The Bali’s battle to bring back Aussies on top of the agenda

Thursday, November 30, 2006

Bali Tourism Board has pledged increased support to improve their presence in the Australian and New Zealand marketplace in 2007 according to Bali Village, Vice Chairman, Herdy Sayogha.

In an exclusive interview with e-Travel Blackboard, Mr Sayogha said he was contemplating visiting Australia and New Zealand at least twice a year from 2007 in a bid to increase promotional activities for both members of the trade and consumers.

“Increasing Australian and New Zealand arrivals are a priority for us. Australia is still Bali’s fourth largest market” he said.

Mr Sayogha said that in recent months, statistics showed that arrivals were on an increase of 50 per cent during the same period year on year. Currently arrivals from Australia were 20 per cent behind pre-2005 levels due to the buoyancy of Bali’s other source markets with most returning to normal levels.

Bali has also experienced resurgence from new emerging markets including Europe and Japan which are now both in the top four for arrivals to the island. He said potential markets included India and China as well as regional markets.

Traditional Balinese Dancers

Mr Sayogha said he welcomed news that Air Paradise may be re-commencing services from Denpasar to Australia saying “any additional carrier that can service between potential markets is positive”.

He also said the recent ‘Where the Bali hell are you?’ campaign by Little Bali Hotel & Resort Company was a “brilliant thought for Bali” and showed that “many people still have concern about Bali”.

Regarding hotel occupancy levels, Mr Sayogha said it was “hard to say” due to the ever increasing number of new properties or extensions on existing hotels opening each month.

The “Bali is my Life” tagline which is used in conjunction by Indonesia’s national carrier, Garuda and its wholesale division, Garuda Orient Holidays in Australia, has been widely accepted and approved by the Ministry of Indonesia and will continue to be used throughout 2007, according to Mr Sayogha.

“It is an expression of everybody that lives in Bali,” he said.

Bali was recently awarded “Best Island in the World” by the readers of Travel + Leisure magazin

Starbucks bets on China's new social mobility

Wednesday, November 29, 2006

By Janet Adamy in Shanghai, The Wall Street Journal

To make Chinese people familiar with Starbucks coffee, barista Stephanie Chen pours customers a 30-milliliter sample and invites them to join her for a tasting. Then she blurts out the first thing that comes to mind when the brew hits her palate.

"Dry land," Ms. Chen declared recently after slurping a robust blend from a tiny white cup. "In the west in China, it is always hot and dry and it reminds me of those places."

Ms. Chen's tastings are an important part of Starbucks Corp.'s plans for global growth. The Seattle company aims to one day have thousands of stores here, eventually making China its largest market outside the U.S.

But Starbucks faces a big obstacle as it goes after the market here: Most of China's 1.3 billion people don't care for the chain's signature product. In tea-drinking China, coffee has such a narrow following that until recently many Starbucks here didn't brew drip coffee unless a customer ordered it.

Starbucks is betting that a new generation of Chinese with growing spending power and an appetite for high-status brands will flock to its stores because Starbucks embodies China's new sophistication.

"Coffee represents the change," says Wang Jinlong, president of Starbucks Greater China, while sitting at a riverside Starbucks here on a hot afternoon. The patio was packed with young adults fidgeting with cellphones as they sipped lattes and Frappuccinos topped with whipped cream. "The disposable income is concentrated on the young people and this is the place they want to come."

Starbucks's strategy in China points to a dilemma facing many Western companies who covet the nation's huge market: Should they change their offerings -- or attempt to change Chinese tastes?

So far, most of the company's plan has involved the latter. Starbucks is hoping to draw Chinese customers first by offering a new type of informal gathering place. Once patrons are inside, their coffee education begins. The chain stacks cream-and-sugar counters with brochures titled "Coffee Brewing Wisdom" and others that answer questions like "What is espresso?" Workers float through stores passing out small cups of pumpkin spice latte and other drinks.

Some of the most successful Western companies pushing into China have tailored their products to suit locals. Yum Brands Inc., owner of KFC, the largest restaurant chain in China, is starting a Chinese fast-food chain to sell noodles and rice. General Motors Corp. has restyled a Cadillac for China. The model has a more luxurious back seat given that many affluent Chinese have their own drivers.

Whether Starbucks succeeds in China will also be an important barometer of social and economic change. A 480-milliliter latte -- what Starbucks calls a "grande" -- costs about $3.50 in Shanghai, a luxury considering the average income in this city is about $3,800 a year. Despite the steep price, Starbucks's ability to charge a premium has been a critical component of the chain's overall success. Rather than lower drink prices, then, executives say they are considering making certain food items less expensive as a way to attract more customers.

Starbucks faces competition from a new generation of Chinese teahouses that offer both traditional beverages and a coffeehouse culture. The chain also has to navigate lots of pesky roadblocks. Financial regulations prevent the chain from offering a Starbucks payment card. If Starbucks wants to tinker with its offerings, adding white-chocolate mocha drinks in China, for instance, it has to get government approval to import the flavoring.

Starbucks is relying on Mr. Wang to smooth over these hurdles. The Beijing native worked for the Chinese government in the early 1980s and helped it form its first partnerships with overseas auto makers before joining Starbucks in 1992, when it had 120 U.S. stores. He left the company in 2000 to return to China, then rejoined Starbucks in 2005 to lay plans for its Chinese expansion.

Mr. Wang has a different strategy than the one Starbucks has used to blanket the U.S. Instead of enticing customers with coffee, he wants to make the gathering-place element of Starbucks the initial draw, particularly because living spaces are small here and people need a place to congregate.

Most of Starbucks's 436 locations in mainland China, Taiwan and Hong Kong offer more food and seating than in the U.S. About 90 percent of orders are consumed inside the store. The U.S. average is about 20 percent, Starbucks says. Crowds peak in Chinese Starbucks during the afternoon. Mornings are so slow that employees spend them restacking displays of coffee mugs.

Stores sell green-tea cheesecake and Chinese moon cakes, traditional pastries served during the Mid-Autumn Festival. The drink menu is anchored by the same coffee-based beverages as in the U.S., and tea plays only a minor role on store menus.

