Indonesia second-most fraud-prone country

The Jakarta Post/Asia News Network, Thursday, Oct 18, 2012

Indonesia, often cited as the fastest-growing market in Asia, remains chronically plagued by fraud according to a global survey that found that 65 percent of companies in the country have been affected by fraudulent practices in the past year.

The percentage is above the global average of 61 percent, throwing Indonesia, alongside China, the region's economic behemoth, into second place among countries where businesses are most impacted by fraud.

First place went to India, where 68 percent of companies surveyed admitted that they had been affected by fraud.

The study, conducted with more than 800 senior executives worldwide, was commissioned by Kroll Advisory Solutions with the Economist Intelligence Unit, and the findings published in Kroll's Annual Global Fraud Report.

"Our ground-level experience reveals that the major developing economies in the Asia-Pacific region are as corrupt and as fraud-prone as ever," said Tadashi Kageyama, Kroll Advisory Solutions's senior managing director for Asia.

The survey listed information theft as one of the most common forms of fraud in Indonesia, with 35 percent of respondents - the highest figure globally - claiming losses in this area.

"Fraud perpetrated against Indonesian companies also tends to originate from vendors; 27 percent of companies reported that a vendor played a leading role in fraud, compared to 17 percent worldwide," the Kroll report noted.

Information theft has also become the bane of companies worldwide, its prevalence declining slightly to 21 percent this year from 23 percent in the last survey. The US and Europe follow at Indonesia's heels in terms of information theft, with rates reaching 26 percent for both countries.

"Surprisingly, it is employees, rather than hackers, who are more to blame for the loss of information," the report mentioned.

Information technology (IT) analysts have previously pointed out that the growing trend of bring-your-own-device (BYOD), where employees utilize their personal devices such as smartphones and laptops for work, had unleashed issues concerning the security of company information.

Tom Hartley, Kroll Advisory Solutions president and CEO, said that companies, however, had taken action "in response to the myriad of external threats, leading to the overall decrease in the prevalence of fraud".

The study shows that globally, fraud concerns have eased. The number of respondents answering that they were moderately or highly vulnerable to information theft decreased to 30 percent from 50 percent, even though only 2 percent of companies reported having suffered from this type of fraud.

The findings, the report concludes, suggest that companies have grown overconfident regarding their vulnerability to fraud, which actually increases their risks.

Indonesia's Bakries slam Rothschild Bumi resignation

Yahoo, AFP, 16 October 2012

Indonesia's powerful Bakrie family hit out at British tycoon Nathaniel Rothschild Tuesday after he resigned from the board of Bumi Plc, saying he was a "threat to all shareholders" of the mining firm.

In the latest saga of a row analysts say has attracted the attention of possible foreign investors in Indonesia, the Bakries said Rothschild should have quit earlier to avoid Bumi Plc's stock price from plunging.

"Mr. Rothschild is a threat to all shareholders who are fighting for the best interests of the company, and ultimately for themselves and the investors they represent," Bakrie Group spokesman Chris Fong said.

"There are no winners in this deal anymore, it's pure damage control."

Rothschild's resignation on Monday from Bumi, which he co-founded with the Bakries, came as its board considers a proposal by the Indonesian family to sever their ties with the company and buy its most productive Indonesian mines.

The long-running power struggle has seen the London-listed firm's shares slump more than 70 percent this year.

At the heart of the dispute is a Rothschild-backed probe into alleged financial irregularities at the Bakrie-founded Bumi Resources, Indonesia's largest coal miner, which is part-owned by Bumi Plc.

Bumi Resources is among a string of companies owned by the family of Aburizal Bakrie, one of Indonesia's wealthiest men and a likely candidate in presidential elections in 2014.

The 65-year-old is one of Indonesia's richest men with businesses spanning coal, telecommunications to construction.

But he is a highly divisive figure in Indonesia after one of his companies was linked to the triggering of a mud volcano near a gas drilling site in 2006.

The Bakries have offered to give up their 23.8 percent stake in Bumi and pay about $1.2 billion for its mines, which would leave Bumi Plc with no assets other than the cash from the deal.

In the resignation letter quoted by Dow Jones Newswires, Rothschild stated his vehement opposition to the Bakries' proposal.

