setting policy; 2017 GDP growth is seen at 5.1%. The JCI is forecast this year to rise from the current 5,380 to 5,800 (an 8% gain) driven by earnings growth. PE multiples are expected to fall to 14.8x under the base scenario; JCI could rise to 6,100 under an optimistic scenario (up 13%) or fall to 4,925 (down 9%) if fiscal spending disappoints and U.S. yields rise more than expected. A fundamental rerating of Indonesian equities could happen in this year when S&P reviews its country rating for Indonesia. The chart below shows the best performing sectors year to date, and the most expensive sectors by PE. The cheapest sectors by PE now are financials, at 9x, and oil and gas at 5x. The sectors with the most decline are healthcare, down 3%, and telecom, down 1%, year to date.
Moodys followed Fitch in raising its outlook to positive, showing that Indonesias credit rating is on an uptrend. S&Ps key criteria, including fiscal spending quality and banking NPLs, are also improving. The government seems fully cognizant of the elevated external risks and thus is motivated to push structural reforms and Jokowinomics even further. Investors in Indonesian equities should take notice.
According to the Universal Declaration of Human Rights, freedom of expression is the right of every individual to hold opinions without interference, and to seek, receive and impart information and ideas through any media, and regardless of frontiers.
The degree to which this is upheld varies enormously from severe restrictions in closed societies to almost full freedom in countries such as the U.S., where the right is protected under the First Amendment to the Constitution, no matter how obnoxious someones views might be to the majority of the population.
Some restriction is warranted, of course, especially to guard against hate speech and incitement to violence. Meanwhile, redress for direct attacks on individuals through propagation of false witness is generally channeled through the civil courts, though chances of success often depend upon the cases legal jurisdiction.
With rights come obligations, however, and in the Internet age and social media, where everyone can globally broadcast their views in an instant, the integrity of the freedom of expression has come under threat from false news. While not a new phenomenon, false news or misinformation as it was previously termed, has long been a clandestine tool for those in power or seeking power. It plays on the human tendency to believe what theyre told.
The easiest way to counter false news is to treat with suspicion anything that cant be verified by at least one independent source. However, thats a lot to ask from a general public in haste, as even journalists fall foul of this dictum from time to time. Indeed, some have made their living from writing half-truths and innuendo and their publications maintain contingency funds to cover out of court settlements.
Unlike printed media, however, by its very evolution the Internet lives in a largely unregulated world where there is no responsibility to tell the truth. Indeed, why shouldnt those who believe in a flat Earth be able to espouse their claims? Nevertheless, as in other media where the publisher must be responsible for what they publish, so too should websites have some duty to the public for what is posted.
Suggestions to register all websites and somehow hold them responsible is fraught with queries in regard to the origin of domain name and where data is stored, plus of course assumes everyone wants to complyI think not. Nevertheless, the major Internet and social media players cannot claim they are mere enablers and thus not responsible for their content. Freedom of expression should not include posting outright lies, falsifications or made up news. There is a duty to gain the publics ethical trust by developing methods to determine and mark the reliability of news items. The alternative is national censorship.
Frankly, I am surprised to learn Makassar, South Sulawesis capital, has managed to grow its economy by 8% last year while inflation was at 3%well above national growth of 5%, with 3% inflation. Moreover, the human development index also improved, from 79.4 in 2014 to 79.9 in 2015. Life expectancy in the same period has also gone up, from 71.4 to 71.5.
These figures come from a Special Coordination Meeting of the Makassar city government on February 8. At the event, I met Dr. Dino Patti Djalal, the former Indonesian Ambassador to U.S. All the local government staff (SKPD) were seated around the stage in the middle. In front of the stage, some tables were put up to discuss creative ideas with action plans. The next event at the meeting was lectures from speakers such as the army, police, the attorney general of Indonesia and an anti-corruption NGO.
Dino and I were asked to provide inputs on marketing for Makassar from general and international perspectives. Thus, three things were immediately accomplished:
Inputs from various sectors from outside parties for Makassars bureaucrats.
The completed Action Plans of new initiatives.
For all SKPD to understand what other SKPD were doing, forming one solid unit.
The show was broadcast live by a local TV station, and streamed on the Internet. It was a breakthrough from Mayor Mohammad Ramdhan Danny Pomanto, who has been the regional head for two years and seven months. Years ago, I had reviewed the innovative garbage bank initiative. Garbage can be deposited into an SME Waste Bank, which organizes the garbage and pays the depositors. The municipal government will sell the waste to recycling companies. Thus, ordinary people are collecting trash and depositing it into the Trash Bank. I have also reviewed the hallways that have been greened by residents on government guidance, with plants grown from seeds given by the government. Makassar has also been made into a Smart City with call center services, various apps and CCTV coverage. Makassar is becoming famous as a city being transformed into a town that Danny calls a Sombere and Smart City. Sombere Makassar is a term for hospitality. In promoting tourism, the city has also held the Makassar International Festival & Forum 2016.
For his accomplishments, Danny has become the only Indonesian mayor invited to a U.S.-ASEAN Leaders Summit two years ago. Much has been done by Dannywho wants to be called Si Anak Lorong and he is an example for other regional heads. He is a mayor who is entrepreneurial, creative and productive. As a professional expert on urban spatial structures, he has made a breakthrough to improve the city. Thats why investors are flocking to Makassar to help build the city. We should applaud the mayors accomplishments, because competitions between cities has become more exciting than competitions between countries.
We are living at the peak of global trade, with the value expected to be over $44 trillion by end-2016, the largest dollar amount of transactions in history. Global trade value in 2016 was 80 times larger than that of 50 years ago, and almost 2.5 times the value of 2000. However, weak global demand since the 2008 global financial crisis and the rise in protectionism worldwide has meant a slowing of global trade. The trade value is expected to grow just 2% in 2016 and no more than 3% in 2017, as per a WTO analysis. As a contribution to global GDP, the trade has declined from approximately 61% in 2008 to about 58% in 2016.
Indonesia, which represents 0.8% of global trade value, has experienced much faster growth than the rest of the world240 times bigger trade value in 2016 as compared to 1967 and three times from 2000. Annual GDP growth has averaged 5.6% in the last decade, coupled with rising prosperity across Indonesia. Preliminary analysis from a recent survey in Jan-Feb 2017 shows urban Indonesians, agreed with the following:
Macroeconomic data supports these perceptions. Indonesian unemployment fell from a peak of 11% in 2005 to currently under 6%. Annual inflation, which was 13% in 2006, is also now close to 6%. Since 2006, Indonesia has opened up more to global trade, helped by eight Free Trade Agreements under force since then, and more underway. This opening up of the economy could have had a contribution towards the aspects mentioned above.
However, gains from rapid economic growth do not seem to be distributed evenly. The Gini coefficient has increased from 0.31 in 2001 to 0.41 in 2014 (a higher value means more inequality). Our survey also highlights that:
With slowing economic and trade growth, those left behind in globalization risk being left behind even further. All levels of government and NGO stakeholders should ensure that we do not see widespread anger towards globalization as is playing out in the West. Indonesia has played the balance between globalization and promoting domestic interests well so far; but the bigger question iscan it continue its balancing act?
If a medical device supplier is considering an entry into the Asian market, Indonesia should be on the list. Indonesia is Asias third most populous country with more than 250 million inhabitants; so try to imagine the huge and growing healthcare demand. With the implementation of the universal healthcare system by the government, every Indonesian citizen and expat who is longer than six months in Indonesia will be able to access this healthcare system.
Thats why foreign suppliers should be eager to participate in Indonesia. Hospitals are shooting out of the ground like cabbages in the field, and all of these need to be equipped. Mobile equipment to cover remote areas has a high potential.
For suppliers entering Indonesia, there is much to keep in mind, including regulatory and cultural differences. The process may not go as smooth as European companies would like, nobody says it is easy, but the rewards may justify the effortand remember, other countries have their own set of challenges. That the Indonesian language uses the same alphabet as most Western countries is an undervalued detail. While suppliers dont need to learn the entire language, it might be helpful if you want to know what is written.
For foreign companies who are considering the Indonesian market, I have the following advice: be prepared, always consult the institutes specialized in the market, such as chambers of commerce, embassies, the EIBN or companies who are already there and willing to share their experiences.
Select your partner carefully. Finding the correct partner is one of the main concerns for foreign suppliers in Indonesia. When you find a partner who shows responsibility to his customers, he probably does the same to his suppliers, and thats a good sign.
Adapt to the Indonesian culture, dont waste time trying to change it, even when business is not going as fast, or in the same way as you are familiar with in Europe. If regulations change and you get something unexpected, you should not give up, but go with the flow, and dont be surprised to find youll probably get where you wanted to go in the first place.
Be there, if there is a demand for your products, the requirements can be fulfilled and the price is right, you will have a good chance to get a small piece of that big pie. If youre not there, your chances also arent there. After all, as Wayne Gretzky said, you miss 100% of the shots you dont take.
In putting together lectures on sustainable development I was reminded, as highlighted in the diagram, of the huge impact that population growth over the past 70 years has on the planets resources. This growth has been possible through the acceleration in technology over the past one and a half centuries, but the trend is obviously unsustainable, even with the best efforts to expand food and water resources.
One may underline, in particular, the impact of Carl Bosch and Fritz Habers early 20th century success in pulling nitrogen out of the air to create fertilizer, and thereby finding an essential way to feed billions. On this subject, with due care and correct sustainable policies, Indonesia, with its fertile soils and equatorial climate, could signficantly increase its agricultural output and become a net food exporter.
In addition, despite millions of deaths from horrific wars and genocides, medical advances have countered otherwise killer diseases and extended lifespans, despite a continuing battle with viruses, a stubborn enemy.
Even as improvements in the field of food production, as stated above, the growth trend is clearly unsustainable. It thus behoves humankind to take much more care of this issue as well as the planetary environment as a whole.
In underprivileged communities, lacking electricity and connectivity, population growth is often unchecked and poverty rampant, as is true in many remote areas of Indonesia. Addressing this unacceptable situation should be a top government priority with local administrations working alongside the private sector.
Overall more should be done to encourage the empowerment of rural communities across the archipelago as well as peri-urban dwellers. It is critical that communities take ownership of initiatives, as simply imposing them from outside is nearly always doomed to failure. In this way, the seeds of small businesses are planted and, along with good infrastructure, entrepreneurial initiatives can flourish.
McKinsey has shown the importance of encouraging the culture of startups, family businesses and entrepreneurship. In emerging markets, family businesses account for some 60% of private sector companies with revenues of more than $1 billion. Furthermore, the upward trend for family businesses is a significant input to national economies in emerging countries and is strong and increasing. It is expected to represent 40% of the worlds largest companies in 2025, compared with 15% in 2010.
Thus, Indonesia, as well as other emerging countries, will hold an inaugural conference to discuss these and related issues in early May this year in Bali under the aegis of President University, with support from institutions across the archipelago and from overseas. Releasing the potential energy of these marginalized communities would have an enormous impact on growth, and the physical and moral health of the nation, as well as helping solve some global problems already outlined.
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Ahmad Zamroni / Forbes Indonesia
Indonesias agricultural logistics is notoriously inefficient, with many layers of middlemen. This system can mean that prices are higher than they should be, and also swing wildly depending on demand, the time of the year and the weather. For example, the price of chili, a common ingredient, last year fluctuated between Rp 28,000 and Rp 108,000 a kilo within less than 12 months.
Looking to bring stability, transparency and better pricing to the agricultural sector is LimaKilo, a startup founded in 2015 that cuts out the middlemen and directly connects end-consumers with farmers through a site and mobile app. The company, known formally as PT Limakilo Majubersama Petani, was started by three entrepreneurs: Lisa Ayu Wulandari, 27; Walesa Danto, 27; and Arif Setiawan, 26.
The firm connects farmers in villages with consumers in big cities and eliminates middlemen in the chain. Users of LimaKilo are able to order commodities such as shallots, chilis, sugar and potatoes directly from the farmers at minimum order of five kilograms (hence the name, limakilo which means five kilos.) By streamlining the process, customers can buy goods off the site at prices cheaper than normal market prices.
The firms roots go back to August 2015 after winning a government-sponsored Internet competition, Hackaton Merdeka 1.0. The three made a presentation in front of President Joko Jokowi Widodo. We presented our idea in front of Jokowi. It was only five minutes and after the presentation, we walked and talked together. The informal talk changed everything. He asked, How many weeks do we need to finish the project? We got one month to prove that our business model can work, says Lisa. The Limakilo site shows a photo of the founders shaking hands with Jokowi. The Ministry of Communications and Information officially launched the site in early 2016one of a handful of startups being championed by the government to bring digital disruption to the agricultural sector.
The three picked shallots as their first commodity, because it is the third highest-consumed commodity after rice and sugar, at 2.5 kg per capita per year. To learn about the supply chain, the team visited Brebes in Central Java, as the region is Indonesias largest shallot producer. Having a 700 kilo order to fulfill on their pilot project, the trio bought shallots from several sources, including in auction and directly from the farmers.
They learned how most farmers sell their crops to middlemen before harvest. Around two weeks before harvest time, the middlemen make a calculation of how much the crops will be worth, said Lisa. The middlemen take a profit of 65% after they grade and pack the shallots, and ship them around the country.
Ahmad Zamroni / Forbes Indonesia
Theres no holiday for love and romancewhich makes for a good business. While many spent their yearend on holiday, Asmaraku.com co-founders Grace Natalia and William Tunggaldjaja were busier than ever, handling customer orders at its ITC Kuningan office in Jakarta just days before the New Year. The two sell what many consider taboosuch as condoms, lubricants and sex tonicsalong with more prosaic items such as deodorants, vitamins and candies. Now the site, whose name means my love, has been expanding into other romance-related items such as flowers and lingerie.
The idea to set up an e-commerce company selling intimate and romance products actually came when Grace was purchasing condoms and lubricants in a store for a friends bachelorette party few years back. She received awkward stares from a salesperson and other customers. While others might have been upset, Grace saw an opportunity to start a new venture. Before setting up Asmaraku in 2014, Grace was Lazada Indonesias marketplace head. William joined later, and had worked at Path and Zomato as country manager and vice president of Lazada Indonesiaboth are 31 years old. From the beginning, we saw a huge potential for selling intimate products online and there wasnt any e-commerce company that provided their customers with a professional service, and we know for sure people need it, Grace says. A year after being established, Asmaraku obtained seed funding from venture capital firm Alpha JWC Ventures and Japans IMJ Investment Partners.
Given its product mix, Asmaraku has a slightly different approach from other sites. The company is very customer centric. Since it is sending sensitive items, Asmaraku guarantees its customers privacy. The Asmaraku delivery box has no branding, and there is even extra packaging inside to make sure that the product will not be seen by others when the package is opened. The senders name is given as PT Modern Abadi, Asmarakus registered name, which doesnt give a hint of its business. The same approach is taken with its invoices and other material.