Competitors consider the drink strategy a weakness given the distinct palate of the Chinese. "They will enjoy tea more than coffee," says Garvin Lau, a general manager for Real Brewed Tea, which has about 100 new-age teahouses in China that attract the same young clientele as Starbucks. The stores sell basic tea drinks for as little as $1.75 each.

Real Brewed Tea aims to be "the Starbucks of tea," Mr. Lau says. It has carefully studied the Seattle chain. Real Brewed Tea's stylish locations have high ceilings, bright green chairs and menus that tell customers the chain is "determined to become a lifestyle."

Other multinationals are also betting coffee will catch on with upper-income Chinese. Sara Lee Corp. recently began selling its Senseo coffee machine, a high-end home brewer, for about $100 in Chinese retail outlets.

Starbucks's success could hinge on attracting what Mr. Wang calls the "little emperors." China's one-child rule created a generation of individuals who have been pampered by parents and grandparents and have the means to make indulgent purchases. Instead of believing in collective goals, these young people embrace Starbucks's ethos of individuality that the coffeehouse perpetuates through customized drinks, personalized service and unique music, Mr. Wang says.

"Their view of this world is very different," Mr. Wang, 49 years old, says. "They have never gone through the hardships of our generation."

The son of textile-factory workers, Mr. Wang grew up in Beijing during the Cultural Revolution, when millions were sent to villages to perform manual labor. He was assigned to teach English, and then to work for the Chinese government after he finished college. The government sent him to law school in the U.S. to help China better understand American law.

After he graduated from Columbia University's law school in 1988, Mr. Wang planned to work in the U.S. for a year and return to China. But the Tiananmen Square protest crackdown rattled the country. He moved to Seattle and took a job at the law firm Preston Gates & Ellis.

In 1992, Starbucks hired him to start its legal department in the U.S., and four years later, he helped open its first stores overseas in Japan. Then Starbucks started looking at China.

The company surveyed Chinese consumers and came up with a list of the top 20 reasons they visit cafes. Coffee-drinking ranked sixth. Consumers said the No. 1 reason they go to cafes is to have a place to gather.

Executives didn't think the coffee part stood in their way. They hoped the appeal of the brand and experience of sitting inside Starbucks would be enough to draw Chinese. Many of Starbucks's espresso drinks are so heavily sweetened they don't taste like coffee, and some Frappuccinos don't contain any coffee. In 1999, Starbucks opened its first China store in Beijing's China World Trade Center.

Expansion was slow. Government regulations forced Starbucks and other international retailers to open stores through partnerships with local firms. Starbucks left many of the operating details to the partners and told them to call if they needed anything, executives say.

Hsu Ta-Lin, chairman of H&Q Asia Pacific, which invested in Starbucks' first stores in Beijing, says that after the first year, he "certainly did not have the feeling this was going to be a resounding success," and remained concerned that drink prices were too high.

By then, Mr. Wang was restless to return to China. He had promised his Chinese wife he would take her back home. In 2000, he left Starbucks and moved to Hong Kong, then Shanghai. He was so bored he says he felt physically sick. So he volunteered his expertise to a chain of convenience stores -- his way, he says, of helping to create something new for China.

Meanwhile, he kept his eye on Starbucks. He saw Chinese businesses, including a dairy company, growing faster than the coffee chain. The government had installed new regulations that promised to make it easier for multinationals like Starbucks to expand without local partners. On visits back to Seattle, Mr. Wang met with Starbucks Chairman Howard Schultz and urged him to move more quickly. "In China, there's only one speed: faster," Mr. Wang told Mr. Schultz, both men recall.

"I knew he was right but we didn't have the right people," Mr. Schultz says. Late last year, Mr. Wang came back to Starbucks to lead the expansion.

Mr. Wang overhauled the company's growth strategy to focus more on adding stores in China's metropolises instead of entering a lots of new cities.

To build a coffee culture in China, Starbucks has begun with its employees. Many of them had tasted only instant coffee, the most common variety in China, before joining the company. On a recent morning at Starbucks Shanghai headquarters, workers gathered in the lobby and divided into teams for a coffee-tasting competition. They sipped two samples of coffee and guessed which country it came from and its level of acidity. Some workers wrinkled their noses at the taste.

They also hold more formal tastings for customers, like the ones Ms. Chen performs at her Shanghai store. After she pours samples, she tells patrons to smell, then sip the coffee and describe how it makes them feel. Ms. Chen tells customers that it is good for them to drink coffee in the morning. If customers don't like the coffee samples, workers encourage them to come back for another tasting, or offer them a different drink to get them on the "coffee journey," says store manager Bruce Yin.

On a warm summer evening at a Starbucks in downtown Shanghai, customers lined up at the counter to order mango Frappuccinos, fruit and vegetable cups and blueberry cheesecake. Warren Guo, a 30-year-old who works in foreign trade, sat on the patio and shared a piece of cheesecake with his friend David Wang, 35, who also works in foreign trade. Mr. Guo says he doesn't like coffee but comes to Starbucks because there are "many girls."

Fang Sun Yan sipped a latte with whipped cream on the patio while checking her cellphone for messages. The 23-year-old runway model started coming to Starbucks to meet friends. Now she says she has grown "a little bit addicted" to coffee and visits as often as three times a week.

Mr. Wang concedes that coffee culture has caught on faster than coffee itself in China. But Starbucks's sweeter beverages, like flavored lattes and Frappuccinos, are becoming popular. One of the best-selling Starbucks drinks in China is the caramel macchiato, made with espresso, milk and caramel flavoring topped with whipped cream and caramel sauce. It costs about $4 for a grande size.

China's tightly regulated business environment still throws up lots of hurdles for Starbucks. Its fragmented government and currency-conversion limits make banking difficult. "If I want to move money out of China, it's a hellish process," says Charles Jemley, Starbucks vice president of finance in China. Book bags and coffee mugs barely made it out of customs in time for Starbucks to pass them out at a rural teacher-training session it sponsored. Poor water quality in some cities means Starbucks has to install elaborate filtering systems.

Starbucks won't disclose sales or profit details for its China stores. The company cites its expansion in Japan as proof it can carve out a market in a tea-drinking country -- even though the chain has struggled to expand sales there. Starbucks does say China stores have lower sales than U.S. stores. That is offset by cheaper labor and other lower operating costs. Though it declines to provide China-specific details, Starbucks says it plans to eventually have 20,000 locations overseas -- with a substantial portion of those in China, says Martin Coles, president of Starbucks Coffee International.

