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Draft, 25 Sept 2012

Inclusive Business Roundtable for Indonesia
Tuesday 16th October 2012, Hotel Borobodur, Jakarta

BACKGROUND INFORMATION
The Asian Development Bank - in cooperation with the Netherland’s development organization SNV, the Indonesia Business Council for Sustainable Development (IBCSD, and the Ford Foundation - are jointly hosting the first Inclusive Business Roundtable for Indonesia. The event will be held on Tuesday 16 October 2012 at the hotel Borobodur in Jakarta, Indonesia. It is perhaps the first Inclusive Business event in the country. The IB Roundtable for Indonesia The objective of this roundtable is to present the initial findings of the Inclusive Business (IB) Market Scoping Study for Indonesia and to discuss the recommendations for the ADB and the development community to support inclusive business scale-up in the Indonesia. The roundtable will discuss the scale of the inclusive business market in Indonesia, the macro-economic environment, interest of possible investors and donors to promote inclusive business, capacity building requirements, and impact assessment tools. It will also discuss - as proposed by the consultants - possibilities for supporting inclusive business in Indonesia through a distinguished inclusive business fund, the first ever for the country, or through a financing facility – maybe as part of a broader Mekong or Southeast Asian fund. The forum will bring together around 60 participants. Private sector chief executive officers will present inclusive business models, fund managers and potential investors will discuss their interest to participate in such ventures, and government representatives and development partners will see how they can support inclusive business in Indonesia. The roundtable – with 70 participants - will bring together representatives and CEOs from inclusive business companies and industry associations, the finance community, government agencies, development partners, and other experts. It presents a unique opportunity for inclusive business's leaders to network and share experience and suggestions for providing technical assistance and financial support to relevant IB industry sectors. Preliminary findings of the Inclusive Business Market Scoping Study for Indonesia can be summarized as following:  The business environment in the country has substantially improved and the consumption power of the people in Indonesia likewise increased significantly during the last decade. This also affects inclusive business, which can find a huge market opportunity in the country.  Initial results indicate that inclusive business in Indonesia primarily follow mainly the employment and supplier model, and is concentrated in the agriculture/ agribusiness, handicrafts / traditional industry products, the retail markets, and in

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tourism services. There are also opportunities for IB in renewable energy (e.g. biomass) and in nutrition and food products. Geographically the opportunities are mainly in high population centers that provide good economic infrastructures. However some companies can also be found in remote areas where the extraction of natural resources and mining activities create new purchasing power. Inclusive business has strong multiplier effects, especially on the creation of jobs and income opportunities for the poor and low income youth. This is particularly true for large scale producers relying on small farmers to supply to their factory as is often the case in agro-industries and food processing. The study identifies various business models with large scope for replication, and suggests both government actions as well as advisory services and financing are needed to help high performing social enterprises scale to achieve higher market returns with broader and more systemic social impact. It proposes that a funding facility for inclusive business should address equity requirements beyond the scope of seed and social venture capital by adding debt financing for qualified investees to help preserve and enhance existing equity. In addition, technical assistance support should help companies invest in areas that are typically under-invested due to long-term, ‘public good’ nature of returns and therfore reduce impediments to growth and profitability of social enterprises. Such support should focus on bridging the technology gap, providing management skills, and facilitating strategic alliances. The discussions will also cover issues such as the capital market environment, overall fund strategy, fund manager and co-investor perspectives, the role of patient capital, exit strategies for investors, and an effective package of equity, debt and TA to meet growth stage development needs.