The discretion applies even to more ordinary products. Knowing that Indonesian men are often shy to bring flowers to loved ones, Asmaraku puts its flowers into a special box so buyers arent seen carrying around roses. In case the customers doesnt feel confident to receive a package at their office or home, they can opt to pick up their goods at 150 pickup points in Jakarta, Bogor, Depok, Tangerang, Bekasi and several other major cities. We are finalizing to add up 4,000 pickup locations nationwide this year. Its more difficult to find addresses in small cities, thus it will make it easier and cheaper for us as well, William says.
Listening to customers is another thing. Aside from providing feedback, with an anonymous optionwhich Grace says tends to make the feedback more honest and usefulAsmaraku also provides interactive chats for customers to learn about products. In fact, she said the companys product assortment development is based on customer feedbacks and requests, which she claims is already around ten thousand SKUs (the site stocks 16 different brands of condoms). Some questions are forwarded directly to the product producers for answers.
Ahmad Zamroni / Forbes Indonesia
Last November, celebrity couple Sandra Dewi and Harvey Moeis got married in the Jakarta Cathedral. They wanted to share their happy day with their fans, so they turned to the website Bridestory. On the day of the ceremony, Bridestory broadcast it on Facebook Live. It was the first celebrity wedding broadcast live in Indonesia, and was very successful. A lot of media referred to our Facebook account with total views of more than three million from both Facebook and Youtube, says Kevin Mintaraga, co-founder and chief executive of Bridestory.
The broadcast was another success for Bridestory, a site for wedding resources and a marketplace for wedding vendors. Bridestory was launched in 2014 to tap Southeast Asias estimated $18 billion wedding market. Today, Bridestory has become the countrys top wedding site, according to SimilarWeb. As a marketplace, Bridestory has 15,000 vendors classified into 28 categories, such as entertainment, flowers, jewelry, photography and honeymoon services. It attracts 500,000 monthly users to the site.
Founded by Kevin, 32; Chief Technology Office Doni Hanafi , 30; and Chief Operating Officer Etienne Emile, 37; Bridestory targets two big markets: couples planning weddings and the wedding vendors, under Bridestory Pro. We made this to help vendors to run their businesses. For instance, if a wedding photographer wants to upload photos, ask for a review, or wants to expand their business, they can easily use the Bridestory Pro, Kevin explains. The site provides its services both online and through an app.
Meanwhile, for couples, Bridestory provides an app called Hilda, a wedding planning assistant to help couples to find their needs within specific budgets and requirements. Hilda is a chatting application in your mobile phone. You can talk with a wedding expert and it is free, says Kevin.
As a startup, Bridestory has secured a series of fundings. It has received three rounds of undisclosed funding from global and local investors including Rocket Internet, who headed the Series A in 2015, as well as Skystar Capital, Sovereigns Capital, Venturra Capital, Global Founders Capital, Fenox Venture Capital, East Ventures and Beenos Partners. They also have great team that is targeting categories that we like, they add value to Indonesia consumers, and of course, have a good return on investment, says Willson Cuaca, managing director of East Ventures.
Despite being a startup, Bridestory began making money just a few months after being launched. We earn money mostly from the subscription fees, says Kevin. When a vendor signs up to the site, they will get five free credits. The credit can be used to check inquiries or message prospective customers. Each time a vendor receives an inquiry, Bridestory removes a credit. When the vendor runs out of credit, they can buy a subscription fee. When vendors buy a subscription, they can get unlimited credit for a year and their profile will be on Bridestory, says Kevin. The subscription fee ranges from Rp 5 million to Rp 50 million per year.
Ahmad Zamroni / Forbes Indonesia
Its a truism that Indonesias Internet ecosystem lags those in other countries by a few years. Venture capitalists Adrian Li, 37, and Donald Wihardja, 45, are turning that notion into an advantage, looking to bridge the more advanced Internet developments and entrepreneurs from around the world with those in Indonesia. To fund their firm Convergence Ventures, and act as mentors, the pair built a global network of Internet entrepreneurs and venture capitalists, mostly from China and India.
We want to support entrepreneurs, beyond just helping with capital but also with know-how, Adrian says.
One example of transferring know-how is when Steven Kim, co-founder of Qraved, had a meeting with Zhang Tao one of the founders of Dianping, a Chinese company that is now valued at $18 billion after a merger with Meituan. We are able to have a one-on-one session, Adrian says. Qraved was Convergences first invesment, an online restaurant reservation platform that was inspired by the success of OpenTable in the U.S. and was co-founded by Adrian; currently it has over 25,000 listed venues in Jakarta and Bali, and over one million monthly users.
Convergence Ventures was founded in 2014 and currently has 20 startups in its portfolio such as E27, Nida Rooms, and Female Daily Network. The latest investment is Helpster, a startup founded in 2015 that allows users to post part-time and full-time staffing opportunities to its curated platform for those who work in industries such as food and beverage, events, cleaning and retail. According to Adrian, Convergence Ventures is the largest Indonesia focused early stage venture fund with over $30 million in committed capital. Among its investment portfolios, nine startups have raised follow-on investments and four companies have raised series B. Convergence Ventures aims to add another 10 startups this year to its portfolio. Investing is a very local game, its hard to do to overseas, and so we are also helping investors that believe in Indonesia but dont have a presence here, Adrian says.
Adrian and Donald are a formidable duo. Adrian is a seasoned Internet entrepreneur that in the past decade has co-founded and operated six Internet ventures in China and Indonesia. With an MBA from Stanford, Adrian is also a business mentor at several startup incubators and accelerator programs including Endeavor, Founder Institute, GEPI, Ideabox, Incyte and Sky Star Ventures.
Donald, on the other hand, has over two decades of experience working in the technology sector in Indonesia as an entrepreneur, operator and investor. He has spent combined over five years in digital payments: recently as general manager for Indonesia in 2C2P, a regional payment gateway, and previously as chief information officer in Indomog. He also worked in the private equity firm Quvat (which BKPM head Tom Lembong co-founded), where he helped managed an investment of over $100 million into the Matrix cable network. Adrian has experience from the business side and I have experience in computer science, so we complement each other, Donald says.
Ahmad Zamroni / Forbes Indonesia
Internet investment firm Kejora Ventures was started in January 2014, founded by Sebastian Togelang, 38; Kris Adidarma, 43; Baritono Pangestu, 37; Rachmat Harsono, 36; and Andy Zain, 43. Initially, they never thought the small office space they rented in West Jakarta would not be enough space. Starting with less than 10 people, in a few months the room was packed with people working for its first investee company, startup fintech firm Cekaja.com, launched in April 2014. Cekaja.com provides information on financial products, such as credit cards and insurance, allowing users to browse and compare offerings from a broad range of providers, then purchase them.
Today, the firm has bigger offices, covering about 5,000 sqm, with 27 investee companies (13 companies are directly under Kejora, while the rest are under its partner, the Ideabox-IndosatOoredoo incubator) and employing about 700. Were glad with the progress, since the firm grew faster than we expected, says co-founder Sebastian.
As an active venture capital, Kejora Ventures invests in at least four to five startups every year. Its first fund of $12 million, raised in 2014, has already been deployed into 28 companies (one later failed). Each company got funding ranging from seed capital to pre-series B funding, up to $1 million. This month, Kejora will raise its second fund for as much as $80 million, and so they can deploy larger investments into startups. In this second fund, we are going to increase our investment, ranging from $2 to $5 million for each startup, says Sebastian.
Currently, Kejora invests in a variety of sectors, such as fintech, with firms such as Cekaja, Investree and Pawoon. Other sectors are digital media, logistics and human resources. We prefer startups that can solve a big problem for society. Many problems are a result of inefficiency. One of them is logistics. For example, we have Etobee to solve logistics problems, says co-founder Kris.
As a venture firm, Kejora is selective, with strict requirements to ensure a high success rate. During three years of operation, out of 13 startups we have invested in, only one startup has failed, says Sebastian. Among the requirements are experienced staff and an ability to quickly generate revenue.
Unlike most startups, Kejoras portfolio firms are already making profits. From the start, we are aiming to create sustainable companies, not merely burning money. We are looking for companies that can get revenue quite early, says Sebastian.
Thats why Kejora does more than disburse capital; it also tries to create an ecosystem to help its startups grow. In its headquarters in Wisma Barito Pacific, Kejora puts all its startups together in one place so they can network, and share resources and ideas. As a part of Kejora, we are lucky enough to have a healthy ecosystem to grow, and have state of the art technology which can be leveraged, as well as access to international investors, says Adrian Gunadi, chief executive of Investree.
Ahmad Zamroni / Forbes Indonesia
It's 11 o' clock in mid-December outside the Pasaraya Grande building in Blok M in Jakarta, and a group of about 14 motorcycle taxi drivers dressed in bright green uniforms are buzzing with excitement. They are getting their photo taken Nadiem Makarim, the 32-year-old founder of PT Go-Jek Indonesia, who is standing among them dressed in a black T-shirt with Go-Jek printed on the front. In unison they pump their fists in the air and shout Go-Jek, Go-Jek, Go-Jek, then click selfies with Nadiem.
The drivers' energy is just one indication of the remarkable Go-Jek phenomenon. From a small startup in 2011, Go-Jek is now arguably Indonesias most successful Internet firmresponsible for several major transformations. For one, it has transformed the way thousands of Indonesians earn a living, and also get their goods and services, beyond just the original motorcycle taxis. Second, it has emerged as Indonesias first unicorn, an Internet startup with an implied valuation over $1 billion. Finally, it has propelled Nadiem from an obscure entrepreneur into the countrys most visible poster boy for Indonesias booming Internet sector.
In a rare interview, in Go-Jeks new headquarters on the top floor of Pasaraya Grande, Nadiem explains Go-Jek success by paraphrasing the Lord of the Rings. One app to rule them all, he says. By this he means Go-Jek has evolved far beyond being a simple ride-sharing app into an entire ecosystem. It's your portal to connect to the real world, he says. Today Go-Jek provides 15 different types of services, from massages to package delivery. Its payment system Go-Pay connects all of them. A new service, Go-Points, allows loyal users to collect and win extra points if they use Go-Pay.
Thus a user can spend much of his day within the Go-Jek system. You're there in a world of services, that the user can then live in, says Nadiem. One can use Go-Bike or Go-Car to go to work, order lunch from Go-Food, and after work, get tickets to a movie from Go-Tix or a massage with Go-Massage. If your smartphone is running low, theres Go-Pulsa to top it up. All of them can be purchased with Go-Pay. In fact, the firm has put several of its services under the aptly named app Go-Life. Go-Jek is a unique combination of different verticals which is constantly changing, says Nadiem. The company's key emphasis is on solving problems rather than product offerings, making it different from other startups. He adds: The beautiful part is how these all services synergize together, and basically empower each other. Go-Jeks path is similar to that of the original ride-sharing firm Uber, out of San Francisco, which has also been busy adding services such as Eats, for food delivery, and Freight, for package delivery, and even Moto, a motorcycle service similar to Go-Jek's original service.
Today, Indonesia is a hotbed for e-commerce startups. With 2017 forecasted growth of 5.1%, we can expect to see more startups. The thing is, we cannot easily predict which ones will thrive and which ones will die. As the Y Combinator co-founder Paul Graham once said: What I tell founders is not to sweat the business model too much at first. The most important task at first is to build something people want. If you do not do that, it will not matter how clever your business model is. The thing is, deciding what people want and when to start marketing often takes a villageespecially when the founders do not see eye to eye.
Founders can be broadly divided into two types: Technical and non-technical. Technical founders are usually engineers, which are also called full-stack founders. Non-technical founders are likely marketers, which are also called front-end founders. These two group do not always have the same mindsets on many issues. One issue is that of the full-stack. in startups with only one technical founder, usually full-stack dilemma occurs, when coding is the only thing that matters, according to Luke Fitzpatrick, who teaches startup entrepreneurship at Sydney University.
Graham wrote that in many cases, the best founders are full-stack developers. Fitzpatrick, however, thought that there are risks with that structure. Fitzpatrick coined the term wavelength conflict, to refer to the conflict between front-end non-technical marketing founders and technical founders, as they think on different wavelengths.
Nietzsche summed it well: It is not conflict of opinions that has made history so violent but conflict of belief in opinions, that is to say conflict of convictions. Thus, the founding model options are: (A) having technical founders only, or (B) having both technical and non-technical (marketing) founders. While which founding model is better is still debatable, having both front-end and technical co-founders has three key advantages:
It allows pre-launch marketing done by front-end co-founders at least three months in advance, while the technical co-founders are working on finalizing the product before the launch date. This would allow for a more synchronous performance.
A well-designed site with intuitive functionality and compelling web copy greatly affects user experience. The bare-bone minimum viable product (MVP) may be enticing to a technical audience but would not attract non-technical customers.
Many full-stack developers have the so-called hacker mentality, where they combine codes and release them as something new, which can be a buggy product. By doing pre-launch marketing, they have more time to test the products for bugs.
In conclusion, worry not about the business model at first. Fret more about who are the co-founders, as they make important decisions about the business. Whenever possible, combine both technical and non-technical founders, to allow for marketing and technical activities to work together in creating a sustainable startup.
The fun part of being a value investor is that we see what others cant. What I mean is most investors only look at the latest news and latest stock prices. We, however, focus on company fundamentals, the fair value of the stocks, and observation and research, not just looking at whats happening on social media and elsewhere. In short, we can see some missing but essential investment points.
One missing point is related to infrastructure. Bear in mind, when President Joko Jokowi Widodo was sworn in as president in October 2014, a main focus (and promise) was to accelerate infrastruture development. Therefore, the media immediately found infrastructure booming, which caused construction stocks, especially the SOEs, rise significantly rise. However, the reality was much development hadnt yet started.
Now, after two years, theres almost no talk about infrastructure development. Did accelerated infrastructure development happen? Yes, it has. In Jakarta, there is construction of toll roads, flyovers, light rail transit and mass rapid transit. Last December, I went to Berau, Samarinda and Balikpapan, all in East Kalimantan, and I found infrastructure development also being accelerated. In December 27, 2016, Jokowi inaugurated the construction of geothermal plants worth $500 million in Tompaso, North Sulawesi, one of several projects he visited that month alonebut this got little media attention.
Politics may be distracting the media, with two big rallies in Jakarta last November and December over the blasphemy case against Jakarta Governor Basuki Tjahaja Purnama (aka Ahok). Meanwhile, with no news, traders sold down construction companies, especially in the second half of 2016. During 2016, the Jakarta Composite Index gained 15.3%, but property and construction firms only gained 5.4%. Several construction stocks even dropped to 12-month lows, such as Adhi Karya (ADHI).
However, these companies have no fundamental problems. Their long term prospects are good with the acceleration of infrastructure develoment. Waskita Karya Beton (WSBP), for example, reported a 85% rise in net income in the third quarter 2016, and successfully booked Rp 12.2 trillion of new contracts until the end of 2016, far above its target of Rp 7.9 trillion.