He also said chairman Samin Tan appeared "determined to drive through the Bakries' proposal", a move he decried as a "disgrace" without first completing a probe into alleged financial irregularities at Bumi Resources.

The 41-year-old scion of a European banking dynasty also expressed his determination to fight for the company's investors from outside the board and said he regretted helping the Bakrie family list in London.

The offer for the break-up from the Bakries followed an investigation order by the Bumi Plc board in September over "potential financial and other irregularities", including a $637 million writedown of development funds and assets in Bumi Resources.

Rothschild was ousted as co-chair of Bumi Plc in March after calling for a "radical clean-up" of the Indonesian firm.

Analysts say the ugly battle has been carefully watched by potential foreign investors already wary of corruption and a lack of corporate governance in Indonesia.

"It had been hoped that the listing of Bumi Plc in London would create a new ethos," said Keith Loveard of Jakarta based consultancy firm Concord Consulting.

"Regrettably the reverse has occurred," he added.

Nat Rothschild has resigned as a non-executive director

of mining group Bumi. Photograph: Nick Harvey/WireImage

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Norway to double carbon tax on oil industry

Extra funding for climate change mitigation and forestry programmes also part of oil-rich nation's radical programme

guardian.co.uk, Severin Carrell, Scotland correspondent, Thursday 11 October 2012

Ekofisk oil platform in the North Sea, Norway. The Norwegian government has
 proposed increasing its carbon tax on offshore oil companies. Photograph:
Ulrich Baumgarten/Getty Images

Norway is to double carbon tax on its North Sea oil industry and set up a £1bn fund to help combat the damaging impacts of climate change in the developing world.

In one of the most radical climate programmes yet by an oil-producing nation, the Norwegian government has proposed increasing its carbon tax on offshore oil companies by £21 to £45 (Nkr410) per tonne of CO2 and a £5.50 (Nkr50) per tonne CO2 tax on its fishing industry.

Norway will also plough an extra £1bn (Nkr10bn) into its funds for climate change mitigation, renewable energy, food security in developing countries and conversion to low-carbon energy sources, Environmental Finance reported.

It will step up spending on new projects to combat deforestation in developing countries to £44m, taking up its spending overall on forestry programmes to £327m. Previous forestry projects have involved Brazil, Indonesia and Ethiopia.

The Oslo government is also to spend £69m on buying carbon credits in 2013, to help offset its emissions, force through new building regulations to make all new homes carbon-neutral by 2015 and increase efforts to heavily cut emissions from cars, switching to electric vehicles.

The scale of these initiatives will pose a significant political challenge to other oil-producing nations, who are also investing in low-carbon technologies and cutting their own emissions, but not yet investing heavily in tackling the impacts of climate change on developing countries.

The UK and Scottish governments estimate there are up to 24bn barrels of oil left to be exploited over the next 40 years from the UK's oil and gas fields in the North Sea, west of Shetland and smaller sites off western England.

But that would lead to total CO2 emissions of an extra 10bn tonnes – dwarfing the UK's annual 500m tonnes of CO2 emissions, at a time when many climate scientists urge cutbacks in oil, gas and coal use to avoid significant global warming and to meet climate targets.

Neither the UK or Scottish government has supported a carbon tax on the oil and gas industry.

The Scottish government, which often looks to Norway as a model for its independence plans, has greatly increased its funding and support for renewable energy investment. It announced a £103m investment fund for marine renewables and community power schemes on Wednesday and has a £4m "climate justice fund" to help developing countries.

But fields in Scottish waters account for about 80% of the UK's North Sea oil and gas fields, which produced 1m barrels of oil a day in August.

Alex Salmond, Scotland's first minister, said on Wednesday that oil economies have a"moral obligation" to increase low-carbon energy and tackle climate change, but says there is no contradiction in maximising oil, gas and coal production.

He told a conference on low-carbon investment: "As countries such as Denmark show, there's no contradiction between making use of substantial in their case gas reserves which will be needed by the rest of the world in the coming decades by the rest of the world, while leading the transition to a low-carbon economy."