The Indonesia roundtable is organized by ADB in cooperation with SNV the Netherlands’ Development Organization, the Ford Foundation, and the Indonesia Business Council for Sustainable Development (IBCSD). The Netherland’s Development organization SNV is the core partner in developign th IB study for Indonesia. In addition to Indonesia, SNV is also working with ADB on inclusive business scoping studies in Bangladesh, Pakistan, and Viet Nam SNV is an international development organization of Dutch origin committed to eliminating poverty and inequity in emerging markets Worldwide. The organization has been promoting inclusive business, value chain development efforts, and improving access to markets for the poor for more than two decades in Africa Asia, Latin America, and the Balkans. In Latin America, SNV has been promoting inclusive businesses through various initiatives including several projects with the Inter-American Development Bank (IDB) and the Andean Development Corporation (CAF). It is currently expanding this model to Asia and Africa. For more information, please view http://www.snvworld.org/en. SNV also worked with the Ford Foundation (http://www.fordfoundation.org/) which is supporting additional inclusive Business company interviews in remote areas of Indonesia. The Jakarta roundtable is organized together with the Indonesia Business Council for Sustainable Development (IBCSD). Members of INCSD served as consultant to do the enterprise development component of the IB study. IBCSD) is a CEO-led association of companies operating in Indonesia, who share a commitment to promoting sustainable development through sustainable economic growth, ecological balance and social progress. Established in April 2011, IBCSD’s concept of sustainable development lies on the premises where sustainable development does not merely make sense, but also makes good business sense. As part of WBCSD’s Regional Network, in many ways, its program and activities mirror the WBCSD’s programs that are replicable but at the

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same time provide room for policy or concept alteration to best respond to Indonesia’s unique circumstances. For further information please visit our website at www.ibcsd.or.id For more information on the Indonesia Inclusive Business Roundtable, please see our website at http://www.adb.org/news/events/inclusive-business-forum-indonesia, or contact the organizers  IBCSD: Dino Vega / Tiur Rumondang, Tel: office: +6221 5290 1941 or 42, email: "Tiur Rumondang" <tiur24@cbn.net.id>, "'Dino Vega'" <bmv@cbn.net.id>  SNV: Phil Harman, Tel: +62-21-7892489 x 128, email: pharman@snvworld.org  ADB: Armin Bauer, Tel 0063-2-6325550, email: abauer@adb.org; contact in the ADB office in Indonesia: Pamela Bracey, email:pbracey@adb.org, Tel: 0062-212612721  Conference secretariat: Ms. Lusye Marthalia, Phone: 021 – 52901941 ext. 18, Fax: 021 – 52901949, Email: lusye@cbn.net.id ADB’s regional Inclusive Business work The Indonesia IB roundtable is part of ADB’s wider an inclusive business initiative, which is (a) performing market scoping studies in 10 Asian countries, one of them also Indonesia, (b) developing an inclusive Business impact assessment tool, (c) preparatory work for potentially establishing investment facilities or funds for inclusive business, and (d) supporting knowledge exchange – among others with the Inter-American Development Bank. ADB’s Inclusive Inclusive businesses are private sector investments specifically targeting this low income market with the double purpose of making reasonable profit (i.e. an internal rate of return of 8-20%) and creating tangible development impact for (poor and low income) people through the provision of sustainable decent jobs and better income opportunities, as well as services that matter for the poor's life. ADB defines Inclusive Business as companies that meet 3 major criteria at the same time: (a) addressing key problems of the poor and low income population groups through generating sizable and systemic impact, (b) achieving high (15% and above in USD terms) financial rate of returns, and (c) striving for growth prospects that make the inclusive business model part of a company’s core business. Inclusive business differs from social enterprises and corporate social responsibility activities in its realized profit making motive, as well as its social impact in scale and systemic contribution to poverty reduction, and consequently also the larger size of investment needs. It also differs from the original base of the pyramid approach that sees the poor mainly as market for private ventures and assumes automatic benefit for the poor through the provision of consumed goods. ADB’s regional inclusive business initiative is in partnership with the inclusive business work done by, the World Business Council on Sustainable Development, and other development partners including DFID, the Ford Foundation, KfW, SIDA, SNV, and the Inter-American Development Bank (IADB). ADB’s IB website (http://beta.adb.org/themes/poverty/inclusive-business-base-pyramid.) provides more information on (a) the concept of the BoP and inclusive business; (b) features of the ADB's inclusive business initiative; (c) inclusive business enterprise and finance market scoping studies in 10 Asian countries, including India; (d) ADB's proposed inclusive business funds for financing inclusive businesses in the Asia-Pacific region, including in India; (e) the schedule of planned inclusive business investment fora; (f) the methodology for assessing and monitoring poverty and inclusive growth impact; and (g) how ADB collaborates with other development partners.