Competitors say Starbucks doesn't have a wide enough audience to expand significantly in China. Be for Time Tea House has 160 locations in China including many near universities with signs written in English. It offers unlimited drinks for $2.25 to appeal to customers who spend hours smoking, playing poker and celebrating birthdays.

"The really big population comes here," says Chen Yong Hua, who runs a Shanghai Be for Time that is decorated with mismatched wicker chairs and faded Hollywood movie posters. He says Chinese prefer a noisy place like his cafe instead of Starbucks's serene atmosphere because "it makes you feel warm." His most popular drinks are orange juice and bubble tea, a sweet beverage with chewy pearl-shaped bits that customers slurp through a straw.

Mr. Wang says he doesn't think Starbucks's prices are too high for China. Many customers use Starbucks as a cheaper alternative to gathering for a meal or for business meetings. "Customers really perceive our coffee has the value for their money," he says.

On a recent morning, Guo Shi Yuan, a 48-year-old Buddhist monk dressed in a gold robe, ordered a cup of black tea and sat at a downtown Shanghai Starbucks. He had traveled from his nearby mountain village by train to meet another monk to discuss their faith.

"I come here because I prefer the environment more than the coffee," Mr. Guo said while music by Marvin Gaye played in the background. "It makes people feel comfortable."

Unilever seeks to acquire new brands

The Jakarta Post

PT Unilever Indonesia, the publicly listed consumer goods maker, is in negotiations to acquire brands and pursue partnerships with local companies to help it strengthen its presence in the Indonesian market.

"We are negotiating with a number of companies," said Franky Jamin, Unilever corporate secretary, while refusing to name names.

"But it is possible to undertake other kinds of cooperation with those companies in case these negotiations fail."

The last brand the company acquired was Taro snacks, produced by PT Rasa Murni Utama, in 2003.

The acquisition plan was part of the company's expansion strategy, Franky said, so that it could retain its strong grip on the market and even strengthen it.

Unilever, already the country's largest consumer goods maker, produces processed foods and beverages such as instant noodles, tea and bread.

Turning to the company's performance, Franky said he was optimistic that sales would increase by more than 10 percent in the last quarter of the year, having registered a healthy 14 percent growth in the previous quarter.

Last year, the company, a unit of Rotterdam and London-based Unilever, booked a 1.62 percent drop in sales as the fuel price hikes eroded people's purchasing power.

Infrastructure Development in Indonesia: Moving Forward

C. Lawrence Greenwood Jr.,

Vice-President
Asian Development Bank

Indonesia Infrastructure Conference and Exhibition
1 November 2006
Jakarta

I. Introduction

Your Excellency, President Susilo Bambang Yudhoyono, Honorable Ministers, Excellencies, Chairperson of this session, ladies and gentlemen. It is a pleasure to join you for the Indonesia Infrastructure 2006 Conference and Exhibition.

I would like to begin by congratulating the Government of Indonesia for its initiative in advancing Indonesia’s infrastructure development through this important conference. As the Government well knows, investing in decent roads, water supplies, energy, telecommunications and other basic infrastructure services is vital to sustain economic growth and improve people’s standards of living.

We at the Asian Development Bank are proud to be partners in Indonesia’s development efforts. Since its first loan to Indonesia in 1969, ADB has provided more than $20 billion in cumulative development assistance, with a significant share of that assistance going to infrastructure.

Read More ....

Riding along with the tigers

Instead of throwing in the towel, Thais are urged to cash in on the China-India boom

UMESH PANDEY, ASIA FOCUS, The Bangkok Post

Thailand's small and medium-sized enterprises need to increase their efficiency and look to move toward the regional economies if they want to be successful in their ventures in the long run.

"The changing situation in Asia mean you can't be satisfied with what you have done but instead you have to continue to adapt to the changing world," Kosit Panpiemras, deputy prime minister and industry ministry, said in his opening remarks at a seminar entitled "Thailand and the New Economic Powers of Asia".

Mr Kosit said that Thai SMEs had to look at the rapidly changing situation in Asia as an opportunity to further their operations rather than a threat.

"We want all of us gathered here to look at the emergence of these two countries (China and India) and look at them as opportunities," he said to a packed audience at the Bangkok Bank auditorium.

He added that partnering with companies in these two countries would help increase the value for Thai SMEs.

"Once we are partners (with companies in China and India), it will be good for us and help change the situation by increasing our efficiencies and by adding value," he said.

"The faster we partner, the stronger we become."

His remarks were echoed through the entire seminar during which academics and economists presented their viewpoints on the two emerging global economic powerhouses.

China and India, which have nearly 2.5 billion people, represent an important market for Thailand with two-way trade with the two countries standing at more than $21 billion during 2005 and is set to increase further this year.

"If we were to say that all roads lead to China, then we would not be understating the facts," Chartsiri Sophonpanich, president of Bangkok Bank Plc, said in his opening remarks.

He added that it was only a matter of time before China took the top position as the world's economic powerhouse but this would help, rather than hurt, the development of the Thai economy.

"It would be both India and China that would help put Asia's growth on a sustainable path going into the future," Mr Chartsiri added.

Most economists do not doubt the fact that the next century would be that of Asia.

"The two economies are what we would compare to as ones that are the RCA (Royal City Avenue) and Center Point of the future," said Assoc Prof Sompop Manarungsan, an adviser to the Chinese studies centre at Chulalongkorn University, drawing an analogy between the young and dynamic nature of both China and India and the popular places for youth culture in Bangkok.

He added that the European, Japanese and the American markets are more mature and will grow at a slow pace.

Citing the need for Thai companies to expand their operations into these countries, Dr Sompop said that it was necessary for Thai corporations and SMEs alike to move into these markets if they were intent on maintaining their competitiveness.

Citing the example of the foreign direct investment (FDI) into China, Dr Sompop said that the staggering figure of $72 billion in 2005 alone was something that investors should start to notice.

India, on the other hand, he says, attracted just $6.6 billion, a far cry from those seen in China but still a commendable figure.