After speaking at the same conference on Thursday, Ed Davey, the UK energy and climate secretary, told the Guardian he believed the UK's actions on climate change and green energy were also world-leading. The UK government was putting £3bn into the new green investment bank, and aims to cut CO2 emissions by 34% by 2020, he said.

Asked about Norway's new programme, Davey said: "I would say that the UK government has very ambitious climate change targets and carbon emission reduction targets.

"We were one of the first countries in the world to pass legally binding targets on ourselves, with the Climate Change Act 2008 which had cross party support. And the government has introduced on the back of that, the fourth carbon budget and the whole electricity market reform, the green deal, the green investment bank.

"These are all our tools to deliver on those targets; these are incredibly ambitious and maybe some countries are catching us up."

Ranking third among the world's oil exporters, with production peaking at 3m barrels of oil a day, Norway has 51 active oil and gas fields in the North Sea, and believes it has more than 7bn barrels of undiscovered reserves. Its oil and gas sector is the world's richest: its employees earn $180,000 on average a year.

With a population of 5 million - the same as Scotland - it is the third wealthiest country per capita in the world thanks to its oil and gas exports. Norway's plans to offset the impacts of its oil exports on the world's climate come as it also proposes to expand oil exploration into the Barents Sea to the far north.

Richard Dixon, director of WWF Scotland, said: "Norway is showing how you can use oil income to fund the transition out of oil, we should be doing the same with UK oil revenues. The Scottish National Party have always been keen on the Norwegian oil fund, and now it is setting an example really worth following."

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"Recalibration of Free Choice"–  Mar 3, 2012 (Kryon Channelling by Lee Caroll) - (Subjects: (Old) Souls, Midpoint on 21-12-2012, Shift of Human Consciousness, Black & White vs. Color, 1 - Spirituality (Religions) shifting, Loose a Pope “soon”, 2 - Humans will change react to drama, 3 - Civilizations/Population on Earth,  4 - Alternate energy sources (Geothermal, Tidal (Paddle wheels), Wind), 5 – Financials Institutes/concepts will change (Integrity – Ethical) , 6 - News/Media/TV to change, 7 – Big Pharmaceutical company will collapse “soon”, (Keep people sick), (Integrity – Ethical)  8 – Wars will be over on Earth, Global Unity, … etc.) - (Text version)

“…  4 - Energy (again)

The natural resources of the planet are finite and will not support the continuation of what you've been doing. We've been saying this for a decade. Watch for increased science and increased funding for alternate ways of creating electricity (finally). Watch for the very companies who have the most to lose being the ones who fund it. It is the beginning of a full realization that a change of thinking is at hand. You can take things from Gaia that are energy, instead of physical resources. We speak yet again about geothermal, about tidal, about wind. Again, we plead with you not to over-engineer this. For one of the things that Human Beings do in a technological age is to over-engineer simple things. Look at nuclear - the most over-engineered and expensive steam engine in existence!

Your current ideas of capturing energy from tidal and wave motion don't have to be technical marvels. Think paddle wheel on a pier with waves, which will create energy in both directions [waves coming and going] tied to a generator that can power dozens of neighborhoods, not full cities. Think simple and decentralize the idea of utilities. The same goes for wind and geothermal. Think of utilities for groups of homes in a cluster. You won't have a grid failure if there is no grid. This is the way of the future, and you'll be more inclined to have it sooner than later if you do this, and it won't cost as much….”

Foreign consumer brands see declining market share in China

Want China Times, Staff Reporter 2012-10-07

Mutinationals like P&G are losing their market share steadily to domestic
 companies, who are expanding aggressively in first and second-tier
cities in China. (Photo/Xinhua)

Global companies selling consumer products, such as Procter & Gamble (P&G) and Unilever, are experiencing a decline in their market shares in China as they face growing competition from local rivals that dominated markets in smaller Chinese cities, the Chinese-language Global Entrepreneur magazine reported.

According to a report by Euromonitor International, P&G's market share in China's toothpaste market, which is dominated by foreign brands, had dropped from 20.8% to 19.7%, while Unilever's share slipped from 12% to 9.9%.

Such a development, the magazine said, was a the result of foreign and Chinese companies going head-to-head in the competition, as foreign brands permeated smaller Chinese cities and Chinese brands expanded into first and second-tier markets.