So its opportunity when quality stocks are at low prices. Remember: Hot issues in the news will eventually be forgotten and replaced by other news. Maybe infrastructure development will become hot againand these stocks will rise. On the other hand, investors cant ignore fundamentals forever, so sooner or later they see good value in construction stocks. Now better to get an early start on these stocks, so profits could be bigger than usual. If you wait until talk of infrastructure development, its already too late.
Indonesia enters this year with its financial markets having posted an extremely good 2016, and benefitting from surging commodity prices. Overseas real-estate investors have been lured by the nations emerging middle class. What to expect from 2017? With U.S. President Donald Trump in office, Asia may be a lower priority than under Barack Obama, with his pivot to Asia. Then again, Trump and his administration are staunchly hawkish on China relations, meaning the U.S. may seek allies in Asia. His foreign policy pronouncements during the campaign were all over the place, and his aides warn that you cant take seriously what he said during the campaign.
Indonesia is likely low on Trumps priority list. Besides China, he is eyeing Japan and Mexico, as purported thieves of jobs, regardless that Toyota is the biggest U.S. auto producer, with 136,000 employees. U.S. investment in Indonesia has been scarce. China, via the Asian Infrastructure Investment Bank, and Japan, via the ADB, has by contrast used infrastructure investment to build ties. Japan and China will undoubtedly keep competing for Asias affections, as regional superpowers. The real-estate market, typically a lagging indicator, should take the stock markets lead in 2017. Higher oil prices boosted Asias occasional OPEC member, an on-again-off-again relationship that the country suspended (again) in November.
President Joko Jokowi Widodo has initiated a relatively successful tax amnesty to lure back overseas and undeclared domestic assets. His aim is to spend heavily on much-needed infrastructure. As one of his first steps on taking office, he abolished a decades-long gasoline subsidy, without much backlash, which has also freed up cash in the budget.
Such moves make hay with the emerging middle class. Jobs are aplenty, relatively speaking. Residential has had a tough time, but should recover over the next 12 monthsalbeit slowly. The immediate gains will feed greater consumer spending and increased demand for retail space. The manufacturing sector will require more warehouse and industrial space. The office sector is oversupplied, and rents and capital values will soften.
Overseas real-estate investors pumped at least $2.8 billion into Indonesia last year, according to Reuters, including a $1 billion tower backed by the China Communications Construction group. Mitsubishi, Tokyu Land, Hongkong Land and Sime Darby also have deals under way in Jakarta and nearby. With 200,000 moving to Jakarta each year and a young, middle-income population of 55 million families, there is strong demand from owner/occupiers, the underpinning of a stable market.
Indonesia has made it easier to own a home. Bank Indonesia cut interest rates three times, a total of 150 basis points, to 4.75%, in 2016, and lowered minimum down payments. Property sales will grow at least 15% this year, the first annual growth since 2013, according to Indonesia Property Watch. Business is good, and easier. The country rose 15 places in the World Banks Doing Business index, putting it among the top-10 gainers, although it is ranked 91 worldwide. Business-friendly moves include abolishing minimum capital requirements for small- and midsize businesses, and introducing online tax filings.
As we contemplate the investment outlook for 2017, it pays to look back and remember that the media and financial markets have an incredible capacity for reacting to news and economic developments in a way that confounds market professionals and private investors alike. The only difference being the latter will admit to being confused, while the former will quickly come up with a few dusty realizations. What I learnt in 20 years in the investment business is that nobody really knows.
With that caveat, expect increasing volatility in the context of newly rising social, political, economic and market themes in 2017. This year will reward more macro strategy oriented investors. Sector calls and tactical asset allocation could outperform passive index investing. The Trump reflation trade seems stretched in both sentiment and price action. Hope and momentum is fuelling the rally but execution risk and negative side effects of governing by Twitter could spook markets in the first half of 2017.
A multi-week correction in risk assets could start in the first quarter. Traders bought the Trump election but might turn to sellers on the inauguration. The U.S. stock market correction could happen soon, and last into a late first quarter, with an early second quarter bottom, followed by a bounce in risk assets and a reflationary move into the summer months.
The U.S. dollar will remain an important driver in 2017. On an index basis, (i.e. DXY) the USD should reassert its inverse correlation with most risk assets in a risk-off move in the first quarter. Thus I expect the USD to top out in the first quarter in tandem with a bottom in risk assets, followed by a weaker USD phase.
Within emerging markets, Indonesian stocks are increasingly expected to offer most attractive returns in 2017. While Im fundamentally positive long-term for Indonesian equities, recent news that some in the Indonesian government wanted to punish JP Morgan for a negative rating is truly worrying, and sends the wrong signal.
Indonesia has strong consumer confidence, with a stimulus program introduced in 2015 that continues to make progress, a tax amnesty proving more successful than initial expectations, and President Joko Widodo having a 90% approval rating. Why mess with success, especially when IDX plans to encourage 52 companies with stocks trading abroad to consider a secondary listing on the IDX?
On August 8, 2017, ASEAN will celebrate its 50th anniversarya half century merits congratulations both to the institution and the ASEAN member countries. Historically, Southeast Asian was called the Balkan of the East because of the wars, confrontations, and conflicts that flared up in the region. Western powers colonized them, and made Thailand the buffer between the British (Myanmar) and the French (Indochina) colonies from the mid-19th century.
The modern example was the Indonesia-Malaysia confrontation because President Soekarno thought neocolonialists were trying to limit Indonesias natural influence in Southeast Asia. ASEANs main achievement is its ability to create a regional institution for a common and cooperative security in Southeast Asia, transforming it into a region of peace and cooperation.
ASEAN is a construct of strong post-colonial sovereign states, which are willing to sacrifice some elements, especially in the economic field, of their respective sovereignty to move on from the Cold War in 1967, while maintaining their sovereignty and freedom. Intra-ASEAN economic cooperation has been faring will, and was tested in the 1998 Asian financial crisis, and the global financial crisis in 2008.
ASEAN will have to face a bigger challenge, namely a new global multipolar order. In East Asia, the hegemonic U.S. will have to face a multipolar world with China the other great power. ASEANs role to create a regional order where two great powers can peacefully co-exist is challenging. However, ASEAN must play this balancing role lest ASEAN becomes irrelevant or has to succumb to one of the powers. Now ASEAN must become stronger and more solid to handle this role, by improving its organization and cooperation.
First, ASEAN leaders have to build closer relationships among themselves to understand better the environments, histories and strategies of East Asia. ASEAN Summits must become opportunities to create an understanding in the form of retreats, with the assistance of high-ranking sherpas.
Another important aspect is public participation in ASEANs decision-making processes by involving politicians, Parliament members, business, media, think-tanks and NGOs. In addition, there is the issue of which decisions have to be taken unanimously, for instance on membership, or on a majority such as economic issues. Otherwise, there will be never be a quick decision possible while future developments are moving quicker.
Budget is another matter of importance, and should be decided on the basis of per capita income and GDP, plus the results of the integration process, that are based on the intra-ASEAN trade, so it can be increased in five years time to at least 0.02% of a members budget (while the EU budget is around 1% of a members annual budget), to around $90 million.
Last but not least, the organization must streamline and reduce the number of meetings because 1,600 of them a year is just plain impossible and unnecessary. Also, the roles of the ASEAN Secretariat and the Committee of Permanent Representative should be clear, realistic and efficient, and that process can enhance their separate roles.
Ahmad Zamroni / Forbes Indonesia
A career diplomat, Ambassador of the Peoples Republic of China (PRC) to Indonesia Xie Feng (53) has spent most of his time dwelling on American affairs at Chinas Ministry of Foreign Affairs. He has served a total of five years in Washington in two separate stints. His last post was Director-General of the Department of North American and Oceanian Affairs before his appointment, in 2014, as ambassador to Indonesia. In an interview with Forbes Indonesia at his official residence in Kuningan, Central Jakarta, the ambassador discussed wide-ranging bilateral issues in an open and frank manner. On the 10 million ethnic Chinese Indonesians residing in the country, for example, Xie said that while they have deep cultural and emotional roots with their ancestors in China, they are first and foremost Indonesian citizens and should abide by Indonesian laws. He added that: The presence of so many ethnic Chinese Indonesians here actually helps China and Indonesia understand each others culture. While an ambassadors term is usually three years, this Ambassador noted that he looks forward to serving longer in the country. Indonesia is a very suitable country for me, said Xie. China and Indonesia will always be good neighbors, good friends and good partners.
FORBES INDONESIA: How would you describe China-Indonesia relations?
XIE FENG: As good neighbors, good friends and good partners, China and Indonesia share broad common interests. Our relations go back over 600 years, when Zheng He, the famous Chinese navigator and diplomat, visited Java six times and opened trade. Since the comprehensive strategic partnership was established in 2013, China and Indonesia have achieved rapid development in bilateral relations marked by frequent high-level exchanges and deepening mutual trust.
President Xi Jinping and President Joko Widodo have worked together to synchronize the 21st century maritime silk road initiative with the global maritime fulcrum strategy. Construction of major flagship projects, including the Jakarta-Bandung high-speed railway, is underway as well as mutually beneficial cooperation in infrastructure, production capacity, trade, investment, finance and e-commerce.
For five consecutive years, China has been Indonesias largest trading partner. China is now the largest source of overseas tourists for Indonesia. They spent an average of $1,107, contributing over $2 billion to the economy.
Last year, relevant government agencies of both countries agreed to increase the existing bilateral currency swap agreement to RMB 130 billion. Three Indonesian state-owned banks, including Bank Mandiri, have received a loan commitment worth $3 billion from the China Development Bank. The Industrial and Commercial Bank of China (ICBC) offered a $500 million in loans to the Indonesian Eximbank. ICBC Indonesia also signed an MoU with the Indonesian National Savings Bank to provide RMB 5 billion lending support.
LOreal Indonesia, the Indonesian branch of the French personal care giant, has been in the country for 37 years, yet the current head of the firm feels now is one of the best times for the brand. Southeast Asia is a hot spot in the global beauty care market. The market is buoyant, dynamic and exciting, and Indonesia is at the heart of it, says Umesh Phadke, president director at PT LOral Indonesia. While the economy has been recovering from a slowdown, the beauty care industry has seen steady growth.
Umesh, who took the job last year, was previously managing LOreal Thailand for just over five yearsa business with a turnover of about $300 million a year, one of the largest in Asia for the brand. Thus the stakes were high for Umesh, as LOreal has decided Indonesia is a key market for the firm. In late 2012, LOreal opened its largest factory in the world, out of 43 around in the globe, in Indonesia. The factory is located in the Jababeka industrial estate outside of Jakarta, an investment of over euro100 million.
The 66,000 sqm factory will serve as a production center for both the Indonesian domestic and international markets, with about 30% of its output for Indonesia, and the rest for international exports.
The domestic beauty market in Indonesia, according to Umesh, is worth over euro3.5 billion, and is expected to significantly increase in the next few years. According to him, the company has successfully managed to double its business in the last five years in the country.
The personal care giant now has two operating units in the country: PT LOral Indonesia, which handles marketing and distribution activities, and PT Yasulor Indonesia, which focuses on manufacturing operations. LOral brands in Indonesia comprise of: LOral Professionel; Kerastase Paris; Matrix; LOral Paris; Maybelline New York; Garnier; Lancme; Biotherm; Shu Uemura; Yves Saint Laurent; Kiehls; perfumery which includes Giorgio Armani, Ralph Lauren, and Diesel; and The Body Shop, which is distributed by a third party agent.
Umesh is reshaping the strategy to match the changing needs of consumers. He wants beauty care products to be made available to every consumer, irrespective of age, skin, or other factors. This shift is important, he says, because it will represent a transition from focusing on products, to more engagement with consumers through digital, advertising, communication, packaging and even retail.
Look at the known worlds total GDP over 55 years, from 1960 to 2015. The only two drops in global output over that time happened in the last decade. Whats happening? The world economy is experiencing turbulence created by the convergence of three megatrends: free market economics, the digitization of process, and a millenial-dominated workforce.
aEconomic governance in many countries has shifted from Maynard Keynes idea of government-driven markets to Friedrich Hayeks free market ideology. Starting in 2016, Indonesia is already party to special economic ties with 29% of the worlds population that owns 40% of world GDP. When the APEC goes live in January 2020, those numbers go up, respectively, to 70% and 86%.
a Internet users reached 3.2 billion in 2015, two-thirds of which can access each other using two billion smartphones. Never before in history has the world become so accessible. Shipping costs have fallen from $5.60 per ton in 1965 to $0.16 per ton in 2015, and long distance communication costs have fallen to practically zero.
a A digital savvy new generation form the majority of the workforce. They are infinitely more knowledgeable and open to new ideas compared to their parents. They prefer being technopreneurs, and disrupt traditional ecosystems and build new ones that redefine business practices across geographic borders.
The rise of these three inescapable megatrends calls for a new definition of organizational effectiveness. The ability to produce results with efficiency, the traditional definition, is inadequate. A more powerful and operative definition is the process-driven capability to execute a business model for sustainable optimum results, with agility, flexibility and efficiency.
When two equally efficient businesses compete, the organization with more agility and flexibility will win. Agility, flexibility and efficiency are process-driven capabilities. Sustainability is the new test for any business model, to survive the disruption from changes in technology, customer preferences, and regulations.
The new definition of organizational effectiveness begs the question: how to measure organizational effectiveness so as to manage it? The answer: (1) correctly perceiving organizationit does not exist, except in juridical terms. You cannot shake hands with nor engage an organization in a discussionyou can only shake hands and talk with individuals who represent the organization; and (2) mandating the building of process-driven capability to manager-leaders, each of whom must supervise a team of individuals.
Manager-leaders should be individually responsible for their respective teams effectiveness. Organizational effectiveness is the sum total of the work of the respective teamstheir management qualityand leading their team members to executetheir leadership quality. To survive and grow in the turbulent years ahead, redefine and develop your organizational effectiveness by measuring, monitoring and heightening the personal effectiveness of all your manager-leaders.
Limited Concession Schemes (LCS) for airports are one of the most effective ways for governments to monetize existing airports that are cash positive but in need of upgrading and expansion. LCS is not privatization since the government remains the owner. LCS is also not a securitization, which is a fancy word for borrowing money today by mortgaging an assets future revenues.
In fact, LCS is a direct investment by the private sector to operate, upgrade, expand and maintain an existing asset for a limited concession period, say between 15 to 25 years. During the concession period, the assets owner is not required to invest anything. The best part of the LCS is that the private sector will pay upfront to the government for the concession.
Infrastructure projects can be double wins, first from employment and economic input, and second from the long-term economic benefit from utilizing the asset. For an LCS, however, theres a third winupfront cash to the government.
Its easy to askso why hasnt Indonesia done it already? Its a complex answer. To be fair, the government recognizes the benefits and value of LCS; however, theres caution over a prime asset such as Soekarno-Hatta International Airport (SHIA). Instead, some suggest large and risky greenfield projects like Karawang Airport or smaller airports like Wakatobi.
