MAIN NATURAL RESOURCES AND INDUSTRY

In the 1990’s, Indonesia’s economy experienced a set-back as a consequence of the economy crisis that
hit most Asian countries. However, the economy is now relatively stable.

Indonesia has abundant natural resources outside Java including crude oil, natural gas, tin, copper and
gold. Indonesia also enjoys being the second largest exporter of natural gas. The country was also a
member of OPEC but later on left the said organization, this is due to the fact that the country hasn’t
enough oil to sustain its needs. The agriculture products of Indonesia include rice, tea, coffee, spices and
rubber.

The major trade partners of Indonesia are Japan, the United States of America, The European Union and
neighbouring countries namely Malaysia, Singapore, and China.

Although Indonesia is rich in natural and human resources, the country is still facing crucial issues of
poverty that mainly is caused by the wide-spread corruption in the government.

On the other hand, the Indonesian economy should continue to experience domestic demand growth, with
the aid of its Investment Law of 2007.

MAIN IMPORTS AND EXPORTS

Indonesia’s major imports are: machinery and equipment; chemicals, fuels and food. Main import
partners are Singapore, China, European Union, Japan and Malaysia. It’s exports are: gas, plywood,
textiles and rubber. Indonesia is the world's largest tin market. Although mineral production traditionally
centered on bauxite, silver, and tin, Indonesia is expanding its copper, nickel, gold, and coal output for
export markets. Until 2007 Indonesia has been an oil exporter. Main export partners are: Japan, European
Union, United States and Singapore.
HISTORY

Indonesia's geographical location has always assured its historical prominence. The archipelago
dominates the main lines of communication both west-east (from the Atlantic and Indian Oceans to the
Pacific) and north-south (from the great Eurasian landmass to Australasia).

Between 3000 and 500 BC, two waves of immigrants from the north (proto-Malays and deutro-Malays)
settled in the region alongside the resident Melanesian population (still found in the eastern islands). A
series of Hindu and Buddhist empires rose and fell between the 7th and 14th centuries, after which Islam
spread throughout the region. From ancient times Indonesian sailors traded and voyaged as far afield as
the west coast of Africa in one direction, and to China and Japan in the other.

The coming of the Europeans

The wealth of the islands of Indonesia - the East Indies - was well known to Europeans from Greek and
Roman times onwards, both by reputation and by such indirect trade as took place via the Middle East. It
was, indeed, the riches of the ‘Spice Islands’ (Maluku, or the Moluccas) that drew the Portuguese and
Spanish, sailing in different directions around the world, to the archipelago in the first place. The spices
of the region were then, in the 16th and 17th centuries, integral both to European cuisine and to European
medicine, and commanded very high prices.

The establishment of Dutch rule

From 1511 the Portuguese, followed closely by the English, set up trading posts throughout the
archipelago. However, it was the Dutch who eventually won the lion's share of influence in what was to
become the Netherlands East Indies. The Dutch East India Company established itself in Java, founding
Batavia (now Indonesia's capital city Jakarta) in 1619. In the 17th century the Dutch had still only
managed to establish trading centres, while extensive Indonesian kingdoms dominated the region. But
during the 18th-19th centuries the Dutch gradually took control of all of present-day Indonesia, including
the surviving sultanates.

Although Britain occupied the islands for a brief period during the Napoleonic Wars, in general it suited
British purposes to have agreed spheres of influence in Southeast Asia, and the Netherlands posed little
threat to British interests. Indonesia became a Dutch colony in 1816, and from 1824 onwards a series of
agreements between Britain and the Netherlands gave the latter ‘rights’ to the entire archipelago, while
Britain was assured of its ‘rights’ in the area that now constitutes Malaysia and Singapore. In 1828, with
the Dutch annexation of Irian Jaya, the boundaries of the modern republic were set.

Dutch exploitation in the 19th century

The Dutch attitude to Indonesia was unabashedly that the colony existed for the enrichment of the home
country. When war and the secession of the southern provinces (now Belgium) bankrupted the Dutch
exchequer, a system of forced labour, called the Cultuurstelsel (culture system) was imposed on Java in
1830. Under it, commercial crops were grown, under compulsion, by the Javanese peasantry for delivery
to the Dutch, who shipped the goods to the Netherlands for sale. The system was extremely profitable to
the Dutch (who built up their railway network and reduced their national debt from the proceeds), but, by
causing neglect of food crops, it precipitated famine among the Javanese and in general impoverished
them.

Changed international conditions encouraged the Dutch to open their colony to international commerce
after 1870. The capital of many countries flowed in, opening up the outer islands to old and new
commercial crops and products, of which tin, rubber, and oil became of great strategic and economic
importance.

The beginnings of Indonesian nationalism

At the same time a nationalist movement was beginning to stir. Resistance to Dutch occupation had, of
course, always existed, flaring up frequently in peasant risings and occasionally in national wars (such as
that on Java from 1825 to 1830). Islam was a convenient symbol for resistance and nationalism: its spread
through the archipelago had been accelerated by the arrival of the Spaniards and the Portuguese in the
16th century (as a kind of extension of the Mediterranean conflict and partly, too, as a proto-nationalist
gesture).