Earlier, foreign brands had targeted the higher end of the market and focused on modern retail channels, while Chinese brands established strong sales networks in the smaller cities, the magazine pointed out.

The integration of sales channels will further intensify the competition between foreign and Chinese brands, said Bruno Lannes, from the consultancy firm Bain & Company.

Despite the prominent influence of foreign brands, the magazine said, Chinese companies have the upper hand owing to their flexible strategies at the retail end, which, according to a Bain and Kantar Worldpanel report, requires more investment than advertising does.

The report also found that as the consumer and personal care products market became saturated, consumers display lower brand loyalty and are more willing to try different brands, making last-minute changes in their purchase decisions.

However, contrary to the report's suggestion, P&G is conservative in its investments at the retail end, with several retailers complaining about the small profit margin for selling P&G products.

Additionally, salespersons play a more important role than the brand itself in retail channels in smaller Chinese cities, where foreign companies are trying to get a foothold, the magazine said.

Meanwhile, the magazine added that Chinese companies are catching up with their foreign rivals in their ability to quickly introduce new brands or products. A P&G product developer even called the change introduced by China's Liby Group in its products as too fast.

In its bid to achieve faster expansion in the Chinese market, Japan's Kao formed an alliance with China's Shanghai Jahwa United Co last year, and plans to expand its reach from 90 Chinese cities to 650.

On the other hand, employees at some foreign companies told the magazine that their firms had become over reliant on discounts. They pointed out that over 50% of the sales of P&G's shampoos and Unilever's washing powders came from products sold at a discounted price, which might lead to a major crisis for strong brands.

BRICS nations thrash out World Bank alternative

Want China Times, Xinhua 2012-10-02

The 2012 BRICS Think-Tanks Forum in Chongqing, Sept. 26. (Photo/Xinhua)

Experts from five emerging world economic powers have told how a two-day forum for thinktanks this week reached consensus on creating a BRICS development bank designed to complement existing global financial institutions such as the World Bank.

Liu Youfa, deputy director of the China Institute of International Studies, said, "At the previous forum before the BRICS summit meeting in March, we were still discussing whether to create this bank, but now we are talking about how to create this bank."

The 2012 BRICS Think-Tanks Forum, held in southwest China's Chongqing municipality on Wednesday and Thursday, was part of efforts by the five countries — Brazil, Russia, India, China and South Africa — to create a BRICS development bank. Its establishment joined the official agenda when BRICS leaders agreed at the organization's summit in India's New Delhi in March to consider the possibility of creating a new development bank. They decided to convene expert meetings on the matter.

Being the first think-tank forum of its kind, briefed to advise governments of each BRICS country, experts at the event said in follow-up interviews that their agreement on the necessity and practicality of creating the bank would be presented to officials, who would advance the governments' decision making.

Ideas that carry weight

Liu Youfa said thinktanks are a preliminary step in government policy-making and the influence of their ideas in part depends on their feasibility and thoroughness.

According to Liu, the consensus from the forum has three main aspects: the need to build a legal framework, the need to establish a theoretical framework and the need to further discuss technical issues. The first of these concerns defining the legal status of the bank, the second was to explain its purpose, and the third was about how the bank should be run and capitalized and other specific matters.

Leonid Grigoriev, deputy director of the Russian Energy Agency and professor of the Higher School of Economics, said, "We generally agreed to create this bank. We scanned all the related issues to be further discussed and formed our opinions on them, issues such as the mode, the capitalization, the purpose of the bank.

"What we did is groundwork and solving technical issues. The rest is for political negotiations, but the governments need ideas in making decisions, especially those from other countries."

Such think-tank forums are usually held right before BRICS leader meetings, as they were before the summit in New Delhi this year and the one in Sanya, China, last year. Interviewed experts said much of the content of the reports formed at the two forums eventually appeared on the summit declarations.

According to HHS Viswanathan, a distinguished fellow of India's Observer Research Foundation, this week's event did not produce a report, but its discussion will surely be included in the report of the next forum, set to take place in South Africa before the next summit there in 2013.

Viswanathan told Xinhua that India expects to see the bank established as soon as possible. Although no timetable was set, a road map has become clear after this week's forum and all five sides are clear what to do next: figuring out the bank's form of organization, equity shares, head office and other issues.

