Forbes Indonesia 2013 February (e-magazine full)

Full E-magazine Forbes English version (copyright)

Phone : +62 21 5212288, +62 21 5212300

Leading you to Indonesia

For over two decades, Bank Mayapada has proven to be a strong and reputable bank

in Indonesia We offer a wide range of financial services to meet our clients’ personalized

business needs supported by state of the art IT and knowledgeable staff With over than

170 branches in 19 provinces in Indonesia, Bank Mayapada will continue to serve the ever

growing economy in Asia.

Mayapada Tower, Ground Floor – 3rd Floor Jend Sudirman Kav.28 Jakarta 12920 – IndonesiaPhone : +62 21 5212288, +62 21 5212300

Leading you to Indonesia

For over two decades, Bank Mayapada has proven to be a strong and reputable bank

in Indonesia We offer a wide range of financial services to meet our clients’ personalized

business needs supported by state of the art IT and knowledgeable staff With over than

170 branches in 19 provinces in Indonesia, Bank Mayapada will continue to serve the ever

growing economy in Asia.

2 | FORBES INDONESIA FEBRuARy 2013

Indonesia

Obama’s ugly foreign policy legacy.

The battle to limit government: America needs to win now.

hEAlThONOMICS

The country is in the midst of an unprecedented drive to expand the hospital industry

By Ulisari Eslita

Hasbullah Thabrany’s long desire to ensure all Indonesians have access

to healthcare is about to be realized

By sonya angraini

Long known for its drugstore chain, Kimia Farma under Rusdi Rosman

is now undergoing a major expansion

By rEnjani PUsPo sari

Marcus Pitt is revamping the Soho Group to better compete

as the healthcare system undergoes its own transformation

By jEffrEy HUtton

On the brink of major transformation.

ISSuES & IDEAS

As the first chairman of the OJK, Muliaman Hadad explains how the agency will operate.

By sonya angraini

Developing Papua’s Merauke area could help the country but plans to do it are controversial

By rEnjani PUsPo sari

And then there were ten.

Post-industrial network synchronization.

single plAyer cAn

not win AgAinst

double plAyer.”

—teddy rAchmAt,

owner oF triputrA group

FEBRuARy 2013 FORBES INDONESIA | 3

4 | FORBES INDONESIA FEBRuARy 2013

With his brother and now his son, Raj Kumar put a non-Chinese face

on the Lion City’s real estate map.

By naaznEEn Karmali

Jakarta: it’s good to be number one.

Changing the game in 2013.

phIlANThROpy

Butet Manurung learned to teach in new ways

to reach her students in the Sumatran jungle.

By Ulisari Eslita

ThE wORlD’S MOST pOwERFul pEOplE

There are 7.1 billion people on the planet These are the 20 who matter.

They control one of the world’s great companies Liberals (and competitors) may hope they go away, but Charles Koch and his brother David are just getting started.

By daniEl fisHEr

Daring to dream of things that never were.

Craig Jackson owns and runs the hugely successful Barrett-Jackson Collector Car Auction The best part about his job? He gets to keep a few cars himself.

By HannaH Elliott

“i lived together

with them And

shAred everything.”

—butet mAnurung, sokolA

“Jungle school” Founder

“it’s the sAme

thing with

pensioners, iF they

Are heAlthy they

will live longer

And remAin As

customers.”

— Jerry ng,

btpn FinAnciAl Advisor

FEBRuARy 2013 FORBES INDONESIA | 5

6 | FORBES INDONESIA FEBRuARy 2013

Editorial dEPartmEnt

Renjani puspo Sari

Arya Satya Nugraha, hamish McNicol

BUsinEss dEPartmEnt

Pt WaHana mEdiatama

forBEs mEdia llC

President & Publisher, forbes asia

william Adamopoulos

Next year is in the spotlight due the presidential elections But an equally

important event is slated to happen in the same year, the effects of which will perhaps be as profound as those coming from whomever wins the election What is the event? The introduction of a system guaranteeing universal healthcare coverage to all citizens—starting first with the poorest of the poor and then extended to everyone The Badan Penyelenggara Jaminan Sosial (BPJS) will be a grand experiment—on a global scale When implemented,

it will reportedly be the world’s largest “single-payer” national health scheme, meaning one agency will be responsible for collecting the premiums and paying the bills

Improving the health of its citizens has long been a point of pride for the country, which has made enormous progress in areas such as infant mortality and life expectancy over the years The introduction of the BPJS can be seen as another step—and a big one—in this important journey If all goes according to plan, the BPJS will be the catalyst for a wholesale renovation of the country’s healthcare system Along with creating more rationalization in pricing for healthcare practices, it should also drive more consistent, and higher, standards for care nationwide The reform will create huge new demand, thus providing

a reason for entrepreneurs and investors to deliver the supply—across a wide spectrum of goods and services Geography should be less of a barrier to quality care, as there will be new incentives to build facilities in areas where before there were none

The articles in this package on healthcare cover the various aspects of this coming revolution, from an interview with Professor Hasbullah Thabrany who

is the intellectual father of the BPJS and has worked hard to see it become a reality, along with preparations underway at a leading state firm—PT Kimia Farma—and a leading private one—PT Soho Group—to prepare themselves for this coming transformation of the healthcare sector The change cannot come too soon Having a vital healthcare sector is a critical part of any developed economy—as an industry that creates many high-paying and high-value jobs and also as one that underpins the health, literally, of the economy

Whatever happens in the next few years will no doubt be watched closely by others to see what lessons can be learned from Indonesia’s grand experiment Ensuring that everyone can feel secure about getting adequate healthcare when needed is no small accomplishment F

Next Year’s

other big event

forBEs indonEsia is published by PT Wahana Mediatama under

a license agreement with Forbes LLC, 60 Fifth Avenue, New York,

New York 10011 “FORBES” is a trademark used under license from

FORBES LLC.

©2010 PT Wahana Mediatama • ©2010 FORBES LLC, as to material

published in the U.S Edition of FORBES All Rights Reserved.

©2009 FORBES LLC, as to material published in the edition of

FORBES ASIA All Rights Reserved.

FORBES INDONESIA is published monthly, 12 times per year

Copying for other than personal use or internal reference or of

articles or columns not owned by FORBES INDONESIA without

written permission of FORBES INDONESIA is expressly prohibited.

ContaCt information

forbes indonesia: Menara Sudirman 19th Floor Suite 19D,

Jl Jendral Sudirman Kav 60, Jakarta 12190 Tel: (021) 522 6828,

Fax: (021) 522 7208 Website: www.forbesindonesia.com

: Forbes Indonesia Magazine : @forbes_id

subscriber Enquiries: Please contact Circulation Division SMS to

0817 0109 777, email: circulation@forbesindonesia.com Or visit

www.forbesindonesia.com to subscribe or advertise Single copy

price Rp 50,000, local subscription rate

Rp 420,000 + postal fee (Jabodetabek) for 12 issues.

FEBRUARY 2013 • VolUmE 4 IssUE 2

Justin Doebele Chief Editorial Advisor editor@forbesindonesia.com

FEBRuARy 2013 FORBES INDONESIA | 7

8 | FORBES INDONESIA FEBRuARy 2013

“With all thy getting, get understanding”

AfghAnistAn’s mercurial president,

Hamid Karzai, came over for a visit to

discuss future U.S troop levels in his

country The White House vibes on this

are bad: President Obama wants no U.S

presence in Afghanistan after next year

He did the same thing in Iraq in late 2011,

pulling out all U.S forces Given U.S war

weariness, such actions score well in the

polls, but they point to bloody troubles for

the U.S in the future Obama’s desire to

reduce the U.S global presence to the scale

of, say, Belgium is deliberate but betrays an abysmal,

murderous ignorance of history and global realities

Without a strong U.S political/military presence

around the world instability increases as

anti-American, antimodern forces violently assert

themselves We’ve seen this movie before in the

isolationist 1930s and again in the 1970s, when the

U.S seemed to be in terminal decline We are not the

world’s policeman, but we are the best guarantor of

peace and stability

Take Europe, a continent that was wracked by

constant conflict for centuries Today a major war

there is inconceivable This new reality wouldn’t exist

if it weren’t for the security umbrella the U.S has

provided since the end of World War II

Or look at Asia North Korea is becoming

increasingly belligerent, and China is more truculent

with its neighbors Alarm bells are going off in

neighboring countries Vietnam, for example, has

made abundantly clear that it wants an increasing,

not a decreasing, U.S military presence in that part of

the world Vietnam and China had a brief but violent

military flare-up in 1979 Japan’s new prime minister

has made clear his desire for Japan to embark on its

first major rearmament program since World War II

Would it really serve the purpose of global peace to

have Japan engaging in a major military buildup, as

well as becoming a nuclear power? Do

we really want the instability of increased tensions and the possibility of armed conflict in the region?

