You are here: HomeIndonesia 2010 › Industry

Domestic giants ready to take on the world

Jun 01, 2010
Credit : GMI Post


Indonesia’s resilience to the 2008 global financial crisis was unsurprising. The country did learn its lesson well in the aftermath of the the 1997 Asian currency meltdown.

Over the past two years, Indonesia’s plantation companies grew between five and ten percent, with crude palm oil (CPO), leading the way. The country, in 2009, became the world’s largest producer of CPO, with a total output of 19.4 million tons.

Whether upstream or downstream, Indonesian palm oil companies have made a strong effort to become environmentally certified.

Megasurya Mas, a maker of palm oil-based products, is the world’s first palm oil derivative company to obtain a Roundtable on Sustainable Palm Oil (RSPO) certificate.

“I’ve always believed that this sustainability issue, the RSPO certification, is very important. It is not required by regulation to be RSPO-certified, but in places like Europe, if you are not RSPO-certified, people will not buy from you. Our goal is always to be the industry standard,” said Managing Director Bahari Karim.

And in crisis, lies opportunity. “Our turning point was the Asian currency crisis. A lot of companies in Indonesia folded up but we stuck with it. The change of our business model by producing more value added downstream products helped us survive the crisis,” Bahari said.

The Indonesia banking sector has gone from Asia’s weakest to one of its most robust, with strong balance sheets and a rapidly growing consumer sector with many new borrowers.

Between 30 to 35 percent of the population is in the middle income group and the country’s GDP per capita has neared the $3000 mark associated with rising economies.

According to Eugene Keith Galbraith, president commissioner of PT Bank Central Asia Tbk (BCA), the only locally-controlled of the country’s top private banks,“ The Indonesian economy is largely domestic consumption driven, so our sensitivities to the global problems were somewhat minimized. Indonesia is a country which now has a very substantial self–ascribing middle class. It’s not so much that it’s growing. It’s that it has become aware of itself and demand patterns have been changing.”

BCA is the country’s largest transactional bank, responsible for 30 to 40 percent of all payments in the local banking system.

“The bank was the first to introduce ATMs. We have always been in the forefront of commercial application of technologies. We are the first bank to use PCs and we are the only bank in the world with a satellite-based realtime network which links the whole country,” Galbraith said.

Meanwhile, Indonesia’s property sector has benefited from low interest rates and a more prosperous middle class.

President Director of Lippo Karawaci, Ketut Budi Wijaya, sees great potential in this.

“The middle income group has disposable income in excess of $5000. This is the income group that ranges from $5000 to $15,000 per annum. There are big windows opening to us as a first mover to take advantage of this consumer growth,” says Wijaja.

Lippo Karawaci is one of the country’s largest conglomerates and operates $3 billion in assets. Over the next 5 years, the company hopes to acquire $8 billion in assets.

“We benchmark ourselves in terms of performance, governance and best practices. For example, we are the only property company rated by 3 agencies, which are Moody’s, Standard and Poors, and FitchRatings. S&P announced they were upgrading our rating one notch from ‘B’ to ‘B+.’ This is an appreciation not only of the company but also of Indonesia,” Wijaya said.

“We really want to attract multinationals in order to bring international best practices into the organization,” he added.

Faisal Firdaus - Chief Executive Officer Arutmin

Indonesia becomes world’s second-largest source of coal

By Philippe Le Saux
- Jun 01, 2010
Credit : GMI Post


The last five years have presented unparalleled opportunities for foreign investors looking at Indonesia.

Between 2005 and 2010, the country’s GDP grew at an average of 5.68 percent. The financial sector emerged from the recent global recession relatively unscathed, having learned its lesson from the 1997 Asian currency crisis.

The manufacturing sector and fast– moving consumer goods sector continue to power the economy but natural resources and mining have become Indonesia’s newest major engines of growth. In fact, Indonesia has become the world’s second-largest exporter of coal, with companies such as Kaltim Prima, Adaro, and Arutmin leading the way.

Rapid growth has also brought with it growing pains. Especially in the major cities, Indonesia has not been able to cope with the rapidly growing number of new cars hitting the roads, resulting in day-long rush hour traffic.

