Indonesia Update - Bank Mandiri

Contents
Indonesia Economic Update :
Balance of Payment in 2011
Fund Inflows and Foreign
p.02
Ownership In Indonesian Capital
Market
p.08
US EPA Statement About CPO
“Failure”: Should We Worry?
p.40
Coal Market 2012: Future Remains
Bright
p.45
Property Sector (Apartment)
Outlook in 2012
p.57
Mandiri Leading Economic Index
(LEI)
p.64
Indonesia Current Data (Table) p.67
Chief Economist
Destry Damayanti
destry.damayanti@bankmandiri.co.id
Analyst
Faisal Rino Bernando
Andry Asmoro
M. Ajie Maulendra
Nadia Kusuma Dewi
Nurul Yuniataqwa Karunia
Sindi Paramita
Reny Eka Putri
Ahmad Subhan Irani
Andrian Bagus Santoso
Publication Address:
Bank Mandiri Head Office
Office of Chief Economist
18 th Floor, Plaza Mandiri
Jalan Jend. Gatot Subroto Kav.36-38
Jakarta 12190, Indonesia
Phone: (62-21) 5245516 / 5272
Fax: (62-21) 5210430
Email:
rino.bernando@bankmandiri.co.id
andry.asmoro@bankmandiri.co.id
ajie.maulendra@bankmandiri.co.id
nadia.dewi@bankmandiri.co.id
nurul.karunia@bankmandiri.co.id
sindi.paramita@bankmandiri.co.id
reny.putri@bankmandiri.co.id
ahmad.subhan@bankmandiri.co.id
andrian.bagus@bankmandiri.co.id
See important disclaimer at the end of
this material
OFFICE OF CHIEF ECONOMIST
March 2012
Indonesia Update
Indonesia economic update : Balance of Payment in 2011
Indonesia’s recorded deficit for the second consecutive quarter in its balance of
payment, sending the full-year balance of payment surplus down to USD11.9 bn
from USD30.3 bn in 2010. Interestingly, it was not caused by the trade balance as
the trade surplus increased, but by increasing use of foreign services, notably
transportations, and also higher income repatriation by foreign direct investment
(FDI) investors.
Fund Inflows and Foreign Ownership In Indonesian Capital Market
Increasing funds from domestic investors, foreign capital inflows coming into the
domestic capital market are relatively also experiencing an upward trend. Although
at the end of 2008 global financial market suffered from crisis and liquidity
problems, causing a correction in the domestic capital market, in 2009 a recovery in
the domestic financial market has occurred.
The Development of Commercial Banking in Indonesia
Development of Indonesia’s banking system during 2011 still showed the maintained
stability with the improved intermediary function, despite of amidst the financial
market turmoil due to the influence of the global economic downturn. The solid
domestic banking condition was still reflected in the high Capital Adequacy Ratio
(CAR), which was far above the minimum of 8%, reached 16.1% by December 2011
US EPA Statement About CPO “Failure”: Should We Worry?
An agency in the United States (U.S.) engaged in the environment sector, namely
EPA (Environmental Protection Agency) had issued an announcement related to its
studies that biodiesel and renewable diesel produced from crude palm oil do not
meet the environmentally friendly requirements. The EPA studies show that
biodiesel produced from crude palm oil cannot reduce greenhouse gas emissions in
a minimum amount of 20% as required in the U.S.
Coal Market 2012: Future Remains Bright
The global outlook for coal demand and supply in 2012 is marked by uncertainty.
From the demand side, recovery from financial crisis has been fragile in many
countries, casting doubt on future growth rates. But, the growth in developing
countries – lead by China and India – will lead demand growth in recent years.
Property Sector (Apartment) Outlook in 2012
Development of the property sector is expected to continue in 2012. In 2012 the
developers are starting to add the property projects, including residential such as
apartments along with better economic conditions and increasing purchasing power.
Security Ownership by the Types of Security Holders (January 2012 period)
Corporate Individual
533,291
348,811
174,589
26,552
Mutual
Fund
117,661
227,162
Securities
Company Insurance
14,507
50,897
105,947
11,524
Pension
Fund
55,025
65,082
49,906
249,678
3,979
1,505
Foreign Ownership (IDR bn) Local Ownership (IDR bn)
Financial
Institution Foundation Others Total
1,630
337,859
1,056,533
1,319,070

Indonesia Economic Update : Balance of Payment in 2011
Aldian Taloputra (aldian.taloputra@mandirisek.co.id)
Indonesia’s recorded deficit for the second consecutive
quarter in its balance of payment, sending the full-year
balance of payment surplus down to USD11.9 bn from
USD30.3 bn in 2010.
Specifically, the current account posted a deficit of USD0.94
bn in 4Q11, swinging from a surplus at USD0.47 bn in 3Q11 as
the trade balance surplus continued to narrow while foreign
transportation needs resulted in a larger net outflow on
overall services. For the full-year 2011, the current account
surplus continued to drop from USD5.1 bn in 2010 to USD2.1
bn. Interestingly, it was not caused by the trade balance as the
trade surplus increased, but by increasing use of foreign
services, notably transportations, and also higher income
repatriation by foreign direct investment (FDI) investors.
On the other hand, capital & financial account deficit
narrowed in 4Q11 to USD1.4 bn from USD4.1 bn in the
previous quarter. Surprisingly, the main cause for the net
outflow was rising placement of funds by Indonesians on
deposit and saving overseas, while foreign portfolio
investment inflows posted a marginal result. For overall 2011,
capital & financial account recorded a decline from USD26.6
bn in 2010 to USD14.0 bn in 2011 with the source for the drop
came from the public portfolio, in particular SBIs as it went
from surplus to deficit last year. Nevertheless, we think most
of the foreign outflows on SBI were intentionally done by Bank
Indonesia. On the other hand, FDI continued to record an
increase of inflows last year lured by solid economic
fundamentals.
We believe Indonesia’s balance of payment surplus will
continue to shrink this year. Current account is likely to chalk a
deficit of around USD1.9 bn or 0.2% of GDP, on weaker
exports, stronger import growth, and higher income
repatriation by FDI investors. On the capital account side, we
still believe Indonesia strong economic fundamentals, high
yields, and improved sovereign ratings will continue to attract
foreign investors. Other investments are likely to improve
© Office of Chief Economist Page 2 of 68
Page 2 of 68
© Office of Chief Economist

ITEMS
gradually as the central bank regulation on export and loan
proceed repatriation is gradually implemented. Against this
backdrop, we forecast the rupiah to weaken only slightly to
IDR9,100/USD by YE12 vs. IDR9,068/USD end of last year.
INDONESIA'S BALANCE OF PAYMENTS
(millions of USD)
2010 2011
Q1 Q2 Q3 Q4 TOTAL
I. CURRENT ACCOUNT 1,891 1,342 1,043 870 5,144 2,072 473 468 -944 2,069
II. CAPITAL & FINANCIAL ACCOUNT 5,662 3,767 7,464 9,728 26,621 6,646 12,849 -4,107 -1,370 14,018
III. TOTAL (I+II) 7,552 5,108 8,507 10,597 31,764 8,718 13,322 -3,639 -2,313 16,088
IV. NET ERRORS & OMISSIONS -932 312 -1,552 692 -1,480 -1,052 -1,446 -321 -1,413 -4,232
V. OVERALL BALANCE (III+IV)
* Provisional figures
** Very provisional figures
6,620 5,420 6,955 11,289 30,284 7,666 11,876 -3,960 -3,726 11,856
Figure 1. Indonesia’s balance of payment. (Source: Bank Indonesia)
Q1* Q2* Q3* Q4** TOTAL
Indonesia’s balance of payment recorded another deficit in
the last quarter of 2011, recording the second consecutive
deficit (see figure 1 and 2). Specifically, the current account
turned into deficit for the first time since 4Q08 while capital
account deficit narrowed from that in the 3Q11. Overall last
year, balance of payment surplus shrank to USD11.9 bn from
USD30.3 bn in 2010 driven by the decline on current and
capital accounts.
Specifically, current account posted a deficit of USD0.94 bn in
4Q11, swinging from a surplus of USD0.47 bn in the previous
quarter. We think the deficit was basically caused by two
factors. First, it was due to lower trade surplus compared with
in the 3Q11 as exports were dampened by lower commodity
prices and decreasing global demand during the period. At the
same time imports growth remained robust as investment
activities continued to rise. Second, rising imports led to
increasing transportation costs paid to foreign companies (see
figure 2). Thus, they resulted in a deeper deficit on overall
services as transportation services accounted for 74% of the
total services in 2011.
© Office of Chief Economist Page 3 of 68
© Office of Chief Economist Page 3 of 68