Appropriately, devoutly Muslim Atjeh (now Aceh), a principality in northern Sumatra, held up against
Dutch repression well into the 20th century, the resistance overlapping in time with the formation of
Sarekat Islam. The latter was a nationalist movement that had begun as an organization of Muslim
traders, but had quickly, after 1912, extended its appeal. It became a genuinely mass movement, with
millions of followers.

During World War I, the apprehensive Dutch permitted the formation of a people's assembly (Volksraad)
as a safety valve, but they kept it firmly in their control and on a strict leash. More significantly, left-wing
ideas began to enjoy currency in nationalist circles, and the Communist Party of Indonesia (PKI) was
founded in 1920 (thus predating even the Chinese Communist Party). In 1926 and 1927 the PKI
attempted revolution, but the fragmented risings were soon crushed. The Indonesian Nationalist Party
(PNI), led by Achmed Sukarno, was founded in 1927, but was brutally suppressed by the Dutch and its
leaders exiled.

Regional tensions and World War II

The great interwar depression hit the Netherlands East Indies very badly. To protect Dutch exports to the
colony, the import of Japanese goods was restricted. To maintain the prices of important Dutch products,
such as rubber and tin, production and export were deliberately curtailed. These moves were resented by
both Japan and the USA. Japan depended upon economic access to Indonesia, and the USA - a major
importer of tin and rubber - resented Dutch ‘commodity control’ schemes. The USA also challenged
Japanese claims to regional hegemony, and in this atmosphere there was an ever-growing likelihood of a
war in the Pacific in which Indonesia would be embroiled.

The Japanese overwhelmed Dutch resistance in 1942 with humiliating ease, taking the archipelago in a
mere few days, and subjecting the former colonial masters to every conceivable indignity. The PNI, with
Sukarno at its head, was installed as an anti-Western puppet government.

For the Indonesians the occupation had positive and negative features. On the one hand, they were
allowed use of the national anthem, the national language, and the national flag, and given military
training by the Japanese. On the other, countless thousands were recruited for slave labour on such
infamous projects as the Thai ‘death railway’, from which few returned. For those who remained in
Indonesia, Japanese rule quickly revealed itself as even more oppressive than that of the Dutch. However,
the Japanese did make efforts to improve rice production and to stimulate a local textile industry, and
some of their officers genuinely contributed to the advancement of Indonesian nationalism.
Independence achieved

As defeat loomed, the Japanese moved to grant Indonesia independence. They were forestalled when
Sukarno declared independence on 17 August 1945. The British were entrusted with restoring Indonesia
to Dutch colonial rule, and quickly found themselves engaged in armed confrontation with the
nationalists. By the late 1940s the Dutch, who had taken over the task of suppression, were clearly losing,
and the USA used the weapon of Marshall Aid (post-war financial assistance to European countries) to
force the Netherlands to the conference table. Sovereignty was transferred to the new state of Indonesia in
1949, and in December 1949 Sukarno was elected president.

GOVERNMENT SYSTEM

Indonesia is a unitary state in the form of republic based on Pancasila, as an “ideal” base, and 1945
Decree, as a constitutional base. As a democracy state, the highest power is on people’s interest.

The president, as the head of the country and the Head of government, is the one who hold the highest
executive and elected directly by people. The president is assisted by the Ministers to perform his duties.

“United Indonesia Cabinet” consists of 3 coordinator ministers, 19 Ministers as the Head of Ministry, 11
State Ministers and 4 Government officials, the same level with the Ministers. The ministers have a
responsibility to President.

Administratively, Indonesia region has been divided into 33 provinces. It consists of 349 districts and 91
municipalities, 5,263 sub districts and 69,929 villages.

Pancasila

• The Indonesian national motto, “Bhinneka tunggal ika” (“Unity in diversity”), makes reference to
the extraordinary diversity of the Indonesian population that has emerged from the ongoing
confluence of peoples, languages, and cultures. The country includes more than 300 different
ethnic groups and more than twice as many distinct languages, and most of the major world
religions, as well as a wide range of indigenous ones, are practiced there. Notwithstanding this
diversity, most of the people are of Malay ancestry, speak Austronesian (Malayo-Polynesian)
languages, and profess Islam. With Mix races, culture, morals and beliefs, conflicts can’t be
avoided that resulted to killings, but were later unified by recent events and peaceful negotiations
by the government.
• Religion plays a major role in life in Indonesia. It is stated in the first principle of the state
ideology, Pancasila: "belief in the one and only God". A number of different religions are
practiced in Indonesia and their collective influence on the country's political, economical and
cultural life is significant.
• The Indonesian Constitution states "every person shall be free to choose and to practice the
religion of his/her choice" and "guarantees all persons the freedom of worship, each according to
his/her own religion or belief".
• With many different religions practised in Indonesia, conflicts between believers are often
unavoidable. Moreover, Indonesia's political leadership has played an important role in the
relations between groups, both positively and negatively, including the Dutch East Indies'
Transmigration Program, which has caused a number of conflicts in the eastern region of the
country.
POLITICS

As in other democratic countries, Indonesia applies the Trias Politica that recognizes the separation of the
legislative, executive and judicial bodies. The legislative authority is under the People’s Consultative
Assembly (MPR) that consists of two bodies namely the Parliament composing of members of political
parties and the Regional Representative Council (DPD) composing of representatives from each province
in Indonesia. Each province is represented by 4 delegates that are elected by the people in the respective
region.