At March's summit, the BRICS leaders also directed finance ministers to examine the feasibility and viability of the bank, set up a joint working group for further study, and report back to them before the next summit.

Experts at the forum clarified that the study by the working group was not as thorough as their discussion and that finance ministers usually focus on domestic issues.

The experts said in interviews that they believe a detailed plan that covers the issues mentioned above could be forwarded to the five governments in a year and that, if the plan is adopted, the governments will probably later set up a preparatory committee to kick off the bank's establishment.

Alternative to World Bank

The Delhi Declaration, issued after the BRICS summit, said the new development bank's aim was "mobilizing resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, to supplement the existing efforts of multilateral and regional financial institutions for global growth and development."

When explaining why the BRICS countries need a development of their own, many experts found fault with the existing global financial institutions, in particular the World Bank, for not providing adequate capital for much-needed large infrastructure projects in BRICS and other developing countries.

Yaroslav Lisovolik, member of the Management Board of Deutsche Bank Russia, said the bulk of world savings and financial resources was concentrated in the developing world, but the pattern of the past decade had seen developing countries channelling a significant part of their reserves into the developed world.

For the BRICS, the creation of a development bank may support the institutional base of BRICS integration. For other developing nations, the bank could address one of the greatest reserves for growth in the world economy — the development of infrastructure, Lisovolik said.

Since the word BRIC was coined 10 years ago to group four leading emerging economies — later expanded to include South Africa — its member countries have consistently grown faster than developed nations. By the end of 2011, the BRICS account for 42% of the world's population, 20% of GDP, and 15% of international trade.

Despite that, experts at the meeting said BRICS countries did not have a corresponding role in global governance, particularly in a world financial system dominated by the United States and Europe.

BRICS and other developing countries have continuously called for reform of the World Bank and the International Monetary Fund. The Delhi Declaration said, "We welcome candidatures from the developing world for the position of the President of the World Bank. We reiterate that the Heads of the IMF and the World Bank be selected through an open and merit-based process."

"Furthermore, the new World Bank leadership must commit to transform the Bank into a multilateral institution that truly reflects the vision of all its members, including the governance structure that reflects current economic and political reality."

The developing world's reform efforts have not made much progress yet. Most noticeably, in 2011, developing countries failed to agree to a powerful alternative to Christine Lagarde, who eventually won the nomination to IMF chief.

Oliver Stuenkel, a professor of international relations from Brazil, said at the forum that the United States and Europe remained reluctant to fully include emerging powers into existing financial structures, and a BRICS development bank could indeed become an effective tool to serve emerging powers' needs, while bypassing restrictions and political pressures from US- and Europe-funded banks.

Forum delegates generally agreed the BRICS banks should be a supplement to the World Bank and other multilateral or bilateral financial institutions, and its creation was not intended to subvert the current Bretton Woods system. However, they said the BRICS bank could put pressures on the current system and compete with the World Bank.

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Will Influential Asia Shape the World?

Jakarta Globe, Shoeb K. Zainuddin, September 29, 2012

Customers talk to a salesperson at a Lenovo shop in Shanghai in this
February 17,  2011 file photo. Experts urged the West not to underestimate
China. (Reuters Photo/Aly Song)

            

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New York. Fueled by rising incomes and a half billion new consumers by 2020, Asia will dominate the global economy over the next few decades, forcing the world’s financial and security architecture to reflect the rise of emerging nations.

This point, made by Kishore Mahbubani, dean of the Lee Kuan Yew School of Public Policy, at the 12th annual Leadership Forum in New York, was countered by billionaire investor George Soros, who said that many emerging powers do not have strong internal systems, such as democratic institutions, to play a leading role on the global stage.

The forum — titled “Defining the Future: How Emerging Powers Will Shape The World Order” and co-sponsored by Strategic Review, an Indonesian journal of leadership, policy and world affairs — brought together Mahbubani, Soros and Lakhdar Brahimi, the United Nations Special Representative for Syria.

Indonesian President Susilo Bambang Yudhoyono, who delivered the keynote address, laid the groundwork for the debate when he said the seismic power shifts now underway would continue to have an impact as the Cold War gives way to “Warm Peace.”