Page 4 of 68
As for the full 2011, the current account surplus continued to
slump from USD5.1 bn in 2010 to USD2.1 bn (see figure 4).
What is interesting is the full-year decline was not caused by
international trade as trade surplus increased to USD35.5 bn
in 2011 from USD30.6 bn in 2010. It seems that the lower
surplus was driven by increasing use of foreign transportation
services and increasing income repatriation of income by FDI
investors (see figure 3).
On the other side, capital & financial account registered an
easing trend of deficit in 4Q11, amounting USD1.4 bn
compared with the previous quarter at USD4.1 bn (see figure
4). Surprisingly, the main cause for the net outflow was due to
higher placement of funds by Indonesians outside the country.
Meanwhile, foreign portfolio investment posted a marginal
net inflow even after foreigners took their money out of
maturing SBIs. We believe most of the foreign outflow on SBI’s
was done intentionally by the central bank as they eliminate 3
and 6 month SBI instrument causing impossible for foreigners
to rollover it. Moreover, foreigners were more discouraged
placing on the existing 9 month SBI instrument due to central
bank’s holding period policy for the instrument (see figure 3).
On the other hand, foreign flows to the stock market and
government bonds swung from outflows to inflows. Whereas,
foreign inflows to corporate bonds increased during the
period. Despite the global economic uncertainty, foreign
investors’ sentiment on the domestic financial market was
better in fourth quarter than in the 3Q11. Meanwhile, FDI
continued to increase lured by a solid economic fundamentals.
For the full-year 2011, capital account & financial account
recorded a decline USD26.6 bn in 2010 to USD14.0 bn in 2011
amid global economic uncertainty. Foreign portfolio inflows
significantly slid from USD15.7 bn in 2010 to USD5.6 bn. The
essential source for the drop came from the public portfolio as
foreign flows into SBI’s went from surplus of USD1.3 bn in
2010 to net outflows of USD5.4 bn last year, in line with the
central bank’s goal. On the other hand, foreign inflows to the
government bonds were still positive but eased from USD12.2
bn in 2010 to USD6.2 bn as foreign investors turned riskaverse
in late August. Meanwhile, foreign direct investment
continued to record an increase of inflows from USD13.8 bn to
USD18.2 bn in 2011.
© Office of Chief Economist Page 4 of 68
© Office of Chief Economist

12
10
8
6
4
2
0
BOP (USD bn)-3qma
IDR/USD-RHS (reverse report)
We believe Indonesia’s balance of payment surplus will
continue to shrink this year. Current account is likely to print a
deficit of around USD1.9 bn or 0.2% of GDP, underpinned by
weaker exports, stronger import growth, and higher income
repatriation by FDI investors. On the capital account side, we
still believe Indonesia’s strong economic fundamentals, high
yields, and improved sovereign ratings will continue to attract
foreign investors. However, rising risk aversion may dampen
foreigners’ appetite on risky assets. Other investments are
likely to improve gradually as the central bank regulation on
mandatory repatriation of export and offshore loan proceeds
is gradually implemented. Although there is no requirement to
park such proceeds in the domestic banks for a specific time,
we expect some of the ‘idle’ money will stay. Against this
backdrop, we forecast the rupiah to weaken only slightly to
IDR9,100/USD by YE12 vs. IDR9,068/USD end of last year.
8,000
8,500
9,000
9,500
10,000
10,500
11,000
11,500
-2
12,000
3Q06 2Q07 1Q08 4Q08 3Q09 2Q10 1Q11 4Q11
BOP items (USD bn)
Figure 2. Lower BOP value has led weakening exchange rate (left figure). Higher transportation
service driven from increasing imports (right figure). (Source: Bank Indonesia, CEIC)
© Office of Chief Economist Page 5 of 68
© Office of Chief Economist Page 5 of 68
6
5
4
3
2
1
0
1Q06
3Q06
1Q07
Flows of transportation services
Imports-RHS
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
50
45
40
35
30
25
20
15
10
5
0

20
18
16
14
12
10
8
6
4
2
0
© Office of Chief Economist Page 6 of 68
Page 6 of 68
BOP items (USD bn)
Foreign income repatriation of FDI
FDI
2006 2007 2008 2009 2010 2011
3
2
1
0
-1
-2
-3
-4
Foreign flows in SBI (USD bn)
Persistent foreign outflows in SBI was visible
as foreigners could not rollover it due to BI's
policies in SBI
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11
Figure 3. Increasing income repatriation in line with raising FDI activity (left figure). Presistent
foreign outflow due to BI’s policy (right figure). (Source: Bank Indonesia)
© Office of Chief Economist