The president and vice president are selected by vote of the citizens for five-year terms. Prior to 2004,
they were chosen by People's Consultative Assembly. The last election was held 20 September 2004. The
president heads the United Indonesia Cabinet (Kabinet Indonesia Bersatu) The President of Indonesia is
directly elected for a maximum of two five-year terms, and is the head of state, commander-in-chief of
Indonesian armed forces and responsible for domestic governance and policy-making and foreign affairs.
The president appoints a cabinet, who do not have to be elected members of the legislature.

The current President of Indonesia is Susilo Bambang Yudhoyono (“SBY”) who won a landslide victory
over Megawati in the concluded 2009 elections which was held last July 8, 2009. On the other hand,
Jussuf Kalla remains to be the Vice-President of SBY’s Administration.
KEY PLAYERS IN ECONOMY

From telecoms to property and infrastructure development, a group of bold entrepreneurs is helping drive
the Indonesian economy. Forward thinkers, each has established a business vital to the country’s
continued success.

Some of these entrepreneurs with their respective contributions to the country are as follows.

Trihatma K. Haliman
President Director of Agung Podomoro
Property magnate

After years of bonanza, the global real estate industry now faces uncertain times. But for Indonesian real
estate powerhouse Agung Podomoro, 2008 is shaping up to be a landmark year. President Director
Trihatma K. Haliman says he is planning to take the company public this year, selling 30% to 35% of the
company, which is valued at some $900 million, on the Singapore or Indonesia stock exchange.

It was a previous crisis – the 1997 economic collapse – that saw the emergence of Agung Podomoro as a
leading force in the country’s real estate industry. Not only did the company survive the crisis, largely
because it had always studiously avoided taking on debt, but it seized the opportunities provided by the
financial storm.

“In the aftermath of the crisis, domestic capital was leaving Indonesia,” explains Haliman, “but I stuck to
my country. I bought land in those years that is now worth at least 10 times the value, because I know that
whenever there is risk there is also opportunity, especially in the property business. To know when to
invest is essential to being a successful businessman.”

Agung Podomoro was able to buy well-located land at low prices, then develop it as the economy
recovered. Between 2000 and 2007, Haliman says the company built an astonishing 40,000 residential
units in high-rise towers, the same amount as in the previous 30 years. “Many developers at that time had
stopped their activities, so I could recruit good professionals to join the team.”

In the past five years a major focus of the company has been on developing entire districts in Jakarta,
such as its flagship Senayan City and Podomoro City (also known as Central Park) developments, which
include apartments, offices, shopping malls, hotels, and recreation facilities. Agung Podomoro was one of
the first developers to anticipate the trend of the middle class moving back into Jakarta from the outskirts
in order to escape traffic chaos and rising transportation costs and to be closer to their places of work and
recreation.

But Haliman, who since 1986 has been running the business set up by his father nearly 40 years ago, feels
strongly that the company also has to develop low-cost housing for the poorer sections of society. “Our
industry can be very profitable and there is a moment when it is right to give back to the community,” he
explains. “For us, the moment has arrived, and we are in the process of building 600 low-cost housing
units in Jakarta, which are spread over 14 towers.”

Haliman is keenly aware of the social demands placed on Agung Podomoro as an industry leader. “This
project for us is a moral obligation,” he says, “and we hope that other developers will follow this
example.”
Herry Winarno

President Director of Meta Epsi

Power player

When Meta Epsi was formed in 1975, it focused principally on construction, but over the past three
decades it has expanded quickly, fueled by Indonesia’s fast-growing economy and the desire to diversify
revenues.

Today, it is one of the country’s biggest and most respected providers of engineering, procurement and
construction (EPC) services for factory and industrial plant projects in the fields of water, electricity, oil,
gas, and petrochemicals. But it also has interests in plant maintenance, power transformer manufacturing,
independent power production.

Herry Winarno, the company’s President Director and a former lecturer at the Bandung Institute of
Technology (ITB), says diversification was inevitable: “Construction is an up and down business and
depends on the market and contracts you get. So we tried to stabilize our revenue by investing in a range
of new businesses, including palm oil.” Indonesia leads the world in palm-oil exports and Meta Epsi will
soon have 19,000 hectares under cultivation in South Sumatra.

Closer to its construction core, one of Meta Epsi’s most important projects is the development of
electrical substations for state power company, PLN. Those built in West Java and Jakarta have bolstered
the electricity supply to the capital and met its growing demand – power demand in the first half of 2007
increased almost 7% compared with the same period the previous year. The company is also working on
the construction of a full fire steam power plant in North Sulawesi. The plant is of a type likely to be
replicated across Indonesia, a niche market Winarno is keen to corner.