“One of the challenges of the Warm Peace is how to accommodate the rise of emerging powers such as Brazil, Argentina, India, Indonesia, China, Turkey and Saudi Arabia,” he said. “Economic growth is what makes a country strong, and it determines a country’s influence in the community of nations.”

The emerging powers, he added, are even more influential today given the gloomy economic outlook in the developed world. “As a result, emerging powers are not just hard to ignore but they are new partners in reshaping the global landscape,” the president said.

This point was picked up by Mahbubani, who argued that despite uncertainty in the short term, the long-term outlook appeared bright as growing numbers of people from emerging powers join the ranks of the middle class.

“Indonesia is part of the larger story and the key word is confidence, which is incredibly high within the emerging countries,” he said.

“But how do we restructure the global order to reflect this significant change? The UN Security Council must change as the current permanent members are dictators as they cannot be voted out.”

Soros, however, was not convinced, saying that the collapse of the Soviet Union and other past emerging powers proved that democracy and freedom of expression are vital components of a nation’s power.

“We must consider this when we talk about the emerging powers and the West, especially so for China. Will it become an open society? That is the single most important development for the world to consider,” he said.

Mahbubani countered by urging bystanders to not underestimate China, because that would be dangerous.

“The Chinese Communist Party of today is very different from the past. More than 70 million Chinese travel every year and they can see how the rest of the world is developing,” he said, adding that the Western mindset is a black-and-white one and cannot comprehend the complexity of China.

Another region of the world that is poorly understood is the Middle East, Brahimi said. The region, he noted, has had many false starts but the Arab Spring has given people a new voice and they are not going to be silenced.

The West, he added, is too preoccupied with Iranian President Mahmoud Ahmadinejad, who will soon leave office.

“But Iran is an ancient civilization that has been around for a long time and will continue to be around in the future.”

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New Zealand Fund Pulls Freeport Investment, Cites Papua Rights Offenses

Jakarta Globe, Jonathan Vit, September 27, 2012

An aerial view of a giant mine run by US firm Freeport-McMoran Cooper & Gold,
 at the Grassberg mining operation, in Indonesia's Papua province in this July 2005
file photo. (Reuters Photo/Stringer) 

        

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New Zealand’s public pension fund pulled more than $1 million in investment from Freeport-McMoRan Copper & Gold over allegations of human rights offenses committed by security forces around the company’s controversial Grasberg mine in Papua.

The $15.7 billion New Zealand Superannuation Fund announced on Wednesday that it would cease investment in four companies that violate international ethics standards.

The fund raised concerns over “breaches of human rights standards by security forces around the Grasberg mine, and concerns over requirements for direct payments to government security forces by the company in at least two countries in which it operates.”

Indonesian security forces have a heavy presence in the restive province, where police and the Indonesian Military (TNI) are ostensibly suppressing a decades-long insurgency waged by members of the Free Papua Movement (OPM).

But Human Rights Watch, citing leaked military documents, has alleged that security forces have targeted everyone from tribal leaders to political activists in Papua. Security forces routinely suppress pro-independence groups in the province, jailing those caught flying the “Morning Star” flag for treason and killing local leaders suspected of being separatists, like Reverend Kinderman Gire and Mako Tabuni, of the West Papua National Committee (KNPB).

Security forces hired by Freeport’s local subsidiary also engage in regular firefights with unknown gunmen along a road leading to the mine in Timika, Mimika district. The OPM operates from a base in Puncak Jaya, near the Grasberg mine.

The fund concluded that while Freeport’s human rights policies have improved in recent years, the activities of the government forces it employs are beyond the company’s control.

“This limits the effectiveness of further engagement with the company,” the fund said in a statement.

Human Rights Watch applauded the move, calling it “a sound decision indeed.”

“Businesses are getting more and more conscious about human rights abuses,” said Andreas Harsono, a researcher with HRW. “Sound businesses do care about human rights.”

The Ministry of Defense declined to comment on the move. Papua Police, local representatives of the TNI and Freeport Indonesia were unavailable for comment by deadline.

The fund had $1,062,061 in holdings in Freeport as of June 30.

Japan’s Tokyo Electric Power Company, China’s Zijin Mining Group and construction and defense firm KBR were also dropped from the fund’s portfolio.