I. CURRENT ACCOUNT 1,891 1,342 1,043 870 5,144 2,072 473 468 -944 2,069
A. Goods, net 6,954 6,848 7,593 9,232 30,628 8,684 9,637 9,586 7,440 35,347
- Exports, fob. 35,088 37,444 39,712 45,830 158,074 45,818 51,797 52,476 51,382 201,473
- Imports, fob. -28,134 -30,596 -32,119 -36,597 -127,447 -37,134 -42,160 -42,890 -43,941 -166,125
1. Non Oil & Gas, net 5,812 5,881 6,605 9,097 27,395 8,628 10,551 9,085 7,013 35,277
1.1. Exports, fob 28,511 30,298 32,763 37,845 129,416 37,092 42,307 42,168 41,626 163,193
1.2. Imports, fob -22,699 -24,417 -26,158 -28,747 -102,021 -28,464 -31,756 -33,084 -34,613 -127,918
2. Oil, net -1,663 -2,140 -1,991 -2,859 -8,653 -3,439 -5,098 -4,060 -3,712 -16,309
2.1. Exports, fob 3,556 3,840 3,749 4,547 15,691 4,856 5,000 5,189 5,239 20,283
2.2. Imports, fob -5,219 -5,980 -5,740 -7,406 -24,344 -8,295 -10,098 -9,249 -8,952 -36,594
3. Gas, net 2,805 3,107 2,980 2,994 11,886 3,495 4,184 4,562 4,140 16,381
3.1. Exports, fob 3,022 3,306 3,201 3,438 12,968 3,870 4,490 5,119 4,517 17,996
3.2. Imports, fob -217 -200 -222 -444 -1,082 -375 -306 -557 -377 -1,615
B. Services, net -2,106 -2,275 -2,155 -2,787 -9,324 -2,122 -3,379 -2,818 -3,503 -11,822
1. Inflow 3,873 4,015 4,334 4,544 16,766 4,456 4,530 5,400 6,146 20,532
2. Outflow -5,979 -6,291 -6,489 -7,331 -26,089 -6,578 -7,909 -8,218 -9,649 -32,354
C. Income, net -4,038 -4,329 -5,547 -6,876 -20,790 -5,518 -6,747 -7,344 -6,058 -25,667
1. Inflow 444 443 521 482 1,890 579 635 653 610 2,478
2. Outflow -4,482 -4,772 -6,068 -7,357 -22,679 -6,097 -7,382 -7,997 -6,668 -28,144
D. Current transfers, net 1,080 1,098 1,151 1,301 4,630 1,028 963 1,044 1,177 4,212
1. Inflow 1,815 1,816 1,883 2,057 7,571 1,830 1,841 1,908 2,057 7,636
2. Outflow -735 -718 -732 -756 -2,941 -802 -878 -864 -880 -3,424
II. CAPITAL & FINANCIAL ACCOUNT 5,662 3,767 7,464 9,728 26,621 6,646 12,849 -4,107 -1,370 14,018
A. CAPITAL ACCOUNT 18 2 4 26 50 1 0 0 0 1
B. FINANCIAL ACCOUNT 5,644 3,765 7,460 9,702 26,571 6,645 12,849 -4,107 -1,370 14,017
- Assets -3,601 -583 -4,748 2,031 -6,901 -3,298 -1,228 -4,399 -7,554 -16,479
- Liabilities 9,244 4,347 12,208 7,672 33,471 9,943 14,076 292 6,185 30,496
1. Direct investment 2,556 2,368 1,764 4,419 11,107 3,461 3,249 1,661 2,066 10,437
1.1 Abroad -427 -982 -1,191 -64 -2,664 -1,529 -2,526 -1,350 -2,317 -7,722
1.2 In Indonesia 2,983 3,350 2,955 4,483 13,771 4,990 5,775 3,011 4,383 18,159
2. Portfolio investment 6,159 1,089 4,517 1,437 13,202 3,588 5,537 -4,665 -261 4,199
2.1 Assets -409 -152 -1,597 -353 -2,511 -521 -731 154 -318 -1,416
2.2 Liabilities 6,569 1,241 6,114 1,789 15,713 4,109 6,268 -4,819 57 5,615
2.2.1 Public Sector 6,556 997 4,820 1,154 13,526 4,383 2,964 -4,270 -2,250 826
2.2.2 Private Sector 13 244 1,295 636 2,187 -274 3,304 -549 2,306 4,788
3. Other investment -3,072 308 1,179 3,846 2,262 -404 4,062 -1,103 -3,174 -619
3.1 Assets -2,764 552 -1,960 2,447 -1,725 -1,248 2,029 -3,203 -4,919 -7,340
3.2 Liabilities -308 -244 3,139 1,400 3,987 844 2,033 2,101 1,745 6,723
3.2.1 Public Sector 147 -879 1,093 1,395 1,756 95 -1,402 -712 -240 -2,258
3.2.2 Private Sector -455 636 2,046 5 2,231 749 3,435 2,813 1,985 8,981
III. TOTAL (I+II) 7,552 5,108 8,507 10,597 31,764 8,718 13,322 -3,639 -2,313 16,088
IV. NET ERRORS & OMISSIONS -932 312 -1,552 692 -1,480 -1,052 -1,446 -321 -1,413 -4,232
V. OVERALL BALANCE (III+IV) 6,620 5,420 6,955 11,289 30,284 7,666 11,876 -3,960 -3,726 11,856
* Provisional figures
** Very provisional
ITEMS
INDONESIA'S BALANCE OF PAYMENTS
(millions of USD)
2010 2011
Q1 Q2 Q3 Q4 TOTAL Q1* Q2* Q3* Q4** TOTAL
Figure 4. Indonesia’s balance of payment. (Source: Bank Indonesia)
© Office of Chief Economist Page 7 of 68
© Office of Chief Economist Page 7 of 68

Fund Inflows and Foreign Ownership In Indonesian Capital
Market
Reny Eka Putri (reny.putri@bankmandiri.co.id)
…foreign fund
inflows coming
into the domestic
capital market are
relatively also
experiencing an
upward trend…
Capital market has provided an important role in spurring the
economic growth in Indonesia. In addition to the financial
service industry, capital market is also a means for people to
invest in various financial instruments, such as stocks, bonds,
mutual funds and others. In addition to increasing funds from
domestic investors, foreign capital inflows coming into the
domestic capital market are relatively also experiencing an
upward trend. Although at the end of 2008 global financial
market suffered from crisis and liquidity problems, causing a
correction in the domestic capital market, in 2009 a recovery
in the domestic financial market has occurred. It can be seen
from the performance of stock markets in the period of 2005-
2009, in which the foreign capital inflows rose sharply in
October-November 2008 when the acquisition of shares of
listed companies by foreign investors and purchase of bluechip
shares from banking and commodity sectors.
Global Liquidity Direction
Financial and economic crisis led the U.S. economy and some
countries in Europe to have a weakening pressure.
Country/Region 2010 2011E 2012F 2013F
United States -471 -462 -391 -353
Euro Area -61 -54 11 44
Japan 196 107 110 118
Other Mature Economies -21 -40 -37 -35
Emerging Economies 363 360 264 58
Latin America -47 -43 -88 -97
Emerging Europe 0 -8 -26 -93
Middle East/Africa 66 185 179 148
Emerging Asia
Note: E = Estimation, F = Forecast
344 226 199 101
Figure 5. Global Current Account (USD bn). Capital flows to emerging markets will still remain
high compared to the United States, Europe, Japan and other mature economies. By 2012, the
Current Account balance of emerging economies is estimated at USD264 billion (Source: The
Institute of International Finance)
© Office of Chief Economist Page 8 of 68
Page 8 of 68
© Office of Chief Economist

…the continued
improvements in
international
confidence in
Indonesia
encourage inflows
of foreign funds…
Unstable conditions in developed countries (Mature
Economies) are believed to be able to attract foreign investors
to transfer funds to developing countries (Emerging
Economies), including Indonesia. The abundance of global
liquidity as an implication of policies in the mature economies
during the crisis and the continued improvements in
international confidence in Indonesia encourage inflows of
foreign funds into domestic financial markets primarily
through portfolio investments.
Based on a report from the Institute of International Finance,
it is estimated the capital inflows to emerging markets will still
remain high compared to the United States, Europe, Japan
and other mature economies. For 2012, the Current Account
balance in emerging economies is estimated at USD264 bn.
261 258 249
201
208
91
488
372
Note: - Latin America (Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Peru, Venezuela)
- Emerging Europe (Bulgaria, Czech Republic, Hungary, Poland, Romania, Russia, Turkey, Ukraine)
- Middle East/Africa (Egypt, Lebanon, Morocco, Nigeria, Saudi Arabia, South Africa, UAE)
- Emerging Asia (China, India, Indonesia, Malaysia, Philippines, South Korea, Thailand)
Figure 6. Emerging Markets: Net Private Capital Inflows (USD bn). In 2012, capital inflows to the
Emerging Asian countries are projected at USD287 billion and in 2013 will reach USD324 billion
(Source: The Institute of International Finance)
In terms of capital inflows for the entire Emerging Economies,
a group of Emerging Asian countries, consisting of China, India,
Indonesia, Malaysia, Philippines, South Korea and Thailand,
are expected to gain greater inflows of funds compared to
© Office of Chief Economist Page 9 of 68
© Office of Chief Economist Page 9 of 68
146
73 64
2010 2011E 2012F 2013F
Latin America Emerging Europe Middle East/Africa Emerging Asia
287
272
217
80
324