The private sector recently convened a conference with key airport sector stakeholders to discuss the optimal way to encourage private sector participation in the airport sector. That event featured some case studies of successful LCS for other airports. Turkey is a good examplethe LCS of Istanbuls main Ataturk Airport raised $3 billion in upfront fees to the government for a concession of 17.5 years. This pilot project was followed by eight airport LCS, raising an additional $2.8 billion. Turkey also saw $16 billion in private sector investments in ports, roads, metro and even PPP hospitalsfor a total infrastructure investment of $22 billion over a decade.
Thus, some government agencies are championing LCS for SHIAestimates say it would raise at least $2 billion in upfront payments for a concession of 20 plus years. As an originator of the LCS concept for Indonesia, we suggest keeping the existing airport operators as minority shareholders to ensure technology and management knowledge transfer at the end of the concession period.
In addition, at least 10 to 15% of the upfront cash received by the government should be injected as fresh capital into the current airport operators. Thus key assets can be monetized without cannibalizing existing SOEs. The government and SOEs need the confidence to make the right decision. In sum, we can LCS Soekarno-Hatta International Airport; all we need is courage.
Within a matter of days towards the 14th anniversary of the massive tsunami disaster of December 2004, tragedy has once more struck Aceh province, a stark reminder of the power of the natural forces which affect the surface of planet Earth. While the devastating 2004 event was triggered by a very large Richter 9.0 offshore earthquake close to where the Indian Ocean plate subducts the Eurasian plate and creeps northwards along Indonesias volcanic Ring of Fire, the more modest but still strong Pidie event of Richter 6.5 magnitude was a land movement at relatively shallow depth. The earthquakes affect on old structures not designed for earthquakes was nevertheless devastating, and cost the lives of over 100 people; our heartfelt sympathies must go out to their families and loved ones.
In the 2004 event, Pidie was effectively untouched so that little focus was directed in its direction, except in the later stages of the projects delivered for the reconstruction of Aceh province as a whole. However, in the Build Back Better platform for the reconstruction of the tsunami hit areas, with the Banda Aceh and Aceh Besar areas being particularly devastated, buildings away from the main damage did not feature in the listings for upgrading or replacement. Hence, today, not just in Pidie but also in all areas across the archipelago that can be considered prone to earthquakes, there are still many older structures that are vulnerable, as shown tragically in the Jogjakarta event of 2006.
It is good to see the government reacting quickly with emergency response to the Pidie disaster, along with some Japanese emergency assistance, but the thought springs to mind that perhaps there should be an inventory made at district level of older civic and commercial buildings in the many earthquake prone areas of the archipelago, and budget set aside to systematically strengthen these to withstand a likely future event. If strengthening is not a viable option then the building should either be taken down and replaced, or marked so that it is clear that the structure would be vulnerable to collapse in the event of a strong earthquake.
Indonesia has arguably more than its fair share of natural disasters because of its location along one of the most tectonically and volcanically active areas of the planet, and from its geology, which is open to annual landslides. It has been well featured in books on disaster mitigation, prevention and response, such as provided by the ADB. Every district should have a capability to respond quickly to events, even if outside assistance is necessary.
On December 6, Muslim hardliners grouped under the Ahlu Sunnah Defenders (PAS) stormed into the Sabuga auditorium in Bandung, and broke up a Christmas service held by the Christian Revival Service (KKR). As PAS members had their way, police officers merely stood by and allowed the incident to run its course. A month earlier, in predominantly Muslim East Kalimantan, a bomb exploded in a church courtyard. leaving four people badly injured, including a child (who later died).
Three days after this incident, President Joko Widodo decided to act: he announced a plan to set up a task force to deal with radical, violent and fundamentalist violence. Intolerance in this country, he concluded, has undermined freedom of expression and even academic life. But as soon as the president disclosed his plan, West Java Governor Ahmad Heryawan dismissed the intolerance as a minor incident.
To his credit, Bandung Mayor Ridwan Kamil, referred to as one of Indonesias few good men, would have none of that. He has issued a nine-point directive, one of which required PAS to send an apology to KKR. And should it decide to ignore the notice, Kamil threatened to ban all PAS activities in the city. For its part, PAS has refused to heed the mayors call, in a defiant move becoming increasingly familiar with Muslim militant groups.
The statement by Heryawan, an Islam-based Prosperous Justice Party (PKS) politician, illustrates how officials have different views on intolerance, and on how to deal with those who practice it. In June, Home Minister Tjahjo Kumolo vowed to disband an unnamed organization he said was anti-Pancasila, the state ideology promoting tolerance. A few months later, Said Aqil Siradj, the chairman of the second-largest Muslim organization Nahdlatul Ulama (NU), called on the president to disband organizations that reject Pancasila. Nothing happened, however, as the government faced a multi-layered wall of bureaucracy.
In a way the presidential task force also reflects the failure of the Religious Affairs Ministry to inculcate tolerance. Conversely, the task force is only as good as its mandate to deal with the issue. In the event, for example, it decides an organization has no place in society, things can be complicated. Under the prevailing law, banning an organization requires the Indonesian Police, the Office of the Attorney General and the Home Ministry to act in unison, with feedback from the BIN intelligence agency.
Public reception to the task force idea has been positive but lukewarm. For what the public wants is not yet another state unit that wastes taxpayers money, but firm action. They also wonder if our democracy will remain messy if the Police, like it did November 4 and December 12, keeps issuing permits for a mass demonstration to be held just 50 meters from the presidential palace. In blunt terms, intolerance is primarily not about the great divide between Muslims and non-Muslims. Seven decades after independence, Indonesians are worse than ever in sectarianism. If the task force is to have any value, it must address why Indonesians have become more intolerant in inverse proportion to their improved social
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The year 2016 has passed and we are entering 2017. From the legal viewpoint, particularly on the promulgation of laws, as seen in state secretarys official website, there has been around 18 laws passed out of 50 prioritized bills. In 2015, there were 40 bills prioritized but only around 14 passed.
The year 2016 saw the promulgation of important laws, such as on security, cooperation on Indonesia-Vietnam defense and Indonesia-China defense, protection of fisherman, disability, preventing financial system crises and child protection. For the business community, laws on housing saving for public, patents, and especially tax amnesty were important. The law on housing saving for the public has benefits to low-income communities. Its implementation will be in 2018.
The patents law has several new features. The application of patent and excerpt of decision on granting of the compulsory license can be electronically filed now. It also permits that the record and announcement related to patent application to be made through electronic media. The simple patent can be granted for intangible inventions, in the form of new process or method, where in the old patent law, the simple patent is only limited to the tangible inventions. The pharmaceutical product that is legally marketed in another country and patented in Indonesia can be imported without the permission of patent holder (parallel import). The patented pharmaceutical product can be produced by other parties within five years before the expiry of patent protection, provided that the manufacturing is for licensing and marketing after the patent expires.
Tax amnesty laws goals were to accelerate growth and restructuring of the economy, which results in liquidity improvement, currency betterment, interest rate reductions, and investment growth. Other goal is to escalate the states revenue to finance national development. Tax amnesty law is seen positive for the state and for any taxpayer, including individuals and corporations.
Bills to watch between 2017 and 2019 are bills on land, which has not been promulgated for the last several years. A bill on criminal code may affect the police and others related to law enforcement. A bill of amendment on oil and gas law, and amendment on mineral and coal law are important, especially since these sectors are struggling. A bill on criminal procedural law may affect arrest, seizure, search, and prosecution. A bill on civil procedural law is important so that Indonesia can have its own law rather than follow the old Dutch law. A bill on the remuneration system may have huge impact on business players. It is imperative for existing capital market law to be updated so that it can stay up-to-date with those worldwide. There is even a plan to promulgate a law on the palm industry.
Laws are now becoming more specific and sectoral. If this continues, the House will have to work hard to pass all proposed bills going to 2019. While business players, academicians, organizations will be involved in the process, the publics involvement is crucial to ensure that the laws address present issues and can be implemented.
Ahmad Zamroni / Forbes Indonesia
Being an archipelago, infrastructure development in remote areas in Indonesia is among the most challenging tasks, and healthcare is no exception. With this in mind, Dr. Lie Dharmawan, now 70, founded DoctorShare, an organization of over 250 volunteers that since 2013 runs two floating hospitals and a flying doctor program reaching the most remote areas in the country with a free healthcare service. Last year, DoctorShare gave healthcare service to nearly 11,000 patients, including 859 surgeries, from Muara Sabak, Jambi, to Mappi, in Papua.
Dr. Lie is a surgeon who got his medical education in Germany. Coming from a poor family background, his passion to become a doctor and help people in need began in his childhood. He saw the difficulties of people around him to access healthcareone of his brothers died as a child because of acute diarrhea because he did not get proper medication. His idea to provide a medical service on a boat came in March 2009, when DoctorShare gave free medical service in Langgur, in southeast Maluku. A mother sailed three nights to bring her daughtersuffering intussusceptionsfor treatment. In theory, the child should have gotten surgery within eight hours, but the child survived.
We cannot wait, the solution is bringing the infrastructure, the healthcare service, to the underprivileged living in remote areas, says Lie. Therefore, in 2012, Lie decided to buy an old phinisi boat and built a hospital on it out of his own pocket. The boat is able to carry loads up to 250 tonnes and traded with nearby islandsfrom Palembang to Riau and Batam. The boat also has a high draft of 4.4 meters, so the surgery room inside the hull is more stable to waves. Aside from the surgery room, the boat also has other equipment such as x-ray and a lab. With the first boat, he sailed to the remote islands in the west and the east.
Luckily I didnt know much about boat and even sailed to the eastern part of the country when the tides were high. People were amazed; they asked if I had sailed on that ship to Papua? I didnt really understand the risks, thats why I have the guts. Once we sailed in a storm, and we felt like a box of matches tossed into a river, he laughs.
His effort gained others support. Partnering with the Ekadharma Foundation, DoctorShare launched the second floating hospital named RSA Nusa Waluya I in 2015. The second ship is bigger and made of steel. Lie is also aware that the floating hospital is only ideal for giving healthcare service in small islands. To help those living in big islands like Papua, DoctorShare also launched the flying doctor program. While around 15 to 20 people run the floating hospital, the flying doctor carries a smaller team of up to eight people. They reach the most remote areas because in some places there arent any roads.
The most common health problems are respiratory infections and surgeries to treat hernias and tumors. For cases that should be done in a real hospital, the patient is flown to a nearby big city. However, Lie says the challenge he and his team faces are mostly funding. DoctorShare spends over Rp 10 billion a year, and for the flying doctors, each flight cost above Rp 100 million to nearly Rp 300 million and the rest is mostly for the floating hospitals, and all of that has to come from public donations.
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Courtesy of Forbes Asia
For the first time in its 16-year history, the prestigious Forbes Global CEO Conference was held in Jakarta for three days in late November 2016, at the Shangri-La hotel. Keynote speakers on two consequent days were Vice President Jusuf Kalla and Finance Minister Sri Mulyani. The event had a remarkable launch with the opening keynote speaker on November 29President Joko Widowo. In typical all-work style, the President arrived, made a short stop in the VIP room and then went straight to the podium to deliver his address, and sound a gamelan gong to signal the start of the Conference. In his remarks, he highlighted his accomplishments, and what yet needs to be done, with a focus on economic reform and improving the investment climatehe also made a playful quip about the incoming U.S. President Donald Trump. His address, delivered in English, lasted about 12 minutes. It was accompanied by a PowerPoint presentation and interrupted several times by applause. Below is a transcript of his address.
PRESIDENT JOKO WIDODO:
Honourable Mr Steve Forbes, Chairman and Editor-In-Chief of Forbes Media Group, distinguished guests, ladies and gentlemen. Good evening. Welcome to Jakarta. It is an honor for us to be able to host such a prestigious conference with so many famous and distinguished guests. First, let me state the following: I am also a CEO. Not only am I the chief executive officer for all of Indonesia, but for more than twenty years, I was also the CEO of my own furniture manufacturing and furniture export business. Therefore, I am happy and honored to attend the Forbes Global CEO Conference for my first time, also as a CEO.
Ladies and gentlemen, when I took office two years ago, as the incoming CEO for the Republic of Indonesia, I knew that we had to restructure our economy as soon as possible. And we had to reform our democracy as soon as possible, and that we had to upgrade and reform our society as soon as possible. The world had changed and we had to change with it. Unless we took action quickly to catch up, it was clear to me that Indonesia would fall behind.
Within one month of taking office, I reduced fuel subsidies by more than 80%, which freed up $15 billion per year of fiscal space. We are able to reallocate this to infrastructure, to education and to healthcare. With the infrastructure budget, we launched the biggest infrastructure program in the history of Indonesia 30 gigawatts of powerplant projects, 1,000 kilometers of toll roads, 3,258 km of railways, 15 new airports and 10 airport expansions, 24 seaport and seaport expansions. Then, 14 months ago, we launched a major effort to deregulate and streamline permits and licenses. So far, we have launched 14 so-called policy packages reforms and took concrete measures such as creating customs logistics centers which make the import of raw materials and the export of finished goods much more efficient.
We created a formulat that puts a limit on the annual increases in minimum wage, which creates certainty for employers, lowering the price of gas for industry, and many other economic reform measures. This year we launched an ambitious tax amnesty program, and after only five months, ours is already the most successful tax amnesty program in the world history. So far, we have collected around $9 billion, or more than 1% of GDP, in penalty payments and a similar amount in capital repatriation. An amazing $300 billion of undeclared assets has been declared to our tax officethats more than 30% of GDP.
Courtesy of Iflx
Netflix is the Iflix of America, declares Patrick Grove, 41, the founder of the Malaysia-based Iflix. Patrick is positioning Iflix to be the Netflix of Asian emerging markets, and has already launched in seven countries Brunei, Indonesia, Malaysia, Maldives, Philippines, Sri Lanka and Thailandsince the company started operations in September 2015. I realized very quickly that people were obsessed with watching things on their smartphones, especially in Asia. Asia is different from America where people prefer to watch entertainment on their televisions, says Patrick. Eventually he hopes to go global, selling his service worldwide.
Iflix is a Subscription-Video-on-Demand (SVOD) application that can be downloaded onto your desktop, laptop, tablet or mobile phone. Iflix offers unlimited access to TV shows and movies from all over the world for a modest feejust Rp 39,000 a month in Indonesia. Unlike its American counterpart, Iflix will have more international content, including TV series and movies from across Asia, from China to India. The platform currently offers 10,000 hours of content programming.
Starting in 2014, Patrick and his team took one year to develop the idea, then launched the service in Malaysia and Philippines in May 2015, and Thailand in Nov 2015. Launches in Brunei, Indonesia, Maldives and Sri Lanka came in 2016. Indonesia is Iflixs most promising market, says Patrick. In Indonesia, he has partnered with Telkomsel and Indosat. If all goes well in the next 18 months, we will have more paying customers on Iflix than on all the cable and pay TVs networks in Indonesia. We are targeting about 4.5 million paying customers in next 18 months, he says, and 80 million subscribers within 10 years. With its huge smartphone savvy population, we are hopeful of getting at least half a billion in revenues from Indonesia in the next 10 years, he says.