The company has ambitious plans for the future. In October, Truba Alam Manunggal Engineering, a
publicly listed EPC company, acquired a 28.91% stake in Meta Epsi. “Given the opportunities
[created by] the new partnership, niche markets and infrastructure projects, I think we can achieve our
target of doubling revenue this year,” Winarno says. “Our intention is to go for an IPO and we
expect that to happen sometime in 2008.

Sugiono Wiyono
President Director and CEO of Trikomsel
Upwardly mobile

Even in cell-phone-crazy Indonesia, it’s a little unusual to carry six mobile phones at the same time. But
then Sugiono Wiyono is President Director and CEO of Trikomsel, supplier of one in four cellphones
in Indonesia and the largest phone retailer in Southeast Asia. Trikomsel was established in 1996, initially
as a distributor for Nokia which is the leading brand in Indonesia. It also distributes
No. 2 brand, Sony Ericsson.

The company runs its own retail operation. After just six years there are now more than 700 Oke Shop
outlets in the country, and Wiyono wants to raise that number to at least 1,000 – he expects to
add at least 150 in 2008, aided by the introduction of franchises. Trikomsel also has a partnership with
Carrefour, the French supermarket giant, and is looking for similar agreements with other international
partners to expand its retail network in Indonesia.
The next major priority for Trikomsel is to expand its mobilecontent business which provides users with
products such as logos, ringtones, games, and wallpapers for their cell-phones.

Cell-phone penetration in Indonesia, at around 40%, is still low by regional standards, and with mobile
operators investing heavily in increased coverage and marketing, and with zero duties on cell-phone
imports, the growth potential of Trikomsel’s business is clearly vast.

“I don’t see too many consumer products in Indonesia which are still growing at a rate of 30% to 60% a
year,” Wiyono says. “We are growing by more than 50%.” And Wiyono says he is aiming to
capitalize on that growth by taking Trikomsel public. He may sell shares to investors on the Indonesia
Stock Exchange later this year.

In this fast-changing industry, Wiyono says it’s another very different passion – collecting Chinese art –
which helps to inform his vision of the business. “Doing business is really a combination of sharp and
brave decisions, and some feeling; and that feeling can grow from appreciating art,” he explains. “I love
artwork. Chinese art, paintings, and sculptures are another part of me.”

Erwin Aksa
CEO of Bosowa Group
Local roots, national ambitions

In just 30 years the Bosowa Group has been transformed from a small South Sulawesi car dealership into
one of the largest conglomerates in eastern Indonesia. When founder Aksa Mahmud entered national
politics in 2004, his son Erwin Aksa took over as CEO, and he is now restructuring the company to meet
Indonesia’s massive infrastructure needs, particularly in the country’s fast-developing east.

“We are focusing on infrastructure,” Aksa says. “I think we’re the only group that has in its portfolio toll
roads, power plants and cement plants.” Bosowa is the largest privately owned Indonesian
cement producer, with output of two million tons a year. It has developed three major toll roads, and is
constructing a coal-fired power plant in South Sulawesi.

Under Erwin Aksa, Bosowa has been reorganized into a modern holding comprising four business lines:
in addition to the infrastructure and automotive units (Bosowa continues to be a dealer for Mitsubishi,
Hyundai and Mercedes), other businesses include financial services (insurance and vehicle leasing), and a
smaller business line composed of property, building materials and transport.

Educated in economics in Pittsburgh and still in his thirties, Aksa is intent on transforming Bosowa into a
more professional and accountable company, and has replaced some family members as part of this
process. “Transparency and good governance is a must if you want to raise capital internationally, and the
family business structure could be an obstacle to achieving that,” he says.

Aksa aims for Bosowa to be a national player as well as a regional heavyweight. The company’s head
office has moved to Jakarta from the provincial capital Makassar, and Bosowa is looking to build cement
plants in Java, the principle source of cement demand. “We have to follow the big national players in
Indonesia and to match them one day,” Aksa explains.

Cement currently accounts for about half of Bosowa’s revenues. Aksa says the government’s
infrastructure program is having a major impact. After 10 years of demand fueled by property
development, infrastructure is now attracting an increasing share. “The fact that the demand for cement is
increasing is an indication that the Indonesian economy is performing well,” he says.
The surge in spending is creating opportunities in the tollroad and power-supply businesses, too. The
coal-fired power plant the company is building in South Sulawesi will provide 2x100MW of capacity.
But Aksa estimates that there is a power shortage of 600MW in the region.

While the group is looking to expand nationally, eastern Indonesia will remain the focus of Bosowa’s
infrastructure business. Strong local connections and a solid portfolio of works make it much easier to
capitalize on new opportunities. Bosowa, Aksa says, will always remain close to its roots in the east. The
company’s name represents three regions in South Sulawesi: Bone, Soppening and Wajo.