According to him, China is set to grow at a faster pace since the country's literacy rate, at about 90% of the population compared to 60% of India, is something that developing countries need to take into consideration.

China, whose gross domestic product (GDP) stands at around $2.23 trillion in the official exchange rate and $8.88 trillion in purchasing power parity terms, is set to show tremendous growth going forward. Its growth in 2005 was a staggering 9.8% and expectations are that it will grow at an even higher rate this year after exports in the first half alone rose 25% year-on-year.

Dr Sompop added that trade between China and India also surged and was set to reach $50 billion by 2010 from the current levels of $17 billion, compared to a mere $7.3 billion in 2003. "At the rate they are going, the $50-billion mark is easily achievable," he said.

But with all these exciting figures, panelists warned Thai SMEs should carefully study the markets before they enter.

"It used to be said that doing business with the Chinese is difficult and I would suggest that investors seeking to enter these markets learn the languages and cultures before they take the plunge," said Pisanu Rienmahasarn, deputy permanent secretary to the Commerce Ministry.

He said that Thai companies looking to benefit from the ongoing changes in China could take advantage of its offer for Thailand to act as its logistics centre.

"There are various roadway projects that are being undertaken to help improve the logistics in the region and we could tap this market," Mr Pisanu says.

Citing the need for China to enter the Andaman Sea in order to export its goods to nearly 400 million middle-class Indians, Mr Pisanu said that if Thailand could help build a port, a rail link and a road link to some of the southernmost parts of China such as Hainan, Thai products could be shipped to the "Pan Pearl River Delta" area, the highly prized economic zone that has a population of more than 460 million people.

"The tastes and preferences [of people] in this area are similar to those of Thais. Therefore, Thai companies could adapt well there. This is an area where people have high purchasing power and once the Asean-China free trade agreement (FTA) is signed and takes effect, it will benefit Thai companies."

He said potential investors should study the Thailand-China and Asean-China FTAs closely to see how they could benefit from the bilateral agreements.

Energizing The Economy

Energizing The Economy

Indonesia is likely to confront looming power shortages due to insufficient capacity expansion in the face of 7 to 9 percent yearly increase in demand. Over 70 million people in Indonesia, mostly the poor, still do not have access to electricity. Read the Brief [pdf 1.5mb]

For more information on World Bank in Indonesia, please visit: http://www.worldbank.org/id

The Road to Economic Growth

The Road to Economic Growth

The road sector accounts for the major share of domestic freight and inter-urban passenger land travel in Indonesia, playing a crucial role in linking communities and markets throughout the country. Read the Brief [pdf 1.1mb]

For more information on World Bank in Indonesia, please visit: http://www.worldbank.org/id

Flow of Funds, Flow of Water

Flow of Funds, Flow of Water

Today, fewer than 20% of households in Indonesia have access to piped water, which is inexpensive and still of reasonable quality compared to alternative sources. The situation has deteriorated in recent years, as the sector can no longer rely on central government grants and loans, formerly major sources of funding. Read the Brief [pdf 674kb

For more information on World Bank in Indonesia, please visit: http://www.worldbank.org/id

Forum encourages youth entrepreneurship

Sri Wahyuni, The Jakarta Post, Yogyakarta

Young people from 35 countries have gathered in Yogyakarta to explore ways to promote youth entrepreneurship.

The three-day Global Youth Entrepreneurship Forum was officially opened Thursday by Yogyakarta Governor Sri Sultan Hamengkubuwono X.

Also scheduled to appear at the forum are Indonesian State Minister for Youth and Sports Affairs Adyaksa Dault, Malaysian Minister for Youth Affairs Datuk Azalina Othman Said and Namibian Deputy Minister for Youth Affairs Pohamba Shifeta.

Some 200 young people have come from Asia, Africa, the Caribbean and Europe to attend the forum, which is being organized by the World Assembly of Youth (WAY), an international coordinating body of national youth councils and organizations that has 115 member organizations from all continents.

Speaking at a joint press conference here Wednesday, WAY president Mohd. Ali bin Mohd Rustam said the forum in Yogyakarta was the first such event held by the organization since it was established in London in 1949.

The assembly says in the future it plans to make the forum a periodic event, to provide a platform for young entrepreneurs, NGO workers, youth activists and others to promote youth entrepreneurship as a means of viable youth employment creation.

"This year we are concentrating on matters concerning ICT (information and communication technology) and small business development," said Rustam, who is also chief minister of the Malaysian state of Melaka.

He said the forum was focusing on job creation because there were more than 60 million young people worldwide currently looking for jobs.

"And this increases about 50 percent every year," said Rustam, underlining the importance of such conferences in helping young people develop their entrepreneurial skills and become job creators rather than job seekers.

It is also for this reason that educators, businesspeople and NGO activists, especially from youth organizations, have been invited to the forum to share their experiences.

Organizers hope the forum will help young people make use of ICT to develop small businesses efficiently and effectively, which in turn will help reduce the global youth unemployment rate.

The International Labor Organization has reported that of the 60 million unemployed young job seekers worldwide, 80 percent are in developing countries.

Forum organizing committee chairwoman GKR Pembayun said it hoped a one-day seminar and two-day workshop held during the forum would give young people the tools to start businesses in their hometowns, rather than migrating to large cities in search of work.

Indonesia earns $110 mln from tea exports

Denpasar, Bali (ANTARA News) - Indonesia`s tea exports earn US$110 million in foreign exchange annually and contribute Rp1.2 trillion to the gross domestic product (GDP).

"Indonesia is the world's fifth biggest exporting country of tea. The country exports at least 98,000 tons of tea annually," Joko Santosa of the National Plantation`s Tea and Quinine Research Center said here on Friday.

The country`s tea market share constituted seven percent of the world`s tea export total volume, Santosa said when speaking in a seminar on revitalization of plantation technology.

The world`s largest market share of tea products was controlled by Kenya (22 percent), followed by Sri Lanka (19 percent), China 19 percent) and India (12 percent).

The national tea agribusiness employs around 300,000 workers and around 1.2 million people earn their leaving from this sector.

However, he regretted that since 2000, most of the country`s tea industries have suffered from losses.

The increase of oil and fuel prices few years ago badly affected the tea industries by drastically increasing the production costs, he said.

