#indonesiatheworldfolio #theworldfolio indonesia · jokowi’s actions that have done much more to...

The administra-tion of President Joko Widodo, or ‘Jokowi’ as he is better known, is

pulling out all the stops to in-crease the ease of doing busi-ness, attract foreign invest-ment and build enterprise in Indonesia. Necessity has dic-tated these economic policies in the face of global conditions that have diminished com-modity prices – the traditional base of Indonesia’s economy. The silver lining for the busi-ness community has been a slew of reforms from the gov-ernment, including tax amnes-ties, deregulation, slashing red tape and increasing foreign ownership designed to boost other sectors.

This is largely a result of In-donesia’s reliance on natural resource exports. With weak global demand, economic growth in Indonesia has hov-ered at just under 5% for the first half of the year. First quar-ter growth for this year is ac-tually higher when compared to 2015, largely as a result of government spending on in-frastructure. However it is just not enough to create jobs for the fast-growing population of the world’s fourth most popu-lous country.

Not a leader to shy away from making tough decisions, the President has directly ad-dressed the country’s econom-ic troubles through something of a hardware and software ap-proach: by building infrastruc-ture and introducing deregula-tion.

To this end, a baker’s dozen economic stimulus pack-ages have been implemented over the last year. These have worked towards slashing red tape, introducing tax incen-tives for business and attract-ing offshore investment.

The government has ambi-tious targets to meet in terms of investment, as Thomas Lembong, Chairman of the In-vestment Coordinating Board (BKPM) explains, “For the 2015-19 period, we set a total investment target amounting to IDR 3,471 trillion (approx. $259 billion). This is a very op-timistic goal, yet it is achievable. We will take several measures to accomplish this. First, we will accelerate the realization

of strategic investment proj-ects and facilitate the expan-sion of existing companies. We will continue with and expand ongoing reforms, including simplifying more procedures and strengthening investment services. We will also pursue bilateral investment treaties and support trade agreements with Indonesia’s strategic part-ners. Moreover, we will ensure the implementation of eco-nomic policy packages, includ-ing endorsing the issuance of relevant regulations.”

Despite these measures, which will bear fruit over the long term, public spending on infrastructure has been the short-term boost the country needs. Approximately $22 billion has been allocated to infrastructure development across the nation.

“This is a vast and complex series of national upgrades that can not be carried out success-fully without highly motivated and capable leadership”, asserts Ir. Tumiyana, President Direc-tor of PT PP, Indonesia’s largest construction company.

The recent cabinet inclusion of Ms. Sri Mulyani Indrawati as Minister of Finance is a notable move towards strengthening the country’s leadership capac-ity in this area. Ms. Indrawati previously worked as Manag-

ing Director and Chief Operat-ing Officer at the World Bank and is part of a government that some are calling the best economic team in all of South East Asia.

Certainly, effective oversight is needed to manage the funds allocated, which represent the largest infrastructure budget allocation in Indonesia’s fiscal history. The vast majority has been committed to develop-ing hard connectivity links that include roads, railways, air-ports and maritime ports. As an archipelago of over 17,000 islands, movement over the sea dominates transport and logistical considerations for this country.

In terms of immediate ben-efits for the population, The One Million Houses Program is the 13th economic stimulus measure. As a five-year ini-tiative, it is aimed at building home for Indonesia’s most vul-nerable low-income families.

The process of deregulation as a long-term fix is one mea-sure that has been aggressively implemented by the current administration. Decades of dic-tatorship until the late 1990s led to a culture of corruption, col-lusion and nepotism becoming embedded in government enti-ties. Since the beginning of the democratic era, presidents have worked to fight this debilitating culture. However it is President Jokowi’s actions that have done much more to quash its exis-tence.

Teten Masduki, Presiden-tial Chief of Staff, was a career leader of human rights and anti-corruption organizations. According to him, beyond be-ing a moral and rule of law is-sue, the economic implications of this reform are far-reaching, “The deregulation program, the second of our priorities, is very important. It is to make

sure that our bureaucracy is efficient and more transpar-ent. We want Indonesia to be attractive for investors. We want to fight corruption and take out more procedural bu-reaucracies.” The effect this plethora of reforms will have on small- and medium-sized enterprise (SME) growth, as well as big business is signifi-cant. Less red tape and oppor-tunity for corruption as well as reduced taxation on a range of sectors has seen the potential for bribe elicitation from gov-ernment agencies diminish. Furthermore, the implemen-tation of soft loans for SMEs, and reduced energy tariffs for labor-intensive industries (a typical characteristic of Indo-nesian SMEs) has boosted the competitiveness of the sector. Protection measures for SMEs have also been implemented.

Small street vendors are ubiquitous in Indonesia, and are the stallwart SMEs of the country. These kind of busi-ness people have also ben-efited from reforms – they are not just for corporate giants. As such, free leasehold certifi-cates were issued in 34 zones

to promote economic activity. As President Jokowi himself was a self-starter businessman early in his career, his knowl-edge of what works to support grass-roots economic growth has clearly been applied in this instance.

One reality embraced wholeheartedly is that Indo-nesia cannot function without extensive foreign investment. No country is an island, not even one that is the world’s largest archipelago.

The idea of isolationism has been entrenched in politics since the republic’s inception and foreign ownership has been limited and international investment even excluded from certain areas of the econ-omy. This paradigm has been changed by President Jokowi who has revised the country’s negative investments list and expanded areas available to foreign business interests.

Increasing foreign trade has been a long-standing priority of the government. Negotia-tions on the Indonesia-Euro-pean Union Comprehensive Economic Partnership Agree-ment (IE-CEPA) are slated for completion by 2019.

“With the cabinet reshuffle in 2015, there was again some cautious optimism and we got the news that there were going to be reforms and economic policy packages, which were well received by the business community. The message from the Jokowi team was very positive and from a trade per-spective. We think the reform packages have really set the right tone from the top and it seems Indonesia really recog-nizes that foreign investment can be good for the country,” explains Brian Arnold, Presi-dent of the American Cham-ber of Commerce in Indonesia.

At the time of writing a 14th package is awaiting approval to encourage the development of e-commerce and the digital economy. This is expected to bring booms to the ICT sector while also greatly facilitating digital payments and transac-tions in this country of 260 million.

IndonesiaTuesday, December 6, 2016

This supplement to USA TODAY was produced by United World Ltd., Suite 179, 34 Buckingham Palace Road, London SW1W 0RH – Tel: +44 (0)20 7305 5678 – [email protected] – www.unitedworld-usa.com

Taking care of businessGovernment-led deregulation, attractive economic policies and an infrastructure

boom is making investment in South-East Asia great again

The recent cabinet inclusion of Ms. Sri Mulyani Indrawati as Minister of Finance is a notable move towards strengthening the country’s leadership capacity in this area. Ms. Indrawati previously worked as Managing Director and Chief Operating Officer at the World Bank and is part of a government that some are calling the best economic team in all of South East Asia

#IndonesiaTheWorldfolio#TheWorldfolio

A UNITED WORLD SUPPLEMENT PRODUCED BY: Country Director: Geoffrey Flugge; Project Director: Miriam Llorca; Project Coordinator: Cristian Isac; Market Analyst: Marko Rankovic; Regional Director: Leandro Cabanillas

President Joko Widodo (Photo Credit: IMO)

Inspire your soul with our beauty

www.indonesia.travel

indonesia.travel

@indtravelindonesia.travel

At some point in your life, you will feel that it is time to unwind. With your usual daily vast occurrences, remember to push the reset button. Stop for a second, let go of your worries. Reconnect with the earth and experience our way of relaxing. Be one with our nature, take your pick: endless mountains, infinite beaches, sparkling cities, or historical wonders. Don’t think twice. Because when everyone else is busy living, we celebrate life instead.

2 Tuesday, December 6, 2016 Distributed by USA TODAYINDONESIA

Our World Insert is produced by United World. USA Today did not participate in its preparation and is not responsible for its content

SOEs increase capacity to accelerate infrastructure development

Spearheading In-donesia’s infra-structure boom are efforts by the country’s state-

owned enterprises (SOEs). Following dramatic in-creases in state budget al-location, the construction phases of a number of key projects were implement-ed by these organizations over the last calendar year, such as the Trans-Su-matra toll road, which is under construction.

As a testament to the suc-cess of SOE management, already the new third termi-nal at Jakarta’s airport and the new Priok container terminal have both been completed and opened. These are the kind of developments that are having a wide-ranging, positive impact on the nation’s connectivity.

Leading the SOE charge is one company that has emerged as a giant in the field, PT PP. Since its establishment in 1953, the company has grown to become the largest integrated construction com-pany in Indonesia. PT PP’s subsidiaries are organized on eight core business activities. These main areas encompass construction, property, EPC, pre-cast, equipment, energy,

investment and infrastructure. The company employs over 1,800 people.

Its history has mirrored that of the Indonesian Repub-lic. Following the struggle for independence its engineers designed and built key infra-structure for the young na-tion. This began with realizing iconic, Sukarno-era projects including the Hotel Indonesia, the Bali Beach Hotel, the Am-barukmo Palace Hotel and the Samudera Beach Hotel.

Large-scale residential con-struction, including the devel-opment of the Cibubur district of East Jakarta, was also under-taken by the company.