MAJOR ACCOMPLISHMENTS OF THE COUNTRY

 Autocratic rule of Government to Democratic

 Improvement in Education
 Increased access to education;
 Improved education quality; and
 Better governance of the education sector.
 Increased minimum wage by around 10% in Jan 1, 2008.
 Political Stability
 The JI organisation has been "shrunk“ – Detachment 88
 Decrease in cultural clashes
 Increase FDI by means of the “Investment Law of 2007”
 Continued Fight Against Corruption

PRESENT CONCERNS AND DIRECTION OF THE COUNTRY

A Nation Advancing Toward 2025

President Susilo Bambang Yudhoyono on Friday (August 14, 2009) vowed to lay the foundations for a
second wave of reform that would lead Indonesia toward becoming an advanced country by 2025.

Delivering his State of the Nation address to the House of Representatives, Yudhoyono outlined his plan
for the nation’s future, including an overview of his next term as president.

He said that the primary goal of the second wave of reform was to complete the reform agendas and to
intensify them in a framework of change and continuity.

The second wave of reform, he said, was intended to liberate Indonesia from the impact and aftermath of
the crisis that took place 10 years ago, and to move the country into a phase that would see it become an
advanced country by 2025.

“This is our vision for the year 2025, Indonesia Vision 2025. We hold the opinion that, God willing, by
2025 our life as a nation will be in a much better condition,” Yudhoyono said.

He said he believed that Indonesia would be an advanced, dignified and prosperous country if it was able
to reinforce the three pillars of life as a state — self-reliance, competitiveness and a superior civilization.

“We have to be a nation that isn’t ensnared with a burden of debt. A nation that isn’t dictated, whether
politically, economically or militarily, by any other country,” Yudhoyono said.
He said that in the last decade, the country had made great strides, undergone a number of changes and he
added that the second round of reform would require even more change.

“We must bear in mind that reform is essentially about change and continuity,” he said.

He said that the main goals the nation needed to pursue was to strengthen unity and social harmony.
“Let’s not repeat the dark history of conflicts that occurred in Poso, Ambon, Sampit and Aceh,” he said,
referring to various problems that had beset the nation in the recent past.

Although the nation’s security was compromised by the terrorist acts last month, Yudhoyono said that he
hoped the nation’s stability could be maintained.

While the economy had grown and strengthened over the past five years, with poverty and unemployment
levels going down, the results should be enjoyed by all across the country, he said.

“The economic growth that we chose is one that is accompanied by equitable spread, so it meets a sense
of fairness,” Yudhoyono said.

He also said that Indonesia needed to continue to consolidate democracy and transparency as well as
persistently and impartially enforce justice and the law.

“The role and functions of the national press as the fourth pillar of democracy must continue to be
solidified,” he added.

Economic progress, he said, should be reflected in greater improvements in people’s welfare, while good
governance and corruption eradication should be intensified.

Other concerns included safeguarding the environment and empowering regional development, he added.

The Yudhoyono Doctrine

In an attempt to lift-up his country and move it towards progress, President Susilo Bambang Yudhoyono
devised a doctrine which would guide them in attaining their goals.

1. Develop a united, just and prosperous Indonesia within a harmonious society

2. Consolidate national stability in the face of terrorist threats
3. Consolidate democracy and transparency
4. Maintain law and order through consistent and impartial law enforcement
5. Intensify high economic growth to strengthen economic security
6. Enhance people’s welfare: lower poverty rate, lessen unemployment, and create a better welfare system
7. Create good governance and fight corruption
8. Protect the environment
9. Intensify regional development
10. Forge global partnership and cooperation
INTERNATIONAL CONFLICT

As a founding member of ASEAN, and host to its Secretariat, Indonesia has traditionally been seen as the
lynchpin of the organisation. Indonesia is keen to promote co-operation with ASEAN countries,
particularly on trade and on regional issues such as piracy and smuggling. This co-operation was
strengthened following the Tsunami, with ASEAN countries being among the first to provide assistance
to Indonesia. Despite disputes with neighbouring countries, including over illegal immigration to
Malaysia and overlapping maritime territorial claims, overall Indonesia’s relations with its ASEAN
partners remain strong. President Yudhoyono's first official visit after taking office was to Malaysia and
Singapore in February 2005.

Indonesia has made significant efforts to improve its relations with East Timor after the violence that
followed the popular consultation in East Timor in 1999 and Indonesia's withdrawal. The relationship was
boosted by President Megawati's decision to attend East Timor's Independence Day celebrations in Dili
on 20 May 2002, despite significant opposition from members of parliament, and President Yudhoyono's
visit in April 2005. During this visit, Yudhoyono signed a provisional border agreement with East Timor's
Prime Minister Alkatiri, overcoming one of the obstacles to closer relations with East Timor. In 2005
Indonesia and East Timor established a bilateral commission of Truth and Friendship (CTF) “to conduct a
shared inquiry with the aim of establishing the conclusive truth about reported human rights violations,
and to make recommendations which can contribute to the healing of wounds of the past and lead to a
peaceful and prosperous future for both nations”. On 15 July 2008, President Susilo Bambang
Yudhoyono and East Timor's President Jose Ramos Horta, received the CTF’s report. In a joint statement
they stated that they "accept the findings, conclusions, and recommendations of the Commission and
recognise that gross violations of human rights occurred prior to and immediately after the popular
consultation in East Timor in 1999". They also committed to the faithful implementation of the
Commission's recommendations. Most analysts have indicated that this report is a positive step forward
for the two countries. Whilst no recommendations were made for prosecutions of named individuals in
relation to the crimes identified, nor were any amnesties offered.