Meanwhile, the prices in the Jakarta Tea Auction (JTA) were only 55-60 percent of those in the Colombo Tea Auction (CTA), Joko Santoso said.

Indonesian coal exports seen raising to 130 mln tons in 2007

Jakarta (ANTARA News) - Coal exports are expected to increase to 130 mln tons next year from the 110 mln tons estimated for this year because of greater demand, Indonesian Coal Mining Association (APBI) chairman Jeffrey Mulyono said.

He said coal output was expected to grow to 185 mln tons next year from the 153.4 mln estimated for this year.

About 70 pct of Indonesia's coal output is exported. Japan, Taiwan, South Korea and Hong Kong are the main buyers.

Coal prices were expected to rise next year from the level of around 45 usd per ton predicted for the end of this year, Mulyono told XFN Asia.

RI, Japan overcome hurdles in trade talks

Andi Haswidi, The Jakarta Post, Jakarta

Indonesia and Japan have finally agreed on most of the major elements of their proposed Economic Partnership Agreement (EPA), and are set to sign preliminary agreements in Japan on Saturday, Trade Minister Mari Elka Pangestu says.

"The chief negotiators ... are finalizing two things this week; the agreement in principal on major elements, and the records of discussion, and will sign them on Saturday," Mari said Friday at the Trade Ministry.

The minister said the agreements would be signed during President Susilo Bambang Yudhoyono's three-day visit to Japan starting Saturday.

Mari said the negotiations on further aspects of the EPA would take several more months, adding that she expected the final agreement to be ready by mid-2007.

Even then, she explained, the entry into effect of the full agreement would have to wait until the necessary amendments had been made to Indonesia's investment, tax and labor legislation by the House of Representatives.

Talks on the Indonesia-Japan EPA have been underway since June 2005 following a visit by President Yudhoyono to Japan that month, with six official negotiating rounds and many other meetings having taken place to date.

The planned partnership agreement will cover issues such as the liberalization of trade in goods and services, the movement of people, energy and minerals, standards and conformance, improvements to the business environment, and investment.

"This is a comprehensive agreement, and will see the removal of 90 percent of tariffs. Some tariffs will be lifted immediately, while others will be gradually phased out over periods of three, six or 10 years," she said.

Japan is expected to drop tariffs on Indonesian manufactured products such as textiles, and marine and farm products such as shrimp and tropical fruits, but will keep those on rice and plywood, while Indonesia will abolish tariffs on such things as automotive products and electronics goods.

Indonesia currently imposes tariffs of between 65 and 80 percent on automobiles from Japan. It is envisaged that tariffs on models with engine sizes exceeding three liters will be lifted by 2012, while those on models with engine sizes of 3 liters or less will be removed by 2016.

To ensure a mutually beneficial partnership, Mari said that Indonesia was seeking cooperation in projects that would ensure knowledge and skills transfer so as to improve Indonesia's production capacity and standards, which in turn would increase the country's global competitiveness.

"Training will be provided as regards the transfer of skills and technology. In the manufacturing sector, for example, we hope to see am improvement in the quality of our industrial components."

"And in the food sector, we hope that we can improve our standards so that we can meet Japan's market requirements," Mari said.

It is also expected that, based on the EPA, Japan will accept skilled labor from Indonesia, including nurses, care workers and hotel staff, in response to the aging problem that Japanese society is facing, which is set to give rise to labor shortages in the service and other sectors.

If this comes to pass, Indonesia will become the second nation, following the Philippines, to be allowed to send workers to Japan under an economic partnership agreement.

The total value of trade between Indonesia and Japan stood at US$24.96 billion in 2005, with Indonesia's exports to Japan standing at $18.05 billion and imports from Japan at $6.91 billion, leaving a surplus in Indonesia's favor of $11.14 billion. Total trade is currently increasing at 3.07 percent per annum.

Green Savings

19 Nov 2006, Elizabeth John

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The luxury resorts people in the region are thinking green, and are the better for it, writes ELIZABETH JOHN.

SOUTH-EAST Asian resorts investing in the environment are realising that green isn’t just the colour of nature: it’s also the colour of money.

Switching to energy saving devices, recycling and using systems that reduce human impact on the environment, have shaved a good slice off their operating costs.

From Bali to Phuket, resorts are also finding that such moves have several indirect benefits — they’ve kept guests returning and staff happy.

At Tanjung Rhu Resort in Langkawi, eco-friendly efforts drove operating costs up by 11 per cent initially.

But since then, it’s dropped six per cent a year, says general manager Arnold Esmond.

And while a daily change of towel and bed linen is a must at a luxury resort like Tanjung Rhu, 12 per cent of guests chose otherwise — which contributes to the bottom line.

Guests, who care about the environment and aren’t afraid to voice their concerns are behind most of the resort’s ideas for change, says Esmond.

Any savings these bring are used to fund social projects like gotong-royong and festive or religious celebrations for the surrounding community.

These initiatives earned the resort one of Wild Asia’s Responsible Tourism Awards 2006, which recognises outstanding environmental management practices and social programmes benefiting institutions and nearby communities.

Frangipani Langkawi Resort and Spa, short-listed for the award, rewired their luxury seafront property so each light could be individually controlled. It took 20 per cent off the electricity bill.

Water recycling and saving measures lowered that bill by about 15 per cent, says William Lam, the resort’s director of sustainable development.

The best in Asia, Evason Phuket in Thailand, saved a "significant sum" when they created a rainwater-fed reservoir and became self sufficient in water.

With only one government-controlled dam on Phuket and many on the isle relying on water from privately-owned sources, Evason’s move was driven as much by conscience as need, says Arnfinn Oines.

"Being self sufficient meant reducing pressure on already scarce water resources," explains Oines, the resort’s environment co-ordinator.

"If we had trucked in water, we would have spent a fair bit."

With a solar thermal plant for hot water and no air-conditioners in four of five restaurants, Evason was the only resort to score full points in the award evaluation.

Managed by Six Senses Resorts and Spa, Evason Phuket is also the only hotel in South-east Asia certified under Green Globe 21, the international certification programme for sustainable travel and tourism.

At Bali’s ALiLA Ubud Resort and ALiLA Manggis, staff turnover is low with some employees having served the resorts for over 14 years.