…Indonesia is a
developing
country that
becomes a target
of global
investors…
…the inflows of
foreign funds are
primarily through
portfolio
investments…
© Office of Chief Economist Page 10 of 68
Page 10 of 68
countries in Latin America, Emerging Europe countries and
Middle East / Africa. In 2012, capital inflows into Emerging
Asia countries are projected at USD287 bn and in 2013 will
reach USD324 bn.
Capital inflows into Indonesia: Increased Sharply
Recently, Indonesia is a developing country that becomes a
target of global investors. Since the economic and financial
crisis in developed countries, Indonesia and other developing
countries become more attractive locations for foreign
investors to invest their capitals. This condition is of course a
momentum of its own for the domestic financial sector to the
inflows of foreign funds to be properly managed and used to
support the domestic economic growth.
Over the last eight years, inflows of foreign funds (foreign
capital inflows / financial account liabilities) had an increasing
trend and reached its peak in 2010 at USD31.7 bn, up
significantly by 65.5%YoY. The inflows of foreign funds are
primarily through portfolio investments. Portfolio investment
liabilities in 2010 reached USD15.7 bn (about 50% of the total
inflows of foreign funds) or increased 1.5 times higher than in
2009 at USD10.5 bn.
During the period of 2004-2011, the decline in capital inflows
occurred in 2008 just as the impact of the global financial crisis
widespread. Further declines in commodity prices, a
downward revision to demand from abroad and a potential of
additional shocks to the domestic economy also affect the
inflows of payment balance.
Historically, with a longer period of time, Indonesian financial
account did not always have a surplus. In the period of 1980-
1996 (before the crisis in 1998), the financial account was
recorded to have a surplus at an average of USD4.88 bn per
year. However, during the period of 1997-2003, the financial
account had an average annual deficit of USD5.02 bn since the
Asian financial crisis that began in July 1997 in Thailand, which
ultimately affected the currency, stock and other asset prices
in several Asian countries including Indonesia. This event is
also often referred to as the 1998 monetary crisis in Indonesia.
Furthermore, during the last eight years (2004-2011), the
© Office of Chief Economist

-
30
25
20
15
10
5
(5)
(10)
(15)
(USD bn)
average annual financial account again had a surplus of
USD6.04 bn.
2004 2005 2006 2007 2008 2009 2010 2011
Direct investment Portfolio investment
Other Invesment Financial Account
(USD bn)
Figure 7. Indonesia Balance Of Payments. Over the last eight years (2004-2011), the average
annual financial account again had a surplus of USD6.04 billion. (Source: Bank Indonesia)
…the portfolio
investments
began to improve
as marked by the
initial high capital
inflows into
various
investments…
© Office of Chief Economist Page 11 of 68
© Office of Chief Economist Page 11 of 68
30
25
20
15
10
5
-
(5)
(10)
(15)
The pressure of the debt crisis in Europe in 3Q11 triggered the
high outflows of portfolio investments in the country.
However, the pressure was reduced as the perception of
foreign market participants that returned to be positive in
4Q11. The capital outflows on the balance sheets that occur
when foreign investors sell government stocks and bonds may
occur at any time. It should be noted that the domestic
market is quite sensitive to the flows of funds and ownership
of assets by foreign investors.
The portfolio investments began to improve in 4Q11
compared to 3Q11 as marked by the initial high capital inflows
into various investment instruments in the form of stock,
government securities (SBN) and the issuance of USDdenominated
sharia bonds (sukuk). Global liquidity factors and
high positive perception of investors towards Indonesia’s
macroeconomic stability (as reflected by the relatively strong
economic growth, controlled inflation and exchange rate)

…better ratings to
Indonesia also
become a factor
driving the inflows
of foreign
capital…
© Office of Chief Economist Page 12 of 68
Page 12 of 68
support the increasing inflows of foreign funds mainly to the
domestic investment instruments (portfolio).
According to Asia Bond Monitor reported by Asian
Development Bank, foreign holdings of Emerging East Asian
Local Currency government bonds (as percentage of total
bond holdings) continued to rise in all markets especially in
Indonesia. Foreign holdings in Indonesia reached 30.87% in
October 2011, higher than Malaysia (24.6%), Thailand (10.2%)
and Japan (5.7%).
Portfolio investments are encouraged by the development of
Indonesia’s Sovereign Credit Rating
A number of international rating agencies that puts better
ratings to Indonesia also become a factor driving the inflows
of foreign capital. The government anticipation that is
considered appropriate in the face of global economic turmoil
gets a positive response from the international community.
On April 8, 2011, the Standard & Poor’s increase Indonesia’s
debt rating to be BB+ from BB or one notch below the
investment grade. The new rating is the highest since the
financial crisis of 1997. The increase reflects the improved
financial condition and liquidity of domestic markets, thus
potentially widening the foreign capital inflows to Indonesia in
the coming periods.
On December 15, 2011, Indonesia’s sovereign credit (longterm
debt) was also rated by an international rating agency,
the Fitch Ratings, to be included in the investment grade
category (becoming BBB- from BB+) with a stable outlook. The
Fitch stated that the rise in rating was based on an assessment
that reflected the country’s strong and resilient economic
growth, low and continuously declining public debt ratio, a
strong external liquidity and prudentially executed macro
policy framework.
The steps of the two rating agencies were followed by the
Moody’s, which performed an upgraded rating to the
Indonesia’s sovereign credit rating becoming Baa3 from Ba1
on the last January 18, 2012.
© Office of Chief Economist

Standard & Poor's
Moody's Investor
Service
Fitch Rating
Japan Credit Rating
Rating & Investment
Information
08 Apr 2011 : BB BB+
12 Mar 2010 : BB- BB
26 Jul 2006 : B+ BB-
18 Jan 2012 : Ba1 Baa3
17 Jan 2011 : Ba2 Ba1
16 Sep 2009 : Ba3 Ba2
15 Dec 2011 : BB+ BBB-
25 Jan 2010 : BB BB+
14 Feb 2008 : BB- BB
13 Jul 2010 : BB+ BBB-
07 Jul 2009 : BB BB+
06 Sep 2007 : BB- BB
31 Oct 2007 : BB BB+
12 Oct 2006 : BB- BB
Agency Commentary : Indonesia continuing improvements in the government's
balance sheet and external liquidity, againts a backdrop of a resilient economic
performance and cautious fiscal management
Agency Commentary : A more favorable assessment of Indonesia's economic
strength is underpinned by gains in investment spending, improved prospects for
infrastructure development following key policy reforms and a well-managed
financial system
Agency Commentary : The upgrades reflect the country's strong and resilient
economic growth, low and declining public debt ratios, strengthened external
liquidity and a prudent overall macro policy framework
Agency Commentary : Indonesia's enhanced political and social stability along with
the progress in democratization and decentralization. Sustainable economic growth
outlook underpinned by solid domestic demand and alleviated public debt burden as
a result of prudent fiscal management
Agency Commentary : Indonesia economic structure, which depends substantially
on domestic demand, cushioned the negative impact resulting from the drop in
external demand that was triggered by the global recession
Figure 8. Indonesia’s Upgraded Credit Rating. S&P, Moody’s, Fitch and JCR have all recently
upgraded Indonesia’s credit rating based on Indonesia’s sustained strong economic growth
(Source: Bloomberg)
…our country has
a conducive
investment
climate and
strong
macroeconomic
fundamentals that
have been
successfully built
by the
government in the
last 10 years…
The World Bank also welcomed the rise in Indonesia’s
sovereign debt rating because it believes that our country has
a conducive investment climate and strong macroeconomic
fundamentals that have been successfully built by the
government in the last 10 years. A good macro policy
framework and progress on structural reforms have made
Indonesia generate a positive economic growth. This
development is a momentum in order to encourage long term
investments in infrastructure, regulatory certainty and
transparency that are highly important to create jobs and a
more inclusive growth of Indonesia. The position of
Indonesia’s debt rating nowadays can be in aligned with
Singapore, India, China and Brazil.
The increasing role of foreign investors may increase liquidity
and reduce the cost of capital (increasing investment), indeed;
however, for developing countries like Indonesia it also should
be wary to avoid the high volatility in capital markets. The
inflows of funds into a large scale as the hot money may lead
to withdrawal of funds on a large scale (sudden reversal) and
may cause a severe shock to the domestic capital market
instability.
© Office of Chief Economist Page 13 of 68
© Office of Chief Economist Page 13 of 68