Following change of Indo-nesia’s political and economic environment after the end of the Suharto-era, the company’s stake-holder base was trans-formed. The Employee Man-agement Buy Out (EMBO) program in 2004, and subse-quent IPO in 2009 changed PT PP’s ownership structure from 100% government-owned to include private investors and company employees. Today, the Government of Indonesia maintains a 51% controlling stake, however the remaining distribution keeps the compa-ny profitable and its workers’ motivated.

PT PP’s business lines be-gan to move into new and promising directions follow-ing its corporate restructuring. Investment in infrastructure development was foremost in its strategy, which put it years ahead of competitors when opportunities presented

themselves during the Jokowi administration. In 2011 the company completed its first major investment project: the 65-megawatt Talang Duku Gas Power Plant (PLTG) in South Sumatra. The comple-tion of 14 similar energy plants followed this achievement.

Since 2012 the company has become heavily involved in infrastructure, including the construction of the new Tan-jung Priok port, Jakarta’s most important maritime facility. The company also completed seven different airport con-struction projects that year.

Just as impressive as its energy and infrastructure projects, PT PP’s residential and commercial construction resume reads like a list of the country’s contemporary ar-chitectural landmarks. These include the Ministry of Public Works, PT Dahana’s Energetic Materials Centre and the Sin-gaporean embassy.

The Ministry of Finance of Timor-Leste was also built by the company. To maintain its trans-archipelago reach PT-PP

has commercial offices in eight cities across the country and in Dili, East Timor.

Underpinning the com-pany’s engineering expertise is its focus on fostering in-novation. This includes a sig-nificant investment in human resources while also investing in technology such as building information modelling (BIM) and digital construction map-ping systems.

As a result of this, PT PP has expanded beyond con-struction by developing lo-cally produced subway, light rail and elevated train pas-senger wagons. These can be utilized for the country’s growing mass transit public transport projects.

These Metro Kapsul cap-sules are aerodynamic, 9.3 meters long and capable of transporting 50 passengers. Ninety-five percent of com-

ponents are sourced in In-donesia and all engineering and testing was conducted in-country by local specialists. Powered by four electric mo-tors, they have backup batter-ies that are activated following any power loss.

Metro Kapsul is capable of reaching a speed of 80 kilo-meters per hour. Calculations indicate that up to 24,000 pas-sengers can be moved by this system per hour. Pollution reduction was factored into its development, with plans in place to recharge energy cells with biomass energy produced by garbage.

This system occupies a place of pride for the company, as Ir. Tumiyana, PT PP’s President Director explains, “I know that as a leader I have an obli-gation to strive for innovation and there is no better example of that than the Metro Kapsul

transportation system, which was 100% engineered in Indo-nesia and has huge potential in Indonesia and abroad as it is highly competitive on pricing and quality.”

Undoubtedly it has been the company’s success in deliver-ing on large-scale infrastruc-ture projects that has set it on the road to becoming the ASE-AN’s premier builder. Gov-ernment policies focused on massive upgrades to national infrastructure have coincided with the rise and rise of PT PP.

As Ir. Tumiyana tells United World, “The President’s fore-cast for the next five years (of infrastructure spending) is IDR 4,900 trillion (approx. $365 billion), about IDR 1,500 trillion (approx. $112 bil-lion) of that is coming from government spending, with the balance made up by the private sector. This has been allocated to the overarching infrastructure plan, including power, roads, bridges, ports and airports.”

To put things in perspec-tive, this infrastructure spend-ing will surpass 30% of GDP during this period, and PT PP is well placed to absorb a significant portion of these funds.

Given the accolades the company has received, it is hardly surprising to see why it has become the champion of Indonesia’s infrastructure boom. This year it received both ‘The Best Managed Company in Indonesia’ and ‘Best Investor Relations’ awards from Finance Asia and Credit Suisse. PT PP also won the Gold Award for Dual Fuel Power Plant of the Year at the prestigious Asian Power Awards, held in Seoul.

Another regional award was the ‘Best Civil Engineer-ing Project’ award for an out-standing and remarkable con-tribution to the advancement of Civil Engineering and De-velopment in Asia, awarded by the Asian Civil Engineering Council in Hawaii.

But of course it is the com-pany’s balance sheet figures that stagger its competitors.

According to Ir. Tumiyana, “Last year in 2015, our eq-uity stood at IDR 5.12 trillion (approx. $380 million). Our projection is that by 2018 this figure will increase to IDR 38.97 trillion (approx. $2.9 billion).This 690% increase will be driven by our corpo-rate action (extensive long-term corporate diversifica-tion strategy, such as taking our business from six to eight business lines by adding en-ergy and infrastructure lines) and also the acceleration of infrastructure priority pro-gram by the Indonesian gov-ernment. By this measure we will be larger than every other major construction company in the ASEAN region.”

“Last year in 2015, our equity stood at IDR 5.12 trillion (approx. $380 million). Our projection is that by 2018 this figure will increase to IDR 38.97 (approx. $2.9 billion) trillion. This 690% increase will be driven by our corporate action … and also the acceleration of the infrastructure priority program by the Indonesian government. By this measure we will be larger than every other major construction company in the ASEAN region”

IR. TUMIYANA,President Director, PT PP

“The President’s forecast for the next five years (of infrastructure spending) is IDR 4,900 trillion (approx. $365 billion), about IDR 1,500 trillion (approx. $112 billion) of that is coming from government spending, with the balance made up by the private sector”

IR. TUMIYANA,President Director, PT PP

SOEs such as PT PP will be critical to realizing Indone-sia’s infrastructure ambi-tions. The company has ambitions beyond this, with plans to become ASEAN’s largest integrated construc-tion company by 2018

WE BUILD THE MASTERPIECEWe were born to build this country,

through integrity, hard work and passion, to continue to grow and

evolve to a greater Indonesia

For more than six decades, PT PP (Persero) Tbk has been part of Indonesia’s growth story, successfully becoming one of the main players in national construc-tion through the accomplishment of projects across Indonesia, including high-rise buildings, bridges, roads, airports, harbors, dams and power plants. With a strong domestic foundation, PT PP now looks further abroad in the pursuit of leadership within construction and investment sectors across South East Asia.

MAIN BUILDING OF MINISTRY OF PUBLIC WORKS & HOUSINGThe 1st Indonesian Green Building

KALIBARU CONTAINER TERMINAL 1. The largest port in Indonesia. Awarded by the Asian Civil Engineering Coordinating Council

GRAND KAMALA LAGOONThe biggest property development in East Jakarta

METRO KAPSUL. Indonesia’s most innovative & efficient train transportation system, 98% Indonesian engineering

GORONTALO GAS FIRED POWER PLANT PEAKER 100 MWThe fastest built power plant in Indonesia

CIKAMPEK – PALIMANAN TOLL HIGHWAYThe best performing toll highway construction in Indonesia

www.pt-pp.com

A SUSTAINABLE ASEAN-CLASS

COMPANY

LOMBOK COMBINED CYCLE POWER PLANT

PT PP President Director, Ir. Tumiyana (center left, blue shirt) with President Joko Widodo (center right)


3Tuesday, December 6, 2016Distributed by USA TODAY INDONESIA

As Margaret Thatcher, Brit-ain’s longest-serving prime minister and

the first woman to have been elected to that office once famously said, “You and I come by road or rail, but economists travel on infrastructure”.

This wry observation rings particularly true when applied to Indonesia today.

Since the establishment of the Republic in 1949, the Indonesian economy and social development that has been held back by a pronounced lack in the quality and quantity of its infrastructure. Certainly this is due to the lack of in-vestment during the colonial period and the vast damage inflicted onto the country by World War Two and the subsequent struggle for in-dependence.

This applies both to hard infrastructure (roads, rail-way lines, harbors, airports and electricity generation and transmission assets) as well as soft infrastructure (education institutions, so-cial welfare agencies and health care and medical fa-cilities).

Critically, the develop-ment of hard infrastructure linking the nation has not kept pace with its rapid pop-ulation growth. Indonesia is actually ranked as the fourth most populous country in the world, after the China, India and the U.S.

Geography also plays a key role in the country’s demand for infrastructure. As a vast archipelago of over 17,000 islands, it is impossible for Indonesia to develop its economic potential with-out dramatically improved connectivity. The free and affordable movement of people, goods and services from island to island and across seas, mountains and jungle requires extensive infrastructure to be built, upgraded or expanded. Without such a nation-wide move, there is no way to ef-fectively facilitate the eco-nomic growth of this coun-try of 260 million people.

Currently, there are many short falls not just in the far flung provinces of lightly populated Eastern Indone-sia, but also in major cen-ters such as Java and Suma-tra. Even these engines of growth have not been able to keep pace with demograph-ic growth and population demand, and suffer from a lack of rail, road, sea and air connectivity, as well as vital utility shortages including energy and water supply.

To counter this, and set the scene for up and coming generations, the Jokowi Ad-

ministration increased infra-structure spending in Indo-nesia by 51% last year. This is the first time any presi-dential administration has devoted so many resources to this key issue – one that has been traditionally over-looked and has plagued In-donesia since independence.

This infrastructure fo-cus is set to transform the country’s macro-economic climate and reduce poverty, if carried out successfully. Though it is not without challenges as the undertak-ing is enormous in terms of logistics, spending and con-struction and engineering expertise.