All four were dropped after the fund decided that they were unlikely to affect any change in their policies.

“In making a decision to exclude a company from our portfolio, one of the tests we apply is whether engagement with the company might realistically lead to sufficient improvements,” the fund said. “We have come to the conclusion that further engagement by the Fund with these companies is not likely to be effective.

“We would rather focus our efforts on companies where we believe we can make a difference.”

The fund’s equity portfolio includes shares in more than 6,500 companies. It manages the government pension fund available for all New Zealand residents 65 and older.

Freeport, which runs the largest copper mine in the world at Grasberg, has a market capitalization of $37.29 billion and pulled in $3.17 billion in net income last year.

Seventy-three percent of its shares are held by institutions and mutual funds.

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Indonesia Occupies Wall Street With Its Heft of Resources, Democracy

Jakarta Globe, Shoeb K. Zainuddin, September 25, 2012

Indonesian President Susilo Bambang Yudhoyono visited Wall Street, in
 downtown Manhattan, to drum up investor interest in Indonesia, during his
visit to New York on Monday. (AFP Photo/Timothy A. Clary)

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New York. For about three hours on Monday morning Indonesia occupied Wall Street as President Bambang Susilo Yudhoyono addressed several American captains of industry and financial titans.

For the first time in its history, the New York Stock Exchange hosted an Indonesian Investment Day, a reflection of growing global interest in the country and Indonesia’s rise as a major global economy.

As pointed out by the chief executive of NYSE Euronext, Duncan Niederauer, in the past seven years, Indonesia’s gross domestic product has grown by 200 percent, its blue-chip stocks have risen by 200 percent and its overall stock market has shot up by 300 percent.

In his speech, Yudhoyono sought to differentiate Indonesia from the rest of the emerging economic pack.

“Here on Wall Street and around the world, there is a lot of talk about emerging markets,” he said. “Indonesia is included in almost every acronym to describe these markets, but among emerging powers, Indonesia is unique.”

Yudhoyono added that Indonesia is constantly adapting itself to global economic and social trends and the government is very conscious of not falling into the resource trap.

The government, he added will not be irresponsible with the nation’s wealth in natural resources.

“We are mindful that natural resources can also be a curse. In fact, we will add value. By 2014, all raw materials will be processed domestically before being exported, as this will not just boost growth but social equity,” he noted.

“Indonesia is doing well, but for how long is the common question. I believe it can be sustained because we have built the foundations and our political stability anchors our economic strength,” he added.

Indeed, few economies in the world offer opportunities for growth and profits that Indonesia does, said Nouriel Roubini, chairman of Roubini Global Economics. He said that the rise of emerging markets would totally transform the global economy over the next few decades, as consumption rises and demand for natural resources increases.

“Who will produce these natural resources? There are a lot of opportunities in Indonesia, which has an abundance of these resources,” he said.

Roubini added that there has been too much hype given to the BRIC countries (Brazil, Russia, India and China) over the past few years, but in many aspects Indonesia fairs much better than they do. “Indonesia has a more robust democracy and a much more diversified economy than Russia or China.”

“One of the strong points of the Indonesian economy is that while its exports are strong, domestic demand makes up two thirds of the economy,” he added. “This is what makes it very resilient.”

The country will, however, need to continue to invest in infrastructure and manage its widening current-account deficit.

Shares Slump as Coal Miner Bumi Probes Irregularities

Jakarta Globe, Clara Ferreira-Marques, Sarah Young, Janeman Latul & Neil Chatterjee, September 24, 2012

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London. Bumi Plc, the coal mining group controlled by Indonesian investors including the politically influential Bakrie family, has begun an urgent investigation into allegations of “financial and other irregularities” at its Indonesian operations, sending its shares down more than 30 percent.

Bumi, co-founded by financier Nat Rothschild, said in a brief statement on Monday that it had commissioned an independent investigation into the allegations concerning its Indonesian subsidiaries, including 29-percent owned Bumi Resources, Asia’s biggest exporter of thermal coal, which is used in power stations.