…the share of
foreign ownership
on all traded
investment
instruments was
accounted for
55.5%, higher
than the share of
local ownership of
44.5%...
© Office of Chief Economist Page 14 of 68
Page 14 of 68
Increased Foreign Ownership Mainly in Equity Markets
From year to year, the foreign ownership composition shows
an increase compared to the domestic ownership. Based on
the recent data obtained from Capital Market and Financial
Institution Supervisory Agency (Bapepam-LK), as of January
2012, the share of foreign ownership on all tradable
investment instruments was accounted for 55.5%, higher than
the share of local ownership of 44.5%. Nominally, the types of
effects that are mostly owned by foreign parties include
equity of IDR1,305,600 bn, followed by corporate bonds (IDR)
reaching IDR7,425 bn. The high foreign composition in the
stock market indicates that foreign investors tend to seek
short-term profits by utilizing the domestic market liquidity.
© Office of Chief Economist

Securities (IDR bn) Foreign Ownership Local Ownership Total Ownership
Equity 1,305,600 876,115 2,181,715
Corp. Bond (IDR) 7,425 136,940 144,365
Corp. Bond (USD) 9 711 720
Govt. Bond 570 12,424 12,995
Warrant 1,492 3,013 4,505
MTN (IDR) 1,447 10,083 11,530
MTN (USD) 1,549 3,113 4,663
Mutual Fund (IDR) 379 110 488
Islamic Bond 589 7,217 7,806
Sukuk 10 5,399 5,409
Asset Backed Security 0 1,407 1,407
Total 1,319,070 1,056,533 2,375,603
Equity
40.2%
59.8%
Corp.
Bond
(IDR)
Corp.
Bond
(USD)
94.9% 98.8% 95.6%
Govt.
Bond Warrant
66.9%
33.1%
MTN
(IDR)
87.4%
MTN
(USD)
66.8%
33.2%
Mutual
Fund
(IDR)
22.5%
77.5%
Islamic
Bond Sukuk
92.5%
5.1%
1.3%
4.4%
12.6%
7.5% 0.2%
Foreign Ownership Local Ownership
Asset
Backed
Security Total
99.8% 100.0%
Figure 9. Value and Ownership Composition in Various Instruments between Foreign and Local
Investors by the End of January 2012. Nominally, the types of effects that are mostly owned by
foreign parties include equity of IDR 1,305,600 billion, followed by corporate bonds (IDR)
reaching IDR 7,425 billion. (Source: Bapepam-LK, CEIC)
44.5%
55.5%
Meanwhile, based on the types of security holders, holdings in
the domestic market by foreign investors are dominated by
categories of corporate investors with the ownership of
IDR348,811 bn and financial institutions with the ownership of
IDR249,678 bn. Moreover, local investors mostly comprise of
public companies with the ownership value of IDR533,291 bn,
followed by individual investors with the ownership value of
© Office of Chief Economist Page 15 of 68
© Office of Chief Economist Page 15 of 68

Corporate Individual
533,291
348,811
© Office of Chief Economist Page 16 of 68
Page 16 of 68
174,589
26,552
…the stock market
transactions are
more open and
widely
accessible…
Mutual
Fund
117,661
227,162
IDR174,589 bn. This shows the interest of local retail investors
in investing in the stock market is quite high.
Securities
Company Insurance
14,507
50,897
105,947
11,524
Pension
Fund
Figure 10. Security Ownership by the Types of Security Holders (January 2012 period). Local
investors mostly comprise of public companies with the ownership value of IDR533,291 billion,
followed by individual investors with the ownership value of IDR174,589 billion. (Source:
Bapepam-LK, CEIC)
55,025
65,082
49,906
249,678
3,979
1,505
Foreign Ownership (IDR bn) Local Ownership (IDR bn)
Financial
Institution Foundation Others Total
1,630
337,859
1,056,533
1,319,070
Stock Market Performance: Foreign Purchase Transaction is
still high
Viewing the development in the stock market, the JCI (Jakarta
Composite Index) in Indonesia Stock Exchange also shows a
rapid growth. The number of companies listed on the JCI
increased to 442 companies as of February 2012 from 331
companies in 2002. Market capitalization also shows a
significant increase from about IDR268.4 tn at the end of 2002
to IDR3,755.5 tn at the end of February 2012. This
development shows that the stock market transactions are
more open and widely accessible. People can diversify
investments, not just save their assets into the banking sector.
Simultaneously, the share of foreign investors that is also
increasing in the stock market indicates the growing
integration of Indonesia’s capital markets and money markets
in the globalization era. The increase in Indonesia’s stock
performance prospect rating by Morgan Stanley from
underweight to equal weight in 2011 helped to strengthen
investors’ interest to increase their holdings in the domestic
stock market.
© Office of Chief Economist

..ROE is
estimated at
28.8% of CSPI in
2012, higher than
the ROE in 2011 of
28.4%...
80
70
60
50
40
30
20
10
(%)
In addition, the amount of investment returns in the domestic
stock market also illustrates the improved performance of
listed companies as seen from the increasing market
expectation to Return on Equity (ROE) of JCI to 28.8% in 2012,
higher than the ROE in 2011 of 28.4%. The figure below shows
the trend of the ratio of foreign sales and purchases to total
transactions in the domestic stock market. During the period
of 2004 to January 2012, the ratio of foreign purchases to total
purchasing transactions is still quite high in the range of
52.3%.
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12
Foreign to Total Sales Ratio Foreign to Total Purchases Ratio
Figure 11. Foreign Component of Indonesia Stock Exchange Share Trade. High uncertainty in
the global market makes the domestic stock market fluctuative. During the period of 2004 to
January 2012, the ratio of foreign purchases to total purchasing transactions is still quite high in
the range of 52.3%. (Source: CEIC)
The Development of Government Securities: Utilizing the
Momentum & Managing the Risk
Along with the development in the stock market, the inflows
of foreign funds also come into the Indonesia’s bond market.
Bond prices continue to improve and yield decreases. Low
yield would provide an opportunity for Indonesia to utilize
funds from the capital market with lower interest costs than
those offered by banks.
© Office of Chief Economist Page 17 of 68
© Office of Chief Economist Page 17 of 68

(%)
25
20
15
10
5
0
Figure 12. Development of the Indonesia Government Bond Yield. Along with the optimism on
the domestic economy prospects, increasing foreign investor confidence can be seen from the
improvement in risk perception and declining Indonesia government bond yield. (Source:
Bloomberg)
…the inflow of
foreign funds that
continues to
increase in the
government
security market,
which can pose its
own risks…
© Office of Chief Economist Page 18 of 68
Page 18 of 68
1-year yield
5-year yield
10-year yield
20-year yield
Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12
Ownership of foreign investors in government securities (SBN)
during the period of 2005-2011 is in an increasing trend. This
shows the confidence of foreign investors to government
bonds is increasingly strengthened based on the fiscal policies
and sound and prudent government debt management.
Some factors that make the Indonesian bond market remain
attractive to foreign investors include, among others,
Indonesia’s economic growth that remains solid amid the
economic slowdown in developed countries. Indonesia
managed to overcome the global crisis of 2008-2009 and
increase the credibility in the eyes of foreign investors.
However, a thing to wary is the inflow of foreign funds that
continues to increase in the government security market,
which can pose its own risks.
Until the end of February 2012, foreign ownership reached
30.2% of the total government securities. As a result, the
domestic bond market will be more vulnerable to the global
financial turmoil.
© Office of Chief Economist