However senior govern-ment figures are optimis-tic about the benefits this program will have for the common citizen. According to the Coordinating Min-ister for Maritime Affairs, Luhut Pandjaitan, “We are seeing an unprecedented government infrastructure program, this is a historical first. This is creating many job opportunities. However we don’t just want to talk about growth, we also want to ensure equality. You have to create programs across the country, especially in the 74,000 villages, for the ordinary people. If we don’t tackle this problem in the regions, there is a greater chance of radicalism due to poverty. We need urban and rural development to occur in parallel, which will reduce the extremism and boost the economy”

However it is a long walk from government policy to concrete, on the ground construction progress. And every day of lost produc-tivity counts. So focused is the president on closing the national infrastructure gap that during a recent confer-ence he urged government agencies to speed up devel-opment, stating, “I have told

the Public Works Minister that I don’t want to work just one shift, but three shifts, because we have been left behind”.

Indeed the laundry list of up-and-coming projects is long and covers the full spectrum of infrastructure needs. A total of IDR 2,216 trillion (approx. $165 billion) has been set out in the na-tional infrastructure spend-ing plan covering 2015-2019.

According to the Presiden-tial Chief of Staff, Mr. Teten Masduki, “Spending will be focused on a number of key areas, including power gen-eration through the 35,000 Megawatt program, but also toll roads, railways, harbors and ports. We have some issues regarding logistics cost, for example the distri-bution of the logistics from west to east leaves a large gap. This has led to uneven economic growth between the western and eastern is-lands of Indonesia. We have huge potential in natural re-sources in the east, but due to infrastructure limitations, this area remains underde-veloped”

Even with such a deep war chest, galvanized political will and very capable state-owned enterprises (SOEs) ready to implement proj-ects, the government has ac-knowledged that it does not have the resources to realize this vision alone. The need for public-private sector col-laboration has been openly

discussed and agreed on by the government, business community, project benefi-ciaries and other stakehold-ers.

It is only natural that given the lucrative com-mercial returns and the as-sociated economic benefits over boosting nation-wide connectivity, the private sector supports this policy wholeheartedly. Bottlenecks caused by the infrastructure gap will cause stagnation as the economy struggles to accommodate the country’s booming population.

The Chairman of the country’s premier business association, Indonesia’s Chamber of Commerce and Industry (KADIN), Rosan Roeslani is an enthusiastic advocate of the govern-ment’s vision.

“Infrastructure develop-ment is vital for Indonesia’s future economic growth”, he said during a recent high-level industry event.

Dr. Ir. M. Basoeki Hadi-moeljono, Indonesia’s tech-nocratic Minister of Public Works and Housing is open to increased public-private partnership (PPP) and sees cooperation between gov-ernment and business as a critical prerequisite for achieving the nation’s stated infrastructure development goals.

“The message is clear, in-frastructure is the number one priority program of the Jokowi Government era and there are a lot of things that can be done. Not only to be done by the government, because the government un-dertakes only 30% or 40% of the projects, the rest would be an opportunity for private and state owned companies” he says.

The precedent has cer-tainly been set through the launch of recently approved infrastructure projects un-dertaken across East Java, one of the least developed parts of Indonesia’s most populous island.

As Dr. Hadimoeljono tells United World, “We have successfully implemented PPPs in toll roads, as well as in water resources. We are currently looking to imple-ment one on water supply in East Java that was just ap-proved last month. This will be the first PPP in the water sector and Umbulan water supply will create 4,000 liters (1,000 gallons) per second to serve Surabaya and the other

five surrounding kabupatens (regencies) with an invest-ment of IDR 3 billion (ap-prox. $224,000)”.

In order to ensure the suc-cessful and timely comple-tion of its infrastructure goals, Indonesia’s govern-ment has reached out to international development agencies and international lending institutions for funding. Additionally and perhaps more importantly, it has passed a number of regulatory reforms to foster an environment more en-couraging for private sec-tor’s participation.

These substantial and per-tinent incentives are are sure to bring smiles to investor’s lips. They include allowing increased foreign ownership in certain areas of economic activity, bringing in deregu-lation packages connected with important sectors of in-vestment, slashing red tape through e-government ini-tiatives (including a one-stop shop for permit application through the Investment Co-ordinating Board, BKPM), and allowing PPPs based on payment availability.

As a “Plan B” to garnering private sector investment in infrastructure and funds from international lenders, the In-donesian government has devised innovative means of boosting the public treasury.

One critical step lauded by the business community has been the passing of the Tax Amnesty Law in July this year. This move, which encouraged under-the-table traders to declare income, has increased tax revenue substantially. Armed with these bonus funds, the gov-ernment could support a schedule of greater infra-structure spending and thus accelerate project timelines.

As proof in the pudding, the first phase of the tax amnesty has raised IDR 89.2 trillion (approx. $6.6 billion) for the national budget. This not insignificant amount actually accounts for more than 50% of the IDR 165 tril-lion program target up until Q1 of next year.

Certainly, even with the funds in place and the active support of the private sector, the rate of project realiza-tion is daunting. It will take the nation’s best managers, technical staff, engineers, lawyers and business devel-opment specialists to ensure that roads, ports, buildings and other structures are de-livered on time, under bud-get and at a high standard.

Certainly lucrative oppor-tunities for both individuals and firms will be won dur-ing this time. Employment in the construction sector will see hundreds of thou-sands of Indonesia’s archi-tects, engineers, tradesman, unskilled workers and sup-port staff receive generous salaries while building their country’s future.

Certainly, without such an undertaking, Indonesia will find it harder to provide for its people in an increasingly competitive global market. This is a point that has not been lost on policy-imple-menters.

As the man tasked with realizing much of the task Dr. Hadimoeljono remains focused on the far reaching consequences of successful conclusion for these infra-structure projects.

As he points out to United World, “Now is the era of competitiveness, and to be competitive we need better connectivity, which will re-duce the disparity between East and West Indonesia. We also have the challenge of creating employment opportunity and reducing poverty. The role of infra-structure is becoming more and more important in ad-dressing these challenges. This government is focused on serving the people, so when I look back on my term as minister, in 2019, I will be looking at what was achieved for the people, not what was planned.”

Infrastructure, connectivity number one priority

Government enacts large-scale infrastructure devel-opment to boost long-term economic growth and improve national competi-tiveness

“Infrastructure development is vital for Indonesia’s future economic growth”

ROSAN ROESLANI, Chairman, Indonesian Chamber of Commerce and Industry (KADIN)

“The message is clear, infrastructure is the number one priority program…the government undertakes only 30% or 40% of the projects, the rest would be an opportunity for private and state owned companies”

DR. IR. M. BASOEKI HADIMOELJONO, Minister of Public Works and Housing

“Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco labori”

LOREM IPSUM DOLOR,Lorem ipsum dolor

“I have told the Public Works Minister that I don’t want to work just one shift, but three shifts, because we have been left behind”

JOKO WIDODO,President of Indonesia

One critical step lauded by the business community has been the passing of the Tax Amnesty Law in July this year. This move has increased tax revenue which could support more government infrastructure spending. In fact the first phase of this amnesty has raised IDR 89.2 trillion (approx. $6.6 billion) for the national budget

“Spending will be focused on a number of key areas, including power generation through the 35,000 Megawatt program, but also toll roads, railways, harbors and ports. We have some issues regarding logistics cost, for example the distribution of the logistics from west to east leaves a large gap. This has led to uneven economic growth between the western and eastern islands of Indonesia. We have huge potential in natural resources in the east, but due to infrastructure limitations, this area remains underdeveloped” TETEN MASDUKI,Presidential Chief of Staff

Bajulmati Dam, East Java Province A bridge constructed in Maluku Province

Dr. Ir. M. Basoeki Hadimoeljono, Minister of Public Works and Housing Luhut Pandjaitan, Coordinating Minister for Maritime Affairs



Green, prosperous and at the heart of ASEAN

West Nusa Tenggara: Eastern Indonesia’s next big thing

One part of I n d o n e s i a has emerged in recent years as a

growing tourism hub, with a progressive SME development policy and potential to develop a major green field mari-time hub.

This is West Nusa Tengg-ara, locally known as NTB, a collection of heavily forested islands making up a prosper-ous and increasingly inter-nationally branded province of Eastern Indonesia. The province begins directly to the east of Bali – the coun-try’s tourism mecca. This collection of islands is best known for Sumbawa and Lombok, with the latter hav-ing emerged in recent years as an increasingly popular tourism destination.

For many, Lombok has be-come “The Unspoiled Bali” and is known as a tranquil alternative to its often hectic and crowded neighbor. The Gili Islands in particular, off the coast of Lombok, have become major drawcards for visitors seeking a relaxing, eco-tourism experience on its pristine, car-free shores.

The majority of the popu-lation of NTB is made of the Sasak ethnic group. They are related to the Balinese peo-ple, with religion the main distinguishing feature be-tween the two peoples. The famous Gandrung dance – a fertility ritual undertaken by young women in golden eye masks (a well-known symbol of Bali) is also a Sa-sak tradition. The Gendang beleq marching drum dance is also a Sasak musical tra-dition. Here groups carry-ing enormous drums play in the streets wearing colorful

costumes and public perfor-mances are a common site.

Dotting the green, forested landscape of Lombok are the charming, pile-built, bonnet shaped rice barns known as lumbung. These distinctive and quaint structures give villages a cozy, fairytale look.