Ironically, Telkom blocked Netflix from entering the Indonesian market in early 2016, citing concerns about its content and licenses. Unlike Netflix, Iflix didnt face regulatory, and censorship challenges in Indonesia. While we believe in the freedom of communication, we also believe that one should be respectful of the countrys customs, laws, religious beliefs. By modifying content according to the countrys censorship laws, we are trying to create long term relationships in these growing markets, he says.
Ahmad Zamroni / Forbes Indonesia
As Warren Buffett once said, investors should be fearful when others are greedy and greedy when others are fearful. This mantra could well describe the strategy of Hilmi Panigoro, president director of a PT Medco Energi Internationalgreedy while others are fearful. For over a year, in the midst of a continuing slump in commodity and energy prices, Hilmi has been buying assets in these sectors. Hes taking bold steps. Within three months last year, he committed close to $3 billion in two major transactions. Here are the details: in November, Medco closed an acquisition agreement with U.S. oil giant ConocoPhillips to buy a 40% stake in an oil and gas block at the South Natuna Sea Block B for $239 million. In September, Hilmi finalized an agreement for Medco to buy an 82.2% stake in Newmont Nusa Tenggara, a copper and gold mine in Batu Hijau, for $2.6 billion.
When commodity prices are near the bottom, it is the time for acquisitions since prices are reasonable. Hopefully, when the cycle is going up, we can reap what we sow today, says Hilmi, 61, in an interview in the top floor of the Energy Building (which Medco owns) in Jakartas SCBD, where senior management have their offices. For his vision in being a savvy contrarian, completing two landmark deals, Hilmi clearly stands out to be qualified for the title of Forbes Indonesias Businessman of the Year.
Hilmis decision to acquire those assets is also remarkable in that he was able to secure the financing despite the company in the past few years facing some major challenges. Last year, Medco booked negative net income of $188.1 million, $216 million of EBITDA, and $2.2 billion of liabilities. The company was in deep trouble, facing a major downsizing or possibly even worse.
Mulling his options, Hilmi weighed two choices to revive the company. First, he could lower debt by selling assets and cutting back operations, the path taken by many other companies. If he did so, he would help balance out debt and EBITDA. That approach would have shrunk the debt but also the company.
The other option, which Hilmi took, was not to cut debt to match reduced EBITDA, but to raise EBITDA to cover more debt. To do that, he had to add to the existing debt, but as long as the assets were good investments, the cash flow would help cover those additional debt costs. His decision seems to have been proven right. In the third quarter of 2016, Medco successfully booked $22.3 million of net income. Hopefully with these acquisitions, next year our EBITDA would be $1.4 billion, with total debt of $2.3 billion. Look at the ratio. It is not even two to one, says Hilmi with pride.
Investors also liked what they saw. Medcos stock prices had fallen from Rp 3,850 on October 1, 2014its five-year highall the way down to a five-year low of Rp 702 on January 1, 2016, a drop of 82%. As Hilmi start pursuing his strategy, Medcos stock price climbed back to a high of Rp 1,651 by April 1, and now hovers around Rp 1,305, a rise of more than 80% from the start of 2016. Hilmis family, which owns 56% of the firm, have also seen their net worth climb. Hilmis brother Arifin, is listed as the countrys 48th richest man, worth an estimated $475 million, according to the 2016 list of Indonesias 50 richest.
Serial entrepreneur Martin Varsavsky has a $200 million war chest built around persuading women to freeze their eggs while theyre young. Decisions about career, mates and motherhood will never be the same
Imagine walking into your nearest health center where a retina scan confirms your identity as you enter the cubicle, thus pulling from the central filing system your medical history, including your individual genome sequence, while a robotic nurse takes your blood pressure, temperature, and so on. Updating your records and adding the symptoms you describe, your medical appliance of the future will swiftly diagnose the likely ailment and prescribe the treatment required or further tests to be undertaken.
It may all seem a little impersonal, but the medical profession is just one area of professional expertise in which robotics and artificial intelligence are replacing humans. Already the U.S. Food and Drug Administration has approved a system that can automate delivery of low-level anesthesia, while surgeons are using automated systems to aid in low-invasive procedures. From the pharmacy side of things, meanwhile, robots have taken over operations in some hospitals, drawing the correct amount of prescribed drugs from their containers and delivering the correctly labeled dosages to the individual nursing stations throughout the hospital. Whats more, unlike humans, they dont get tired and make mistakes.
This is vitally important in the medical profession, of course, especially as medical errors are now the third leading cause of death in the U.S. Its not just carelessness or tiredness, but also a lack of time to keep abreast with the latest medical advances. This is where the likes of IBMs Watson cognitive computing technology has come to the fore, providing in some tests a 90% diagnostic success rate for lung cancers compared to just 50% by humans.
Yet the ability to crunch vast amounts of data and extract patterns and likely scenarios based on probability is useful in other professions. This is the future of financial audits, since by employing Watson-type technology, larger amounts of data will be processed than current sampling techniques permit. Swiftly alerting the human auditor to areas of question, the resulting completed report could be posted online to enable every stakeholder, including regulators, transparent access to the results of operations.
Other professions threatened include legal associates poring through millions of documents in the discovery process, while financial analysts and advisors will find it increasingly difficult to match the results of predictive systems analyzing big data. Nor is artificial intelligence restricted to just the evaluation side of things, as media outlets are already publishing reports on diverse subjects such as corporate earnings and sports events all written by machines.
What links all this, plus other areas such as music, poetry and even artworks, is that each is based on the evaluation of past experiences to determine the most likely or desired future outcome. Looking forward, how will artificial intelligence cope with situations where past human experiences have been colored by the moral climate of the time. Will artificial intelligence develop its own morality, or will it follow the lead provided by its human creator? Only time will tell.
Ahmad Bambang, better known as Pak Abe, has been awarded Marketeer of the Year (MOTY) Indonesia 2016. After much discussion at MarkPlus Campus, the judging panel found that Ahmad deserved the crown. The announcement was made before 5,000 attendees during the opening of the 11th annual MarkPlus Conference this month.
For the past decade, the MOTY has been awarded to Indonesias finest C-Level marketing executive, carefully selected through three stages: nomination, evaluation, and judging. A MarkPlus team received nominations across 18 sectors and evaluated the nominees based on public information as well as nomination documents. The nominees are then judged by a panel of past MOTY recipients, Indonesia Marketing Association representatives, and MarkPlus representatives. As previous years, Arief Yahyathe Minister of Tourism as well as the MOTY 2013 when he headed Telkom Indonesialed the judging panel this year. From Category Champions in 18 different industry sectors, the panel selected one person as best of the best.
Ahmad is now deputy president director for downstream and new renewable energy at Pertamina. However, he won due to his remarkable achievements as Pertaminas marketing and trading director. Almost 30 years in Pertamina, Ahmad knows the company inside out, and has the courage to make bold entrepreneurial decisions, summed by his concept of dGil Marketing (Idea Gila/Crazy Marketing).
When he took charge of the Marketing and Trading Directorate, Pertamina was suffering losses from the sale of Premium fuel. Pertamax, despite better quality, could not attract customers from Premium due to a large price gap. Ahmad then launched Pertalite, with quality and price positioned between Premium and Pertamax, getting Premium users to switch to Pertalite. In the past, Premium was approximately 87% of total sales volume for Pertamina fuels.
Now, it is only approximately 55%. Ahmad also did this in diesel fuel by launching Dexlite. Similar to Pertalite, Dexlite is positioned between the cheaper Solar and higher priced Dex. It aims to switch Solar users to higher quality fuel, yet cheaper than Dex. Other innovations leading to a major financial turnaround in Pertaminas downstream business were the launch of the pink Bright Gas and Pertamax Turboboth encouraged customers to trade up.
While other oil and gas companies are struggling due to the oil price drop, Pertamina had strong profits in its downstream business. With more profits, Pertamina can better help the nation. When President Joko Widodo asked for a single fuel price nationwide, including Papua, Pertamina was ready to support.
The one-price policy for fuel is the start of Pertamina Rahmatan Lil Alamin or Pertamina 3.0, with four major initiatives for SMEs, 3T Regions (Terluar, Terdepan, Tertinggal), human empowerment and the environment.
MOTY receipients are all achievers: Dyonisius Betty (2006), Chairul Tanjung (2007), Sofyan Basir (2008), Emirsyah Satar (2009), Dahlan Iskan (2010), Johannes Loman (2011), Dino Patti Djalal (2012), Arief Yahya (2013), Ignasius Jonan (2014) and Jahja Setiaatmadja (2015). President Joko Widodo was the Best Marketing Champion in 2010 and 2012 (government category) while Solo mayor and DKI Jakarta governor. Welcome to the Club, Pak Abe!
Before the 1997 Asian financial crisis, Indonesia experienced the Asian Economic Miracle as investment flowed freely into the region. Many recall how the crisis eroded the bedrock of East Asian exports. Indonesia, blessed with large petroleum and mineral resources, was spared the full impact of this, as the commodities boom from the 2000s spurred growth. Chinas emergence as a manufacturing powerhouse at the turn of the 21st century resulted in a surge in commodity prices. Consequently, in Indonesia, commodity exports have surpassed manufacturing exports since 2002. Over the past three years, the Chinese economy has slowed down and commodity prices have dipped.
Manufacturings contribution amounted to 17.8% and 18.2% of GDP in 2014 and 2015 respectively, according to the Indonesian Ministry of Industry. The main contributor to the Indonesian manufacturing industry in 2015 was the food and beverage sector at 5.6% of GDP, followed by oil and gas manufacturing at 2.7%.
Although the overall contribution from manufacturing has declined from the levels experienced in pre-2000, its increasing contributions are especially crucial because of declining commodity prices. President Joko Widodo has focused on high-value manufacturing to achieve an ambitious GDP growth target of 7%, and he has established the National Medium-Term Development Plan 20152019 to increase manufacturings GDP contribution to 21.6% by 2019.
A key global trend in manufacturing is the Industrial Internet of Things (IIoT), which refers to the convergence of cyber and physical systems through the Internet. On a global scale, Cisco predicts that companies adopting IIoT solutions could grow four times faster and cut maintenance costs by 67%. Regionally, South Korea, Japan, and Singapore offer pragmatic examples of IIoT that Indonesia could follow to boost its status as a regional manufacturing hub. In fact, several Indonesian manufacturers have already begun implementing IIoT solutions to gain a competitive advantage. Frost & Sullivan research shows investments in IIoT in Indonesia reached $1.4 billion in 2015, with a year-on-year growth of 6.7% forecasted for 2016.
Indonesias possible renewal of its free-trade agreement with the EU and the Trans-Pacific Partnership could increase investments in automation technologies. Furthermore, the ASEAN Economic Community is an opportunity to tap into a regional consumer base of approximately 700 million. Frost estimates the Indonesian automation revenues to be worth $114 million for the food and beverage sector, and $215 million for the oil and gas sector.
Indonesian manufacturers need to seize the opportunities arising from an expanding regional customer base and the IIoT is a viable solution to upgrade Indonesias manufacturing capabilities.
Last year, the number of motorbikes sold in Indonesia was more than six times than the number of cars sold. Although motorcycle sales fell slightly in 2015, Indonesia is the worlds third largest market with about seven million units sold a year, and this figure is expected to grow in coming years. Motorbikes are preferred transport for several reasonsfirst, they are cheaper than cars to buy and maintain. Second, they can weave through traffic jams and access side roads too small for cars. They also require minimal parking spaces. Third, they can be driven in rural areas, over dirt roads, and paths only wide enough for foot traffic. Finally, they can be adapted for all sorts of uses, from transporting entire families to mobile shops.
Despite their practicality, motorbikes are the considerable source of CO2 emissions, accounting for 16% of total CO2 emission in 2013, more than cars with just 13%. Indonesia having signed the Paris Climate Summit 2015 agreement it has committed to significant reductions in CO2 emissions, so therefore there is a clear need for new two wheelers that are more environmentally friendly. We believe that electric scooters, called eScooters, can be the answer.
As electric vehicles, eScooters do not emit CO2 in operation, but do need to access electrical power, which can be generated by power plants that release CO2. If the electricity is produced in high efficient modern power plants, the emission of CO2 per km is significantly lower than that of a traditional motorbikes combustion engine. This electricity could also be provided by renewable sources such as solar, wind, wave or geothermal, and then the emission which comes from setting up the plant - would be close to zero.
With modern lithium-ion batteries and efficient motors and drive trains, the energy consumption of eScooters can be further reduced. Such systems extend also the range of eScooters. However, eScooters for now have higher total costs compared to combustion engines, which limits their appeal (although wider acceptance and higher production would drive down costs). As experience in other countries has shown, eScooters requires initially active support by the local government to offset their higher costs for reaching a large acceptancesuch as by subsidizing battery costs. Other incentives for eScooters buyers could be free parking and use of roads which are closed for motorcycles.
The acceptance of technology depends on part in making charging an eScooter as easy as filling up a regular motorbike with gas. The government can support this with the installation of charging stations, or, even better, swapping stations for eScooters users to exchange batteries with fully charged ones, eliminating the down time of charging. The Indonesian government has now a window of opportunity to ramp up the sales of modern eScooters. By doing so, the Indonesian government can also encourage the development of a local eScooter industry that later will be able to export its models.
Various historical periods have been defined by the materials people used, such as the Iron Age and Stone Age. The present day Digital Age is going to see the primacy of new energy metals, which will become the building blocks of disruptive technologies that will change the way people drive and power their buildings. This new age will result in higher dependence on renewables and breaking away from traditional infrastructure networks.
In the past decade, the progress of lithium-ion batteries has been essential to modern technology, powering smartphones, laptops, tablets, medical devices and power tools. Lithium-ion batteries are lighter and store more energy than conventional dirtier lead-acid batteries. Lithium-ion batteries are seen as green. The real growth story for these batteries is only getting started, with the emergence of electric vehicles (EV), and the energy storage market, expected to be the backbone of the new energy economy.
Current industry opinion anticipates that up to 40% of vehicles sold in 2040 will be electric, from a base of less than 1% of global sales today. A recent Deutsche Bank report states the global battery consumption has increased 80% in two years to 70 GWh in 2015, of which EV accounted for 35%. It is expected global battery demand will reach 210 GWh in 2018 across electric vehicles, energy storage and traditional markets. By 2025, global battery consumption should exceed 535 GWh.
While lithium grabs the headlines because of its use in batteries, it is just one of the minerals being used, and in fact, isnt even the most common element in most lithium-ion batteries. Depending on the battery type, the strategic mined metals include cobalt, graphite, nickel, zinc, copper, manganese and aluminium, and these will likely become increasingly important raw materials in the new energy economy.
If you look at the constituents of the lithium-ion battery, Petra Commodities believes cobalt is the next standout. There is no doubt that lithium has grabbed the media headlines lately, with the price having soared to multi-year highs (from about $5,000 to $20,000 per tonne). However, cobalt has been a much more modest performer, with the LME price actually dropping to a multi-year low of $21,750 a tonne in February, before staging a rally to $28,750. However, this price is still well below the $33,100 cobalt fetched in August 2014.