At the Ubud resort over 65 per cent of its staff comes from surrounding villages. At Alila Manggis, the figure stands at 80 per cent, says its general manager Jork Bosselaar.

"We try to be as light on nature as possible and integrate with the local community. When they gain, so do we. These are benefits that’re hard to quantify," explains Bosselar.

The staff, on the famous holiday island that is steeped in religious and cultural belief, determine their own timetables and juggle shifts with colleagues during important celebrations.

They are also encouraged to invite guests to join them in these festivals.

The resorts’ policy of sourcing products locally, like organic soap, has supported 100 families in the area, adds Bosselar.

The lifestyle boutique resorts, market leaders in their respective areas, were also award winners.

Bosselar did not provide exact savings figures but said ALiLA Hotels and Resorts would to launch several new properties including luxury villas in Uluwatu, at southern tip of the island where Bali's famous temples stand.

Connecting the Archipelago

Connecting the Archipelago

Indonesia’s telecommunications sector is becoming increasingly dynamic and diversified. This year has witnessed continued, dramatic growth in wireless and fixed-wireless telephony, the launch of third-generation (3G) wireless services, and increased diffusion of wireless Internet services. Read the Brief [pdf 770kb]


For more information on World Bank in Indonesia, please visit: http://www.worldbank.org/id

Improving Indonesia's Competitiveness - Case Study of Textiles & Farmed Shrimp Industries

Improving Indonesia's Competitiveness - Case Study of Textiles & Farmed Shrimp Industries

This study was carried out at the request of the Government of Indonesia to identify the most important factors in improving the efficiency and competitiveness of Indonesia’s textile and apparel sector and the farmed shrimp sector, as a lens for identifying policy options to improve national export performance. The main issues raised by industry stakeholders are discussed in this paper, together with some actionable public policy and private sector recommendations.

Read the case study:
• Volume 1
• Volume 2

For more information on World Bank in Indonesia, please visit: http://www.worldbank.org/id

Economic and Social Update

Economic and Social Update Since the 1998 financial crisis in East Asia, the World Bank has been issuing its East Asia Update to provide forward-looking analysis of the region's economic and social well-being. The half yearly update for Indonesia focuses on the country's economic performance - growth, investment, markets, policy direction and the outlook fr 2006-07. Read the Report For more information on World Bank in Indonesia, please visit: http://www.worldbank.org/id

ASEAN untapped by int'l investment community

The China Post - 2006-11-17 11:25:52

MANILA, 2006/11/13 (AFP) Despite a potential market of some 600 million people, the ASEAN region is still largely untapped by the international business community, business leaders say. In the four years from 2001 to 2005 some US$50 billion flowed into the Association of Southeast Asian Nations (ASEAN) region compared to US$274 billion to China, according to the Manila-based Asian Development Bank (ADB).

Total net foreign direct investment into the region last year amounted to US$23.9 billion of which 60 percent went to the island state of Singapore.

"Compare this to the US$60 billion invested in China last year and you get some idea what the region is up against," says economist and president of the Philippine Business Leaders Forum, Michael Clancy.

"Business has failed to focus on the opportunities that a common ASEAN market will create," Clancy said. ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Clancy's group, which is a country associate of the Economist Intelligence Unit, will manage this year's ASEAN Business and Investment Summit (ASEAN-BIS) in the central city of Cebu next month.

Established four years ago by the ASEAN leaders it now forms an integral part of the annual summit.

Donald Dee, head of the Philippine Chamber of Commerce and Industry (PCCI) and national host of the ASEAN-BIS said: "ASEAN is on the way to becoming a common market of almost 600 million consumers." He said structural changes put in place in recent years coupled with the quickening pace of ASEAN economic and political integration is making the region an attractive investment destination with its young and growing population.

This year, for the first time, the ASEAN business leaders summit will open its doors to the wider global business community.

"Our intention is to be inclusive rather than exclusive," Dee said.

"Multinationals and other foreign businesses operating within ASEAN are legitimate stakeholders in developments within the region and we want them to contribute to the dialogue process," Dee added.

According to Clancy, the achievements and opportunities of Southeast Asia, dominated by ASEAN, tend to be neglected in the boardrooms of London, New York and Dubai.

Despite China's overcapacity it is still attractive to investors, but China has failed to deliver on its early promises and the expected consumer market continues to elude major corporations, he says.

The rapid rise of local firms has meant that for many global companies seeking a slice of the Chinese market an investment in China has meant falling prices, falling margins and in some cases total loss of competitiveness.

"Many companies are finding that there is a hidden cost of doing business in China," Clancy said.

"One survey recently suggested that many companies were worried about their inability to conduct due diligence on local partners or suppliers.

"Cost and quality of living for expatriate staff remains a problem and finding and retaining talent is a growing problem.

"Problems of intellectual property protection abound and supply chain management is also a major concern for many companies," Clancy said.

"Increasingly, global companies are coming to the realization that while an Asian presence is essential to their global growth strategy, total reliance on either China or India to provide that presence is undesirable.

"'China plus one' appears to be a hedging strategy that many companies are now adopting. Southeast Asia and in particular the 10 ASEAN countries are well placed to take advantage of this development," Clancy says.

He said the four-day meeting should be seen in the light of how ASEAN is moving towards developing an all-embracing economic and trading policy framework for the region with the help of the international business community.

It will also focus on specific sectoral changes taking place and the opportunities and challenges these changes will create for business.

"This is a golden opportunity for the global business community to take a lead, together with their ASEAN counterparts, rather than remaining on the sidelines and being critical of the slow pace which ASEAN is coming together," Clancy said.

Intel to invest a billion US dollars in Vietnam

But Will It Payoff?

KGO By Karina Rusk

Nov. 10 - The world's largest computer chip maker has decided to triple its investment in Vietnam. The World Trade Organization has just accepted the still communist country, as it eases toward a free-market system.

Vietnam is a nation of 84 million people and trails only China on Asia's list of fastest growing economies. Intel has decided Vietnam's Ho Chi Minh City will be the first place the chipmaker builds its new generation of huge, high efficiency chip assembly and test facilities, the investment is $1 billion dollars.