Listed below are other territorial disputes of Indonesia with other neighbouring countries:

• Australia – Indonesia “Hibernia Reef”

• East-Timor – Indonesia “Palau Batek/Fatu Sinai”
• East-Timor – Indonesia “Small areas of Oecussi-Ambeno”
• Malaysia – Indonesia “Karang Unang”
• Malaysia – Indonesia “Ligitan and Sipadan” Awarded to Malaysia in 2002

OPPORTUNITIES TO BE DISCOVERED
• Important opportunities exist in mining, agribusiness equipment and services
• Infrastructures
• Telecommunications Technology and Satellites/ICT
• BPO
• Tourism
• Energy (Palm oil biofuel processing and refining)
• Agriculture
• Automotive
• Education
EVENTS OF GLOBAL IMPACT

Several events both had a positive and negative effect in the country which in turn affected how other
countries see Indonesia as an investment prospect and as a tourist destination.

• Enactment of Investment Law of 2007

With its investment law of 2007 it has open its doors for foreign investment, the law also
tends to reduce the procedures to approve new investments by promoting better coordination
between the various government institutions, providing tax incentives to make the returns to
investments attractive and by persuading major players to capitalize on the 'large' domestic
consumer market.
• SBY won
His victory suggest continued stability in this democratic political framework and is a
critical factor in unleashing Indonesia's growth potential.

With Susilo Bambang Yudhoyono as President, we can say that Indonesia will continue
to flourish. With its markets further emerging, Indonesia can be considered as one of the fastest
growing economies in South-East Asia, investors are more confident to take part in Indonesia’s
growing market and attract more domestic demand thanks to SBY and his actions that united the
whole people in the country. Examples of his doings are his commitment to fight corruption and
his support of the work of the Anti-Corruption Commission has contributed to his public
standing, an issue that is important for foreign investors. Moreover, he also contributed in ending
most of the ethnic clashes in many regions of the country and he also led in the shrinking of the
J.I. group of terrorist thriving in the country.

Pro-business, pro-growth, pro-job creation and pro-poor, this is the New Indonesia, and
with the new regulations the economy is now more open than ever for the whole world.

• Terrorist Bombings in JW Marriot and Ritz-Carlton

• Earthquake in CIKANGKARENG, Indonesia
Both heart-breaking events shocked the whole world that caused the country’s on-going
leap to progress to a pause, because it impacted on the country’s tourism, and foreign investment
opportunities. Amidst these tragic events Indonesians became more unified, and this will be their
very foundation on continuous progress, as unity entails success.

THREE MULTINATIONAL COMPANIES

• PT Kalbe Tbk.

Established in 1966, PT Kalbe Farma Tbk. (“the Company” or “Kalbe”) has gone a long way from its
humble beginnings as a garage-operated pharmaceutical business in North Jakarta. Throughout its more
than 40-year history, the Company has expanded by strategic acquisitions of pharmaceutical companies,
building a leading brand positioning and reaching to international markets to transform itself into an
integrated consumer health and nutrition enterprise with unrivalled innovation, marketing, branding,
distribution, financial strength and R&D and production expertise to promote its mission to improve
health for a better life.
The Kalbe Group has an extensive and strong portfolio of brands in the prescription pharmaceuticals,
OTC pharmaceuticals, energy drink and nutrition products, complemented with a robust packaging and
distribution arm that reaches over 1 million outlets. The Company has succeeded in promoting its brands
as the undisputed market leaders not only in Indonesia but also in the international markets, establishing
such household names across all healthcare and pharmaceutical segments as Promag, Mixagrip, Woods,
Komix, Prenagen and Extra Joss. Also, fostering and expanding alliances with international partners have
accelerated Kalbe’s advances in international markets and sophisticated R&D ventures as well as the
latest pharmaceutical and healthcare developments, including stem cell and cancer research.

The Group’s consolidation in 2005 has further enhanced production, marketing and financial capabilities,
providing greater leverage to widen local and international exposure. Today, Kalbe is the largest
publicly-listed pharmaceutical company in Southeast Asia with over US$ 1 billion in market
capitalization and revenues of over Rp 7 trillion. Its cashrich position today also provides for unlimited
expansion opportunities in the future.

• PT Fajar Surya Wisesa Tbk

• Bosowa Corporation

Bosowa Corporation is an entrepreneurial business pioneer from east Indonesia. With an initial focus on
that region, it has now expanded nationwide, and hopes to go on to global success. Starting in the
automotive trading industry, Bosowa has gone on to develop financial services and has entered other
sectors through the development of infrastructure, building materials, construction management,
insurance, multifinance, mining, energy and transportation. Bosowa strives dilligently to pursue its
competitive advantage and achieve high performance. Bosowa excellence will continue far into the
future.