Our unnecessary withdrawal from Iraq is destabilizing that already shaky part of the world Iran is using Iraq as

a thruway to supply arms to the Syrian government, which has killed 60,000 of its unhappy citizens Iraq itself may break apart in communal conflict A meaningful U.S troop presence in Iraq would have been a beneficial check to Iranian belligerence and would have given more credibility to our warnings to Tehran to cease its race for nuclear weapons

Bugging out of Afghanistan after overstretched U.S forces have achieved considerable success in stabilizing much of the country will only mean that the Taliban and al Qaeda get another shot at taking the country Doesn’t anyone remember where the 9/11 plot was hatched? Moreover, the vacuum

we create in Afghanistan will mean more trouble

in neighboring Pakistan, where moderate forces are already on the defensive Their boldness and numbers would grow if they felt the U.S was “staying the course” in their part of the world

Can Afghanistan defend itself against Islamist militants? Probably not, just as Western Europe during the Cold War could never have defended itself against the Red Army without American help The U.S., nearly six decades after the Korean War, still maintains a presence in South Korea Those troops are the only reason North Korea hasn’t again tried to take over the South

We’ve made plenty of mistakes in our foreign policy since WWII, but there’s no gainsaying the fact that our refusal to retreat into isolation, as we did in the 1930s, has made the world a far safer and infinitely richer place F

OBAMA’S ugly FOREIgN pOlICy lEgACy

By stEVE forBEs, Editor-in-CHiEf

FEBRuARy 2013 FORBES INDONESIA | 9

Comfortable & Relaxing

Tour Packages

Travel Management Experts

www.smailingtour.co.id

SMAILING TOURS AND TRAVEL SERVICE

Jl Majapahit No 28 Jakarta 10160

Head Office:

@smailingtour Smailing Tour

tour@smailingtour.co.id

Add and follow our social media for best deals Bursa Efek Jakarta 5153040

Graha Irama 5207610 Wisma Iskandarsyah 7235120

Branches:

Senayan City 72781656 Salemba 3161645 Wisma Soewarna 55912999

10 | FORBES INDONESIA FEBRuARy 2013

AmericA greeted 2013 numbed

to the absurdity of 0% interest

rates, endless Federal Reserve bond

purchases and $1 trillion deficits

President Obama imposed a January

fiscal deal that added $4 trillion to the

projected national debt, on the surreal

claim that the U.S government

doesn’t have a spending problem

His Cabinet and policy choices show

satisfaction with the status quo and a

state of denial over the dangers ahead

In December he made the claim of

national well-being: “Our economy is

really starting to recover, and we’re

starting to see optimistic signs.”

However, per the U.S census,

inflation-adjusted median household

income has fallen for more than a

dec-ade, a stunning national failure The

federal debt has topped $16 trillion,

which is more than our entire GDP

Much of the increase is being funded

by the Fed’s $1.6 trillion in dangerous

overnight debt to the banking system

Meanwhile, the once staid European

Central Bank has propped up Europe by

piling increasing amounts of debt on its

books from underwater banks and

gov-ernments And Japan’s new government

has just launched a new round of deficit

spending and is set to order the Bank

of Japan to buy more Japanese

govern-ment debt, despite Japan’s world-record

245% debt-to-GDP ratio

Central banks have become the

world’s biggest speculators The Fed

in 2012 earned $91 billion in profit on

its $55 billion in equity capital That’s

more than ten times the normal

private-sector profit rate and was achieved by

leveraging its liabilities up to nearly $3

trillion, a 50-to-1 debt-to-equity ratio

The Fed’s interest rate bets are a ro-sum game—the Fed wins, while the losses are borne by underpaid private-sector savers Worse, the policy of ma-nipulating interest rates to artificially low levels has interrupted the vital mar-ket-based connection between interest rates and investment decisions This creates economic distortions that slow growth and will take years to unwind

ze-The result hits U.S living dards Despite gigantic debt-fueled government transfer payments, Amer-icans are suffering from a five-year stagnation in inflation-adjusted dis-posable income, which is expected to continue into 2014 The deterioration

stan-is due to weak labor markets, bigger government, artificially low interest rates and the policy of weakening the dollar in the hope that it will become

so cheap it becomes attractive

Instead, one industry after another has shifted new investment to non-Japan Asia, where currencies are more dependable, the legacy burden of retir-ees is lighter and national debts are not

at a crisis stage

Our daily newspapers are filled with the struggle over the debt limit, but it’s written to harm fiscal conservatives, not

cut spending This leaves us with a grim prognosis and no treatment plan.BaTTLe FoR PoweRThe battle we now need to wage in-cludes debt but is even bigger: to create

an enforceable process for limiting eral power The Constitution provides

fed-a degree of protection through the Tenth Amendment’s reservation of un-delegated power to the states and the people, but this hasn’t translated into limits on government spending or debt.Some focus less on the Con-stitution, hoping that boundaries will emerge through culture, moral government and political compro-mise; others argue directly for bigger government Some expect the bond market and a downgrade in our credit rating to force limits, which seems unlikely given weaker conditions in other countries They’ll fail first.These approaches leave a vacuum

in restraining government growth and debt Rather than negotiate in that framework, our government and citizens must overturn the existing rules and create a workable new debt and spending limit, guided by the Constitution and the rule of law.The President has said he doesn’t want to cut spending His party should then be held to account—they should prepare to vote for a series of short-term increases in the debt limit with

no spending cuts attached If that becomes politically unpopular, as it probably would, they should offer spending cuts and work out bipartisan amendments to the debt limit so that it forces spending restraint rather than default or government shutdown F

The baTTle To limiT goverNmeNT

AmericA needs to win now

daVid malPass, glOBAl ECONOMIST, pRESIDENT OF ENCIMA glOBAl llC; PaUl joHnson, EMINENT BRITISh hISTORIAN AND AuThOR;

amity sHlaEs, DIRECTOR, ThE 4% gROwTh pROJECT; AND lEE KUan yEW, FORMER pRIME MINISTER OF SINg ApORE, ROTATE IN wRITINg ThIS COluMN

TO SEE pAST CuRRENT EVENTS COluMNS, VISIT OuR WEBsitE at WWW.forBEs.Com/CUrrEntEVEnts.

FEBRuARy 2013 FORBES INDONESIA | 11

FEBRuARy 2013 FORBES INDONESIA | 13

Money &

Medicine

overview //// bpjs //// kimia farma //// soho group //// column

ealthcare in Indonesia is undergoing a historic transformation, which should be accelerated by the introduction of the new universal healthcare coverage scheme, the BPJS, next year Major changes are underway in the hospital sector, in pharmaceuticals and in virtually all other areas of healthcare As

noted in this package, the country still faces many challenges, but

for entrepreneurs, these can also be opportunities The

govern-ment has to play its part as well, to ensure that it provides the

right policy mix to underpin the continued growth and success of

the healthcare industry

Indonesia

healthonomics

illustration by eko bintang for forbes indonesia

H

Hospitals Calling

ot enough hospitals that statement summarizes one of the most urgent problems in indonesia’s healthcare industry With a 240 million population, the country has only 1,721 hospitals and 148,125 beds, according to Ministry of health data released in 2012 put into context, indonesia is near the bottom of asia for its hospital beds to population ratio, with just six hospital beds per 10,000 people, well below Malaysia’s 18 and india’s nine, according to World health organization figures Yet challenges can be opportunities entrepreneurs and the government are now in the midst of a major construction boom to build out the country’s hospital sector “the hospital business

will be better than pharmaceutical industry in the future,”

says Boenjamin setiawan, the founder of pt Kalbe Farma

The counTry is in The midsT of an unprecedenTed drive To expand The hospiTal indusTry.By Ulisari Eslita

over-n

FEBRuARy 2013 FORBES INDONESIA | 15

Rp 500 billion investment another state firm that is entering the hospital business is pharmaceutical maker Kimia Farma, both by starting its own hospitals and acquiring hospitals from other state firms

Meanwhile, the Ciputra group already entered this sector in

2011 with its Ciputra hospital in tangerang Ciputra is not the only tycoon to join in the hospital boom

Billionaire eka tjipta Widjaja from the sinar Mas group operates eka hospitals in tangerang and pekanbaru Recently, the eka hospital has developed a relationship with the Mayo Clinic in the u.s.,

to provide telemedicine services this service allows patients to be remotely diagnosed by doctors in the Mayo Clinic

another billionaire owner is

Dr tahir, owner and founder of Mayapada group and co-owner of the license to publish this magazine, who also operates two Mayapada hospitals and is looking to further expand his hospital group

the hospital growth is also coming from international players, which could accelerate from 2015 when they will be allowed to own

up to 70% of a hospital, and will be allowed to open public hospitals with more than 200 beds

“this liberalization will create competition in health services

patients will get better service since the competition between hospitals

indonesia ranks at the bottom

of eight countries in asia.