Cobalt is an important part of the battery market and demand for the metal is expected to grow at an average annual rate of about 6% over the next five years. These remarkable demand figures havent flowed through to the price, because as of yet cobalt hasnt managed to return to its peaks in 1977 and prior to the global financial crisis in 2008. The U.S.
Geological Surveys recommendation to the U.S. Defense and Logistics Agency (DLA) to add the cobalt compounds to the National Defense Stockpile for the first time in 20 years underlines how critical the metal is to the U.S. Essential to its economic health and national defence, the U.S. currently consumes approximately 13% of the worlds cobalt supply, with this projected to grow to 15% by 2020.
It has been a great year for Indonesian equities. Indonesia is the best performing stock market in Asia and the eighth best performing market worldwide. The Jakarta Composite Index rose 16% in rupiah terms and 22% in U.S. dollar terms. The rally was fueled by interest rate cuts, growth-friendly government policies and low inflation of about 2%.
Indonesias stock universe comprises 583 stocks and 10 sectors. The average rise year-to-date has been 4.9% but individual sector performances varied. The healthcare sector, with 16 firms, was the star performer, rising 28.6%. Utilities (three stocks) fell 30%, making it the worst performing sector. The oil and gas sector (11 stocks), despite the significant rebound in oil prices, is only flat year-to-date. Telecom (9) is also unchanged for the year. The broad financial sector includes 143 companies and is the largest sector in terms of the number of companies but only increased 1.5%.
The tech sector (19 stocks) declined 3.7% year-to-date despite the media focus and hype on tech and e-commerce. Industrials with 91 companies rose 1.6% and consumer services with 67 companies rose 4.8% outpaced by the consumer goods sector that comprising 99 stocks and up in line with robust GDP to show 7% gains year-to-date.
Basic material sector comprises 80 companies and rose 23.2% year-to-date due to investors anticipation of Jokowinomics major push on infrastructure spending as the government seeks to attract pension funds for equity investments in infrastructure projects. Government is targeting investment to grow more than 10% and consumption growth above 5% in 2018.
In the price-earnings ratio TTM (blended forward twelve months) the Indonesian investable universe trades at 14.5 times. Due to surging healthcare stocks, it is now the most expensive sector at 50.8, while basic materials is at 20.2. Telecom follows with 18.6, consumer services with 18.4, tech at 15.9, consumer goods at 14.5, industrials at 14.3, utilities at 11.6. Financials with 10.3 are the second cheapest sector after oil & gas with 9.1.
According to New York University research, Indonesias country risk premium now stands at 3.5% and the Indonesian total equity risk premium at 9.7% (or 3.7% above the developed markets average)compared to 1.9% and 7.9% for Malaysia and 2.9% and 8.9% for Philippine equities. Political developments in the Philippines and the 1MDB scandal in Malaysia might lead to a re-evaluation, with Indonesia overtaking Malaysia and the Philippines on these key investor metrics in 2017.
In terms of country risk and equity risk premium, Indonesia is below China but comparable to India. Chinas country risk premium is 0.9% and equity risk premium of 6.9% and Indias 3.4% country risk premium and 9.4% equity risk premium. In comparison the political risk premium for the U.S. currently still stands at 0% and the U.S. equity risk premium stands at 6%. The U.S. election might not lead to an increase in political risk but might push investor sentiment towards emerging markets.
With innovation taking place on a regular basis in the digital age, it is hard to reconcile the opportunities that are available to society connected to technology compared with those still scratching out a living to survive. The changes that will occur over the century arising from technology, however, will provide opportunities to reach into levels of society currently deprived.
Living patterns will change as steady urbanization means most people will live in close proximity to each other. People will also live longer, and an individuals aspirations for a contented lifestyle will bring different challenges.
From a sustainable development point of view, todays governments and communities are still grappling with providing adequate connectivity across most countries, and to provide the necessary movements that people have come to expect daily, as well as a regular supply of food, water and energy. Many of the basic processes and procedures that are applied to these needs have evolved over the past half century since the advent of computers, and their continual upgrading in capability can help solve hugely complex problems, something unthinkable before.
However, todays professional engineering and other technical staff must change their approach to solving problems to take advantage of new digital technologies, not only in processes for sustainable construction, but also in subsequent operations, with flexibility for upgrading, as technologies offer more efficient approaches to the work.
For Indonesia, however, the deficit in the construction of basic infrastructure, whatever the sector, is still hampering the countrys development, although theres a greater effort to make up for lost ground now. Its much needed if the most unconnected people in the country are to take advantage of the opportunities offered by the digital age and, simultaneously, not fall further behind those who have the advantage of easier access allowed by an urban environment.
However, the delivery of key infrastructure to deprived areas remains hampered by elements of the bureaucracy and this has to change, especially where electricity is either missing or only erratically served. The target of 19.5% of electricity generated by 2025 to come from renewable sources will not be achieved unless there is a major change in the regulatory structures needed to encourage the use of renewable energy, and reduction in the current inefficient supply and use of diesel in remote areas.
There is a recognized significant national shortage in skilled staff even for the straightforward build out of basic infrastructure. While some of this has to be attributed to lack of education in both its quality and quantity, the lack of connectivity and access to electricity has also much to do with underperformance in education across the archipelago.
Achieving sustainable development has a long way to go, and education and pre-digital age infrastructure must remain as top priorities.
The outcome of the U.S. presidential election came as a shock to the global markets. While president-elect Donald Trump delivered what can be described as a controversial campaign, he was never crystal clear about either his vision or plans for the country. The initial selloff on Wall Street was naturally expected. What was surprising, however, was the swift rebound of U.S. stocks soon aftermarkets seem to speculate that Trump will unleash a sizeable stimulus package resulting in more job creation and higher inflation, boosting the U.S. economy. That could potentially trigger faster than expected tightening in the countrys monetary policy. Having said that, without clearer direction from the president-elect and his transition team, it is unclear how long the bull sentiment in the U.S. will last.
A number of critical yet unanswered questions, remain: (1) Will the U.S. implement a protectionist policy that could potentially trigger trade wars? 2) What would be the real impact of the new administrations stimulus package on growth and inflation? (3) Will the tax reform implemented this year have a real positive impact on the economy? (4) How about the rest of campaign promises that are quite controversial? (5) How does the new administration strike a balance between growth and regulation over the next four years?
Until a new cabinet is in place, nobody really knows the answers to all those questions. This uncertainty, along with planned elections in key European countries in the coming months, suggests that market volatility will likely to stay throughout 2017.
Although the Indonesian economy undoubtedly has solid fundamentals, in an increasingly interconnected world, global market volatility could still have an impact on the country. Temporary market correction and portfolio rebalancing by investors should be accepted as part of the new normal. When that happens, the monetary authority should step in to soothe the market and not take drastic measures that would only be effective in the short term. Injecting the necessary liquidity and intervening in the forex and bond market are necessary to alleviate anxiety in a turbulent market. It is encouraging that the Indonesian central bank acted swiftly during the recent market volatility, which had an immediate calming effect on financial markets.
As Indonesias economic fundamentals should not be affected by the political developments in the U.S., it is important that the government consistently implement reform packages. Deregulation and reducing bureaucracy should continue in order to attract real money from investors who have a long-term view on the economy. At the same time, the government should maintain security and stability to provide a conducive investment climate. It is also the right time for the government to start tackling a number of critical medium and long- term challenges such as legal reform and also educational reform. There are no easy fixes on both issues but we must start now to have a sustainable impact.
Courtesy of The Indonesian-French Chamber of Commerce & Industry
Beaujolais Nouveau is a wine party tradition in France celebrated all over the world held every year on the 3rd Thursday of November. Over 65 million bottles, nearly half of the region's total annual production, distributed and drunk around the world. It has become a worldwide race to be the first to serve to this new wine of the harvest.
The Indonesian-French Chamber of Commerce & Industry (IFCCI), with support from the French Embassy, organized the Beaujolais Nouveau in Jakarta at the Grand Ballroom, Intercontinental Jakarta Midplaza on Friday, 18 November 2016.
In a grand atmosphere, IFCCI gathered dear friends, members and distinguished guests to cherish this years Beaujolais Nouveau and celebrate French culture and tradition. The event commenced with speeches by IFCCIs Chairman, Mr. Philippe Augier, and French Ambassador to Indonesia, H.E. Mr. Jean-Charles Berthonnet, who welcomed everyone and made the first toast along with ambassadors and representatives of EU countries.
Courtesy of Christies
If age is a measure of excellence then the London-based auction house, Christies, has plenty of it. This year marks the 250th anniversary for the company founded in 1766 by James Christie. The auction house has since conducted many celebrated auctions through the centuries providing a popular showcase for the unique and the beautiful. Christies, the worlds leading art business, had a global auction, private and digital sales in the first half of 2016 that totaled 2.1 billion (about $3 billion). Christies offers around 350 auctions annually in over 80 categories, including fine and decorative arts, jewelry, photographs, collectibles, wine and more. It can handle auctions of items that range from $200 to over $100 million. Christies also has a long and successful history conducting private sales for its clients in all categories, with emphasis on postwar & contemporary, impressionist, modern, old masters and jewelry.
To celebrate the special anniversary, Christies held a series of special sales, exhibitions and events across the globe. Celebrations of this landmark anniversary have included British art that explored the legacy of four centuries of British art, and special curated sales to mark three decades in Asia and a decade in Dubai. Asia is an important market; Christies Hong Kong Spring sale season realized a combined sales of $364 million. This season Christies also offered the first dedicated online sale of Chinese paintings, with 45% of the works achieving prices above their high estimate.
Christies has a global presence in 46 countries, with 12 salesrooms around the world including in London, Mumbai, New York, Paris and Shanghai. Christies has led the market with expanded initiatives in growth markets such as Russia, China, India and the United Arab Emirates, with sales and exhibitions in Beijing, Mumbai and Dubai.
Christies has been in the Indonesian art market for two decades, when Deborah Iskandar opened the Christies Indonesia office in 1996 and was later succeeded by Amalia Wirjono. Charmie Hamami took the position of Vice President and Chief Representative for Indonesia in 2013. Indonesia has a vibrant art market, with unique collecting tastes and trends. Indonesian collectors are maturing very quickly and have a strong interest in new talents and trends, Charmie says. According to her, Indonesia is a special market with its own set of challenges in regulatory, public art infrastructure and government support; however the market has also been maturing. In recent years there has been an increase in development and support for the art ecosystem, from galleries, collectors and the government.
Contrasting to the early 2000s, Indonesian contemporary art was very speculative, however collectors have now focused on more patronage and collecting for passion that is healthier for the market. Furthermore, galleries have started to emerge with consistent programming in order to capture this interest with programs to procure works of Indonesian art, which helps to balance out most of the movement taking place in the secondary market.
The level of support and infrastructure from public institutions have also been on the rise, with fairs like the Jakarta Biennale being able to secure both governmental and private funding to assemble an international-quality presentations. The government has also been more willing to allocate funding and support for Indonesian contemporary arts on an international level through grants and sponsorships. We are encouraged by the developments in the market, and hope to see a continued rise in level of both government and private support to support in the evolution of the Indonesian art scene, Charmie says.
Ahmad Zamroni / Forbes Indonesia
The Mercedes-Benz GLC is one of the most successful SUV from the brand. It is well received overseas and now Mercedes-Benz Indonesia offers the locally assembled car in the market. The car is a SUV version of the C-Class, and will be a rival to the BMW X3, which means it can be an option for one who wants an SUV but not a very big one. Mercedes-Benz hosted Forbes Indonesia for a media test drive around Jakarta, from Kuningan to the old town and finishing at Ancol.
From the outside, the GLC is a beautiful and sleek car, with smooth lines in sync with the current Mercdes design cuesit is unmistakenly a Mercedes-Benz. Inside, the brand successfully designed a luxurious interiora big plus for a car in this price range. The cabin was decorated with black wood panels and leather; one minor letdown was some metal accents in the dashboard were plastic and not real metal, but these are still acceptable. The entertainment system is typical of the contemporary design from the brand, with a tablet like display in the middle. The standard audio system delivers an adequate performance with a good sound quality and a performance more on the bass side. For one that likes to hear music, the sound system is more than adequate for the typical driver.
When you drive, the car is very quiet inside. The engineers have done a good job in dampening the sounds from outside, including the tire noiseeven at high speeds. At low speeds, you can really appreciate the silence of the cabin, especially with the hubbub of Jakarta outside. Another plus for the GLC is the comfort, and for a SUV, it is quite comfortable. Mercedes also offers the option to upgrade to an air suspension. Even though its comfortable, when you want to enjoy driving the car, it still handles very well and is quite responsive. The steering feel in comfort mode is light and enjoyable for daily driving. The GLCs size is quite decent, its not mammoth, so one isnt intimidated driving it by yourself in Jakarta.
The car is powered by a four cylinder turbocharged engine with a two liter displacement, that generates 155 horsepower and 350 Nm of torque starting at 1,200 rpm. Having a good chunk of torque is essential to make the car suitable for daily driving, as a car weighing 1.7 tonnes needs plenty of push. The car claims to be able to sprint from a standstill to 100 kmh in 7.3 seconds. When tested in sports mode, the car has decent thrust, however it was smooth and linear; the gearbox was also smooth and even when in manual mode, didnt give any jolt when changing gears at the maximum rev. This performance may be a letdown for someone who wants more fun, but for daily driving, it is a very good transmission. Another highlight is the GLC is equipped with the new nine speed automatic transmissiona first for Mercedes. The expanded gears mean that it is more fuel-efficient and has a smoother ride. The GLC also is a proper all-wheel drive SUV, means that it can handle itself offroad if needed.
Ahmad Zamroni / Forbes Indonesia
While many companies are suffering a loss or have thin margins, Sekar Group is doing well. Last year, one of its listed companies, Sekar Laut, enjoyed 9% sales growth to Rp 745 billion, while its net profit grew at 18% to Rp 20 billion. We are selling daily food, thats how we can survive, says Harry Sunogo, president director of Sekar Laut.
The Sekar group of companies focuses on the food business. Founded in 1966, the group is now celebrating five decades in business this year. The original company was founded by Harry Susilo (Harry Sunogos eldest brother). Starting as a marine-products trading company based in Surabaya, the Sekar group has grown into a producer of a diverse range of frozen and dry processed foods under the Finna brand, named after Harry Susilos eldest child, Finna Huang.
The Sekar groups main product is crackers. Last year, it produced 8,500 tonnes of a wide variety of crackers (most of them are shrimp crackers) or as much as Rp 229 billion. Why shrimp? Surabaya is located just 20 kilometers away from the Sidoarjo regency, which has long been known for its shrimps and white fish. Since I was a kid, Sidoarjo was already producing much shrimp and white fish. Thus many home industries producing shrimp crackers are based there, says Harry Susilo, founder of the Sekar group.
