Indonesia Forum Auckland , September 28, 2012

1. Indonesia Forum Auckland, September 28, 2012 Doing Business in Indonesia: An Introduction and Overview NOKE KIROYAN

2. The World’s Largest Archipelago • Population: 241 million • Land area: 1.9 million square kilometers (the size of Mexico, almost 2/3 of India) • 17,500 islands • 300 ethnic groups

3. Center of the Indonesian Universe • Population: 140 million, thereof approx. 90 million ethnic Javanese (largest ethnic group in Southeast Asia). • Size: 126.700 km2 (almost 1/2 the size of New Zealand). • 1000-km northern route (great post road/grootepostweg) constructed by Governor General Herman Daendels in 1808 – 1810 in the service of France the island’s main artery to date. • Center of power and economy since colonial times. • Javanese culture dominant, and pre-eminently dominant during President Soeharto’s 32-year reign. 3

4. Faces of Indonesia

5. Cultural Diversity in Indonesia

6. Perennial Optimists “Ask anyone in Indonesia about the country’s future and most likely you will get an optimistic answer. This is no surprise. The third largest democracy and fourth most populous country in the world has transformed itself from a low-income country in the 1960s into a fast-growing emerging market.” “Doing Business in Indonesia 2010” – The World Bank and IMF 6

7. National Policy-making Process Ideology POLITICALWILL Governments Public Opinion Political Attitude Perception of Good of Community GOAL: GOOD OF COMMUNITY Policies and Strategies Economic, Social and Political Circumstances 7 (“Negotiating Mining Agreements: Past, Present and Future Trends,” DanièleBarberis, 1998)

8. Political and Economic Overview 8

9. Article 33 of Indonesian 1945 Constitution 9

10. Economic Nationalism is not a new phenomenon 7

11. Outside mining, many foreign companies are doing well

12. Is Corruption an Issue? It definitely is, but you can do (good) business in Indonesia without promoting and resorting to bribery or being otherwise involved in corruption. 12

13. Some Stats ……… 13

14. Jakarta Airport served 52.4 million passengers in 2011 A few Snippets National flag carrier Garuda flew 4.6 million passengers in Q1/2012 (up 25% YOY) Growth of air travel in 2011 22% Accor to double number of hotels to 100 by end 2015 1200 air traffic controllers needed 800 new pilots needed annually US$ 2 billion commuter line from airport – Jakarta operational 2014 New car sales in 2012 projected at 1 million units Aston Hotels to add 73 new hotels (20 thereof this year) to existing 45 Mobile telephone subscriptions in Q1/2012 255 million numbers 14

15. Challenge # 1: Unfamiliarity breeds disinterest 15

16. Challenge # 2: Hardly Any Commonality 16

17. Challenge # 3: Australia far ahead in bilateral relations May be turned into an advantage if linked to Australia – New Zealand Closer Economic Relations (CER) 17

18. IA-CEPA initial work will focus on four areas 18

19. The Archipelago Economy: unleashing Indonesia’s Potential Indonesia Today …..and in 2030 • 16th-largest economy in the world • 45 million members of the consuming class • 53% of the population in cities producing 74% of GDP • 55 million skilled workers in the Indonesian Economy • $0.5 trillion market opportunity in consumer services, agriculture and fisheries, resources, and education • 7th-largest economy in the world • 135 million members of the consuming class • 71% of the population in cities producing 86% of GDP • 113 million skilled workers needed • $1.8 trillion market opportunity in consumer services, agriculture and fisheries, resources, and education (“The archipelago economy: Unleashing Indonesia’s Potential – Executive Summary” – McKinsey Global Institute, September 2012)

20. Misperceptions about Indonesian economic performance The Indonesian economy has performed strongly over the past decade and is more diverse and stable than many realize. Indonesia had the lowest volatility in economic growth compar-ed to OECD and BRIC countries. Another mis-perception is that Indonesia’s economic growth centers on Jakarta. The fastest growing urban centers are large and mid-sized cities with more than 2 million people, incl. Medan, Bandung, Bogor and Surabaya. Indonesia is not an Asian manufacturing exporter driven by its growing workforce or a commodity exporter driven by its natural resources. The main drivers of growth are domestic consumption and services. The majority of Indonesia’s productivity gain has come not from a shift of workers from lower-productivity agriculture into more productive sectors, but from product-ivity improve-ment within sectors and not at the expense of employment. (“The archipelago economy: Unleashing Indonesia’s Potential – Executive Summary” – McKinsey Global Institute, September 2012)

21. Opportunities abound for NZ companies – but diligence and patience required 21

22. What could be done to accelerate and expand business relations 22

23. A final note: find the right partner! • Unless you are very big, you don’t enter the Indonesian market by yourself, but in partnership with a local individual or company. • Finding the right one takes time and effort • Don’t enter into a partnership without due diligence 23

24. THANK YOU PT KOMUNIKASI KINERJA Menara Karya, 10th Floor Suite H Jl. HR Rasuna Said Blok X-5 Kav. 1-2 Jakarta 12950 – INDONESIA T: +6221 5794 4694 F: +6221 5794 4696 info@kiroyan-partners.com www.kiroyan-partners.com