Source: World Health Organization, 2011

3 4 8

5 6 7

1 2

“that’s why everybody is starting

to build hospitals.” he is putting his

words into action, as Boenjamin now

owns the Mitra Keluarga chain of 12

hospitals, which he is busy expanding

by two new hospitals a year

Meanwhile, siloam hospitals,

which operates 13 hospitals, will

add 50 more hospitals by 2017 and

will spread from its base in Jakarta,

to Kalimantan, sulawesi, sumatra,

and other locations “We will open

hospitals in Makassar, Kupang,

and ambon We must go where

other people don’t go,” says gershu

paul, president director of siloam

hospitals, which is owned by the

lippo group

last month, siloam hospitals

opened a hospital in Balikpapan

equipped with 240 beds, the $20

million investment will aim to cater to

the expatriates who work for oil and

gas companies there

Besides siloam, pertamina, the

national oil company, will also add

another hospital in Bogor it is a

joint venture hospital with property

developer sentul City and will start

16 | FORBES INDONESIA FEBRuARy 2013

will be very stiff,” says Vice Minister

of health ali gufron Mukti

the agreement will not only apply

to hospital ownership but also to

healthcare, allowing foreign medical

professionals, such as doctors, nurses

and dentists, to work in the country, a

practice that is currently illegal

the rise of the hospital sector is

also gaining the attention of the

in-vestment community pt sarana

Me-ditama Metropolitan listed its shares

last month in an initial public

offer-ing, selling 180 million new shares

the company operates the omni

chain of hospitals, which makes

sara-na Meditama the first publicly listed

hospital chain in the country the

proceeds of the listing will be used to

expand the chain and pay off debts as

investors become more comfortable

with the hospital industry, it is likely

that more companies in the sector will seek to raise financing through the capital markets

Medical tourisM

notheR aRea driving the growth of hospitals is medical tourism some 600,000 indo-nesians went abroad in 2012

to get treatment, ing to the Ministry of health, and spent $1.2 billion on this care Most went to nearby cities such as singa-pore, Bangkok, guangzhou or pen-ang singapore is especially popular with indonesians, given its proxim-ity and the high quality of care there, with singapore ranked the sixth best place in the world in terms of care

accord-by the World health organization

according to consultancy McKinsey, the main drivers of medical tourism are cost savings and access to better technology and care

this trend shows that indonesians are willing and able to pay for better care and will travel to get it, implying that if the same level of care was available closer to home, they would

be likely to stay in the country and spend those funds with a local facility

as indonesia develops its expertise in hospitals, it is possible that medical tourism may reverse direction, with foreigners coming to indonesia to seek low-cost care as they now do in countries such as China, india and thailand hospitals

on the resort of phuket in thailand market themselves as health vacation spots—tourists can come there for a checkup or other service while enjoying some time off before or after their visit to the hospital after all, rest and relaxation is one of the best forms of medicine F

indonesia’s healthcare industry has huge potential to grow according

to researcher frost & sullivan research, the medical market in the asia pacific region will grow 151%

to about $3 trillion by 2020—yet indonesia has one of the lowest per capita spends on healthcare of any country in asia, just 2.4% of gdp, while others in southeast asia, such

as malaysia and thailand, spend above 4% of gdp much of the growth in healthcare spending will

be driven by the middle class, who are able and willing to spend more on healthcare indonesia’s middle class

is expected to grow 21% annually this year and next, according to consultancy frost & sullivan

apart from that, starting on January 1, 2014, the government will implement a new national social security system (sJsn) that includes the badan penyelenggara Jaminan sosial (bpJs) mandating universal healthcare coverage for citizens and expatriates

“the implementation of the sJsn and the bpJs has to be supported by a sufficient supply

of hospitals and beds, or else they will be hard to achieve,” says agung laksono, the coordinating minister

on social welfare this new system will also enlarge the healthcare industry growth in the next five years according to a ministry of health re-port, there are still about 20% or 46 million who lack any form of health insurance, which is a large market

to be filled With the bpJs, even the poorest will have access to care, as their coverage will be paid directly

by the government if they qualify for fully subsidized medical care those with jobs will pay premiums split between themselves and government that are charged on a sliding scale according to monthly income

FUeLiNG THe BooM

Source: Ministry of Health, 2012

the number of both hospitals

and beds is on the rise

F You go to a hospital, most likely you will be asked for a

guarantee of payment before you receive treatment, including a

down payment upfront this familiar scenario means many are

unable to get proper treatment, as they lack the funds or insurance

to cover the costs of treatment solving this problem is at the root

of the new universal healthcare system, the Badan

penyeleng-gara Jaminan sosial (BpJs), that is mandated to go into effect in

2014 under the new national social security system (sJsn) law

passed in september 2004 “people want a sense of security when

it comes to healthcare,” says hasbullah thabrany, a professor of

health at the university of indonesia who first developed the idea

of the BpJs in 1999 and has championed its implementation

the BpJs is expected to help standardize healthcare costs

in indonesia “We don’t have a benchmark for healthcare costs,

so hospitals and clinics set different rates,” says hasbullah the

government has established several schemes for healthcare but none of

them provide universal coverage, resulting in inefficiencies, overlapping

systems as well as gaps these schemes include Jamkesmas, providing

health insurance for the poor; askes, for civil services; and Jamsostek

to help manage pension funds and death benefits for workers both in

the public and private sectors Yet none of these schemes cover contract

workers, an example of a missing gap in coverage

the BpJs will combine all existing systems into one, starting in

2014, and extend coverage to all indonesians and expatriates who

have worked in indonesia for at least six months, as well as collect all

payments for healthcare services in brief, the BpJs will centralize

both payments and collections for the country, making it reportedly the

world’s largest “single payer” system in the world For the very poorest,

the government will fully subsidize their healthcare, at an estimated

cost of about Rp 26 trillion a year—a small amount compared to the fuel

subsidies, which cost around Rp 300 trillion a year “energy subsidies

actually favor the rich over the poor if the government really wants to

help the poor, the BpJs is one of the ways,” says hasbullah

For those who don’t qualify for free healthcare, hasbullah says the

payment system for the BpJs will be divided into three tiers according

to monthly salaries: those making above Rp 10 million, those making

between Rp 10 and 5 million, and those earning below Rp 5 million For

the first tier, they will pay 5% of Rp 7.5 million per month (Rp 375,000)

For those in the second tier, they pay 5% of Rp 5 million per month

Good HealtH

For all

i

(Rp 250,000) lastly, for salaries below

Rp 5 million, the premium will be 5% of

Rp 2.5 million per month (Rp 125,000)

For all three tiers, employers will pay 60% of the cost and the individual the rest “By paying this premium, people don’t have to worry about getting good healthcare because no matter what the problem, BpJs will cover everything, in-cluding all the medicine,” says hasbullah

the implementation will start in January 2014 with free coverage for the poorest and by 2019 will be extended to the entire population the BpJs will be

an independent body and the supreme audit agency (BpK) and the parliament will provide supervision Despite de-bate and protests over the required pay-ment schemes, hasbullah says it was necessary to charge for the BpJs’s cov-erage “there’s no use to have the BpJs

if the government ended up paying all the costs,” he says he explains that the body will seek to be self-financing any excess of premiums over costs in one year will be carried over into the next financial year to cover new expenses

to help pay for itself, the BpJs will invest any excess monies in a fund managed by an investment committee

the BpJs will be divided into two units the first will be the BpJs

Kesehatan for healthcare, and the BpJs

Ketenagakerjaan for accidents, pension funds and death benefits another thing

to consider for the implementation of BpJs is the healthcare infrastructure

the BpJs is meant to stimulate a growth in the healthcare industry the availability of universal coverage means there will be an incentive to develop more healthcare facilities and services around the country, even in remote areas While the number of hospitals and clinics has been increasing over the last few years, the developments have mostly happened in urban areas

hasbullah sees the trend shifting “the BpJs creates demand for healthcare, so

it will prompt the supply side because people in rural and remote areas can pay for medical treatment,” he says “there will be a redistribution in paramedics and health facilities.”