800
700
600
500
400
300
200
100
(IDR tn)
0
0
Jan-08 Sep-08 May-09 Jan-10 Sep-10 May-11 Jan-12
Total Tradable Govt. Securities Outstanding - lhs
Foreign Holder of Tradable Govt. Securities Outstanding - lhs
Foreign Holder to Total Tradable Govt. Securities Outstanding Ratio (%) - rhs
Figure 13. Tradable Government Securities Outstanding (SBN) Development. Ownership of
foreign investors in government securities (SBN) during the period of 2005-2011 is in an
increasing trend. This shows the confidence of foreign investors to government bonds is
increasingly strengthened based on the fiscal policies and sound and prudent government debt
management (Source: CEIC)
…in 2012 the
types of
government
securities
instruments have
reached 12
types…
Resilience of the domestic financial market to the global
financial and economic crisis makes foreign investors
increasingly keen to increase the exposure in the government
security market. The increasing foreign purchasing interest is
also supported by macro factors and controllable fiscal risks,
attractive returns and re-achievement of the investment
grade. The current government security market coverage is
also increasingly expanding with the instrument
diversification. In 2002, the government security consists only
of 3 instruments:
1) Fixed Rate Bond (FR),
2) Variable Rate Bond (VR) and
3) Hedge Bond,
But in 2012 the types of government securities instruments
have reached 12 types, namely:
1) Fixed Rate Bond (FR),
2) Variable Rate Bond (VR),
3) International Bond (IB) Bond,
© Office of Chief Economist Page 19 of 68
© Office of Chief Economist Page 19 of 68
(%)
40
35
30
25
20
15
10
5

…Bank Indonesia
issued a policy
package in June
2010 and Policy
Package in
December 2010 in
an effort to
manage the
inflows of foreign
funds…
© Office of Chief Economist Page 20 of 68
Page 20 of 68
4) Retail Bond (ORI),
5) Zero Coupon Bond (ZC),
6) T-Bills (PN),
7) Samurai Bond (RIJPY),
8) Islamic Fixed Rate Bond (IFR),
9) Retail Sukuk (SR),
10) International Sukuk (SNI),
11) Sharia T-Bills (SPN-S) and
12) Project Based Sukuk (PBS)
Foreign purchasing actions mainly occur in short and medium
term government security instruments (including SPN/Surat
Perbendaharaan Negara). Net purchases occurred at the SPN
for USD0.5 bn during 4Q11, causing the share of foreign
ownership of SPN increased to 46.0% from 39.6%.
Bank Indonesia Policies & Foreign Ownership Development
at Bank Indonesia Certificate (SBI)
The outflows of foreign funds should still be concerned about
to keep maintaining monetary stability and financial system.
Therefore, there are some capital flow management policies
made by Bank Indonesia, namely the Policy Package in June
2010 and the Policy Package in December 2010. The first
policy package, relating to the determination of SBI holding
period of at least one month to hold capital traffics to SBI on a
large scale (in-out) (which was later on May 13, 2011
extended to six-month holding period). In addition, the
policies also regulate the issuance of SBI with 9 month period
and 12 month period. With the issuance of the Policy Package
in June 2010, it is expected to strengthen the stability of the
monetary and financial system to support the sustainable
economic growth and at the same time reinforce the
resilience in the face of any economic turmoil possibility.
Meanwhile, further policy package in December 2010 aims to
strengthen the monetary stability, promote the bank
intermediation role, improve the banking resilience and
strengthen the macro-prudential policy. Increased liability of
Statutory Reserve Requirements (GWM/Giro Wajib Minimum)
of foreign exchange gradually is done to strengthen the
management of foreign capital flows by Bank Indonesia
© Office of Chief Economist

June - 2010
Policy
Package
Dec - 2010
Policy
Package
related to efforts to mitigate the risks to the reversal of large
and sudden foreign capital flows.
1. Improvements to the regulation on the Net Open Position
(NOP)
2. Introduction of the minimum one-month holding period
(OMHP) for Bank Indonesia Certificates (SBI)
3. Issuance of 9-month and 12-month Bank Indonesia Certificates
(SBI)
1. Reimposition of the limit on Daily Position of Short-Term Bank
External Borrowings to 30% of bank capital. This policy will
come into force no later than the end of January 2011 with
a 3-month transition period
2. Phased increase in the foreign currency reserve requirement
from 1.0% to 8.0% of foreign currency depositor funds:
Phase I: raise the foreign currency reserve requirement from
1.0% to 5.0%, effective from 1 March 2011
Phase II: raise the foreign currency reserve requirement from
5.0% to 8.0%, effective from 1 June 2011
Figure 14. Bank Indonesia Policy for Management of Capital Flows in 2010. These policies are
expected to strengthen the stability of the monetary and financial system to support the
sustainable economic growth and at the same time strengthen the resilience in the face of the
economic turmoil possibility. (Source: Bank Indonesia)
Continuing the Policy Package in June 2010 and the Policy
Package in December 2010, in 2011 a policy of 6-month
holding period also applied (the extension of the SBI
ownership by Bank Indonesia from originally one month to six
months from May 13, 2011) and removal of SBI auction (for 1,
3 and 6 months). After these policies, the liquidity of the SBI
(Bank Indonesia Certificate) was reduced so that the
placement of foreign funds decreased.
This decrease had a positive impact on the economy, as Bank
Indonesia would like to encourage the inflows of foreign funds
to come into long term investment instruments. Some of the
foreign funds originally placed in the SBI were then
transferred to other financial instruments, especially the
government securities (SBN). The number of mature SBI also
encourages the outflows of funds from the SBI.
© Office of Chief Economist Page 21 of 68
© Office of Chief Economist Page 21 of 68

(IDR tn)
400
350
300
250
200
150
100
50
0
24.1
21.2
16.7
19.4
© Office of Chief Economist Page 22 of 68
Page 22 of 68
12.2
32.3
32.3
33.6
27.4
27.1
20.4
25.7
23.0
15.5
18.0
38.9
37.9
33.3
33.1
Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12
32.0
Total Bank Indonesia Certificate (SBI) Ownership - lhs
Foreign Bank Indonesia Certificate (SBI) Ownership - lhs
Foreign to Total SBI Ownership Ratio (%) - rhs
Figure 15. Foreign Ownership in SBI (Bank Indonesia Certificate). The composition of foreign
ownership of SBI fell to 6.5% in December 2011 compared to 27.4% in November 2011. In
February 2012, the share of foreign ownership of SBI increased again to 8.1%. (Source: Bank
Indonesia, CEIC)
…operation to
transfer the
outflow of funds
caused the
composition of
foreign ownership
of SBI decreased…
27.4
21.6
15.5
6.5
7.2
(%)
50
In the 4Q11, the net outflow of SBI transactions reached
USD3.7 bn, which is higher than the 3Q11 of USD2.4 bn. The
number of outstanding SBI has declined, for which Bank
Indonesia made an operation to transfer the outflow of funds
from the short term SBI (which is the inflow of portfolio that is
more susceptible to changes in the flow direction or turmoil in
the market). This condition caused the composition of foreign
ownership of SBI fell by 6.5% in December 2011 compared to
27.4% in November 2011. By the end of February 2012, the
share of foreign ownership of SBI increased again to 8.1%.
Conclusions
1. In the midst of Europe’s debt crisis and economic turmoil
in the United States, the interest of foreign investors in
Indonesia’s investment instruments remains high, driven
by positive international perceptions to the domestic
economy and attractive returns.
8.1
45
40
35
30
25
20
15
10
© Office of Chief Economist
5
0