Mataram on the west-coast of Lombok is the provincial capital. This historical sea port is known for its religious harmony with a plethora of Catholic churches, Hindu and Confucian temples and mosques existing side by side. The island’s Senggigi Beach tourism center is just a short distance from the city. White sand shores, crystal clear seas, fresh-water water-falls and a spectacular view of Mount Rinjani have made this a gateway attraction for visitors.

It is in fact tourism that has driven Lombok forward in recent years.

Lombok’s highlands are verdant and lush, with the Gunung Rinjani National Park offering hiking paths for tourists interested in fresh mountain air and stunning views. The area is dominated by an enormous crater lake, with a surface area of 6.8 square miles that is one of the most popular hiker destina-tions. This lake, Segara Anak Toba, offers breath-taking views of nature and fresh wa-ter heated by volcanic activ-ity beneath the surface.

The previously mentioned Gili Islands have become one of Lombok’s most popular tourism destinations. The three ‘Gilis’ (Gili Trawangan, Gili Meno and Gili Air) are tranquil destinations that offer nature-based, remote island experiences. Cars are not allowed on these islands so locals rely on bicycles and horses as the main forms of transport. The diving areas and beaches there are re-nowned throughout Indo-nesia and continue to draw more international and do-mestic holiday-makers.

The numbers speak for themselves, as the province’s youthful governor, Muham-mad Zainul Majdi, explains, “In 2008, NTB received 480,000 tourists, and then by 2013, we reached 1 mil-lion tourist arrivals. In the year of 2016, we have already achieved 2 million tourists. As we can see, the growth accelerates very quickly un-der the right conditions.”

Perhaps due to the suc-cess of Lombok’s domestic efforts, the island has been incorporated into the na-tional tourism development strategy (see page 7). Prior-ity zones are being devel-oped to demonstrate that the country of 17,000 islands has more than Bali to offer foreign visitors.

To this end a special eco-nomic zone has been estab-lished on the idyllic virgin island of Mandalika. With incentives to invest and tax breaks, it is expected that the island will quickly trans-form into a popular area for travelers as facilities are put in place.

“Our Mandalika Special Economic Zone is one of the 10 main destinations for tour-ism development beyond Bali. Our geostrategic posi-tion in terms of sailing makes it possible to be developed as a global hub, especially in the northern area of Lombok”, says Governor Majdi.

In addition to increas-ing tourist numbers from traditional markets, Indo-nesia has also initiated a

strategy particularly target-ing the global halal tourism boom. Also known as ‘fam-ily-friendly’ tourism, halal tourism is aimed at creating conditions conducive to at-tracting visitors from the moderate Muslim commu-nities. This entails upscaling the destination’s attractive-ness by ensuring the avail-ability of halal food, places of worship and accommoda-tion catered to the needs of this group.

The primary source of these visitors include resi-dents of affluent areas in-cluding Gulf Cooperation Council (GCC) states. Ser-vices demand also exists from non-Muslim major-ity countries that have fast growing Muslim communi-ties. These include the Eu-ropean Union, U.S., Canada, China and India.

Studies show that halal tourists usually travel with more family members, stay for longer periods and ultimately spend more money than oth-er tourist groups. As a result, tourism branding campaigns for Lombok are adapting their approach and services to bet-ter suit this tourist niche.

Lombok’s historical links to Arab seafarers has given it a competitive advantage in this area. Many centuries ago, Yemeni traders estab-lished a community in the port of Ampenan, a coastal district of Mataram. This quarter still boasts architec-ture as well as historical and cultural heritage from this Yemeni period.

Underpinning the growth of areas of economic growth such as tourism are progres-sive local policies aimed at encouraging youth involve-ment in business.

These policies are starting to bear fruits eight years on, according to Governor Ma-jdi. “In 2008 we introduced our program called ‘100,000 Wirausaha Baru’ (100,000 New Entrepreneurs). The backbone of this program

is our youth and we aim to empower the young gen-erations of NTB through its implementation. I believe that NTB’s economic struc-ture can be strengthened not only in the agriculture sec-tor, but also in the entrepre-neurial sector. Through this strengthening we can create sustainable growth through micro and small-medium enterprises”.

On top of grassroots economic empowerment, Lombok is set to play a big-ger role in the nation’s sea-based connectivity. Through developing port locations along the Lombok Strait it is possible to drastically cut down shipping costs and im-prove the movement of mer-chant marine vessels.

“Our President has de-clared creating the global maritime axis as one of his administration’s priorities, and of course we will con-tribute to do that. In fact, to achieve this global maritime axis, a key factor would be the utilization of Lombok Strait (Selat Lombok). Lom-bok Strait has several char-acteristics that Malaka Strait does not have,” says Gover-nor Majdi.

These favorable condi-tions have created invest-ment opportunities for business people interested in cashing in on Indonesia’s ever growing sea transport and logistics sector. Once such site exists in the is-land’s north. Plans are afoot to provide a number of fiscal advantages for investors and business partners in devel-oping this potentially lucra-tive maritime hub.

As Governor Majdi ex-plains, “We have a very good location for a potential port in Lombok called ‘Kayangan’. We have already started talk-ing with the people there, so I believe the needs of land acquisition could be fulfilled. We will be preparing the regulations that will accom-modate this plan now, and

we are communicating with the central government to make the territory a Special Economic Zone (SEZ). This aims to give incentives for in-vestors who plan to build and develop the Kayangan area”.

Time will tell how NTB progresses in its goal to de-velop tourism, promote SME growth and become a key sub-regional maritime logis-tics hub. However the signs are positive and if recent achievements are anything to go by, this island may well be the next big investment destination for Eastern In-donesia.

Strategically on the eastern coast of Sumatra, along the Strait of Malacca and close to neigh-

boring Malaysia and Singa-pore, Riau province sits at the center of the ASEAN region and is known for its natural resources and end-less forests.

The provincial capital and largest city is Pekanbaru, which translates as ‘new market’ in Indonesian. It has long been known as a mercantile center since the Kingdom of Siak fell under the influence of the Dutch East India Company during the mid-1700s. This strategic city of trade was transferred to the Dutch authorities and remained a commercial asset during the colonial period.

Today, Pekanbaru is known for being one of the cleanest cit-ies in Indonesia having won the prestigious cleanest city award for the seventh time in a row in 2011. Pekanbaru is also famous for its wide main roads, and for its tolerance. Besides being home to a large Christian and Muslim demographic it also has a significant Chinese minority, which makes up more than 10% of the city’s population.

As a province, Riau is known as being one of the most pros-perous in Indonesia, with rich deposits of hydrocarbons and lucrative palm oil and rubber plantations.

International oil companies, including Chevron have offices in the province. There is also a substantial oil refining and ex-port facility in the port of Dumai.

Although petroleum has transformed Riau into some-thing of an Indonesian Texas, forestry has increasingly be-come a lucrative source of in-come and employment for the province. Important investors in Riau include PT Riau An-

dalan Pulp Paper (RAPP) and PT Asia Pulp and Paper (APP). These two Indonesian paper giants have embraced sustain-able plantation harvesting and reforestation practices over the last decade to ensure the future of the sector.

“We have a total of a million acres under restoration and con-servation at the moment. We are committed to spending $100 million for conservation over 10 years” explains Tony Wenas, RAPP’s President Director.

Along with its major environ-mental commitments, RAPP has invested heavily in Riau in recent years, especially in im-proving downstream product volumes. In fact this period of low commodity prices has been utilized by the company to upgrade its capacity, including commissioning a new $300-mil-lion paper mill.

This aligns with the eco-nomic vision of Riau’s governor, Arsyadjuliandi Rachman, who has implemented a number of reforms designed to encourage visitation and increase the ease of doing business in the prov-ince. Prior to becoming gover-nor, he spent most of his career in the private sector after study-ing in the United States. Mr. Rachman was particularly active in the Young Entrepreneurs As-sociation (HIPMI), and went on to serve in Jakarta as a member of parliament and also spent time as a senior representative of the Indonesian Chamber of Commerce (KADIN).

These experiences working in companies, serving in govern-ment and managing business as-sociations have certainly shaped his approach to developing Riau’s economy, and increasing finished product generation is one of them.

“We are looking to create jobs in value-added sectors, as we have all the raw materials, we just need to develop the down-stream. For this we will need the private sector’s involvement,” ex-plains Governor Rachman.

One of the major ecological

issues afflicting the province and its neighbours, which also hinders economic development tremendously, has also been successfully tackled by a range of initiatives from two of its major investors: RAPP and APP.

Vast forest peat fires have plagued the area and caused damaging smog clouds. These are primarily the result of slash-and-burn fires caused by farm-ers that get out of control.

For its part, RAPP has imple-mented an effective preventa-tive initiative called the Fire-Free Village Program (FFVP).

Beginning two years ago, the FFVP aimed to encourage responsible land management practices by providing incen-tives to communities that end slash-and-burn activities. Vil-lages that keep their area free of fire receive around $7,500 in assistance from the company, a significant amount for rural communities there.

Alternatives to burning off are provided through the com-

“In 2008, NTB received 480,000 tourists, and then by 2013, we reached 1 million tourist arrivals. In the year of 2016, we have already achieved 2 million tourists. As we can see, the growth accelerates very quickly under the right conditions”

MUHAMMAD ZAINUL MAJDI,Governor, West Nusa Tenggara

By cultivating its natural advantages, Lombok, West Nusa Tenggara’s main island, is rapidly developing its economy and emerging as a regional hub.