As the countrys largest shrimp cracker producer, Sekar Laut processes five tonnes of shrimp into 30 tonnes of crackers every day. About 60% of the crackers are shipped to 30 countries, such as Netherlands, Hong Kong, Japan, Australia and the U.S.; while the rest goes to the domestic market. This year, Sekar Laut is expected to grow at 10% and is planning on exporting shrimp crackers overseas. As we are going to cater to more markets in the Middle East and Europe, we believe we can achieve the target, says Harry Sunogo.
Besides crackers, Sekar Laut also produces other products, such as chili sauce, seasoning and bread. As a relatively new product, launched only in 2014, chili sauce has been a big success. Last year, Sekar Laut sold Rp 115 billion of chili sauce last year31% of the companys income, on the back of sales up 28% year on year. I think our chili sauce fits our customers expectations, says Harry Sunogo.
To boost chili sauce sales, this year Sekar Laut allocated Rp 100 billion in investment to build a chili sauce plant with 40 tonnes capacity per day. Located in Mojosari, the plant is expected to start production in 2018. Meanwhile, bread contributed Rp 33 billion last year, up 12% compared to the previous year. Most of the bread is sold to fast-food chains such as McDonalds, Burger King, KFC, and Carls Jr.
While Sekar Laut enjoyed good profit, on the other hand, Sekar Bumi sales declined as much as 8% due to less demand. Last year, it produced 18,578 tonnes of frozen products with total sales of Rp 1.3 trillion. As a part of Sekar group, Sekar Bumi is focusing on frozen food production, such as shrimp, fish and so on. Most of the shrimp is provided by its sister company, PT Bumi Harapan Jaya, which has 1,000 hectares of fishponds in Sumbawa.
This year, the company is expected to grow 40% by boosting both domestic and export markets. We expect to enhance the domestic market by 20%, says Harry Lukmito, president director of Sekar Bumi, another of Harry Susilos brothers (Harry Susilo and his five other brother share the same first name, Harry).
In the second half of this year, Sekar Bumi will open a new plant in Tangerang. Sitting on 3.4 hectares, the plant has installed capacity of up to 1,000 tonnes per month. For this plant, the company will spend as much as Rp 200 billion, and the production is meant to serve the greater Jakarta market. As a consequence, the export market will decrease from 92% to 80% of total sales.
A true leader starts conversations. Its a soft skill that makes an organization, regardless of its size and scope. A good organization understands that a great leader makes a huge difference in operational and project-based activities. This skill can be learned through practice.
By conversation, its not about conversing with others. By conversation, it refers to making people think, being aware of certain issues, discussing and executing ideas. Above all, a great leader makes people believe.
A business relies on belief more than we previously thought. Customers must believe that a product or services would deliver as promised. Employees must believe the company is good enough to exist tomorrow, so one can keep working for them. Managers must believe subordinates have enough skills and motivation to do their jobs. Shareholders must believe the business would earn profits. Belief is the foundation shaping our thoughts and dictating our actions. Thus, a leader who can influence beliefs is the best leader. However, not every leader is aware of this. Thankfully, a belief can be formed and influenced with conversations.
First, things we do are based on decisions. And decisions are made based on what we believe and desire. The stronger the belief and desire, the more likely the decisions will be made faster and with stronger conviction. In the business world, it can translate into customer and staff loyalty.
Second, human nature is primarily driven by emotions, contrary to popular belief that an objective reasoning is key to a successful decision-making. Studies found that even the most logical decision is influenced by emotions.
Neuroscientist Antonio Damasio made an important discovery while studying individuals with damaged brains. The damaged part of the brain was where emotions were processed, thus could not feel any emotion.
Interestingly, not being able to feel anything, they couldnt even make a simple decision, like deciding when or what to eat. Damasio found that emotions are crucial in making decisions, including simple ones that most take for granted. For complicated decisions, requiring more complex considerations and reasoning skills, emotions are also strongly involved, he found. Thus, a good leader should inspire and motivate by evoking emotions associated with positivity, to increase the possibility of good decision-making.
Jeff Bezos, Bill Gates and Jack Ma became as successful as they are today because they are great conversationalists who are aware of the power of storytelling. Top managers can also be great writers, like Tony Hsieh of Zappos, Sophia Amoruso of #GirlBoss and Sheryl Sandberg of Facebook.
When this leadership skill is used in negotiations, its an extremely valuable asset. Start with what help the other party needs, use their perspective. See the pros and cons from their side. Influence them using their visions and objectives, which are meaningfully aligned with yours. A conversation can be simple, but the effects can be long-lasting. A leader can deliver insightful stories and ideas that trigger emotions. Influence positive emotions whenever possible. Anything is possible with the right words.
U.S. citizens have the right to choose their presidentbut since the U.S. has a global role, then others, like me, feel that we should voice our opinion, as the 2016 presidential election is to take place at an important historical juncture, and with one extraordinary candidate: Donald Trump.
Globalization has brought about changes that were not always positive. The gap between social classes is widening. The middle class feel left out of globalization, and the poor become poorer. Unemployment went up in many countries, especially in the EU, and those left behind by globalization did not get what was promised to them.
So, it is understandable that the underprivileged are now upset. We have seen what happened worldwide: Brexit in the U.K., right wing revival in Germany and France, and now the Trump phenomenon in the U.S.
Another by product is narrow nationalism based on race, religion and ethnicity. Migration, refugees and international terrorism are manifestations of those issues. These are the two main reasons why people are disenchanted with the existing, political and economic systems, and want something different. Trump got their support, especially from white- and blue-collar voters.
The main issue is whether Trump is fit to be the U.S. president. During the campaign and debates, he lacked understanding of the issues, kept changing his opinion, lied and denied his lies, and disparaged women. He was crude and arrogant.
The U.S. is a global leader and, therefore, should care about international opinion. With Trump, the world can fairly ask what is happening in the U.S. If America is unwilling to be a global leader, anarchy and conflicts can easily erupt in the future. If Trump is elected as the U.S. president, one thing surely will happen: U.S. global leadership will loose its esteem. In comparison, Hillary Clinton, whatever her failings, is a known personality in the international community. Her foreign policies as Secretary of State are well known. One may agree or disagree with her, but these policies are there for all to see.
For example, she might be more assertive toward China, but then U.S.-China relations have a dual character of cooperation (especially economic and global issues) and competition (in security, especially East Asia). She is pro-free trade. She enjoys recognition at home and abroad as the best prepared, and especially in international relations.
During the 1972-2010 period I visited the U.S. four times annually just to learn about the U.S. policies toward Asia, which I thought highly about until came the second Gulf War. Now I feel the U.S. is in decline. I really feel a letdown. My critical view and disenchantment with the U.S. began a decade ago or so. It is my hope and wish that Trump will never be elected, because if he is, I will feel completely disenchanted about the U.S.s future. I know many share my feeling.
Immigrants are taking a beating on television, at political rallies, even on capitol hill. But on the Forbes 400, its a love story. Weve never had more membersover 10%born outside this country. Thats a healthy thing for American entrepreneurship and job growth
As a child, Philip Anschutz had the mile-high ambition to own the lavish Broadmoor hotel in Colorado. Six decades later the Denver billionaire finally purchased the grand mountainside resortand the reality has surpassed his dream.
The inside story of how Pokmon Go was created by a Google exec who got lost within the giant search company and how he persuaded his bosses to let himand all those creaturesgo free.
Like the burgeoning Korean company she runs, E-Lands Sky Park is only selectively splashy
Heavy duties on Chinese tires create U.S. opportunity for other exporters. GT of Indonesia has geared up.
Bill Gates once again reigns, but pal Warren Buffett cedes the runner-up spot hes held for 15 years to Jeff Bezos, while Mark Zuckerberg moves into the top 5 for the first time.
Courtesy of BMW Indonesia.
To celebrate the 100th anniversary of the brand, BMW Indonesia got a special present for its customers with the official release of the BMW i8; the plug-in hybrid sports car was released in a recent motor show. In a rare session, we tested the BMW i8 in a private area in Nusa Dua Bali last September. The BMW i8 is the first model to be introduced in Indonesia from the BMW i sub-brand.
The i8 really turns heads, as it is one of the most beautiful BMWs to date, with a sporty low-slung, futuristic look with its aerodynamic design. The butterfly doors make the car stand out even more, amplified by its carbon fiber shell visible near the doorsill. The 2+2 coupe combines a plug-in hybrid drive system with a passenger cell made from carbon-fiber-reinforced plastic (CFRP) and an aluminum frame for the combustion engine and the electric motor, the battery pack and the suspension. All the weight savings allow the car to weigh only 1.5 tonnes.
Getting inside the car, the interior, though not as futuristic as the concept car, delivers typical BMW quality with leathers all around the interior. The dash is all digital, to show clearly and responsively all the car data; the entire instrument in the center console is positioned to face the driver. The interior also uses sustainable materials, such as recyclable textiles.
Hybrid sports cars bring a new driving experience, whereas a naturally aspirated engine needs to be revved, and even turbochargers must build boost, the electric motor of the BMW i8 gives an immediate response when you hit the throttle. The gasoline engine will then complement the electric motors later in the rev range. The electric motors in the front wheels delivers 131 horsepower while the three-cylinder 1.5 liter turbocharged engine generates 231 horsepower mounted on the back of the car, the setup means the car is an all-wheel drive with a combined 362 horsepower. The combo allows the i8 to sprint from a halt to 100 kmh in 4.4 seconds, have a top speed of 250 kmh and a staggering fuel economy of 2.1 liter/100 km. The i8 emitted only a mere 49-gram of CO2/km.
Ahmad Zamroni / Forbes Indonesia
When asked the inevitable question about women in management dividing their time between work and family, Sun Life Financial President Director Elin Waty has a blunt reply. If anyone tells you that work life balance is possible, that person is giving you BS, the 44-year-old declares.
That means no time to read, cook or fiddle with nanoblocks, a Japanese construction toy that she likes. It also means little time during the week for her 11-year-old daughter (her 17-year-old son lives in the U.K.) much past a ritual blessing the devout Christian bestows before hurrying out the door at about 6:15 am. I sacrifice myself, she states.
More self-sacrifice seems likely. In March, Sun Life Financials Canadian parent, Sun Life Assurance Company, bought out Asian financial firm CIMB from their local joint venture CIMB Sun Life for Rp 550 billion, thus boosting the companys presence in the country. The deal means much more work for Elin, as the merged company continues to implement its strategy of targeting Indonesias emerging middle class in second-and-third-tier cities amid a slump in the market. The company already has offices in 64 cities.
In mid-October Sun Life opened five marketing offices in Solo, tapping into growing incomes and longer life expectancies. At 77 years, government statistics suggest residents of Solo, hometown of the countrys popular President Joko Jokowi Widodo, have a life expectancy about seven years longer than the national average.
The companys expansionary push has Elin go further afield, too, in part because the bigger, more populated areas are already saturated with competition. In a recent trip, Elin traveled 10 hours to reach to the city of Dompu on Sumbawa, population 230,000, where Sun Life was opening a sales office. The city looks very small, but the potential is very big because no one is touching it, Elin says.
Sales of sharia products, which conform to Islamic prohibition against charging interest for loans, is another vein the company is mining. Elin oversaw Sun Lifes build out of its dedicated distribution network for sharia products in 2014, a year after she joined the company. Elin says the approach differs from some of the companys rivals that may see the sales of sharia products as an add-on business. Instead, Elins goal was products that not only reflect Islamic values but also are competitive with conventional offerings. About 10% of our customers will buy sharia products no matter what. But 80% want a good product. Those people say that if its sharia then theyll take it, she says. I want the products to be sharia and good.
Ahmad Zamroni / Forbes Indonesia
PT Bank KEB Hana Indonesias roots go back to 2007, when South Koreas Hana Bank first entered the Indonesian market by acquiring Bank Bintang Manunggal. In 2014, the bank took over a second bank, KEB Indonesia, to become KEB Hana Bank. KEB Hana Bank Indonesia Chief Executive Lee Hwa Soo, who uses the name Martin Lee, took his post this January, after serving as the chief financial officer of the bank since 2012. Martins office, as well as his lounge, is full of photographs of Mt. Annapurna in Nepal taken by Martin during a recent hiking trip there.
Forbes Indonesia: In 2007, KEB Hana Bank was ranked 124 out of 125 banks in Indonesia. Now it is ranked at 30. How was that achieved?
Martin Lee: KEB Hana Bank focuses on serving the clients. I am from Korea where people are very sensitive and impatient, in a sense. Service companies can only evolve when one can change according to customer feedback. In Korea, you dont see people lined up at banks, because people will get angry if banking takes too much time. The bank should also provide smart banking as well as other convenient services such as Internet banking and mobile banking. Otherwise, customers will go to other banks. Basically, I have implemented what I have learned in Korea. Speed, convenience and smart banking.
KEB Hana Bank is also called the five-minute bank. Branch tellers have an hourglass on their table that runs out after five minutes. All tellers should finish a transaction within five minutes. Wi-Fi is also available in all branches. KEB Hana Bank provides SMS Banking, phone banking, call banking to serve anytime, anywhere, whatever service needed by the clients.
FI: So you make your customers happy by implementing a Korean service standard in Indonesia. What keeps the staff happy?
ML: Indeed, its not easy. Indonesia and Korea have very different work cultures. Therefore it is not easy to push people to just follow. However, I try to be as close as possible with my employees, listening to them as if I am listening to my clients. I hold a bubur meeting every Wednesday morning. Thats a gathering for employees below manager level. I eat with them and listen to what they have to say. We also have a Learning and Training Division, Service Quality Team, Communication Team and Secretary Team that tries to monitor whats going on with the employees and fulfill their needs.
FI: Any specific example of making your employees happy?
ML: Indonesias public transportation is not convenient for all my employees. Therefore I bought seven buses and chose six locations to pick up my employees. Employees do not have to hassle through the traffic nor motorbikes. Also, we have the Hana Lounge where employees as well as customers can enjoy high-quality coffee. I think a coffee lounge provides a better environment for my staff when they are having a meeting. Hana Lounge has a goal to serve better coffee than Starbucks. The coffee in the lounge is from Indonesian villages from our CSR programs. Clients can also get a free coffee, depending on the amount of transactions with our bank. These are not big things but small conveniences and pleasures that make my employees happy.
I have just returned from attending Harvard Business School (HBS) for its Owner / President Management (OPM) Program, HBS three-year program for business owners and entrepreneurs. Reflecting on Indonesias Internet economy in 2016, I cant help but recall a quote from Thomas Edison, cited by our HBS OPM faculty head, Professor Lynda Applegate: Without execution, vision is just another word for hallucination. Looking back at Indonesias Internet economy this year, I can confidently say that, in 2016, we have seen visions executed into reality.