2. The Institute of International Finance estimates that
capital inflows to emerging markets will still remain high
compared to the United States, Europe, Japan and other
mature economies. In 2012, capital inflows into Emerging
Asia countries are projected at USD287 bn and in 2013 will
reach USD324 bn.
3. The portfolio investments began to improve in 4Q11
compared to 3Q11 as marked by the initial high capital
inflows into various investment instruments in the form of
stock, government securities (SBN) and the issuance of
USD-denominated sharia bonds (sukuk). Global liquidity
factors and high positive perception of investors towards
Indonesia’s macroeconomic stability support the
increasing inflows of foreign funds mainly to the domestic
investment instruments (portfolio).
4. As of January 2012, the share of foreign ownership on all
tradable investment instruments was accounted for
55.5%, higher than the share of local ownership of 44.5%.
Nominally, the types of effects that are mostly owned by
foreign parties include equity of IDR1,305,600 bn,
followed by corporate bonds (IDR) reaching IDR7,425 bn.
5. Ownership of foreign investors in government securities
(SBN) during the period of 2005-2011 is in an increasing
trend. Indonesia managed to overcome the global crisis of
2008-2009 and increase the credibility in the eyes of
foreign investors. Until the end of January 2012, foreign
ownership reached 32.1% of the total government
securities.
6. Operation of Bank Indonesia to transfer the outflow of
funds from the short term SBI caused the composition of
foreign ownership of SBI fell by 6.5% in December 2011
compared to 27.4% in November 2011. By the end of
February 2012, the share of foreign ownership of SBI
increased again to 8.1%.
© Office of Chief Economist Page 23 of 68
© Office of Chief Economist Page 23 of 68

The Development of Commercial Banking in Indonesia
Nurul Yuniataqwa Karunia (nurul.karunia@bankmandiri.co.id)
Development of Indonesia’s banking system during 2011 still
showed the maintained stability with the improved
intermediary function, despite of amidst the financial market
turmoil due to the influence of the global economic downturn.
The solid domestic banking condition was still reflected in the
high Capital Adequacy Ratio (CAR), which was far above the
minimum of 8%, reached 16.1% by December 2011, although
the level of CAR decreased when compared to 2010, which
reached 17.2%. Ratio of gross Non-Performing Loan (NPL) of
commercial banking in Indonesia was also still good enough,
equal to 2.17% by December 2011 or under the maximum
limit of the provisions of Bank Indonesia, which was 5%. The
commercial banking NPL rate in 2011 was better than the NPL
by December 2010, which amounted to 2.67%. Furthermore,
the Loan to Deposit Ratio (LDR) of commercial banks also
increased to 78.8% in 2011 from 75.2% in 2010.
Of the growth of Third Party Funds (TPFs) and lending, the
national banking industry has also increased in 2011. TPFs
continued to be accelerated in line with the loan growth. By
the end of 2011, TPFs grew 19.1% (YoY) to IDR2.785 tn. This
figure was higher than the growth at the end of 2010, which
amounted to 18.5% (YoY) and it was also the highest growth
rate in the banking history of Indonesia. Meanwhile, loan to
finance economic activity continued to increase, as reflected
in the loan growth reaching 24.6% (YoY) by December 2011 or
at IDR2,200 tn. The investment loan came with the highest
growth, by 33.2% (YoY), followed by growth in consumer loan
by 24.2% (YoY) and working capital loans by 21.4% (YoY).
Banking development was also evident from the improvement
in the ratio of national bank loans to GDP reaching 29.7% in
2011 from the previous 27.5% in 2010. This increasing ratio
indicates that the intermediary function is getting better. By
region, commercial bank also shows better performance in all
areas, which are divided into regions of Sumatra, Java,
Kalimantan, Sulawesi, Bali-Nusa Tenggara, and Maluku-Papua.
© Office of Chief Economist Page 24 of 68
Page 24 of 68
© Office of Chief Economist

Development of the
banking industry is
highly affected by the
economic development
of a region
12%
The Role of Regions in Indonesia’s Banking Development
The development of Indonesia’s banking industry
performance mostly is still concentrated in Java and Sumatra.
This corresponds to the economic activities and structures
that are also centralized in the areas of Java and Sumatra.
Both regions dominate the contribution of Gross Domestic
Product (GDP) in 2011 nationwide, respectively for 57.7%, and
23.5%.
In this regard, the Ministry of Industry notes the spread of the
concentration of industrial centers in Indonesia by 75% is in
the areas of Java. Distribution of industries outside of Java was
far below the percentage of Java, such as Sumatra by 18.37%,
Kalimantan by 3.41%, Sulawesi by 2.16%, Bali-Nusa Tenggara
by 0.79% and Maluku-Papua by 0.3%. Thus, the government
needs to accelerate industrial development outside of Java in
order to develop the industry in regions.
When compared to 2007, the concentration of industry in
Indonesia has not much changed. With the economic and
industrial structures, banks are expected to take a role in
advancing areas outside of Java and Sumatra. One way is to
have an entrepreneurship program in regions to drive the
local economy. In 2010, entrepreneurs in Indonesia amounted
to 440,000 or 0.18% of the total population. Meanwhile,
developed countries like the U.S. reached 11.5% and
Singapore 7.2%. The government states that Indonesia ideally
requires 2% entrepreneurs of the total population.
TPFs Loan
5% 3% 2% 2%
76%
Jawa Sumatera Kalimantan
Sulawesi Bali NT Maluku Papua
© Office of Chief Economist Page 25 of 68
© Office of Chief Economist Page 25 of 68
13%
4% 4% 2%
1%
76%
Jawa Sumatera Kalimantan
Sulawesi Bali NT Maluku Papua
Figure 16. Composition of the Banking Role by Region, 2011. The role of banks in the areas of Java is
still dominating the banking industry in Indonesia. Collection of TPFs and lending amount more than
70% are still done in Java. (Source: Bank Indonesia)

The high performance
of commercial banks
can also be seen from
the high ratio of loan
to GRDP
© Office of Chief Economist Page 26 of 68
Page 26 of 68
Loan Ratio of Commercial Banks to GRDP
Performance of commercial banks in each province can also
be seen from the ratio of loan to the economy or loan to Gross
Regional Domestic Product (GRDP). The greater ratio the
higher the commercial bank’s role of intermediation to the
economy of the province. This is also related to the economic
development in the province.
In 2010, Jakarta has succeeded to have the highest ratio of
lending to GDP compared to other provinces. This ratio also
indicates that the role of commercial banks in Jakarta is still
dominating in the economic development in Indonesia.
Commercial banking in this provinces is able to achieve the
ratio of loan to GRDP by 100.2%. Meanwhile, some general
banking in Indonesia had a low ratio of loan to GDRP.
However, it is estimated that Jakarta’s lending is not only from
the province but also from other provinces such as the
distribution in West Java because it is recorded to have a low
ratio while it is the basis of several major industries in
Indonesia.
10 Provinces with the Highest and Lowest of Loan to GRDP Ratio, 2010
The Highest Loan to GDRP The Lowest Loan to GDRP
No. Province
Ratio of
Loan/GRDP
(%) No. Province
Ratio of
Loan/GRDP
(%)
1. DKI Jakarta 100.2 1. West Nusa Tenggara 19.3
2. Gorontalo 75.7 2. West Java 18.1
3. Maluku 49.3 3. Lampung 17.7
4. North Maluku 41.6 4. Bangka Belitung 14.5
5. Riau Islands 38.5 5. West Papua 13.5
6. Bali 36.5 6. East Kalimantan 10.1
7. North Sulawesi 35.4 7. Papua 9.4
8. South Sulawesi 35.4 8. South Sumatera 9.2
9. West Sulawesi 33.1 9. Riau 8.6
10. Bengkulu 31.9 10. Southeast Sulawesi 6.5
Figure 17. Loan to GRDP Ratio, 2010. The role of commercial banks in Jakarta areas is still
dominating the economic development in Indonesia. Commercial banking in this provinces is able to
achieve the ratio of loan to GRDP by 100.2%. Meanwhile, Commercial Banking in Southeast Sulawesi
recorded the lowest ratio at 6.5% level. (Source: Bank Indonesia, Central Bureau of Statistics)
© Office of Chief Economist