Chuck Mulloy, Intel Corporation: "Seventy percent of our sales come from outside the U.S.. We try to invest in those markets growing the fastest so we get a return on it."

Liem Nguyen grew up not far from where Intel will break ground. Nguyen is now the director of a San Jose Vietnamese Temple.

Liem Nguyen, Temple director: "I am a software engineer and I am very happy to see Intel doing this to our country and to our people over there."

Intel's investment is just one example of Vietnam's dynamic future. Nguyen sees accelerated growth with each visit.

Liem Nguyen: "There's a lot of change - significant change - everyday."

The Sai Gon High Tech Park is just three years old. It's a magnet for high tech foreign investment with a targeted production value of $4.5 billion dollars by 2010.

Chuck Mulloy: "They have demonstrated, to us at least, a great desire to move forward and advance themselves in the technology industry and so on and that's one of the things that attracted us."

Trade between the U.S. and Vietnam has grown from $1.2 billion in 2000 to $7.8 billion last year and this week the World Trade Organization accepted Vietnam. Many economists say better jobs and wages could eventually promote improved human rights in Vietnam.

Dr. Terry Connelly is Dean of the Ageno School of Business at Golden Gate University.

Dr. Terry Connelly: "Nothing moves us closer to more liberalized politics than an activated and inspirational middle class, and I think that's what these types of investment patterns and those that will follow really open the doors too."

US$15 mobiles for sale by 2008, predicts Motorola chief

By Gemma Simpson, Special to ZDNet Asia
Friday , November 03 2006 11:37 AM

Mobile phones costing less than US$15 will be available in developing countries by 2008, Motorola U.K. chairman Sir David Brown has predicted.

If handsets can be delivered that cheaply, it could lead to another 100 million people a year getting their first phones, he said.

The thrifty price tag on the ultra low-cost handsets is partly due to chip manufacturers committing to the supply of cheap silicon, Brown said.

Speaking at the Institution of Engineering and Technology (IET) Brown said: "It's beginning to look as if sub-US$15 mobile devices might be achievable by around 2008."

Other projects aiming to bring high-tech hardware to the developing world have met with a mixed response, but Brown pointed out a study by the London School of Economics that "found a 10 percent increase in mobile penetration creates a 0.6 percent increase in gross domestic product".

Brown said: "In absolute terms that's a huge number. It's about a fifth of the average annual total global GDP growth."

Brown said developing countries' governments now need to be persuaded not to tax mobile devices as luxury goods.

He said in 14 out of the 50 developing countries the GSM Association surveyed, taxes represent more than 20 percent of the total cost of owning and using a mobile device.

Brown said, "The association's economic experts believe that if ultra low-cost mobile devices could be exempted from import duties and sales taxes, up to 930 million additional ultra low-cost mobile devices could be connected in the 50 developing countries they studied, between now and 2010."

He added, "It's all too easy for those of us who live with seamless mobility every day to become blasé about it. Until we think about using seamless mobility to bridge the digital divide."

BI cuts key lending rate to 10.25%

Urip Hudiono, The Jakarta Post - 2006-11-08 15:33:46

Jakarta, November 8, 2006 (JP) - Bank Indonesia trimmed its key interest rate by half a percentage point Tuesday to bring it down to 10.25 percent, encouraged by the continuing easing of inflation.

Tuesday's widely forecast rate cut is the fourth of its size since August, following two quarter-point cuts in May and July. The central bank's key rate stood at 12.75 percent at the beginning of the year.

The latest cut is in line with falling inflation, with the economy having recently shaken off the lingering effects of last year's fuel price hike. The inflation rate stood at 6.29 percent in the year to October, compared with double-digit levels during the first months of the year.

The country's economy, badly hit by runaway inflation early this year, has been showing signs of a strong recovery in recent months. The economy grew by 5.3 percent in this year's second quarter as compared to 4.6 percent in the first three months.

BI's Board of Governors said in a statement that the main rationale for the rate cut was the need to encourage higher growth amid the room provided by slowing inflation, particularly with signs of continuing macroeconomic improvements entering the fourth quarter.

The rupiah's recent stability had also supported the rate cut.

Forex analyst Farial Anwar, from Currency Asset Management, said the interest-rate cut would not affect the rupiah's stability as there was still a large spread between the U.S. Federal Reserve's current 5.25 percent rate and rupiah-based bonds.

"The cut in the rate will not cause an outflow of foreign funds. Even if there is an outflow from the forex market, it will be compensated for by in inflows to the recently bullish stock market," he predicted.

BI's latest rate cut certainly kept the markets bubbling, with the rupiah rising to Rp 9,123 per U.S. dollar, and the Jakarta Stock Exchange closing 0.8 percent up at a new record high of 1,654.152.

BI admitted, however, that there could still be a time lag before the banks lowered their lending rates, depending on each bank's policy.

Nevertheless, Jahja Setiaatmadja, the vice president of Bank Central Asia (BCA), the country's third largest lender by assets, said that his bank would lower its lending rates by half a percentage point to some 15 percent on Nov. 15.

Meanwhile, Bank Mandiri spokesperson Mansyur Nasution said that the country's largest lender would also evaluate its lending rates, having reduced them to 13.5 percent for corporate loans and 15 percent for consumer loans.

Industrialists have called for lending rates to come down to 12 percent so as to encourage expansion by the real sector and help increase consumer spending.

The Linux game has changed forever

By Stan Beer
Tuesday, 07 November 2006

The events of the past two weeks, which have seen the two largest companies in the world enter the Linux space, demonstrates that the party is over and the Linux game has changed forever. Red Hat is making a brave stand but stands little chance against the likes of Oracle and Microsoft.

One very much gets the feeling that in the enterprise at least, both Oracle and Microsoft are now ready to acknowledge that Linux is a game that they cannot afford to ignore. Both companies realize that they are missing out on a potential growth business by leaving to others what they could do themselves.

In Oracle's case, the company has weighed up the pros and cons and come to the conclusion that it has the people resources, expertise and existing customer base to usurp a growing Red Hat Linux support business worth hundreds of millions of dollars annually. There is little Red Hat can do except fight the good fight, but it is badly outgunned by a much more powerful opponent with little barriers to entry into its market.