Bosowa Corporation’s Business Structure

1. Automotive e. Taxi and Rental
a. Distribution 2. Cement
b. Sales a. Production
c. Services b. Marketing and Sales
d. Spare Parts c. Distribution and Logistics
 d. Packaging Plant b. Office Buildings
e. Ready Mix c. Hotels
3. Infrastructure d. Apartments
a. Toll Road Development e. Hospitals
b. Toll Road Management 6. Agribusiness
c. Construction a. Palm Oil
d. Power Plant b. Rice
4. Financial Service c. Corn
a. Insurance d. Shrimp
b. Leasing e. Seaweeds
c. Banking 7. Mining
a. Marble
b. Nickel
5. Property c. Coal
a. Real Estate d. Tin

COUNTRY SWOT ANALYSIS

Strengths

• Indonesia is South East Asia's largest economy with a nominal GDP of US$450bn, and is the
world's fourth-most populous country with almost 240mn people. It thus offers investors a vast
home market in which to do business.
• Indonesia is also a founding member of the Association of South East Asian Nations (ASEAN).
As a member of ASEAN's Free Trade Area (AFTA), Indonesia is committed to lowering tariff
and non-tariff barriers to trade.

Weaknesses

• Corruption remains a major problem. Indonesia ranked 143rd out of 179 countries surveyed in
Transparency International's 2007 Corruption Perceptions Index, where a low ranking denotes a
higher degree of corruption.
• Indonesia's excessive bureaucracy makes it a difficult place to do business. Among Asian
economies, Indonesia has the longest period (105 days) to start a business. Labour laws are also
considered excessive.

Opportunities

• The Yudhoyono administration has gradually been reforming the business environment,
particularly by strengthening the legal system and fighting corruption. If sustained, this would
boost investor interest in Indonesia.
• Indonesia has been amending its debt and banking regulations in early 2008, with the aim of
attracting Islamic financial activities.
Threats

• Recent high-level business disputes between the government and foreign investors demonstrate
that even after investments become up-and-running, there is still scope for legal problems or
obstacles posed by legal wrangling.
• Vulnerability to external and political shocks (earthquakes, volcanoes, world commodity prices,
climate change, terrorist attacks, separatist conflicts)
• Old infrastructures
• Security threats are a concern for investors. Despite several of its top leaders having been arrested
in recent years, Jemaah Islamiah, the radical Islamist militant group blamed for the Bali
bombings, remains active. There is also a low-level threat from separatist rebels or from
intercommunal tensions.

USEFUL TIPS IN DOING BUSINESS IN INDONESIA

Business Customs

When scheduling a visit to Indonesia, one should avoid coming during July and August since school,
summer and national holidays fall during these months. Business visitors should check the local holiday
schedule before traveling to Indonesia. Also a business visitor should avoid arranging business meetings
in Indonesia 2 weeks prior to and 2 weeks following the Idul Fitri holiday. The same is true for the
Chinese New Year holiday. Many decision-makers will be away during this period.

For your business contacts, please keep the following in mind: Indonesians like to avoid confrontation
and disharmony. One should not lose one's temper or show emotion. One should also pay particular
attention to certain gestures that Indonesians consider offensive and discourteous.

• First, do not use the left hand in receiving or eating. Although hand shaking is common practice,
physical contact is usually avoided, especially with Muslim women. Smiling, bowing, or nodding
is considered more gracious.
• Second, under no circumstances should one touch or extend any part of the body over an
Indonesian's head; the head is considered the most sacred body part.
• Third, never allow the bottoms of your feet/shoes to be visible by others.

Indonesians do not conduct business contractions or make decisions in the same direct fashion as
Americans. Therefore, U.S. business people should be prepared to spend a good deal of time with clients
before settling the business transaction. Patience is the key. The word "no" is rarely used. Exchanging
small gifts is common practice for business or social visits. During such occasions, tea or coffee is almost
always served and should be accepted. It should not be drunk, however, until the host invites you to do so.

Most importantly, Indonesians do business with "friends", people whom they know, so developing a
rapport is crucial. While quality and price are important, they are secondary to the personal interaction of
the business partners.

Business Hours

Commerce
08:00-17:00 Mondays to Fridays*
08:00-13:00 Saturdays (some may take Saturday off)
Government
08:00-16:30 Mondays to Fridays*
*Moslems are released for prayers every Friday from 1200-1300

Banks:
09:00-15:00 Mondays to Fridays*

Shops:
09:00-22:00 Mondays to Saturdays

When making a business trip, do not expect to schedule meetings for Friday afternoons or Saturdays.

Visas and Travel Documents

Entrance and Residence Requirements: Tourists and business visitors from the United States may obtain a
60-day short visit pass (visa) upon arrival. All visitors must have at least 6 months validity left in their
passports and a round-trip or onward ticket. To extend this pass a trip outside the country is usually
required. Visitors departing Indonesia should reserve enough funds to pay the Rp. 100,000 airport
departure tax.

A 6-month to 1-year temporary residence visa may be obtained from the Embassy of the Republic of
Indonesia, for either single or multiple entries. When requesting residence visas, one should allow
sufficient time to meet whatever requirements may be imposed (e.g. sponsorship letters). Note that all
residents must pay a Rp. 1 million fiscal tax at the airport every time they leave the country.