Demand for energy is also at an all-time high.

The electrical power requirement of Indonesia is expected to grow by at least 10 percent annually over the next six years. Unless the country upgrades its plants and shifts to lower-cost coal and gas-powered plants, the country will not be able to keep pace with demands. Such shortages have already resulted in frequent rolling blackouts across the country.

So, the government recently implemented the “10,000 Megawatt” program, aimed at raising electricity production by 10,000 megawatts by 2013. This project will require at least 30 million tons of coal per year and the participation of the private sector to increase coal production.

“We will be supplying 50 percent of the coal needed to power these new plants,” said Arutmin Chief Executive Faisal Firdaus.

Established by BHP Mineral Exploration Inc., Arutmin spent the first eight years on exploration.

Growth was slow because the company began its production only in 1989. Then, in 2001, BHP let go of its holdings in Arutmin, which was then bought by Bumi Resources, the country’s largest coal mining company.

“We are well known in terms of name and product. We have very good quality in terms of low-ash and low-sulfur coal, so we have products that create less impact on the environment”

- Faisal Firdaus, CEO Arutmin

The buy-out made Arutmin the third largest coal mining company in the country. It currently operates four mines and one coal terminal, all strategically located along the coast of South Kalimantan, which reduces transport costs and makes the coal more affordable to the end consumer.

Having separated mine sites is advantageous to a company like Arutmin as it looks towards expansion.
“With separated mine sites, we have the flexibility to expand without any disturbance to our neighboring operations. We don’t have to worry about only using one method of transportation, or one way to load the barge. We can grow each site independently from the other,” he said.

Since it produces high-end coal for more advanced markets like Japan and low-end coal for domestic and regional use, Arutmin has built a strong reputation for itself in the international coal market.

In 2010, Arutmin exported about 82 percent of its coal. Traditionally the main export market for the company was Japan, but today China has become its largest export market.

Since the company can produce high-end coal for more advanced markets like Japan, and low-end coal for domestic and regional use, Arutmin has been able to build a strong reputation and name for itself in the international coal market.

“We are well known in terms of name and product. We have very good quality in terms of low-ash and low-sulfur coal, so we have products that create less impact on the environment,” explained Firdaus.

With a strong product line and a dedicated export market, the company is poised for rapid growth. Plans are already in place for the company to increase its output to 35 million tons per year in the next two years. The company will also expand its product line.

“We have begun trial products with our upgraded brown coal (UBC) products in cooperation with Japan’s Kobe Steel Ltd (Kobelco),” said Firdaus.

The UBC Process raises the heat value of brown coal 1.5 times, to the same level as high-rank bituminous coal but has only one-third of the ash. It is also more efficient to store and ship, making upgraded coal a viable alternative to high-rank coal. Firdaus vows to make this product commercially available very soon.
Given the company’s rapid growth and planned expansion, Firdaus stressed the importance of giving back to the local communities surrounding the mines.
Every year, Arutmin executives sit down with government representatives to plan their annual work program, including their contribution to the local societies, whether they be in healthcare, sports, culture or education.

“We start the process through ‘social mapping’ and develop shortterm and longterm plans for our community development program,” Firdaus said.

“We maintain close relations with local leaders and chiefs of villages. We sit down with them, discuss their exact needs, and craft a yearly program for them. We work closely with the government and have received several recognitions regarding our work,” he added.

Every year, the company gets recognized not only for its CSR work but also for its work with the environment.

It has received the Ministry of Environment’s yearly award for Environmental Performance Rating Program (PROPER). And in 2009 and 2010, it received the “Green Award,” which recognizes the company’s commitment to the government’s environmental standards. Of 50 coal mining and natural resource-related companies, only six have received the prestigious award.

Indonesia 2010 was prepared for and originally printed in Foreign Affairs magazine.

PDF of the printed report

Next :  

latest special features:

Upcoming Reports from

U.S. Great Lakes 2018

See Preview »

With a relationship going back more than 160 years, the United States and Japan share very deep historical ties. And the Midwest states of Illinoi...