Microsoft's case is different. Recognizing that Linux is definitely not going to go away, Microsoft wants to make sure that its software applications work as well with Linux as they do with Windows - interoperability is the name of its game. Working together with Novell, Microsoft wants to get closer to the Linux users, which are gradually infiltrating all enterprise sites. Microsoft is missing out on potential business because its applications can't run on Linux.

Oracle has demonstrated in no uncertain terms that the business of Linux distribution is not about selling software but support. It's a lesson that both Microsoft and Novell could not afford to ignore.

Arabica Coffee Industry

Arabica Coffee Industry
(BKPM - Indonesia)

General Information

Bengkulu Province on the Island of Sumatra has been designated by the Government of Indonesia as a priority area for the development of Arabica coffee plantations. This is due to the fact that the highland soil in Bengkulu is very suitable for this type of coffee. We would therefore like to invite any interested investors to consider locating their Arabica coffee projects in this area.

The area proposed for development is in the Kabupaten Rejang Lebong, at an altitude of around 1,100 m above sea level. There are several main market access routes, namely via Lampung Province or South Sumatra for sea cargo and West Sumatra for airfreight.

The total area planned for conversion to coffee plantations is 4,500 ha, consisting of 1/3 nucleus area and 2/3 plasma area which can be developed in a partnership scheme with the existing smallholders in the area.

The plantation project has prioritized the conversion of both not yet developed hillside and mountain terrain, as well as terrain which is presently is planted with Robusta crops.

The proposed processing industry project would produce roasted, soluble and instant coffee with a product capacity of 3000 tons per annum. Confectionery products are also an additional output with a proposed capacity of 200 tons per annum. The land allocated for value-added processing is estimated to occupy 5 ha of the total project area.

In general, the area proposed for this project has good infrastructure. Most roads are passable, although some sections need intensive maintenance.

Electricity is available, and water supplies are abundant from local
springs. Telecommunications services are available from both the government
and private wireless network.

Market Prospect

Both export and domestic markets have strong prospects for Arabic coffeesales. When value added production is expanded to include soluble and instant coffee, the export market potential becomes even more attractive.

The production output is estimated to reach 0.7 -1 tons/ha, somewhat higher than present average smallholder production.

Indonesia's national strategy is to increase the competitiveness of its
coffee products in world markets. This strategy includes the adoption of new
technologies, the enlargement of production areas, the provision of a secure
long-term business climate, and intent to produce environmentally friendly
products.

The coffee business is estimated to increase by 2.72% per annum through to year 2005. Domestic consumption is expected to increase by 1.65% per annum, while exports will increase by around 3.4% per annum.

Financial Information

The assumptions developed in the financial analysis are:

a. Land equity equal to US$ 150,000.

b. Nucleus planting (1,500 ha) including the seeds, input and labor during 2
(two) years: US$ 400/ha per annum.

c. Plasma planting (3,000 ha) including the seeds in labor during 2 (two)years: US$ 2,400,000.

d. Construction of main processing plant, storage facilities includingpurchasing and maintenance of equipment: US$ 650,000.

e. No purchasing of raw material required except 10% local price of averageplasma production of 2,000 tons/annum.

f. Export product value: US$ 3,000/ton

g. Interest rate no more than 10% per annum. h. Annual depreciation for building and machinery: 8%.

Asia desperately seeking IT talent

By Isabelle Chan, ZDNet Asia
Wednesday, November 01 2006 02:54 PM

Hiring expectations have fallen this quarter but job prospects remain rosy, so much as that recruiters are finding it difficult to fill IT positions, according to latest findings from human resources agency Hudson.

In its fourth-quarter study of Asia's recruitment trends, Hudson noted that permanent employment expectations have fallen from five-year highs in China, Hong Kong and Singapore. The survey polled 2,300 decision makers from multinational organizations of all sizes in major industry sectors in China, Hong Kong, Singapore and Japan.

Hiring expectations have fallen in China from 62 percent in the third quarter to 56 percent this quarter, with similar growth sentiments in Hong Kong where 53 percent plan to hire between October and December, compared to 62 percent in the third quarter. In Singapore, expectations have also fallen from 56 percent to 52 percent in the fourth quarter.

Japan is the only market where hiring expectations remained unchanged. Some 63 percent of respondents indicated plans to hire more staff, the same figure reported for the second and third quarters of 2006. Banks in Japan have the highest expectations, with 75 percent expecting to hire more staff.

Gary Lazzarotto, Hudson's CEO for Asia, said in a statement: "Employment expectations are falling in every market surveyed, expect Japan. However, [hiring expectations] are still [at] a high level, and staff recruitment and retention are seen as the most critical HR challenge across the region.

"Employers are increasing salaries and performance bonuses, and offering more training opportunities to attract the talent they need," he said.

Tech prospects
Recruiters looking to fill IT-specific positions as well as vacancies in the IT and telecommunications sectors, are having difficulty hiring and retaining staff, particularly in Hong Kong and Singapore, according to Hudson's report.

Demand for sales staff in Hong Kong is strong, particularly in IT and finance, while sales and IT professionals are sought after in Singapore where 22 percent and 19 percent, respectively, of new jobs are from these categories.

Hudson also reported that all of its Hong Kong respondents cited skills shortage as a leading obstacle they face in hiring for positions in the IT and telecommunications sectors.

The human resources agency attributed the continued strong demand for IT personnel to Singapore's rapid development as a regional IT and technology hub, particularly in the banking sector. Higher salary demands also have the greatest impact on hiring in the IT and telecommunications sectors, the report found.

Commenting on these market trends, Andrew Sansom, director of DP Search, told ZDNet Asia in an e-mail: "The recruitment wave surged and peaked in third quarter, and is a little slower in the fourth quarter. [Recruitment drive] in the first quarter, and especially the second quarter, of 2007 will most likely be back up again.

"Invariably when demand is high, the pendulum swings back to become a seller's market and candidates will have multiple job offers and higher expectations, like [they do] now," Sansom added. DP Search is a recruitment agency specializing in the IT and finance industries in Southeast Asia.

Recruitment has been challenging in the wake of higher demand for sales positions and senior IT management roles. "Untypically, we have had a rush [hiring demand for] senior user organization roles such as CIO, CTO and IT director," said Sansom.