Employment is not allowed without a work permit from the Ministry of Manpower. In addition, foreign
and domestic investors must submit an employment plan to the Capital Investment Coordinating Board
(BKPM) to obtain approval for expatriate employee work permits. Permits are issued only for positions
that cannot be filled by Indonesian nationals.

Business travelers interested in engaging in such activities as concluding extensive commercial

transactions or performing professional or technical services should obtain a regular business visa, either
single or multiple entry, from an Indonesian embassy or consulate. Temporary resident visas are valid for
six months to one year and are issued exclusively to experts required for national development. A Non-
citizen is not allowed to work in Indonesia unless they have a work permit issued by the Ministry of
Manpower.

In addition, foreign and domestic investors must submit a manpower employment plan to BKPM to
obtain approval for expatriate employee work permits. Work permits are issued only for positions that
cannot be filled by Indonesian nationals. The government issues a list of professions by sectors that are
open to expatriate personnel.

Clothing

The normal business attire is a business suit or white shirt, tie and slacks for men, and a business suit or
dress for women. The traditional batik shirt is also commonly worn in the office and is now considered
proper business attire. Business cards are commonly used.
Transportation

Transportation: In Jakarta, taxis are inexpensive and widely available except during morning and evening
rush hours and Saturday nights during the peak social season, when they become scarce. In Jakarta, make
certain the taximeter is turned on. In other cities, it may be common for drivers to negotiate a price rather
than use the meter. However, one should also exercise extreme caution while using taxis. The number of
patrons reporting thefts and assaults in taxis has increased in recent months, and has prompted many
expatriates to use only the most reputable taxi companies, opting to summon taxis by telephone rather
than flagging them down on the street. In Jakarta, the Blue Bird family of taxis (and the sister Silver and
Golden Bird luxury taxis) are considered to be the safest and most reliable and they can be summoned by
telephone (794-1234).

Business travelers may wish to hire a private car which can be arranged through their hotel prior to
arrival. Rates for this exceed $100 per day. Alternatively, arrangements can also be made with a taxi
driver. Taxi and private limo drivers may not speak much English or be particularly knowledgeable about
the city, and visitors are occasionally taken on roundabout routes. Allow plenty of time between meetings
to accommodate Jakarta traffic jams; one half hour between locations in the central city is recommended.

Train and air services are usually used for domestic travel. Domestic flights are the most convenient way
to travel to most in-country destinations, with the exception of the highly recommended train from Jakarta
to Bandung. For inter-city train service, book a first-class (Eksekutif) seat if available, which can be done
by travel agents or at the train station one week in advance. Ferry services for people and vehicles link the
major islands and many of the smaller
islands.

Language

The national language of Bahasa Indonesia is spoken all over Indonesia, in addition to local
dialects/languages. English is widely spoken and understood in Jakarta by most business people, although
much less so in other cities. Most of the better hotels have English-speaking staff, as do the shopping
centers that cater to expatriates. International telephone operators also speak English. However, the level
of English can vary. Indonesian firms hoping to conduct business with foreigners generally try to employ
some English speakers.

Travel Advisory

As the capital, the largest as well as the most important city of Indonesia, Jakarta is no different than any
other metropolitan cities in the world. Please use your common sense when you walk around the city.
Pickpockets and beggars are common in the city.
Please consult U.S. Embassy for the latest travel warnings at http://www.usembassyjakarta.org1.

Money and Currency

As with most developing countries, in major cities you will find most established organizations will
accept the well known credit cards (MasterCard, Visa, American Express etc.). However you will find
many establishments and taxis which accept only cash, the Indonesian Rupiah. Therefore it is best to take
a mixture of all three types of currency with you:
Credit Cards (MasterCard, Visa, American Express, etc.), American Dollars (to be exchanged for
Indonesian Rupiah on arrival) and Travelers Checks
An exchange machine and bank counters are located near the baggage carousel in the arrivals hall at the
international airport.

Telecommunications

Telephone services vary between areas in Jakarta. The quality of service depend largely on the local
telephone exchange's capacity to handle traffic. Phone service is good along the main business
thoroughfares and the newer residential areas, which are served by fiber optic trunk lines.

In the older residential areas service is less reliable, extra phone lines can be costly, and obtaining them
can be time consuming. International direct dial (IDD) lines are available and will allow connection to an
AT&T, Sprint or MCI operator, but rates are considerably higher than calling from the United States.
Cellular services are readily available but the quality of service varies. Internet is widely used now.

Climate

As Indonesia is very near the equator, temperatures run roughly the same all year round: 88-92 degrees
Fahrenheit. From October to March, Indonesia enters the "Rainy Season" with each day encountering
some form of rain shower, moderate to very heavy. If travelling to Indonesia during this time, be sure to
bring or purchase an umbrella. From April to September, Indonesia is in what as known as the "Dry
Season". Most days during this period are sunny and breezy, although some showers occasionally take
place.

Business meetings usually take place in air-conditioned offices. Therefore, the business traveler will want
to take light-weight suits for business meetings.