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ROUND TABLE DISCUSSIONS

with
Israeli Companies

Key Speaker
Mr. Mufti Hamka Hasan, MBA
President Director
P.T. HATI INTERNATIONAL
Jakarta, Indonesia
&

Consultant to the Economic Department,


The Embassy of Israel, Singapore

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Round Table Discussions
With Israeli Companies

What You Need To Know


When Doing Business In
Indonesia

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Big Country in a Mess
Indonesia
was a country in a hurry
but now a big country with
a mess to clean up

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Indonesia
Geography : >17.000 islands
- Largest archipelago in the world
Population : 240.000.000
60% Rural population
40% Urban population
Race :
more than 400 Ethnic Groups
Religion :
90% Moslem
6% Christian
4% Others ( Buddhist and Hindu)

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Reformation measures since 1998

Trade Role of Women in


Industry Development
Investment Role of Arm Forces
Financial Services Pancasila and 1945
Constitution
Capital Markets
Role of State Apparatus
Oil Exploration
Infrastructure
Education
Health

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Economic Set Backs since the 1998
Crisis

Indonesias Oil Industry


Its contribution to the GDP shrinking
Inefficiency use of fuel
Agriculture
Role as a foreign exchange earner also become smaller
Flow of investments does not support agricultural sector

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Economic Set Backs since the
1998 Crisis (continue)
Manufacturing industry
Machinery, based-metal and electronics industry
Electronic industries
Automotive industries
Aircraft industry
Ship-Building industries

Multifarious industries
Food industries
Textile industries
Chemical industries

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Economic Set Backs since the
1998 Crisis (continue)
The Worrying Burden of Overseas Debt
Current oversea debt reached a total of USD 100 Billion (although
an improvement has been made with efficient debt management y
the current Government)
Banking Sectors
The performance of banks have improved but only achieved by
major banks.

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Economic Set Backs since the
1998 Crisis (continue)
Human Resources Development
World Bank have recommended improvement to the quality of the
work force
Infrastructure Development
Electric Power
Telecommunications
Transport
Urban Services
Irrigation and Water Resource Management
Service delivery improvement (Public Service)

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Economic Set Backs since the
1998 Crisis (continue)

Investment
Government policy
Bureaucracy policy packages
Capital Investment Policies
Security Instability
Ethnic Conflicts
Lack of Social Cohesion

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


ROAD MAP FOR IMPROVEMENT

Export oriented industrial policy


Labor intesive industry
Agro-based and other natural resources industry,
where raw materials are abundant
Capital goods industry to support the above
industry. Components manufacturing is now
strongly promoted
Promoting investment in provinces which are
behind in their development primarily in the Eastern
Region

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


ROAD MAP FOR IMPROVEMENT

Conducive business climate :


Investment procedures
Monetary policy
Fiscal policy
Customs procedures
National and regional planning for industrial zones
Industrial information services, including international linkage for
computerized information system
Strategic alliances with international trading group promote global
marketing

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


ROAD MAP FOR IMPROVEMENT

Human resources development


Engineering, industrial planning and application of
Research and Development
Infrastructure development including the
optimization of the IT Sector

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Main Export Industries

Textile and garments


Wood based including pulp and paper industries
Manufacturing industries
Palm oil industries including oleo chemicals

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Obstacles in Indonesias Industrial
Sector

Internal
Cultural values
Inconsistency of policy execution
Collusion between vested interest group and bureaucracies
Weak middle class level
Lack of Capital
Concentration of industries in Java

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Obstacles in Indonesias Industrial
Sector (continued)

Global
Protectionism attitudes of developed/industrialized countries
International trade cartel
Global monetary fluctuation
Overcapacity in certain industries

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Current Business and Political
Scene
Political
Current Government
Stability
Business
What makes Indonesia on the move

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Political

Current Government
Stability
Indonesias Economic Development - Institutional
Influence

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Indonesias Economic Development
- Institutional Influence
1967 - 1992
PRESIDENT
(STATE SECRETARY
AND
MILITARY ADVISER)

ECONOMISTS
(BAPPENAS + DEPT. OF FINANCE)

CRONIES / CONGLOMERATES
+
MILITARY (CSIS)

TECHNOCRATES (BPPT)

INTELECTUALS
(UNIVERSITIES & EMINENT GROUPS)

CRONIES

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Indonesias Economic Development
- Institutional Influence
1993 - 98
PRESIDENT
( Children +Cronies )

ICMI INTELECTUALS + BAPPENAS


+ CRONIES

CRONIES / CONGLOMERATES
+ MILITARY

SME (COOPERATIVES)

CRONIES

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Indonesias Economic Development
- Institutional Influence
1998 - current
PRESIDENT
(Intellectuals,
Professionals & Military )

Parliament members

Scholars & Economists

Political Parties

NEW CRONIES ???

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Business

What makes Indonesia currently on


the move
Indonesia improving stability
Indonesia is leapfrogging the technology
learning curve
The APEC Forum
The growing middle class society

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Indonesia : What can go wrong ?

Economy
Government borrowing still high
External debt burden substantial
Succession and general change
Oil price uncertainties
Competition from new developing countries

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Indonesia : What can go wrong ?
(continued)

Manufacturing Sector
Not efficient
Low productivity
Weak in quality control
Job Opportunities - unemployment
Uneven development between provinces
Human resources development

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Market Prospects

Priority Sectors
Major Projects

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Priority Sectors

Oil and Gas Industry


IT and Telecommunication
Environmental Technology
Aquaculture / Fisheries
Agriculture
Infrastructure Development

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Business Milue

Culture
Indonesian Businessman

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Culture

Family-run business common


Javanese attitude versus Sumatra attitude
Strong focus on the informal sector
The role of the State enterprises and the Cooperatives
Business disputes are mostly settled amicably

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Live Style Rural Population (60%)

Adat (Tradition) based culture


Collective social milieu
Predominantly agricultural
Small scale economy

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Whats the Difference
Between
Corporate Culture
vs
Kekeluargaan Culture

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Corporate Culture vs Kekeluargaan
Culture
Corporate Culture Kekeluargaan Culture
Maximum profit making Socially limited profit
Rational (logical) making
calculation Calculation influenced
Competition more than by feeling (emotions)
cooperation Cooperation rather
Work under regulation than competition
Corporate over social Work under personal
obligation leadership
Social over corporate
obligations

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Western vs Indonesian
Business Etiquette
(The American case)

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


Western vs Indonesian Business
Etiquette
(The American Case)
American Indonesian
Subject more important than Man more important than
man subject
Starts right away Starts with building up
atmosphere
Informal Address Formal Address
Exercise pressure to win Withdraw when pressed
(silence)
Likes to TEACH
Dislikes being TAUGHT
Win but dont humiliate
Values absolute victory

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


The Indonesian Businessmen

Very well connected to the authorities


Active in the political scene
Mostly with strong influential family background (the
indigenous group)
Majority are Chinese origin

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


The Indonesian Business Vehicle
KADIN (Indonesian Chamber of Commerce)

The KADIN Act No. 1, 1987


The role of the state enterprises
The role of the cooperations
The role of the private sector

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


What HATI INTERNATIONAL
do for the Israeli Industry?

Provide Services to the Israeli Business


Community under the auspices of the Economic
Department of the Israeli Embassy in Singapore

General Market Info


Finding Relevant Contacts for Israeli Companies
Setting up Business Meetings
Arranging visas to Indonesia for Israeli
businessmen

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007


THANK YOU

Presentation by Mufti Hamka Hasan Tel Aviv, 31st May 2007