18 | FORBES INDONESIA FEBRuARy 2013

Bpjs

hasbullah Thabrany’s long desire To

ensure all indonesians have access To

healThcare is abouT To be realized

By sonya angraini

to be sure, most are now close to

some form of a healthcare facility the

latest survey by the health

Minis-try shows around 94% of households

are within a five-kilometer radius of

health facilities other data shows

that indonesia now has 90,000

physi-cians, which means the ratio is one

doctor for 3,000 people out of that

3,000, only around 15% need

medi-cal treatment in one month Divided

by 20 working days in each month,

it means doctors will have an

aver-age of 22 patients per day in terms of

hospital beds, indonesia is still

lack-ing behind other neighborlack-ing

coun-tries such as Malaysia and singapore

a report by the World health nization in 2012 shows indonesia has

orga-a rorga-atio of six hospitorga-al beds per 10,000 people, compared to 18 in Malaysia and 31 in singapore the ratio is also far below the global average of 30 beds per 10,000 people

expanding healthcare will be good news for healthcare providers, medical equipment manufacturers and pharmaceutical firms because there will be a larger market for their products and services the BpJs will also set standards for the healthcare industry to ensure the quality and

consistency of coverage around the country “in the long run, the BpJs will control everything related to healthcare in the hope that there will

be a more integrated system,” hasbullah explains in the meantime, private insurance firms can grow bigger once the BpJs is implemented and they can provide additional treatment on top of the BpJs cover-age, he adds hasbullah realizes that the implementation of the BpJs over the next three years will be a bumpy road “there will be protests due to the coming changes but that’s not something unusual,” he says F

hasbullah thabrany can be considered the intellectual father of the bpJs

he first developed the concept of the bpJs back in 1999, at the start of the reformasi period, and then joined a team formed three years later by former president megawati soekarnoputri to create the blueprint for

a social security system in indonesia from that start, he has continually sought universal healthcare for the country he is also one of the most respected health experts in the country after graduating from the university of indonesia in 1980, he got both his masters and a doctorate in health economics and social security at the university of california berkeley after returning to indonesia in 1995, he served

as a director of the university of indonesia while also teaching on healthcare-related topics he has published four books on health and insurance and written more than 80 articles on these topics for national and international journals he is also developing his own clinics

in bekasi and other areas surrounding Jakarta, which can serve as models for bpJs compliant-clinics

FEBRuARy 2013 FORBES INDONESIA | 19

s heaD oF the olDest pharmaceutical company in the country, president Director Rusdi Rosman of pt Kimia Farma has a legacy to uphold he was appointed May last year with a mandate to continue ongoing reform of the state-owned firm and prepare it for the new national health scheme, the BpJs, which will launch in 2014

With roots tracing back to 1817, Kimia Farma has focused mostly on pharmaceutical production and operating a chain of pharmacies—call it drugs and drugstores—in its most recent years

in 2001, it went public and just in the last four years investors have bid up the stock by more than 400% in hopes of better days ahead

Rusdi, who served formerly as Kimia Farma’s finance director, has been busy implementing a major expansion program that will

be one of the biggest transformations of the firm in its near-two centuries of existence Kimia Farma is expanding into hospitals and hotels, and upgrading its chain from simply dispensing drugs

kimia farma under

rusdi rosman is now

undergoing a major

expansion

By rEnjani PUsPo sari

KiMiA FArMA

20 | FORBES INDONESIA FEBRuARy 2013

to providing a range of services along

with drugs

if the transformation process

is successful, Kimia Farma should

emerge as a much more profitable

business “the margin in the

pharmaceutical market is too low

in the future, we foresee Kimia

Farma can become even bigger in

the healthcare, by combining our

drugstores with the other services,”

says Rusdi Currently the firm has

net margins of 5% on revenues of Rp

4.06 trillion for 2012 in comparison,

privately held pt Kalbe Farma has

margins of about 13% on Rp 13 trillion

revenues estimated for 2012 Rusdi

says Kimia Farma is going to start

building 100 clinics and 66 outlets

in Java and other islands, as well as

opening hospitals and hotels

the start of the new universal

health system known as the BpJs

should help the expansion plans says

Rusdi the BpJs will allocate

mas-sive funds for raising the quality of

care, Rusdi says although BpJs will

initially affect mostly lower-income

communities, it will be gradually

ex-panded to include all indonesians by

2019 the Ministry of health affairs

may allocate as much as Rp 700

bil-lion for training health workers and as

well adding hundred of thousands of

beds for hospitals and clinics

this trend will play well with

Kimia Farma’s move into hospitals

this growth will be done in a joint

venture with pt prakarsa transforma

that was signed in March last year

Kimia Farma will own 60% of the

ven-ture and prakasa transforma the rest

the joint venture will start with

the launch of a specialized liver

center in Jakarta, expected to open

this year with about 200 rooms it will

be the first specialized liver center in

indonesia total investment to build

the facility is estimated to be around

Rp 280 billion once this hospital is

finished, the joint venture will look to

open two more hospitals in Denpasar

and Makassar, followed by three more

in Bandung, Medan and surabaya

to build mass, Kimia Farma will also acquire at least five more hospitals owned by other state firms thus, within a few years, Kimia Farma will have gone from zero to 10 hospitals,

if all goes as planned these hospitals are generally run by state firms whose core business is not in healthcare, thus the idea is to consolidate these hospitals under Kimia Farma to allow for new efficiencies and better medical care

according to Rusdi, Kimia Farma has actually long planned to expand into the healthcare business but only this year implemented the plan part of the rationale for the expansion is that hospitals, hotels and revamped phar-macies have higher margins and less competition than the low-margin com-petitive field of making drugs, especial-

ly the type of generics and unbranded types produced by Kimia Farma

the expansion plans are costly

“You need to be bold to spend the capital for new infrastructure this year, our capital expenditures are really big at Rp 660 billion normally

we just spent Rp 60 billion,” says Rusdi he estimates Rp 400 billion

of this capex will be allocated for a new plant in Jakarta while the rest is going to revamp the drugstore chain the company did a rights issue last year, selling 20% of new shares to the public, to help fund new ventures Kimia Farma’s debt levels have also declined, from Rp 150 billion in 2008

to well below Rp 50 billion today stretching from aceh to papua, Kimia Farma’s 436 drugstores will soon be renovated to provide services along with drugs “each outlet will provide a minimum level of service,

equal to puskesmas [a local

govern-ment clinic], a doctor, and operated in

24 hours a higher end clinic will have dental services and services for moth-ers and babies,” says Rusdi the net-work is still expanding in size, Rusdi notes, with the company now fran-chising them to speed growth Kimia Farma has about 10 franchises, includ-ing three outlets in Malaysia, in a joint project with pt averoes

the expansion moves are already paying dividends last year, the company’s net profit exceeded

Rp 200 billion, a record amount.Kimia Farma’s core business is not without strengths it is the only company authorized to make medi-cines that contain narcotics the company also controls large planta-tions for quinine, a raw material in many pharmaceuticals, and iodium mining in sidoarjo

Rusdi knows there is some risk

in the expansion strategy he notes that indofarma and Biofarma, also state firms, are also under pressure

to raise their performances as a listed state-owned company, Rusdi has to find a growth strategy to please investors with an obligation to serve the public interest in the healthcare industry F

extreMe

Makeover

marcus piTT is revamping The soho group To beTTer compeTe as The healThcare sysTem undergoes iTs own TransformaTion

By jEffrEy HUtton soHo

GroUp

22 | FORBES INDONESIA FEBRuARy 2013

indonEsian spEnding on hEalthcarE is just 2.4% of gdp vErsus 6% for thE world avEragE according to thE world bank.

uring his time

as a ment consultant working on be-half of pharma-ceutical maker

manage-pt soho group, Marcus pitt would spend up

to half the year traveling from his native Mel-bourne, austra-lia for his client

But three years after taking over the helm of soho

group as its first expatriate president

director, he now spends virtually all

his time in Jakarta

that’s because in the coming

months—if all goes to plan—the

com-pany will unveil an overhaul of its

busi-ness: starting with a joint venture

part-ner as early as this month, breaking

ground at its new factory, eyeing the

bond markets for the first time, and

re-freshing many of its products and all

this before capping it off with an initial

public offering slated for 2015

the efforts underscore the

com-ing shakeup in indonesia’s Rp 43

tril-lion pharmaceutical market as the

government plans to roll out universal

healthcare under the BpJs scheme,

soho risks losing share to rivals if its

products and services aren’t what the

doctor ordered “this is about the

pharmaceutical industry providing a

huge increase in the volume of

prod-uct to healthcare providers,” pitt says

and there’s plenty of room

to grow indonesian spending on

healthcare is just 2.4% of gDp versus

6% for the world average according

to the World Bank By 2016, 87

million more indonesians will join

the ranks of the middle class—making

at least $5,000 a year—compared

with the number in 2010, according

to drugmaker novartis Combined,

these various factors mean a major

expansion of the healthcare industry

is on the way to be sure, such juicy

prospects have drawn increased

competition from domestic and international healthcare players, chipping away at soho’s annual rate

of revenue growth from 24% in recent years to around 17% expected for the year to December 2012, which are currently at $420 million (soho

is still majority owned by tan eng liang, the son of the founder who started the company in 1946)