“Our position in the region is right at the heart. We are perhaps the best-located province to take advantage of the ASEAN’s economic integration. We have an impressive mix of regional and multinational companies that are already based here and that number is set to grow”

ARSYADJULIANDI RACHMAN, Governor of Riau

“We have a very good location for a potential port in Lombok called ‘Kayangan’. We have already started talking with the people there, so I believe the needs of land acquisition could be fulfilled. We will be preparing the regulations that will accommodate this plan now, and we are communicating with the central government to make the territory a Special Economic Zone (SEZ). This aims to give incentives for investors who plan to build and develop the Kayangan area”

MUHAMMAD ZAINUL MAJDI,Governor, West Nusa Tenggara

Business-friendly Riau is working to encourage visi-tation and investment while also preserving its forests



Taking into account the volume of territory and p o p u l a t i o n

that the greater Bandung area encompasses, this city is in fact the country’s second largest metropoli-tan zone after Jakarta. Its close proximity to the capital, just 87 miles to the south, is contrasted by its location high in the mountains. At over 2,500 feet above sea level, Band-ung is much cooler than Indonesia’s humid, sea-side population centers.

Due to its agreeable climate and ease of accessibility (even reachable by a short and sce-nic railway journey) the city is a popular getaway destination for Jakartans. Offering an array of nightlife, restaurants, fashion bargains (due to a plethora of outlet stores located adjacent to textile factories), golf courses, green tea plantations and near-by hot springs – it is a welcome break from the busy capital.

Perhaps as a result of its comfortable climate and the fertile agricultural conditions of the nearby Parahyangan Mountains, Bandung was de-veloped into something of a re-sort city during colonial times. Over the years it became fa-mous as the “Paris of Java” with its sumptuous luxury hotels, European restaurants, cafes and boutiques. The tradition continues today.

Also as a consequence of its popularity with the Dutch, Bandung became the site of the country’s first universities. This included the establishment in 1920 of the precursor to the country’s oldest and most pres-tigious higher education insti-tution, the Bandung Institute of Technology. Since this time the city has become a national edu-cation hub and boasts over 50 higher educational institutions in operation today.

This education focus has fostered the city’s growth as the center of development for Indonesia’s aerospace and avia-tion sector. To this day Band-ung produces aircraft for ex-port and is at the heart of next generation defense technology research and development.

In addition to being a well-established center for learning, fashion and tourism, follow-ing independence the city was the site of the young republic’s most important international diplomatic event – the First Asian-African Conference. Held in 1955, this event was a turning point for the promo-tion of world peace and op-position to colonialism from developing nations. The rise of nationalist movements around the world that were inspired by this conference changed the map of the world and defined Cold War alignments.

Given the city’s background, it is perhaps not surprising that Ridwan Kamil, Bandung’s may-or, is a UC Berkley educated architect. Prior to being elected, he lectured as a university pro-fessor and has worked to bring international ideas, technology and best practice to Indonesia’s most dynamic city.

One key reform issued in by the mayor was simplifying the ease of establishing small- and medium-sized enterprises (SMEs). All registration fees were removed, and the process for applying permits was com-pletely digitalized. According to the mayor, this led to the establishment of 30,000 busi-nesses within six months of the platform being launched.

Technology, innovation and making use of people’s talents has been a hallmark of Mayor Kamil’s policies. “In terms of the economy, Bandung does not have natural resources or ener-gy resources, so human capital resources are our focus, which means I am focused on having a more creative economy in Bandung”, says Mayor Kamil.

“The creative economy has 13 different sectors and one of the 13 is ICT. I am creating ICT hubs everywhere, much of them hidden, where we have fitted out old buildings with the best technology. They are our so-called ‘guerilla work-shops’. Beyond this, one of our flagship projects is the new ICT park, Bandung Technop-olis, which is six hectares dedi-cated solely to technology.”

This approach has brought in real results and attracted foreign direct investment from international sources, attract-ed by the tradition of techno-logical innovation and strong human resources on offer.

“This year I secured $100 million in investment from UTC, an aerospace produc-tion company in the U.S. They are going to be based in Bandung Technopolis. They chose our city because we have world-class engineers that live in Bandung; and beyond that, our population is young; 60% are under 40, and highly edu-cated, as we have 50 universi-ties and research institutes here. Investors can use Band-ung to tap into the 50 million middle-class Indonesian con-sumers, or they can use it like UTC, which does not actually sell into the Indonesian mar-ket,” explains the mayor.

The city is in talks with Ap-ple to establish a startup facil-ity. An animation operation,

which will employ some 600 locals, will also be opening its doors in Bandung soon. All told, over the last three years more than 50 international institutions have met with the mayor’s office to discuss es-tablishing operations.

To keep pace with the city’s growth, the mayor is pushing a rapid program of infrastruc-ture upgrades. This includes “monorail, LRT (light rail transit), cable car, electric bus-es, highways and hospitals” to keep up with the needs of 2.4 million residents and some 6 million annual visitors.

These projects will require budget beyond the city’s means and Mayor Kamil has acknowledged the shortfall and implemented a solution.

“We finance 100% (of in-frastructure projects) mostly through the central govern-ment, which is not nearly enough. For example, my an-nual budget for development is $300 million. Now, over five years that is $1.5 billion to spend on everything, how-ever my planning team trans-lated my vision for Bandung and it was more or less $6 bil-lion. I am short $4.5 billion, so

Bandung either needs to wait for nine mayors to finish the job, or you fund things in a creative way.”

This creative way is public -private partnership (PPP). Bandung has applied the best examples from Europe to get private investors involved.

As the mayor tells Unit-ed World, “Bandung is the first city to really push this agenda. I lobbied the President and I said that Bandung needs at least $4 billion, and if you multiply that by the 500 cities in In-donesia, that is $2 trillion for city infrastructure. That number needs to be com-municated to the world, we need to invite investors to Indonesia and tell them that besides federal proj-ects there are city projects. So, in Bandung we have set up a PPP center so inves-tors will have an indepen-dent unit set up to accom-modate the process.”

One point the Mayor Kamil raises is Bandung’s well-known reputation as a tolerant, cosmopolitan place international partners can enjoy visiting and living in.

“Bandung is a model city, it is representative of Indone-sia, we have 4,000 mosques, the highest per capita in the country, but we also have bars, clubs and karaoke. We are an open-minded society, so it all works together”

Technology, creative economy drive Bandung’s growthThe capital of West Java and traditional center of the Sundanese people, Bandung is the country’s most dynamic and open-minded technology hub

Over the years it (Bandung) became famous as the “Paris of Java” with its sumptuous luxury hotels, European restaurants, cafes and boutiques. The tradition continues today

“In terms of the economy, Bandung does not have natural resources or energy resources, so human capital resources are our focus”

RIDWAN KAMIL, Mayor of Bandung

pany’s agricultural assistance program. Excavators and hand tractors are made available to villagers, offering an alternative to slash and burn.

APP, also a major investor in the region, has worked to battle the forest fires by mobilizing a large, well resourced network of locals.

This community engage-ment program is able to mo-bilize more than 2,600 reserve firefighters from across 220 vil-lages. They provide training and equipment for local forest fire management personnel who are from the local communities.

Of course, preventing fires to begin with is better than de-ploying resources to extinguish them. Developed with $10 mil-lion in funding and introduced during COP21 in Paris last year, the Integrated Forestry and Farming System (IFFS), imple-mented by APP, is a commu-nity empowerment program, designed to support communi-ties in developing agroforestry – where agriculture is inter-twined with natural forest – as an alternative to slash and burn farming.

With deforestation and ag-riculture accounting for nearly a third of global emissions, en-couraging sustainable land use is essential to climate change mitigation and adaption. But with 350 million people world-wide living in or near forests, the needs of people must be at the heart of efforts.

One year after its launch, APP’s IFFS program is active

in 58 communities, with 22 ex-pected to join the program by the end of the year. APP has a target of reaching 500 commu-nities by 2020. Communities have been selected on the basis of a model that assesses proxim-ity to APP’s forest concessions and the vulnerability of the local area to forest fire, deforestation and conflict over resources.

The objective of each com-munity project is to boost in-come levels by 30% to 50% over the period of three years by pro-moting economic activities that are closely linked with the vi-ability of areas of natural forest – thus ensuring that communities have a direct stake in the protec-tion of the rainforest. Projects to date have involved animal hus-bandry, rice, corn and vegetable farming as well as the develop-ment of Kemiri Sunan in West Kalimantan as a potential source of bio-fuel for Indonesia’s B15/B20 biodiesel program.

As Aida Greenbury, APP’s Managing Director of Sustain-ability explains, “We believe that this agroforestry program will help communities to achieve economic development while protecting Indonesia’s forests,”

Additionally, and importantly for biodiversity, like RAPP, APP has set aside one and a half mil-lion acres of forest as exclusive wildlife conservation zones. Ap-proximately 70% of the habitat of Sumatra’s iconic fauna is lo-cated within these designated conservation areas, which host much of the island’s tropical rainforest heritage.

These famous forests of Sumatra, with tigers, rhino, elephant and orangutan have been a draw card for tour-ists for generations. Due to its proximity to Indonesia’s neighbors, Pekanbaru serves as a major gateway for tour-ists from Malaysia and Sin-gapore who are just a stone’s throw away on the other side of the Strait of Malacca. These travelers, who are increas-ingly seeking to explore the jungles of Sumatra, (of which a good portion is to be found in Riau) often spend time in the province’s capital enjoying the culture and shopping of this di-verse city. However compared to other parts of Indonesia, Riau is relatively undiscovered.