Germany 2018

See Preview »

The economic center of gravity shifts further towards Asia. With over 4 billion people, Asia is becoming a more sophisticated consumer market for g...

Japan 2018

See Preview »

As Abenomics shows signs of working, Japan is experiencing record growth. The world is keen to see Japan’s next steps for its comeback as the Asian...

Singapore 2017

See Preview »

After celebrating 50 years of independence in 2015, Singapore enters a new phase in its history. With this recalibration, the world is keen to know...

Northwest USA 2017

See Preview »

Global Media Inc. continues its coverage of the United States by returning to the dynamic business environment of Northern California and heading f...

Kazakhstan 2017

See Preview »

2016 was a landmark year for Kazakhstan. It marked the 25th anniversary of the independence of Central Asia’s largest country and establishment of ...




  • Global Media is your partner in reaching a powerful international audience through high-level economic reporting.

    Our ambition is to highlight under-reported developments and opportunities around the world, and allow leaders in these regions and sectors to take their message to the highest global level. We partner with top media to communicate with the world’s most powerful audiences. We specialize in communication and branding initiatives that help our clients effectively get their messages to their existing and potential partners. We achieve results for our clients by introducing them and their initiatives to an audience of elite international business and government leaders.

    Global Media Inc. is an independent media agency with offices in Hong Kong and Canada. GMI has more than a decade of experience in the writing, researching, and production of promotional country reports, with media partners from East Asia to North America. We have teams worldwide that develop country and thematic reports on the latest economic trends and developments.

    We are a media partner of Foreign Affairs,the United States’ most influential publication, published by the New York-based Council on Foreign Relations.

    Nearly a century old, there isn’t a more influential or higher-reaching publication in the United States than Foreign Affairs. The journal is ranked #1 in influence by U.S. opinion leaders in a recent nationwide study conducted by Erdos and Morgan, the premier business-to-business research firm. Their findings place Foreign Affairs ahead of all media, both print and broadcast, including The New York Times, The Wall Street Journal, The Economist, and The Washington Post.

    Testimonials:

    “We were extremely impressed with how efficient, well-coordinated, responsive and reliable the Global Media Inc. team was. We owe them a lot for their professionalism. We were very pleased with the outcome, and the article was very well-written. We hope to have an opportunity to work with Global Media Inc. again in the near future.� – Japan Airport Terminal Co. Ltd.
    “The Global Media team’s professionalism was excellent. Their team was great and always gave us the right suggestions and information. The product was excellent, and we were very happy to have such a great opportunity working with their excellent team.â€� – National Graduate Institute of Policy Studies (GRIPS)
    “We were honored to be chosen as one of the good universities in Japan. This article conveyed Seigakuin University’s educational ideals and the message from President Akudo. The advertisement was conspicuous and gave a good impression that Seigakuin nurtured students to contribute to world peace. We really appreciated what Global Media Inc. had did for us.â€� – Seigakuin University

    Whom we have featured:

    • Australian Prime Minister Julia Gillard
    • Australian Foreign Affairs Minister (and former Prime Minister) Kevin Rudd
    • Japanese Prime Minister Shinzo Abe
    • Qatari Minister of International Trade and Industry Dato’ Sri Mustapa bin Mohamed
    • Japanese Minister of Education, Culture, Sports, Science and Technology Yoshiaki Takaki
    • Taiwanese Foreign Minister Yang Chin-Tien
    • Taiwanese Finance Minister Lee Sush-Der
    • Taiwanese Economic Affairs Minister Shih Yen-Shiang
    • Taiwanese National Science Council Minister Lee Lou-Chuang,
    • Taiwanese Deputy Minister of Transport and Communications Yeh Kuang-Shih
    • Taiwanese Political Deputy Minister of Education Dr. Lin Tsong-Ming
    • Indonesian Ambassador to the United States Dr. Dino Patti Djalal
    • Indonesian Investment Coordinating Board Chairman Gita Wirjawan
    • Philippine President Benigno S. Aquino III
    • Philippine Senate President Juan Ponce Enrile