By the end of the month, soho plans to unveil a joint venture with

a partner who will buy around 40%

of soho subsidiary ethica, sia’s first maker of injectable drugs

indone-the aim, as pitt explains, is to tap into the partner’s research and develop-ment expertise and their portfolio of drugs, paving the way toward devel-oping cancer-fighting medicines and treatments tailored to a patient’s ge-netic makeup in exchange, soho will provide the partner with access to the indonesian market, including soho’s network of 1,500 marketing represen-tatives in the country there has been

no lack of suitors, say bankers ing on the deal “the group is com-pelling there’s been a lot of queries,”

work-says Barclay’s gomos silitonga

soho is also slated to start work

on a new sterile production facility

at a 20-hectare site in Bekasi, then gradually moving staff from its current factories in east Jakarta

Future products planned with the joint venture partner will also be made on the site tougher domestic and international drug regulation, longer approval processes for drugs

as well as stiff price competition has added to the company’s incentive

to find a joint venture partner, pitt explains increasingly government agencies are leaning on drugmakers

to keep a lid on price increases and force potential providers to compete for contracts through online open tender contracts “Right now and into the future, it’s getting more sophisticated and more challenging

to make those products,” pitt says “it makes sense for us to find a partner where we can work together.”

the company is aiming to point advisers later this year to guide

ap-it toward an inap-itial public offering in the next two years to raise funds for manufacturing and expansion plans, pitt says the company is also mull-ing selling bonds to replace more ex-pensive bank debt “We’re testing the waters,” pitt says about selling bonds soon after taking over as head

of soho, pitt put human resources, information technology and corporate finance for the group under the control of the holding company other changes include refreshing its line

of dietary supplements including Diapet anak, giving its brand and packaging a new look Rising incomes and a fickle young buyers are pushing soho to make its health supplements stand out examples include over-the-counter medicine in powder form rather than in pills, and new flavors for energy drinks

the main point of pitt’s work is to grab more of the rising middle classes’ disposal income “the drivers, the security guards, they’re starting to get a little bit more money now and they’re more likely to spend it,” says Rogelio la o, managing director for consumer health prod-ucts expanded medical coverage and more disposable income will put nimble companies in the sector in the driver’s seat, Rogelio says “We’re at a tipping point everything in this market is about to open.” F

ith a population oF approximately 248 million,

indonesia has been steadily improving the quality of

healthcare coverage across the nation While the median

age is 28 years, the age groups beyond 35 years are

pro-jected to grow faster than the average, pointing towards

aggravating existing strains on healthcare delivery

to improve healthcare, public health insurance schemes—such as jamkesmas, jamsostek, and askes—were put into

place and are mostly public importantly, they allow enrollees to be

treated in private hospitals, a step taken to alleviate the strain on public

facilities private healthcare insurance coverage though is still low at

less than 5% of the population, although coverage should grow as the

private hospital industry strengthens some major trends are driving

demand for wider healthcare coverage and better delivery of service:

a continued rise in life expectancy, the middle class, urbanization,

personal income and patient education

the rise of noncommunicable diseases such as heart disease, cancer

and diabetes

the directive of the government to provide universal public health

insurance

indonesia still has significant areas for improvement:

private health insurance penetration is low, estimated to be around

4% or 7.5 million people, concentrated in urban areas

Column by frost & sullivan

HealtHcare outlook 2013:

on tHe Brink oF

Major transForMation

the number of beds per 1,000 people

is low at 0.6 as compared with other asean countries and the rest of the world, where the ratio is 3.9

a shortage of skilled healthcare workers, primarily for nurses and ancillary professionals

a limited number of accredited hospitals in the country

tHe eMerGence oF tHe Private sector

While the government focuses on viding universal basic healthcare, the private sector is emerging, especially

pro-in major cities Most private hospitals are in Jakarta, followed by cities such as Bandung, surabaya, Manado, Makas-sar and tangerang there is also a rise

in investment in healthcare delivery services in key provinces in indonesia

as a net provider of medical tourists to the southeast asia, indonesia is now looking to becoming a player in this field Medical tourism is being targeted

in areas such as Bali with new hospitals there focused on premier patients

lookinG towards tHe Future

there are concerns in terms of health outcomes, geographic inequalities, fi-nancing issues as well as a lack of a sus-tainable healthcare foundation to ad-dress these concerns various initiatives have been taken, the impact of which should be realized in this decade

as a next step, technology could help improve healthcare with a goal to cover all provinces and 60% of districts

or cities with health information systems by 2014 this move will also support healthcare For example, there could be a growing use of telemedicine and the internet for consultation and diagnostics, eliminating the need to visit a clinic technology will help the sector to modernize F

FROSt & SullIvAN wORkS wIth clIENtS tO lEvERAgE INNOvAtION tO ADDRESS glOBAl chAllENgES AND gROwth OppORtuNItIES, AND pROvIDES SERvIcES Such AS RESEARch, ANAlySIS, StRAtEgy AND INNOvAtION It hAS mORE thAN 40 OFFIcES AROuND thE wORlD

w

24 | FORBES INDONESIA FEBRuARy 2013

strategic attractiveness of indonesia’s healthcare sector

Drivers For HeALTHCAre

iN iNDoNesiA

Source: Frost & Sullivan

indonesia HealtHcare delivery Market

total healthcare expenditure

stood at $15.8 billion, or

2.8% of gdp.

urbanization and a slowly

aging population will drive

demand for healthcare.

56% of indonesia’s 238-million

population has some form of

health insurance.

rising number of investments

in exisiting hospitals and new hospital plans in key provinces.

government aims to develop hospitals to achieve a ratio of 1 bed per 1,000 population by 2014.

growing population coupled with a low hospital to bed ratio signifies a demand-supply gap in healthcare delivery services, offering on opportunity to private healthcare providers to address this gap.

FEBRuARy 2013 FORBES INDONESIA | 25

26 | FORBES INDONESIA FEBRuARy 2013

was catapulted into the spotlight after he was appointed as the head commissioner of the Financial

Services Authority (OJK) in June

last year The OJK is a new body that

will supervise banks, brokerages,

insurance and financing firms, taking

over roles currently held by Bank

Indonesia (BI) and formally held by

the capital markets agency Bapepam

LK Some commentators have noted

the agency seems modeled on the

U.K.’s Financial Services Authority

As head of what will become an

important organization, Muliaman

will no doubt be at the center of

much attention during his next five

years in the post He comes to the

position after a long career at BI,

having been deputy governor for BI

from 2006 to 2012 He started his

career in 1986 as the general staff at

BI’s office in Mataram on the island of

Lombok In 2003, he was appointed

as the head of BI’s Financial System

OJK

Taking

The Reins

As the first chairman of the OJK, Muliaman Hadad

explains how the agency will operate.

By Sonya angraini

Stability Bureau in Jakarta and two years later became the director of the Directorate of Banking Research and Administration Muliaman, 53, has his undergraduate degree from the University of Indonesia in economics,

a masters in public administration from the Kennedy School at Harvard University, and a PhD in economics from Monash University in Australia

A confirmed bookworm, he likes to read economic tomes in his spare time and usually starts the day with a cup

of Balinese coffee, his favorite Forbes

Indonesia interviewed Muliaman during a trip to Mataram to discuss the impact of the OJK with local officials and other interested parties

Forbes IndonesIa:The OJK will

be a new and unique organization, what do you expect will be its impact?

MulIaMan Hadad: I realized that many people are wondering about the OJK so that’s why we are doing these socialization efforts across the country We don’t invite only those in financial sector but many others, such

as those from companies, universities and so on I think we are obligated to introduce OJK to all levels of society

By doing this, I hope that once we are in full operation, the society understands what our main tasks are, especially those related with financial education and consumer protection, and can give a positive contribution

to cooperate with the Ministry of Education to create a curriculum that supports financial literacy We also want to cooperate with law enforcement agencies and provide separate education for police officials because to be able to handle such cases requires one to be able to understand cases in the financial sector You should be able to see where the problem actually lies

FEBRuARy 2013 FORBES INDONESIA | 27

FI: So consumer education is your focus right now?

MH: Yes We do that for many reasons

We think the better the education, financial problems related to consum-ers will decline If we look closely, many disputes between consumers and financial institutions are often triggered by a misunderstanding be-tween the parties There is asymmet-ric information Thus, OJK will equip consumers with basic information on financial products and give them bet-ter access to this information and ser-vices This doesn’t mean we can pro-tect consumers from risk The risk is always there once you decide to invest

in a financial product We want sumers to make informed decisions

con-On the supply side, we want financial institutions to register their products

so we can create a database of them This will allow us to detect irregulari-ties sooner, so the supervisory board can assess the product and process it according to regulations

FI: The OJK will take over many supervisory powers from the Ministry of Finance and BI How

is the transition period going?