As Governor Rachman tells United World, “I am focusing a lot on tourism, which has not been done much before. We are looking abroad, we see the potential, and I am sure inves-tors will as well”.

Feeding into increased visitation is the governor’s vi-sion to position Riau at the ASEAN’s economic center by taking advantage of growing regional ties and removal of trade and movement barriers.

“Our position in the region is right at the heart. We are perhaps the best-located prov-ince to take advantage of the ASEAN’s economic integra-tion. We have an impressive mix of regional and multi-national companies that are already based here and that number is set to grow”.

“This year I secured US $100 million in investment from UTC, an aerospace production company in the U.S. They are going to be based in Bandung Technopolis”

RIDWAN KAMIL, Mayor of Bandung

A central part of any smart city, Bandung has its own technologically advanced command center

Candi Muara Takus



For years, Indo-nesia has faced a number of bar-riers for increas-ing its share of

foreign direct investment. Investors have been frus-trated by difficulty and lengthy process of land procurement, limited supplies of raw materials, utilities shortages and in-frastructure short falls. All of this has come at an untold opportunity cost for the nation as poten-tial international business partners look elsewhere.

However since the elec-tion of President Joko Wido in 2014, the government has undertaken a number of con-crete measures to mitigate these issues. Thirteen eco-

nomic policy packages have been introduced, including deregulation measures and incentives that are designed to improve the ease of doing business.

Superstitions regarding numbers aside, these pro-business initiatives have ad-dressed the key limitations and bottlenecks that have plagued investors.

The very first package, released in September of 2015 was primarily aimed at boosting industrial competi-tiveness. It included reducing bureaucracy and improved the ease of acquiring licens-ing while boosting legal com-pliance in business practices.

Not surprisingly, the in-dustrial sector was the first to be focused on, due to its strategic significance to the country’s economy, as the country’s Minister of Indus-try Airlangga Hartarto, ex-plains, “Indonesia’s industries contribute 30% to 40% to GDP and that is set to grow with the further develop-

ment of new strategic sectors and manufacturing.”

This focus is helping to ween the country away from the commodities sector, es-pecially oil, which has domi-nated its economy since colo-nial times.

Dr. Bambang Brodjone-goro, Indonesia’s former Fi-nance Minister and current Minister of National Devel-opment Planning, acknowl-edges the need for a pivot in this area: “It is challenging to find new sources of growth, especially after the collapse of the commodity price, as well as weakening global demand. On top of this, we have had increased market volatility as a result of Brexit. Within this weak and uncertain position globally, Indonesia needs to find alternative growth and of course, there are sectors like manufacturing that we can capitalize on to create higher growth.”

An especially important weather vane for the manu-facturing industry is the textile

and garment business, which is seen as the sub-sector that has moved this area forward for decades. It has grown to become fully integrated is and well known internationally for quality end products.

“In 2015, the textile and garment industry employed 3 million workers – 10.6% of to-tal employees in the manufac-turing sector – with an invest-ment value that reaches IDR 8.45 trillion (approx. $627 million). The contribution is also significant to national in-come with exports valued at $12.28 billion in 2015. To raise the exports, the government facilitates the industry with potential incentives; includ-ing tax exemptions for raw materials used in exported products from value added tax and lower gas prices,” says Dr. Brodjonegoro

Lowering energy prices is an important point that has been factored into the 13 packages and will be needed to ensure Indonesia’s Na-tional Medium-Term Devel-opment Plan (2015-2019) is carried out successfully.

This strategy includes the development of industrial zones beyond their tradi-tional base of Java by “fa-cilitating the development of 14 industrial estates and 22 centers for small and me-dium scale industry around the country; and increasing competitiveness and pro-ductivity through enhance-ment of technical efficiency, technology and innovation, and the development of new products”, says Mr. Hartarto.

At the core of developing these industrial zones, as well as supporting special investment zones is close coordination among the ministries. Coop-eration on infrastructure devel-opment in these areas between the Ministry of Industry and the Ministry of Public Works is absolutely vital to ensure roads, electricity, water and other vital links are in place to support in-dustrial growth.

The defense sector is one area of industrial activity that is set to benefit from these policies. Historically, Indo-nesia was traditionally strong in defense production until restructuring measures were implemented following the 1997 Asian Financial Crisis. Aerospace capacity was par-

ticularly sophisticated and now through international cooperation it is hoped that this area of industry can be revived.

Indonesia’s Minister of Defense, General Ryamizard Ryacudu tells United World, “With new regulations meaning 49% of an Indone-sian defense company can be foreign owned, there are also opportunities for greater partnerships and technology transfer. We are currently in partnership with some Ital-ian companies to build an ar-mament factory. We would of course welcome further partnerships like this where there is also a high degree of technology transfer”.

The general is bullish about the benefits international co-operation will have on the quality of vehicles, ships and aircraft used by Indonesia’s defense force, and is keen to see more partnership.

“The more private com-panies involved the better, so that they can compete to provide the best equipment, and especially maintain the major equipment. There are 200 shipyards in Indonesia, but only 20 are appointed to build ships and vessels for us. We can ask them to build armored personnel carri-ers, vital aircraft, vessels and drones,” he says.

These incentives to boost industrial production have worked hand in hand with regional economic integra-tion policies that will open up more markets to Indo-nesian industrial producers. According to Mr. Hartarto, “The government strives to enlarge the market and improve cooperation for national industry. This is materialized in the compre-hensive implementation of free trade agreements. More opportunities for interna-tional industrial cooperation are expected to increase the

performance of exports, as well as increase employment in Indonesia.”

At the core of this inter-national cooperation is tak-ing advantage of the ASE-AN Economic Community which Indonesia joined at the end of last year.

The Indonesian govern-ment’s pragmatic approach to taxation is another mea-sure that has shown results, and is somewhat reminis-cent of Winston Churchill’s famous question: “Can a people tax themselves into prosperity? Can a man stand in a bucket and lift himself up by the handle?”

Taking this principle into account, a tax amnesty was announced to encourage the repatriation of funds which has injected a vast amount into the economy and, seem-ingly conversely into state revenue treasuries.

“There are many individ-uals and companies in Indo-nesia that have vast fortunes in assets and banks abroad, even though the income or revenue was from Indone-sia,” says Dr. Brodjonegoro.

“This has resulted in limited liquidity domesti-cally, and if we want higher growth we need that capital back in the economy. From our point of view…we can-not force them to bring the money back, because of le-gal limitations in Indonesia. We need to persuade them, which means giving an in-centive, which in our case is the tax amnesty. With the tax amnesty, companies and individuals will repatri-ate or bring capital back to Indonesia, or declare the unrecorded asset to the In-donesian tax authority.”

To date, the first phase of the tax amnesty has raised $6.6 billion for the national budget.

Economic reforms grow key sectors, increase investment

“Indonesia’s industries contribute 30% to 40% to GDP and that is set to grow with the further development of new strategic sectors and manufacturing”

AIRLANGGA HARTARTO, Minister of Industry

Faced with challenging global economic conditions, Indonesia is improving the ease of doing business, attracting cash inflows and wooing investors, particu-larly in the industrial sector

Since the election of Joko Wido in 2014, the government of Indonesia has undertaken a number of concrete measures to mitigate these issues. Thirteen economic policy packages have been introduced, including deregulation measures and incentives that are designed to improve the ease of doing business

ECONOMIC STIMULUS PACKAGES OF THE INDONESIAN GOVERNMENT:

Source: Indonesia Investments

PACKAGE UNVEILED MAIN POINTS

1st 9 SEPTEMBER 2015 • Boost industrial competitiveness through deregulation • Curtail red tape • Enhance law enforcement & business certainty

2nd 30 SEPTEMBER 2015 • Interest rate tax cuts for exporters • Speed up investment licensing for investment in industrial estates • Relaxation import taxes on capital goods in industrial estates & aviation

3rd 7 OCTOBER 2015 • Cut energy tariffs for labor-intensive industries

4th 15 OCTOBER 2015 • Fixed formula to determine increases in labor wages • Soft micro loans for >30 small & medium, export-oriented, labor-intensive businesses

5th 22 OCTOBER 2015 • Tax incentive for asset revaluation • Scrap double taxation on real estate investment trusts • Deregulation in Islamic banking

6th 5 NOVEMBER 2015 • Tax incentives for investment in special economic zones

7th 4 DECEMBER 2015 • Waive income tax for workers in the nation’s labor-intensive industries • Free leasehold certificates for street vendors operating in 34 state-owned designated areas

8th 21 DECEMBER 2015 • Scrap income tax for 21 categories of airplane spare parts • Incentives for the development of oil refineries by the private sector • One-map policy to harmonize the utilization of land

9th 27 JANUARY 2016 • Single billing system for port services conducted by SOEs • Integrate National Single Window system with ‘inaportnet’ system • Mandatory use of Indonesian rupiah for payments related to transportation activities • Remove price difference between private commercial and state postal services

10th 11 FEBRUARY 2016 • Removing foreign ownership cap on 35 businesses • Protecting small & medium enterprises as well as cooperatives

11th 29 MARCH 2016 • Lower tax rate on property acquired by local real estate investment trusts • Harmonization of customs checks at ports (to curtail dwell time) • Government subsidizes loans for export-oriented small & medium enterprises • Roadmap for the pharmaceutical industry

12th 28 APRIL 2016 • Enhancing the ease of doing business in Indonesia by cutting procedures, permits and costs

13th 24 AUGUST 2016 • Deregulation for residential property projects for low-income families



As Southeast Asia’s largest archi-pelago located at the center of the ASEAN

region, Indonesia is incred-ibly well-placed to grow as a tourism destination. Welcoming locals, endless summer, countless beaches, incredible cuisine, stun-ning natural heritage, and a unique and varied cultural mix has drawn increasing numbers of visitors to the country for decades.