Bumi is one of several foreign-owned, London-listed miners that have raised corporate governance concerns among investors over the past year. It has heavily underperformed the mining sector since its re-listing in June last year, weighed down by worries over its subsidiaries’ debts amid weak thermal coal prices, battles between shareholders and a complex corporate structure.

The group’s Indonesian partners tried to oust Rothschild from the board last year after he called for a “radical cleaning up” of governance at Bumi Resources, in what was seen as a sign of his frustration with the Bakries. In a reshuffle at Bumi Plc that followed, Rothschild stepped down as co-chairman, and key investor and coal entrepreneur Samin Tan took the chairman’s role.  

The investigation, to be led by an as-yet unnamed law firm, is expected to include a close look at some $300 million of funds used by subsidiaries and affiliated companies to develop new projects, and also at certain loans extended by Bumi Resources, long a concern for investors.

 Bumi said that “an area of focus” would be the “extensive” development funds of Bumi Resources, most of which were written down to zero at the end of last year, along with one potential mining project held by another subsidiary, Berau Coal Energy.

“We have no knowledge and will await further information before we can comment further,” said Dileep Srivastava, Bumi Resources’ investor relations spokesman.

Bumi, the most traded British mid-cap stock on Monday at 8 times its 90-day daily average, was down 32 percent at 0930 GMT, at 133 pence, off an earlier all-time low of 119.5 pence.

Shares in other Bakrie Group firms also fell on Monday on investor concerns that Bumi’s financial problems would affect related companies. Property developer Bakrieland Development and energy firm Energi Mega Persada both slid 12 percent, while plantation firm Bakrie Sumatera fell 9 percent.

“It’s a major development for Bumi Plc, which now has Samin Tan in control. People have been wondering whether these national coal assets have been mismanaged,” said Jemmy Paul, an equity fund manager at Sucorinvest Asset Management in Jakarta, who manages over $200 million.

But some saw the move as potentially positive.  

“We see this investigation as a positive development, although we feel it does have the potential to bring to light some gross [and potentially criminal] mismanagement of funds which may turn off shareholders in the short-term,” analysts at Liberum said.

“Clearly, given PT Bumi’s high debt levels, the repatriation of funds and focus on core coal mining business is critical.”

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British financier Nathaniel Rothschild, left, has criticized the
 management and corporate governance at Bumi Resources,
 the Indonesian coal company he is trying to transform into a
 top-tier global miner, the Financial Times reported on
Thursday. (Antara Photo/File)

Nation’s Competitiveness Slipped: WEF

Jakarta Globe, Tito Summa Siahaan & Muhamad Al Azhari, September 06, 2012

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Fears over corruption, the costs of crime and poor ethics has led to the World Economic Forum demoting Indonesia in its Global Competitiveness Index.

The Geneva-based organization ranked Indonesia 50th of 144 nations in its 2012-13 report, down four places from the previous year’s position. In formulating the annual index and accompanying report, the WEF reviews business, political and social indicators in countries across the world.

The report, released on Wednesday, said Indonesia was plagued by “concerns about corruption and bribery, unethical behavior within the private sector, and the cost to business of crime and violence.”

However, it also praised some the government’s effort to slash red tape. “Bureaucracy is less burdensome and public spending less wasteful than in most countries in the region, and the situation keeps improving,” the WEF said.

On infrastructure, the report said Indonesia remains largely “underdeveloped,” and ranked it 78th.

The WEF praised Indonesia’s macroeconomic performance, ranking the country 25th. “Macroeconomic stability is buoyed by its solid performance on fundamental indicators: the budget deficit is kept well below 2 percent of GDP, the public debt-to-GDP ratio amounts to only 25 percent, and the savings rate remains high,” the report said.

“Inflation was reduced to around 5 percent in recent years after frequent episodes of double-digit inflation in the past decade.”

Business leader Sofyan Wanandi said the report carried significant messages. “We should be ashamed because our competitiveness rating has been dropping for two consecutive years,” said Sofyan, the chairman of the Indonesian Employers Association (Apindo).

He supported the WEF findings on infrastructure, adding that complicated bureaucracy and poor productivity was plaguing the country’s competitiveness.

The report said Indonesia was “one of the best performers within the developing Asia region, behind Malaysia, China and Thailand yet ahead of the Philippines, Vietnam, and all South Asian nations.”

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