MH: Basically, the main task of

the OJK is to create a better and more integrated supervision in the financial sector and to cooperate with BI and the Ministry of Finance

in the maintenance of our financial system’s stability This is a critical period and we have formed a special team for the transition As far as I am concerned, the transition period has quite smoothly run We already have

a board of commissioners and we are now selecting the human resources for the OJK They will all come from the Ministry of Finance and BI We will also prepare the regulations and a more detailed organizational structure I know that creating a proper supervisory environment cannot be done in a short time, so we will keep on developing our system until banking supervision is in our

28 | FORBES INDONESIA FEBRuARy 2013

hands, hopefully in 2014 From

there, we can do any adjustments

as necessary

FI: What about existing rules and

regulations? Will they be changed?

MH: We will, of course, review all

rules and regulations But at first, we

will leave them in place If a revision

is needed, we will do that We will

harmonize all related regulations

between BI and the Ministry of

Finance to ensure transparency And

if there’s a need for a new regulation,

then we will create one or, if there’s a

regulation that is no longer reliable,

then we will repeal them We want

the regulations to be just right

FI: How will you exactly divide

responsibilities with the central

bank and the Ministry of Finance?

How will you curb the possibilities

of overlapping?

MH: There should be a close

coor-dination between the Ministry of

Finance, BI and the OJK There is a

possibility of overlapping, especially

with BI But keeping a clear

separa-tion between these two regulators

will not be simple because every

policy taken by BI will affect banks,

which will be under the OJK To

address this, there should be an

ar-rangement between the OJK and BI

on how to handle any overlap issues

We are still discussing the best

prac-tice in doing this with the central

bank Since the board of

commission-ers for the OJK was appointed, we

have held regular meeting with other

regulators and players in the

finan-cial market, and the discussions so

far have been productive

FI: Some have said the OJK is needed to reduce fraud in the financial system Is that one of the goals?

MH: I think one of the main reasons for an integrated supervisory institution is so there will be no blind spots or gray areas in the system

We also want to avoid regulatory arbitrage Several cases have been transferred to a weaker supervisory board to avoid sanctions With the OJK, the supervision will be conducted within one organization,

so there won’t be any regulatory arbitrage However, we cannot work alone Participation from the society

is required For instance, if there is an offer of an extraordinary investment return, well above the average, people have to find reliable information on the product It doesn’t mean it is a bad product, but consumers need to

be cautious To support them, we are currently building an information center, which is expected to start operation this year

FI: What about crisis prevention?

What kind of steps will you take?

MH: We already have the Financial System Stability Coordination Forum (FKSSK) We hold regular meetings with the FKSSK and we also file reports to each other if there were urgent issues so that each regulator knows who is doing what in both normal and crisis periods These regular meetings, one way or the other, will help prevent a crisis as they can be part

of our early warning system Each institution needs to update the other

on what they’re currently doing

and what problems they’re facing, not only by top-level officials but also those in technical areas This combination of better supervision will allow us to respond as quickly as possible and should prevent a crisis from happening

However, if a crisis still comes, we have to create an effective solution to overcome this crisis We do have the Financial System Safety Net (JPSK) bill, which is now being discussed at the parliament The bill will become our legal basis, especially for cases with a systemic impact However,

as this bill is still in discussion, so

in the meantime, we can mitigate the risk by signing a Memorandum

of Understanding between BI, the Ministry of Finance and the Deposit Insurance Corporation (LPS) We have agreed on our responsibilities and will act based on regulations for each body

FI: When will the JPSK bill

be passed?

MH: We finished the draft a long time ago and the final decision now depends on the parliament In the bill, we outline the role of the OJK,

BI and the government if a crisis should hit the country: whether it

is systemic or whether we should use state funds to solve the crisis

We will be actively involved in the bill discussion as well as with other regulations regarding the supervision

of financial organizations

FI: Several countries also have institutions like OJK How do you assess their performance?

MH: Each country has their own

“The main TaSk of The oJk iS To creaTe a BeTTer and

more inTegraTed SuperviSion in The financial SecTor.”

FEBRuARy 2013 FORBES INDONESIA | 29

system, but usually countries with developed financial institutions no longer depend solely on the central bank for supervision, so it creates

a new institution like the OJK It usually happens when financial institutions start to consolidate

That’s what is happening in Indonesia right now The more these financial institutions develop, the more complex they become

Independent bodies with specific tasks, such as the OJK, will be needed as a watchdog for these financial institutions, as we see in China, the U.S and the U.K I admit that there are countries which have failed in implementing OJK-type organizations But I guess the failure is not in the supervision but due to coordination with the central bank If a bank has a problem

then the OJK should coordinate as early as possible with the central bank, which is the lender of last resort It is crucial for the OJK to communicate and coordinate with the central bank whenever there

is a problem That’s basically what

we do now, to make sure that the coordination smoothly runs

FI: What about fees? Some have noted that BI does not collect any fees.

MH: Yes, that’s right But we should remember that banks are obliged

to put funds in the central bank

to maintain minimum reserves requirements, for which the central bank doesn’t pay any interest The central bank can invest these funds and that’s where the central bank derives its income

FI: So fees are appropriate?

MH: There’s nothing unusual about collecting fees The OJK-type organizations in other countries do the same The fees will range from 0.03 to 0.05% of assets, but this detail is still being discussed by parliament This year, we have proposed a Rp 1.6 trillion budget, to

be financed by the state budget and the remainder from collected fees

We will collect these fees and the Ministry of Finance is drafting a regulation to regulate the fee collection The collection will be auditable and based on principles such as accountability and transpar-ency These funds will be largely used for running programs related to supervisory, financial literacy and other programs that will increase confidence in the financial sector F

in the system,” says muliaman hadad.

30 | FORBES INDONESIA FEBRuARy 2013

BamBang Darmono is reluctant

to talk about the Merauke Integrated

Food and Energy Estate (MIFEE)

proj-ect in Papua The reason? He would

like to avoid adding any fuel to the

con-troversy that rages around this project

As the chief of the presidential unit

for the acceleration of development in

Papua and West Papua (UP4B),

Bam-bang is intimately familiar with the

project and its controversy

The rationale for the MIFEE is

rea-sonable While the initial idea can be

traced back as far as the early 2000s, it

was most formally launched in Papua

in early 2010 by Johannes Gebze, the

former Merauke regent, who saw it as

The Fight Over

Papua’s Savanna

Developing Papua’s Merauke area could help

the country but plans to do it are controversial

By renJani puSpo Sari

a way to accelerate growth by ing billions to develop the area’s po-tential as a hub for agribusinesses and energy production—supplying not just the country but the wider Asian region with its output

attract-In fact, under the Dutch ists, the area had previously been a major agricultural center before be-ing largely abandoned as instability hit Papua after independence Various plans were floated to develop Merauke for large-scale cultivation during the Suharto regime, but none were actu-ally implemented The goal was to create large industrial farms in the Merauke regency, which boasts rich

colonial-soil in a broad savanna, thus making it suitable for large-scale farming

The government also saw this project as one way to help the country achieve food self-sufficiency The area affected is one of the unclear points of the project—with estimates ranging from 1.8 million hectares to as much

as 2.5 million hectares of land Even at its lowest estimate, the MIFEE would cover a major swath of land Proposals

to develop the land in 2010 came from more than 30 investors, both local and international, including several con-nected to wealthy tycoons, such as Ra-jawali, Sinar Mas, Wilmar and Medco, the last being one of the earliest and biggest investors

The plan called for the ing of a wide variety of crops, such as soybeans, sugar, rice and livestock,

plant-as well plant-as other crops such plant-as coffee, cocoa and sago However, as licenses were issued to the investors, the final distribution for 90% of the crops has reportedly been for just three types: sugar, palm oil and forestry planta-tions Only 10% was said to have been left for other crops and livestock

“If we want plantations, then we should plant what Papuans can grow well, such as coffee, cocoa and sago These commodities have been cultivat-

ed here for many years,’’ says

Darmo-no, sitting in his office on a hill outside Papua’s capital of Jayapura Coffee is indeed an established crop, and brings

in over $200 million to the country Besides coffee, Merauke is also ideal for sago and cocoa Darmono says MIFEE should give more attention to the needs of local communities