This has been a banner year for Indonesias Internet economy where our technology ecosystem continues to strengthen across three key pillars: (1) People, (2) Infrastructure, and (3) Funding. On people, there is increasingly good talent in Indonesia, consisting of both local and returning Indonesians, along with foreigners attracted by our nations potential. As a venture capitalist, a key part of what I do is meet entrepreneurs, and it is fantastic to see more people across various walks of life create tech startups. On infrastructure, there are more options for entrepreneurs to jumpstart their business, such as formal mentorship or incubation/accelerator programs. On funding, an influx of capital can now help fund startups.
So whats next in 2017? I believe Indonesia is experiencing an exciting transformative growth chapter, and with three big trends:
First, big data analytics and artificial intelligence will enable businesses to unlock value. In 2016, Indonesian tech firms spent aggressively to acquire customers. However, for sustainable growth, companies must not only acquire users, but also retain them to create long-term value. Thus companies must leverage big data analytics and artificial intelligence to better understand their customers to create value-add. A good example is Amazon. According to McKinsey, over 30% of what consumers purchase on Amazon comes from product recommendations based on sophisticated algorithms and predictive models.
In Indonesia, microlender UangTeman leverages its own proprietary data analytics model with both traditional and alternative data to assess borrowers creditworthiness. In addition, Sale Stock, a womens fashion company, uses artificial intelligence to improve conversion rates with customized information when consumers access its mobile app or its mobile website.
We will continue to see big companies work with specialized big data analytics companies to unlock value. For example, big data analytics firm Dattabot has helped a leading fast moving consumer goods (FMCG) company by hyper-profiling consumers in order to increase revenue. Dattabot helps this firm better understand consumers to more effectively distribute their products at outlets, down to the village level. Dattabot leverages the companys data from SAP and Salesforce, and integrates them with Dattabots proprietary big data analytics and an artificial intelligence machine. This activity requires intelligent machines to analyze massive amounts of data from different sources. As a result, this client achieved an over 40% revenue increase compared to its historical single digit growth rate.
The hottest topic in Indonesian politics right now is undoubtedly the tax amnesty program. Despite early reports that confessions and both domestic and repatriated funds were only trickling in, there was a flood of applications at the last minute. Truly Indonesian style!
The newly declared moneys impact will first be felt in increased infrastructure spending. Over the medium term, it means stronger confidence in the real-estate sectornot least because the planned infrastructure will open up possibilities for investment along newly created roads, rail and ports.
Indonesias economy, ticking along at an annual growth of 5%, is the key driver of the property market. Yet tax amnesty will feed through in other important ways. Tax revenues have historically been paltry, and rampant evasion hampered the governments ability to budget for needed spending.
With the first round of the amnesty closed at the end of September, we wont know how many used it, as the paperwork will take some time to process. However, any fresh funding for infrastructure are a positive.
Clearly, the Joko Jokowi Widodo administration is serious about reform. It cut in half a home sales tax as of September, thus bolstering the residential market. Home sellers will pay a final tax of 2.5% of the transaction price, down from 5%. For homes under 36 square meters, the tax is only 1%, to support low-income citizens. The tax office head Ken Dwijugiasteadi was quoted saying: One of the peoples primary need is to own a house.
The official said on October 3 that the amnesty program had already collected Rp 97.2 trillion ($7.5 billion) in the first round, or 59% of the initial 165 trillion rupiah ($12.7 billion) target. The scheme runs through March 2017, with three three-month sessions. For the last three months of 2016, the redemption rate for newly declared assets overseas now rises from 2% to 3%, and from 4% to 6% for domestic money.
Tycoons such as Anthoni Salim and James Riady have reported assets, as well as Tommy Suharto, setting an example for others. These declarations may have a snowball effect, encouraging others to report. The vast majority of the assets recouped are domestic. Repatriations are anemic, at only 13.6% of the Rp 1 quadrillion target, with 57% coming from Singapore. The government is targeting Rp 4 quadrillion in newly declared assets within Indonesia.
The Jakarta Stock Exchange is the best performing stock market in Asia and the eighth best performing in the world, rising 26% so far this yearand the outlook for next year is becoming more positive. Globally, many investors were underweight emerging markets and overweight developed markets equities for the last few years. This year, however, there has been a shift in investor positioning as many have realized that developed markets are highly indebted and low growth, while emerging markets such as Indonesia are a good long-term investment with relatively low debt and high growth.
If you want growth, President Joko Jokowi Widodo is your man. Growth is underpinned by Indonesias central bank cutting interest rates five times this year and the governments push for infrastructure and e-commerce. Indonesia revised down its growth forecast for 2017 to the range of 5.3% to 5.9% year on year. The Asian Development Bank forecasts next years growth at 5.1%, while the World Bank predicts 5.3% for 2017 and 5.5% for 2018.
While these projections are still below Jokowis target of 7% growth, it still delights investors in Indonesian equities. The Jakarta Composite Index (JCI) is trading at a current PE of 17.9 and an estimate forward PE for 2017 of 15.2, with a 1.7% dividend yield. The JCI correlation to the S&P 500 Index stands at 0.552, thus attractive diversification for global investors.
The Indonesian tax amnesty scheme is another boon to the local stock market, and will help add liquidity to market in the first quarter 2017. In addition, the central bank sees companies moving away from bank funding to non-bank sources, including sales of bonds, stocks and rights offers, which would further deepen capital market liquidity throughout 2017.
In competitiveness rankings, however, things seem to be deteriorating. Indonesia fell four places to rank 41 in the World Economic Forums Global Competitiveness Report 2016-2017. In terms of technological readiness, Indonesia currently only ranks 91st. The ICT penetration still remains low as only one-fifth of the population uses the Internet, while there is only one broadband connection for every 100 Indonesians. Therefore, the digital economy is the way of the future.
Indonesias e-commerce market, according to consultancy McKinsey, could be one of the worlds fastest-growing, adding $150 billion a year to GDP by 2025. Online sales could reach 8% of the total retail market by 2020 from currently about 1%. Indonesias central bank projects e-commerce transactions will almost double to $4.6 billion this year and could reach $16.4 billion by the end of 2020.
This year of 2016 is a pretty good year so far the Indonesian stock market, which, when this column was written, the Jakarta Composite Index (JCI) has gained more than 18% for the year to date. However, the stock market has not been going anywhere since 2013. The rise of JCI always stopped at no higher than 5,500whenever JCI touched this level, it then went down. In 2015, precisely in April, JCI had scored an all-time high at 5,524, but soon began to fall, and eventually dropped 12% for the whole year, the worst since the market crash of 2008.
However, starting in 2017, the JCI will rally once again. As we know, the Indonesian economy began to grow rapidly in the early decades of the 2000s because of the commodity boom, in this case coal and crude palm oil (CPO). The boom reached its peak in 2011, where the nations economic growth touched a record 6.9% year on year. Since that year, however, commodity prices including coal and CPO slowly but surely began to fall, and continued to fall. In 2011, the coal price benchmark was $110 per tonne, while the price of CPO on the Bursa Malaysia was RM 4,000 per tonne.
Four years later, in 2015, the coal price was as low as $51 per tonne, while the CPO was RM 1,900 per tonne. Following the decline in commodity prices, coal and palm oil companiesand their sharesexperienced a severe decline, which also dragged down the national economy as a whole. Stocks in general fell. In just five years, coal stocks have declined by 90% or more.
Luckily, while the commodity business was falling, other industries such as property, construction and tech began to rise. As a result, the national economy, despite a significant slowdown, did not fall into crisis. The JCI, despite having dropped in 2013 and 2015, still grew overall, or approximately 45% in total in the last five years.
Even as commodity prices continued to fall in recent years, I have always believed that the decline will eventually stop. When the coal price dropped, for example, its just a matter of supply and demand alone. Along with Chinas slowdown, the largest coal consumer in the world, coal demand also fell while there was oversupply from coal minersand thats when coal prices began to drop. However, did China stop using coal? Obviously not! Similarly, other Asian countries, including Indonesia, are still using coal for power plants and steel mills. So when the supply and demand of coal reach a point of balance, then thats when the price will stop declining, and will rise again.
For CPO, the story is the same: The price dropped because of falling demand, not because people stopped using CPO (in fact, CPO is still essential for use in cooking oil, pharmaceutical products, cosmetics and so on). Look at oil: Every time the price drops, people always speculate that it is because the world will stop using it, because we now have electric cars. Yet its been almost 200 years that oil has been used as fuel for motor vehicles, and we still use gasoline for cars.
In 2017, President Joko Jokowi Widodos third year in office, we believe Indonesian equities, already the best performing in the region year-to-date, will rise further. At this stage of the cycle, the country is entering a new low inflation regime, allowing for lower interest rates, a stronger rupiah, and a higher stock marketwith a JCI target of 6,600. Inflation is a supply phenomenon with a volatile component taking part in determining inflation. Interestingly, average core inflation is declining, however, especially following low commodity prices and muted growth. Thus, Bank Indonesia has lowered its inflation target to 3.5% in 2018, allowing for a new low benchmark interest rate in 2017.
To tackle inflation fluctuations, the government has put in price controls, especially for basic necessities such as cooking oil and beef. In the last two years, core inflation had a strong correlation with the rupiah, with a stronger rupiah causing lower core inflation. Historically, fuel prices are the number one factor for inflation. Our analysis finds that every 10% fuel price increase adds 0.7% month-on-month higher inflation. That said, recent low oil prices in rupiah terms mean manageable, lower inflation.
With no fuel-price shock in 2016, coupled with weaker demand, 2016 inflation should be 3.3%, near historical low levels, and advancing to 3.8% in 2017 with economic recovery. On the monetary side, there can be further rate cuts, in line with Bank Indonesias decision to pursue easing since early 2016. Therefore, theres room for further cuts, particularly as real rate differentials remains wide between Indonesia and the U.S.
In fact, the situation now is similar to 2012, with inflation below 4%, and the 10-year U.S. treasury at 1.7%, below forecasts of 2%. Hence, Bank Indonesias monetary easing should allow interest rates to reach 5.5% for the BI Policy Rate in 2017. Recently, a combination of lower inflation and improvement in the Current Account boosted the rupiah. At this stage, lower inflation and widening yield spreads strongly influence the rupiah, allowing sizeable inflows to bond and equity markets. Hence, we expect the rupiah to end the year at Rp 12,800. Furthermore, the governments tax amnesty funds should reach Rp 300 trillion by 1Q 2017, strengthening the rupiah to 12,500 by end-2017.
Positive sentiment on the rupiah comes from improving FX reserves, to be further strengthened by tax amnesty repatriation. September FX reserves have increased to $116 billion, up 14% for the year, supported by FX receipts, as well as the government withdrawing loans. Looking at foreign payments, declining imports and debt payments have lifted the foreign reserve to imports to 10.4 months. Last but not least is the importance of political stability following two years of Jokowis leadership, encouraging investment and growth for Indonesia.
Leadership is overrated. Without good management as a foundation, good leaderships multiplier effect is weak. I remind CEOs that productivity is a function of the men, material, methods and money available to execute the work (management) multiplied by the morale of the people doing the tasks (leadership).
A good management system needs a top-down approach. Management is a discipline with five dimensions: time, process, skill, balance and focus. All five dimensions need to be handled in the right way. Timebe in time. Processwork with rules. Skilldo it well. Balanceknow the boundaries. Focusstay on course. Having a good management system is the CEOs first duty.
A good leadership style yields cohesive relationships based on trust. Leadership releases energy generated by positive human relationships that stoke morale. It has a multiplier effect on management systems output. Colin Powell correctly observed: Leadership is the art of accomplishing more than the science of management thinks is possible. Having a good leadership style is the CEOs second duty.
Having both good management and good leadership in the workplace simultaneously yields the best possible result, and achieved in a sustainable way. A CEO should ensure that a good management system is in place first, to get the best result technically possible, and then ensure that a good leadership style stokes the morale of the rank and file.
If the management system is not yet enforced properly, the results can neither be optimal nor sustainable. Even if a good leadership style is available, its impact in a bad management system will be little, if any.
However, its sexier to talk about leadership than management these days. Why? What has caused this exponential increase in interest on the subject of leadership? The answer may be in the work of George Elton Mayo, known as the father of the human relations movement. Mayos groundbreaking 1933 book, The Human Problems of an Industrialized Civilization, looked at the results of early motivation experiments, and concluded that psychological and social factors played a larger role in productivity than physical elements.
His subject grabbed the lime light from Frederick W. Taylors seminal book, The Principles of Scientific Management, which got him known as the father of scientific management and a pioneer of the efficiency movement. How? Leaderships personalities and human relations stories are always more colorful and interesting to begin with. Managements business models, statistics and control charts can be boring.
But remember this: strong leadership, servant leadership, transformational leadership and many other leadership types cannot solve todays organizational ills until a good management system is first enforced with discipline, top-down.
To my client CEOs: Tackle order before morale. System before style. Strategy before culture. Management before leadership. In people and organization development, prioritize the technical side. Enhance the social side as you go along. Always.
Having lived in Indonesia for over 25 years, I still find on my trips back to Europe that many people have difficulty in associating with it, both in regard to the location and its vastness. While they may have heard of Bali, many place Indonesia as somewhere off Singapore. It comes as a shock to them that superimposed over a map of Europe it would stretch from the west coast of Ireland to beyond Moscow in the east, and roughly from the Baltic to beyond the toe of Italy. Thus carrying out business in Indonesia in many ways poses similar problems to operating across the European Union, and beyond.
While MNCs are used to expanding operations worldwide and can generally afford to set up their Indonesian headquarters in the capital, Jakarta, SMEs have a more lean and mean existence, eschewing the expense of Jakarta to operate hands-on at the site of their operations. And while much of Indonesian business is concentrated in and around the capital, or at least on Java, there are a further 10 cities with over a million inhabitants, plus 122 more that are home to at least 100,000 people.
However, here is where the differences between operating in an EU and Indonesian environment start to emerge. Operating in a city of 100,000 inhabitants in an EU country youd expect to have a full range of services at hand. PricewaterhouseCoopers, for example, has 27 office locations in Germany alone; it has one in Indonesia. Under current Indonesian OAA regulation, an international financial services company can only be associated with a single audit firm, which is licensed by the Finance Ministry under the name of its Indonesian partners. However, under a recent OAI regulation, two Indonesian audit firms are permitted to link together to form a network.
We at Moores Rowland Indonesia are very interested in exploring this area, as in regard to the provision of non-audit services such as tax, law and financial consulting, we have already dipped our toe in the water by opening a branch in Bali. Moreover, unlike the wider client base of our main office in Jakarta, the Bali operation is largely supported by foreign-owned SMEs. Therefore, we have already proven the concept that on the spot provision of services is what SMEs require in Indonesia.
It makes sense, for SMEs need more support from professional business service providers and are less inclined to make expensive trips to Jakarta just to consult with their tax or legal advisors. Moreover, a local presence by a service company can address regional nuancesenabling more effective service to clients.
There can be little doubt that the current business-minded government is anxious to root out the deficiencies in both infrastructure and governance that constrict national development in Indonesia, particularly in the eastern islands. While this affords opportunities for SMEs, expanding service provision to these areas will also be required to provide a more conducive business environment.