Bali is perhaps the best known of the Indonesia’s 17,000 islands. From the 1970s onwards this tranquil island of Hindu temples, white sand beaches and forest covered mountains has transformed from an obscure province into an international tourism me-ga-destination. Since its “discovery” some 40 years

ago by Australian surfers and Dutch holiday makers, Bali has served as a gateway destination for the rest of the country.

The popularity of the is-land opened the world’s eyes to the amazing vistas on offer across the rest of the vast archipelago nation. Today it still dominates the average visitor’s itinerary. According to official sta-tistics, visits to Bali alone account for approximately 45% of Indonesia’s total tourist numbers.

Largely as a result of this lasting international love affair with Bali, there has been a steady growth in the national tourism sector. One driver of this has been the changing makeup of in-ternational visitors over the intervening decades. Trav-elers from Europe, neigh-boring ASEAN states, other parts of Asia, the Middle East and the U.S. have con-tinued to increase in num-ber during this time.

Although visitors from the U.S. are the premier holiday spenders in the Asia-Pacific region (generating more than $231 billion for the sec-tor in 2015), relatively few visit Indonesia compared with citizens of nearby countries. Chinese and East Asian tourists are coming in increasingly higher numbers and over the last few years have become particularly prominent in Indonesia. For the first 9 months of this year Chinese accounted for roughly one-fifth of over-all visitor numbers in Bali, rivaling Australians, who previously were the largest single visitor group.

Altogether, approximately 10.5 million foreigners trav-eled to Indonesia in 2015, according to statistics sup-plied by Indonesia’s Ministry of Tourism. Approximately $12.4 billion was gener-ated by these visitors for the country’s economy during this time, a significant liveli-hood generator.

The government believes that Indonesia can attract significantly more visitors in the years to come, which is completely logical given the tremendous area it has to offer geographically.

In fact, it has set an am-bitious goal of doubling the absolute number of visi-tors by 2019. This would mean bringing in a total of 20 million tourists. If successful, this would lead to the creation of some 13 million new jobs while boosting the economic footprint of the sector to $25 billion.

In order to make this a reality, a war chest of $200 million has been allocated by the Indonesia govern-ment to encourage visita-tion and increase tourist numbers. The creation of the “Wonderful Indo-nesia” brand, in addition to a number of initiatives to develop the sector has seen it increase its ranking in the Travel and Tourism Competitiveness Index of the World Economic Fo-rum. Currently, Indonesia is ranked 47th out of 144 countries, according to the 2015 report.

As the tourism sector begins to take shape as a new catalyst for economic growth, the government is taking concerted action to promote new tourist desti-nations and ensure they are capable of handling rising numbers of holiday makers.

At its core is a policy of promoting Indonesian tour-ism destinations beyond Bali. Altogether ten special-ly prioritized tourism desti-nations have been designat-ed for promotion to absorb increasing tourist numbers.

These destinations, cho-sen for their location and at-tractions, are spread across the country. Some like the Borobudur Hindu Temple offer fascinating cultural and religious significance. Others such as the lush vol-canic Mount Bromo in East Java or Lake Toba, a vast pristine crater lake in North Sumatra offer spectacular inland adventure.

Belitung, Tanjung Lesung, Morotai and the Thousand Islands are all known for their white sand beaches. Komodo Island with its famed dragons, and Wakatobi National Park, an underwater sanctuary, are unique nature reserves. Adjacent to Bali, Lombok has emerged as the center of Indonesia’s family-friendly tourism boom.

However it is not as simple as promoting the destinations and opening the country to a f lood of new arrivals. As Napoleon once famously remarked,

“Amateurs talk strategy, experts talk logistics”, and this is particularly true for realizing Indonesia’s tour-ism vision.

In order for increasing volumes of visitors to be able to access and to be absorbed by the ten rising destina-tions, critical infrastructure has to be built. This in-cludes the construction or expansion of airports, roads, bridges, maritime ports and the related utilities needed to make these developments function.

This comes at a hefty price tag of $20.8 billion – well beyond state allocation for the development of the sector in any country. So in order to raise the funds to develop these new tourism zones, the Indonesian gov-ernment is working to at-tract the needed investment by holding international roadshows.

A dedicated project team has toured the ASEAN re-gion meeting with busi-ness communities. So far it has succeeded in enticing no less than ten potential large-scale investors who showed interest in building resorts, hotels, theme parks

and other amenities in the targeted destinations. Natu-rally the estimated returns are substantial.

At the time of writing in-terested investors from the wider region, including Chi-na, Hong Kong, South Ko-rea, Australia and Japan are also in talks with the proj-ect team. It is also expected that significant investments focused on tourism will be forthcoming coming from Dubai, which invested $1.5 billion in Indonesia last year.

Four of the ten top destina-tions have achieved special economic zone status, which would facilitate investment by offering advantageous conditions for investors. These locations are Tanjung Lesung, Morotai, Mandalika (Lombok), and Tanjung Ke-layang (Belitung).

The government aims to transform all ten prior-ity destinations into special economic zones in the near future. Such a move would certainly hasten the arrival

of business interest needed to transform these areas into tourist hubs.

In terms of government spending, $122 million has been allocated specifically to developing infrastructure in Lake Toba, Mandalika and Borobudur. Over the next two years these funds will be spent on a variety of infrastructure projects cov-ering drinking water provi-sion, improved road access, sanitation and housing in these areas.

Lake Toba’s portion will include toll road construc-tion, needed to better con-nect the remote location with major urban areas. Work in Mandalika will fo-cus on bridge improvement, the expansion of roads maintenance, and the con-struction of an irrigation network in the central part of Lombok.

Spending for Borobudur includes housing develop-ment, road reconstruction, the building of new toll roads, and a regional drink-ing water system.

Beyond private sector investment and national budget, the government of Indonesia is also seeking to

obtain funds from interna-tional lending institutions, specifically the World Bank, to cover infrastructure de-velopment in these destina-tions. A loan of $200-$500 million is being discussed to cover the creation of vital infrastructure.

Early steps towards real-izing these developments have been positive. In 2015, combined direct invest-ment (both foreign and domestic) in hotels and res-taurants totaled $1 billion. This represents an increase of 45% when compared with the previous year.

Importantly, as acknowl-edged by international lending institutions, red tape and busi-ness licensing is being reduced in order to promote growth. In fact there was a five-fold growth in the number of in-vestment licenses approved in the hotel and restaurant sec-tors in 2015, when compared with the previous year.

In addition to traditional tourism, international fo-

rums, conventions and con-ferences have also driven up visitor numbers. This has especially been the case in Jakarta, Bali, and Batam (directly adjacent to Singa-pore), which have hosted an array of international events.

The Ministry of Tour-ism has been increasingly focused on tapping the world’s largest tourism mar-ket – China. To date, Indo-nesia has welcomed around 1.2 million Chinese tourists. This represents only one percent of the country’s to-tal outbound travelers.

Data collected so far this year already points to a sig-nificant increase in overall tourist numbers from other niche markets. Increase in visitation from France, In-dia, and the Middle East in particular has seen double-digit growth when com-pared with the previous year.

The latter group in par-ticular has been particular-ly drawn to Lombok, which offers family-friendly ap-

proach favored by Middle Eastern visitors. According to official statistics, in 2015 approximately 182,000 tourists from the Middle East and North Africa (MENA) region visited In-donesia. It is expected that by the end of 2016, govern-ment planners estimate this number will double to 300,000.

If visitor numbers con-tinue to increase in the same way they have for the first three quarters of the year, Indonesia will come close to achieving its tar-get of attracting 12 million visitors by December 31.

This bodes well for reaching its challenging, though not unobtainable target of 20 million tourists by 2019. With the infra-structure in place, Indone-sia will be able guarantee that more visitors than ever before experience a relax-ing, unique and enjoyable holiday in this vast archi-pelago.

ARIEF YAHYA, Minister of Tourism

The creation of the “Wonderful Indonesia” brand, in addition to a number of initiatives to develop the sector has seen it increase its ranking in the Travel and Tourism Competitiveness Index of the World Economic Forum. Currently, Indonesia is ranked 47th out of 144 countries, according to the 2015 report

Setting the stage for 20 million tourists by 2019 Indonesia’s Minister of Tourism is committed to doubling tourist numbers over the next three years. This will be achieved by improving infrastructure linking the country’s 10 new up-and-coming travel destinations

Komodo Island Borobudur Temple

Belitung



10 Priority DestinationsThe government has outlined 10 strategic locations and attractions which will be the basis for the “new Balis”.

LaBuaN BajO’S KOMODO The gateway to the famous Komo-do Island is Labuan Bajo, a coastal town located at the western end of Flores in the Nusa Tenggara region of east Indonesia. Once an isolated fishing village, today Labuan Bajo is fast becoming a busy center of re-gional tourism.