To realize the plan, government will need to cut down the existing forests and force many communities to move off land they have lived on for many years, a move that raises concerns from various NGOs and activists Aside from the land for agricultural projects, the MIFEE project will need land for infra-structures such as roads, powerplants, housing, offices and other buildings c

FEBRuARy 2013 FORBES INDONESIA | 31

1 2 3 4

26

16

24 20 15

23 19

27 28

17

25 21

Some of the companies involved have countered that they are doing their work in full cooperation with the local communities, and taking steps such as setting aside land for their use and en-suring they will have job opportunities when the projects get off the ground

Another point of contention is the environmental impact The area is said

to have many forests and peatlands, which contain vast stores of carbon

Some groups allege the government is deliberately downplaying the environ-mental impact in order to promote de-velopment The area is also known to contain much wildlife that would also

be threatened by large-scale farming

The issue’s sensitivity is raised

giv-en Papua’s history and long-troubled relationship with the central govern-ment in Jakarta Some characterize the MIFEE as a type of colonization by

outsiders, both domestic and tional One other aspect of the MIFEE project is that international investors have been asked to invest in various parts of the project

interna-However, MIFEE is important to the current administration President Susilo Bambang Yudhoyono declared

in 2010 that Merauke was part of his plan to “feed Indonesia, then feed the world.” The MIFEE is one of the major components in the MP3EI, the masterplan for national development that designates parts of the country for specialized development (all of which support the masterplan)

This year, companies such as Medco and Rajawali have already started cultivating the land, covering about 500,000 hectares, with Medco planting sugar cane and palm oil trees and Rajawali planting commercial

trees such as acacia and teak

“Many companies have not started developing their sites So we have sent a letter to the president to limit the land use to 250,000 hectares,” says Abner Mansai of local NGO Cooperation Forum

As a response to the protests, Merauke’s regent Romanus Mbaraka has recently been looking at ways to slow the progress of land cultivation in order to give time to consider the issues involved, including the future of the Malindnese, the indigenous people

of Merauke who inhabit the area One

of the byproducts of any development would likely be the influx of a large number of non-Papuan workers to help develop and manage the agricul-tural estates Abner says that local people need more time to prepare for the coming development F

CaRved Up

A map of planned estates from May 2010.

1 Pt anugrah rejeki nusantara: 200,000 ha

2 Pt kharisma agri Pratama: 40,000 ha

3 Pt Muting jaya lestari: 40,000 ha

4 Pt Digul agro lestari: 40,000 ha

5 Pt agri surya agung: 40,000 ha

6 Pt nusantara agri resources: 40,000 ha

7 Pt kertas nusantara: 154,943 ha

8 Pt Dongin Prabhawa: 39,800 ha

9 Pt Mega surya agung: 24,697 ha

10 Pt wanamulia sukses sejati: 116,000 ha

11 Pt wanamulia sukses sejati: 96,554 ha

12 Pt wanamulia sukses sejati: 61,000 ha

13 Pt selaras inti semesta: 301,600 ha

14 Pt inocin kalimantan: 45,000 ha

15 Pt Berkat citra abadi: 40,000 ha

16 Pt Papua agro lestari: 39,800 ha

17 Pt Balikpapan forest indonesia: 40,000 ha

18 Pt Bio inti agrido: 39,000 ha

19 Pt ulilin agro lestari: 30,000 ha

20 Pt energi hijau kencana: 90,225 ha

21 Pt central cipta Murdaya: 31,000 ha

22 Pt agrinusa Persada Mulia: 40,000 ha

23 Pt agriprima cipta Persada: 33,540 ha

24 Pt hardaya sawit Papua: 62,150 ha

25 Pt hardaya sugar Papua: 44,812 ha

26 Pt tebu wahana kreasi: 20,282 ha

27 Pt indosawit lestari: 14,000 ha

28 Pt Bangun cipta sarana: 14,000 ha

29 Pt energi Mitra Merauke: 40,000 ha

30 Pt Medco Papua alam lestari: 74,219 ha

31 Pt Plasma nutfah Marind Papua: 67,736 ha

32 Pt Medco Papua industri lestari: 2,800 ha

33 Pt karyabumi Papua: 30,000 ha

34 Pt cendrawasih jaya Mandiri: 40,000 ha

35 Pt Muting jaya lestari: 3,000 ha

36 Pt sumber alam sutera: 15,000 ha

Source: Merauke Regency’s Investment Planning Board (Bapinda), May 2010.

32 | FORBES INDONESIA FEBRuARy 2013

wonders if the effort is worth making

For example, all parties are required

to have a central board in Jakarta and similar entities in all 33 provinces replete with bona fide offices If that

is not enough of an organizational nightmare, they must also organize themselves in at least 75% of the number of districts in each province

So in North Sumatra Province, where there are 33 districts, a party needs to have chapters in 25 regencies

Lest political parties somehow managed to overcome that logistical hardship, the nine parties that ratified Law on Election No 8/2012 made sure other obstacles are on hand For one, each party must have at least 1,000 members in each regency For another, at least 30% must be female

Protested Indonesian Justice and

Unity Party (PKPI) chief Sutiyoso, the former governor of Jakarta: “In Papua, you can count with your fingers the number of local women who are interested in politics, much less qualified to be politicians.”

The KPU may have shortcomings, but most pundits agree they did a good filtering job Many of the 24 disqualified parties have accepted the KPU decision in good grace Some, like the aforementioned PKPI and the Independent People’s Union Party (SRI), are beginning to act like bad losers by mulling legal action against the KPU This is akin to a team that takes the referee to task for the loss of

a match For the fact of the matter is, the KPU had merely been enforcing articles of the election law

Several of the ten parties are now already courting the chiefs of the rejected parties to join them in a common front Whether this is an effective means to pull in votes in the next election is at best dubious—mem-bers do not always go where their chief honchos When Indonesia held its first free elections, in 1955, an assortment of

177 political parties and organizations took part In the ensuing authoritarian periods under Sukarno and Suharto,

no free election took place until post-reform1999, when 48 parties had their day In 2014, ten may even be four

or five too many, but it’s a good start F

Election mittee (KPU) last month an-nounced that only ten parties were eligible to take

Com-part in the 2014 legislative election,

the Indonesian public breathed a

col-lective sigh of relief For in 2009, the

figure was 38—up from 24 in 2004—

creating chaos and confusion at the

ballot boxes on election day So when

legislators of the new House convened

in 2010, their first order of business

was to draft a new election bill to

prevent new political deadbeats from

crowding the field To their credit, but

to the dismay of the 24 that were

dis-qualified by the KPU, the idea worked

Nine of the ten parties make up the

present House They are namely the

ruling Democratic Party, Golkar Party,

Indonesian Democratic Party of

Strug-gle (PDI-P), Prosperous Justice Party

(PKS), National Mandate Party (PAN),

United Development Party (PPP),

Na-tional Awakening Party (PKB), Great

Indonesia Party (Gerindra), and

Peo-ple’s Conscience Party (Hanura) With

newcomer National Democratic Party

(NasDem) now in the ring, all ten

par-ties will slug it out in April two years

from now In fact, they will be fighting

among themselves, for they are

practi-cally comprised of two camps:

nation-alists and Muslims

To be sure, the 24 parties

disqualified from taking part in the

2014 election had it all coming—some

were new but cash-strapped, while

others old but idoleogically struggling

to keep aloft Some of the rules were

ridiculously stacked against them, one

And Then

There Were Ten

Taufik daruSmanIS ONE OF INDONESIA’S mOSt ExPERIENcED jOuRNAlIStS HE HAS HElD cHIEF EDItOR ROlES At BuSINESS WEEk INDONESIA AND INvEStOR mAgAzINES,

AND tHE INDONESIAN OBSERvER NEWSPAPER.

To be sure, The 24 parTies disqualiFied From Taking parT in The 2014 elecTion had iT all coming.

FEBRuARy 2013 FORBES INDONESIA | 33

glObAl vIEwpOInt

JEnnIE S bEv

In a knowledge economy, those who have access to funding might no longer be the strongest players

In a knowledge economy, the most important player is the one with the most “innovative capital.” In Silicon Valley, they are IT geeks In the movie industry, they are the independent producers In other fields, they are the innovative scientists For the first time

in history, the strongest capital isn’t money, as money doesn’t translate into creativity and innovation

The time for winning through tellect and knowledge has come Indo-nesia needs to develop such people, as most have limited skills and training

in-The Indonesian education system is notorious for its rote learning and re-stricting creativity Yet some Indone-sians are genius knowledge informa-tion players

A multimedia company based in Batam and Singapore, Infinite Studios, founded by Mike Wiluan, for example,

is an internationally known trial player Sehat Sutardja of Marvell Technology in Silicon Valley, another example, is a highly respected inventor and entrepreneur with 150 internation-

post-indus-al patents Kaskus, a Web-based munity with 4,000,000 registered users, was created by Andrew Darwis, Ronald Stephanus and Budi Dharmawan as

com-students in Seattle Indonesian Internet companies have started to gain the in-terest of global venture capitalists.For Indonesia to transition from a manufacturing economy to a knowl-edge economy requires more than a shift of consciousness and upgrad-ing skills It requires, above all, a shift from compartmentalized societal aspects to a synchronized network

of catalystic changemakers In other words, it requires a boost led by indi-viduals who are more than experts in their fields, they must be inspirational Without Steve Jobs, the world would not have seen Apple products After all, a knowledge economy is no longer a mass economy; it is a unique economy in which added values cannot

be simply made by machinery, they will come from an individual’s unique talents, skills and knowledge F

especially Santa Clara

in Silicon Valley where

I reside, has reached the

post-industrialism or

“knowledge economy” era In

Indone-sia, hints of post-industrialism can

al-ready be sensed Indonesia is aware of

the power of post-industrialism, and

it helps to have persons such as Mari

Elka Pangestu as the minister of

tour-ism and creative economy

A post-industrial society is created

when the service sector produces

more wealth than the manufacturing

sector In a newer definition, a

post-industrial society is one in which

innovative products and services

are primarily created by individuals

working with strong scientific and

artistic knowledge

Silicon Valley and Hollywood are

good examples of a knowledge or

post-industrial economy The main

characteristic of this economy is

creativity, with continuous invention

and re-invention A post-industrial

person is future-oriented and is highly

innovative regardless of the field

Instead of manufacturing products

and being a rank-and-file employee

or executive, or even a factory worker

by following orders and having a rigid

job description, they are individuals

who are set to replace the Industrial

Revolution’s workers

Consequently, the environment

has become highly competitive When

Adam Smith wrote The Wealth of

Nations, massive consumption and

making as much profit as possible

required massive amounts of capital

POsT-IndusTrIAl neTwOrk

synchronizaTion

For indonesia To TransiTion From a manuFacTuring economy To a knoWledge economy requires more Than a shiFT oF consciousness and upgrading skills

Jennie S Bev IS AN AWARD-WINNINg AutHOR, cOlumNISt, AND ENtREPRENEuR BASED IN SANtA clARA, cAlIFORNIA HER WRItINgS cAN BE READ At jENNIESBEv.ORg.

Story

Teddy Rachmat has been a success

as both a top executive and

an entrepreneur, and one of his few regrets is not being more of the latter sooner

By Gloria Haraito

FEBRuARy 2013 FORBES INDONESIA | 35

In 1998, he had the chance to buy Astra for $65 million during the Asia financial

crisis, but never took the step “Unfortunately, I did not buy it because I was

thinking as an employee,” says Teddy, whose formal name is Theodore Permadi

Rachmat The company was eventually acquired by Hong Kong’s Jardine group

That experience was part of the inspiration for him to become more

entrepreneurial and start more of his own businesses, where he could have

greater control over his destiny As a result, Teddy is the owner of one of the

biggest privately held business groups in the country, the Triputra group He

is also a shareholder or owner in many other major entities, such coal miner

PT Adaro Energy Now 69, Teddy could easily retire, but instead goes to the

office every morning “I’m here not to expand the group but to mentor the

next generation,” says Teddy In total, Teddy’s companies and investments

have given him an estimated net worth of $1.6 billion, making him the 17th

wealthiest man in Indonesia

Triputra, which means three children, now employs 30,000 people and

aims to have Rp 1.5 trillion profit on Rp 40 trillion revenues last year, up 45%

from 2011 Rp 27.5 trillion By 2017, Teddy would like Triputra to have Rp 85

trillion in revenues To reach this target, Teddy allocates Rp 4 trillion as capital

expenditure, partly used to plant 40,000 hectares of land The group

is divided broadly into four areas:

agribusiness, manufacturing, mining, and trading and services Many of his companies are among the largest companies in their fields

Teddy got started on his remarkable career immediately after he graduated with a degree in mechanical engineering from the Bandung Institute of Technology (ITB) in 1968 That same year he was offered a job as a salesman by his uncle William Soeryadjaya, the founder of Astra International, which he had started in 1957 Teddy became employee number 15 at Astra In the early days, he drove to meetings on a scooter and often slept

in the office As Astra grew, Teddy’s responsibilities grew along with it Teddy then went on to help found

in 1972 and then manage PT United Tractors (UT), the heavy equipment business under Astra With $500,000 capital in 1960s, now UT’s valuation has risen to $10 billion In 1985, Teddy was appointed chief executive

of the entire Astra group, a position

he held until his retirement in 2005 Teddy also participated in developing Adira, a finance company established

in 1990 by Teddy’s father, Raphael Adi Rachmat Through 1998 to

2002, Adira’s outstanding loans grew 1,700% Yet Teddy saw that the company was reaching its limits—to compete on a large scale it needed to

be backed directly by a bank So in

2004, Teddy sold Adira in two stages, selling 75% to PT Bank Danamon in

2004 for Rp 1.2 trillion, then selling the remainder in 2008 for Rp 1.8 trillion “If we kept trying to do it alone, Adira would never been as big

as it is today,” says Teddy

Teddy RachmaT is a man

wiTh few RegReTs buT one

of Them is noT becoming

an enTRepReneuR sooneR

having been a pioneeR who

helped build The laRgesT

business gRoup in indonesia,

asTRa inTeRnaTional, also

inspiRed him To become one

36 | FORBES INDONESIA FEBRuARy 2013

FEBRuARy 2013 FORBES INDONESIA | 37

“if we kept trying to do it alone, adira would never been as big as it is today,”

says teddy rachmat.

38 | FORBES INDONESIA FEBRuARy 2013

Swakarsa 75,000 ha and Amara 70,000 ha—for a total of 245,000 ha

By 2016, Teddy targets having 380,000

ha Every year, these plantations produce a total of 600,000 tonnes of palm oil

Rubber is the other big commodity aside from palm oil for Teddy His Kirana Megatara is the largest rubber producer in the country, with an 18% share of total revenues Kirana supplies rubber to the 10 largest tire manufacturers in the world Last year,

Teddy has prepared his succession planning, with his children holding prominent roles

in his businesses in 2011, Teddy appointed his eldest son and first child, Christian ariano

rachmat, as the head of family business he also officially sits as vice president director

of PT adaro energy his second child, arif Patrick rachmat, serves as chief executive of

TaP Teddy’s youngest, ayu Patricia rachmat chose to become a housewife while her

husband, Patrick Waluyo, is instead involved in Teddy’s business

Kirana booked $2 billion in revenues,

up 67% from revenues in 2010 of $1.2 billion Teddy set up rubber business after seeing Indonesia was the second largest rubber producer in the world after Thailand Although synthetic rubber has made inroads, natural rubber remains in high demand due

to its properties of elasticity As more

of the world can afford to buy vehicles that use rubber-based tires, Teddy’s business should remain healthy

Teddy aims to make Kirana the largest rubber processor in the world, raising production from the current 450,000 tonnes to 1,000,000 tonnes within the next few years

Teddy tries to balance ties with manufacturing and services,

commodi-as each hcommodi-as its own cycle

Current-ly commodities are weak, so Teddy

is putting more focus on the other businesses To that end, one interest-ing business for Teddy is motorcycle distributor PT Daya Adicipta Mus-tika (DAM) This year, Teddy expects DAM to sell 700,000 motorcycles with an average sales price of Rp 10 million Teddy sees the potential to rise from today’s national sales of

7 million motorcycles to at least 10 million units in the next five years

Mentoring and Succession

Adira is a turning point for

Teddy shifting from

pro-fessional to entrepreneur

The proceeds from selling

Adira he used to buy a 15%

stake in Adaro and

devel-op other business under

Triputra, which he started in 1998

Today Triputra has 14 companies

en-gaged in palm oil plantation, rubber

plantation, Honda motorcycle

distrib-utor for West Java, motorcycle spare

parts manufacturing, coal mining and

coal services The biggest companies

in the group are in commodities, palm

oil producer PT Triputra Agro Persada

(TAP) and rubber producer PT Kirana

Megatara Although Triputra was

started in 1998, some of the companies

under the group are much older, such

as Kirana, which dates back to 1968

and Puninar Logistics, which was

started in 1969

Besides Triputra, Teddy also has

other palm oil plantations under

the joint venture PT Dharma Satya

Nusantara, with partner Winarto

Oetomo and established in 1998

This JV has two major plantations,

PT Swakarsa Sinarsentosa and PT

Agro Maju Raya (Amara) Currently,

TAP has 100,000 ha of planted area,

Revenues of the group by business line.

Source : Company Profile