Komodo dragons the world’s largest lizards (which grow to a length of 10 feet and weigh up to 150 pounds) are only found on the Komodo, Rinca and Padar Islands. Labuan Bajo is the launching point for expeditions to these Jurassic Park-like destinations.

Of course there is more to the is-lands than just man-sized reptiles. The Kanawa and Seraya Islands, located near Labuan Banjo, offer excellent, clear waters for divers or snorkelers. In Kalong Island thou-sands of flying fox bats appear in the evening, creating an amazing natu-ral display.

Close to the town of Labuan Bajo itself are both jungle and seaside ecotourism sites. These include waterfalls, mountain trekking trails and an array of beaches.

THE THOUSAND ISLANDSLooking for a relaxing island get-away less than 30 miles from Jakarta, Indonesia’s sprawling capital? Then look no further than the Thousand Islands.

Scattered throughout Jakarta Bay, this array of 120 tropical islands and coral atolls offer everything from luxury resort living to a private, cast-away escape under a grove of coco-nut trees.

With a minute population of around 13,000 people, the bay is made up of a mix of both inhabited and uninhabited islands. A quick speedboat from the mainland or a leisurely cruise can easily transport the holiday maker to either.

Dominating the site is the Thou-sand Islands Marine National Park. This stretch of reef and vibrant un-derwater habit covers the archipelago and teems with life. Divers, snorkelers and boating enthusiasts can explore this immense ecosystem while island hopping from atoll to atoll.

One particular part of the island chain, Paradiso, speaks for itself. This scenic slice of heaven offers white sand beaches and spectacular views of the forest and the sea.

MOROTAIThis spice island speaks to anyone who has dreamed of being a cast-away in a remote Pacific paradise archipelago. Sparsely populated and located in the remote prov-ince of North Maluku, Morotai is a pristine, untouched paradise literally littered with history.

Dugongs, dolphins, fish and tropical marine wildlife co-exist amongst shipwrecks, rusting amphibious troop carriers and relics from World War II. The island had been the site of major battles during the closing days of the Pacific Campaign, and it shows.

For nature lovers it boasts underground rivers, rich reefs, butterflies, birds, uninhabited beaches and a plethora of diving wrecks to explore.

The sparkling blue colors of the ocean turns into lush green hills covered with the region’s endemic cloves and nutmeg.

A wandering visitor can easily imagine Tero Nakamura, the last Japanese soldier, living a Rob-inson Crusoe existence until he eventually surrendered in 1974.

MOUNT BROMOIndonesia sits on the so-called “Ring of Fire”, the active tectonic zone that pushed the archipelago out of the sea millions of years ago. Nowhere reminds the visitor more of this fact than Mount Bro-mo, named after the Hindu cre-ator god. This active volcano rises 7,500 feet into the sky and pierces the cloud layer. It has been wor-shipped by the local Tenggerese people for millennia. Lucky visi-tors are able to watch offerings being thrown into the lava dur-ing the annual Kesodo ceremony, an ancient and mesmerizing oc-casion. It takes an hour to hike to the crater itself, which has a diameter of two and a half thou-sand feet.

East Java’s best known tourist attraction offers an astonishing view. Over 20 square miles of sur-real dune sea surrounds the volca-no. This ring, known as the Sea of Sands supports a unique climate, created as a result of volcanic ac-tivity. Amazingly, zones range from alpine to desert within this section of the tropical island.

LAKE TOBAApproximately 70,000 years ago a super volcano erupted in the moun-tains of northern Sumatra. This event, the most explosive eruption to occur during the last 25 million years, led to the formation of Indo-nesia’s and indeed South East Asia’s largest body of fresh water - beauti-ful Lake Toba.

Nestled in the cool, green Suma-tran hills, the 440 square miles of lake offers a perfect relaxing get-away from the hustle and bustle of the cities. Surrounded by waterfalls and world class ecotourism sites, visitors can easily access the habitat of Sumatra’s unique indigenous spe-cies including orangutans, tigers, elephants and rhinos.

The Toba Batak people that live on the shores of the lake have re-tained their unique and distinc-tive culture. Mainly protestant Christians, their strong reputa-tion for hospitality and skill with music dates back to pre-colonial times. Visitors often remark on the charming and distinctive bow shaped rumah bolon traditional houses, which dot the landscape.

WAKATOBI Located off the coast of South Sulawesi, the Wakatabi National Marine Park covers five and a half thousand square miles of islands, atolls and sea, 60% of which is coral reef. Located be-tween the Flores and Banda seas, it forms the largest barrier reef in Indonesia, and is second only in area to Australia’s Great Bar-rier Reef.

It is the habitat of countless fish species, turtles and marine mammals such as dolphins and whales. Jacques Cousteau fa-mously described it as an “Un-derwater Nirvana”.

Of 143 islands, only 7 are in-habited by less than 100,000 people. In fact Wakatabi is home to one of the most intriguing and unique ethnic groups of Indonesia, the the Bajo people. These famous seafaring nomads live a hunter-gatherer existence almost entirely at sea. Subsist-ing as fisherman and traders, they spend most of their life on the water, either on traditional boats or on homes built over the sea on stilts.

BOROBUDUR Surrounded by the lush, green fields of Central Java, Borobu-dur is an ornate, ancient and mystical Buddhist temple. The structure is covered with over 2,000 relief panels and some 500 statues, and when contrasted with the surrounding country-side is incredible to behold.

This UNESCO world heri-tage-listed site, reminiscent of Angkor Wat, actually predates that temple complex by three centuries. For hundreds of years it was lost to world history, un-til Governor of British Java, Sir Thomas Raffles, best known as the founder of Singapore, was alerted to its existence by locals.

Following Raffles’ departure, this incredible temple remained vine-shrouded and left to the mercy of the elements until the late 1970s. Once opened to the public, it grew in popularity to become the country’s most vis-ited attraction. Besides Bud-dhist pilgrims, the site draws millions of eager domestic and foreign tourists drawn by its distinctive Gupta architecture.

BELITUNGBelitung, an island off the southeast coast of Sumatra is one of the coun-try’s most promising up and coming destinations. Surrounding the main island, once known for tin mining, are hundreds of smaller islands known for their natural beauty, white sand beaches and crystal clear water. Coral atolls and underwa-ter reefs growing over granite rock outcrops give the area a unique and starkly beautiful appearance.

In addition to the beautiful coastline, Belitung offers cultural and historical sites born of its role as a colonial spice island, which add to its charming character as an international melting pot. Leng-kuas Island for example is home to a 129-year-old lighthouse from the Dutch colonial period. Chinese in-fluence is felt through the Taoist Fu De Ci temple.

Most intriguingly, The Belitung shipwreck sheds light on the is-land’s history as a meeting point for international trade. An Arabian dhow which sailed from Africa to China sunk off its coastline in 830 AD, containing some 60,000 valu-able items from across the region.

LOMBOK’S MaNDaLIKaKnown as “The Unspoiled Bali”, Lombok’s highlands are covered in verdant, lush forest. The Gunung Rinjani National Park offers adven-ture tracks for hikers interested in fresh mountain air and mountain views. A vast crater lake called Seg-ara Anak Toba, as it is known locally, offers breath-taking views and warm fresh water due to volcanic heating.

As far as seashore tourism is con-cerned, the Mandalika Conserva-tion Area is above and beyond the island’s jewel in the crown. With almost 9 miles of pristine beaches and 11 bays, it offers the potential to become a major hub for visitors seeking sand and surf.

Virgin forests dot this sparsely in-habited island which is rich in biodi-versity. Its waters are rich in marine life and supports local fishermen. In order to maintain the island’s appeal as an Eden by the sea, developers are creating a series of world class, sustainable, and integrated planned resort communities. The final result will be the continuation of Lom-bok’s green, clean and sustainable model.

TANJUNG LESUNGBanten is the westernmost province of Java and is just a short hop, skip and a jump from Jakarta.

Beaches on this coastline, which feed into the Indian Ocean, are known for good surfing conditions, calm swimming spots, considerably extensive and thriving reefs, and soft, white sand. Tanjung Lesung is perhaps the most famous of these and it is fast rising as a popular and elite tourism destination.

Its proximity to the legendary peak of Krakatoa has only highlight-ed its natural beauty of the coastal landscape. The sight of Krakatoa (whose eruption some 130 years ago was heard 3,000 miles away) has made Sunda Strait well known all around the world. Today its fame is rubbing off on the development of Tanjung Lesung as an A-class luxu-ry tourism destination.

Currently it is a three-hour drive from the capital city, making it a popular weekend getaway location for residents. However this trans-port time will be drastically reduced following the completion of specifi-cally designed toll-roads.

LaBuaN BajO’S KOMODO

LOMBOK’S MaNDaLIKa

WAKATOBI

BOROBUDUR TANJUNG LESUNG

MOUNT BROMO

THE THOUSAND ISLANDS

BELITUNG

SUMATRA

JAVAWEST PAPUA

PACIFIC OCEAN

BANDA SEA

INDIAN OCEAN

SOUTH CHINA SEA

KALIMANTAN

SULAWESI

LAKE TOBA

MOROTAI

PRIORITY TOURIST ZONESSPECIAL ECONOMIC ZONES

Mount Bromo Lake Toba Morotai

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