Jakarta has become a
province that is able to
collect the largest TPFs
with a share of 51% of
total national TPFs
1,417
DKI Jakarta
41%
Gorontalo
Factsheet of Commercial Banking by Region in Indonesia
Commercial Banks TPFs
In 2011, Jakarta has become a province that is able to collect
the largest TPFs with a share of 51% of total national TPFs.
East Java becomes the province with the second largest TPFs
collection with a share of 9% of total national TPFs. In terms of
TPFs, North Sumatera is able to increase the collection of TPFs
from the top five ranking in 2005 to the top four ranking in
2011 by shifting the position of Central Java.
10 Provinces with the Highest TPF Distribution in Indonesia, 2011
(IDR tn)
251 219
Jawa Timur
Malut
Jawa Barat
Kalteng
127 125
Sumatera
Utara
Kaltim
Jawa
Tengah
Bengkulu
70 67 51 46 46
© Office of Chief Economist Page 27 of 68
© Office of Chief Economist Page 27 of 68
Banten
Kalsel
Kalimantan
Timur
NTB
Kepulauan
Riau
Kepri
Sulawesi
Selatan
10 Provinces with the Highest TPF Growth in Indonesia, 2011
(%)
37%
34% 34%
32% 31%
28%
26%
25% 24%
Figure 18. Share and Growth of TPFs in Indonesia, 2011. The largest TPFs are in Jakarta, reaching
IDR1,147 tn. North Sumatra managed to increase the collection of TPFs from the fifth rank in 2005 to
the fourth rank in 2011. Meanwhile, there are six provinces that are able to grow the TPFs more than
30% in 2011. (Source: Bank Indonesia)
NTT
Bali
Banten
National
19.1%

A province that has the
highest loan growth in
2011 is North Maluku,
which reached 35%
(YoY).
© Office of Chief Economist Page 28 of 68
Page 28 of 68
1,080
DKI
Jakarta
Commercial Banks Lending
The highest lending in Indonesia is also in Jakarta of IDR1,080
tn, followed by East Java of IDR190 tn. Both provinces have a
share of 57.7% of total loans in Indonesia in 2011. In terms of
loan, South Sumatra could shift the Riau lending rank from the
top seven ranking in 2005 to the top six ranking in 2011.
Meanwhile, the Riau lending rank fell from the sixth position
in 2005 to the ninth position in 2011. In the meantime, a
province that has the highest loan growth in 2011 is North
Maluku, which reached 35% (YoY).
35% 34% 34%
Malut
190 173
Jatim
10 Provinces with the Highest Lending in Indonesia, 2011
(IDR tn)
Gorontalo
Jabar
Babel
121 106
Jateng
31% 30% 30% 29% 29% 29% 29%
Papua
Sumut
Kalteng
53 52 42 36 35
10 Provinces with the Highest Loan Growth in Indonesia, 2011
(%)
Sumsel
Jambi
Banten
NTT
Kaltim
Kaltim
Riau
Bengkulu
Kepri
Papua
Barat
National
24.6%
Figure 19. Share and Growth of Lending in Indonesia, 2011. The highest lending is also in Jakarta,
reaching IDR 1,080 tn. South Sumatera managed to increase the loan Rank from the seventh position
in 2005 to the sixth position in 2011. Meanwhile, there are six provinces that are able to have loan
growth of more than 30% in 2011. (Source: Bank Indonesia)
© Office of Chief Economist

In 2011, the highest
loan based on the use
in Indonesia is used for
working capital loans
which reaching 48.6%
of total lending
disbursed by
commercial banks
Commercial Banks Lending Based on Type of Use
In 2011, the highest loan based on the use in Indonesia is used
for working capital loans which reaching 48.6% of total lending
disbursed by commercial banks. If seen by the largest
percentage in the lending, working capital loans in Java get the
highest share, reaching 55.5%. Meanwhile, investment and
consumption loans gained the highest share compared to
other regions, respectively in Kalimantan (22.9%) and Maluku-
Papua (53.1%).
The development of lending based on the type of use in
Indonesia experienced the share transfer. In 2011, the share
of working capital lending of 48.6% decreased in share
compared to 2007, reaching more than 50% or 53% of total
loans provided. The share of consumer loans in 2011 also
declined from 30.3% in 2007 to 28.4% in 2011. Meanwhile, the
share of investment loans increased from 18.5% in 2007 to
21.1% in 2011.
When viewed from the loan growth by the type of use per
region in Indonesia, in 2011 investment loans had the highest
growth in Maluku-Papua, amounting to 63.1% (YoY). Working
capital loans and consumer loans in the regions also
experienced the highest growth, reaching 23.5% (YoY) and
28.1% (YoY), respectively.
Loan of Commercial Banks Based on Type of Use By Region, 2011 (IDR bn)
Area Working Capital Investment Consumption
Java 835,283 351,445 444,523
Sumatera 127,205 58,454 104,761
Kalimantan 31,763 27,352 34,721
Sulawesi 35,598 14,820 45,265
Bali-NT 18,165 7,465 26,469
Maluku-Papua 9,316 2,604 10,949
Others 11,345 2,123 464
Total 1,068,676 464,262 667,155
Figure 20. Commercial Banks Lending Based on Type of Use in Indonesia, 2011. Lending based on
the use in Indonesia is most widely distributed for working capital loans. However, the share of
working capital loans was 48.6% in 2011, which decreased compared to 2007 reaching 53% of total
loans distributed. (Source: Bank Indonesia)
© Office of Chief Economist Page 29 of 68
© Office of Chief Economist Page 29 of 68

Area
Commercial banks
lending by economic
sector in 2011 were
mostly given to the
trade sector, reaching
18.4% of total lending.
© Office of Chief Economist Page 30 of 68
Page 30 of 68
Agri
culture
Commercial Banks Lending by Economic Sector
Commercial banks lending by economic sector in 2011 were
mostly given to the trade sector, reaching 18.4% of total
lending. The share of loan by economic sector in 2011 also
experienced a change in the lending than in 2007. There are
four economic sectors that have increased in the loan share,
including the Mining Sector (from 2.6% to 4.0%), Utility Sector
(from 0.8% to 2.1%), Transport and Communication Sector
(from 3.7% to 4.3%), and Social Service Sector (from 1.4% to
2.6%). Meanwhile, some economic sectors also experienced a
decline in the loan share, such as Manufacturing Sector (from
20.5% to 15.7%), Trade Sector (from 21.6% to 18.4%),
Agriculture Sector (from 5.7% to 5.2%), Construction Sector
(from 4.4% to 3.4%), and Business Service Sector (from 11% to
10.2%).
From loan growth by economic sector in each region, several
regions in Indonesia experienced loan growth of over 100% in
2011. Some fast-growing economic sectors in Sulawesi include
the loans of Mining Sector (115.2%, YoY), Utility Sector
(120.2%, YoY), and Transport and Communication Sector
(113.7%, YoY). Other regions that experienced significant
growth in sectoral loan are Maluku-Papua that experienced
growth in Business Services Sector of 107.7% (YoY) in 2011.
Loan of Commercial Banks Based on Sectors By Region, 2011 (IDR bn)
Mining Manufa
cturing
Utility Const. Trade
Trans.
and
comm.
Business
Service
© Office of Chief Economist
Social
Service
Java 63,301 79,496 297,159 43,330 54,284 268,510 80,019 196,688 42,712
Sumatera 35,353 2,246 36,061 1,470 9,569 66,715 6,799 11,661 5,384
Kalimantan 11,392 3,110 3,355 433 4,580 18,337 5,186 7,326 3,048
Sulawesi 2,062 482 4,174 196 3,381 27,537 1,968 4,080 2,447
Bali-NT 839 116 1,284 52 1,386 15,438 327 2,003 1,797
Maluku-Papua 228 51 511 33 1,873 6,033 238 646 1,038
Others 1,546 2,277 2,051 329 323 2,871 672 1,744 1,552
Total 114,721 87,778 344,595 45,843 75,396 405,441 95,209 224,148 57,978
Figure 21. Loan of Commercial Banks by Economic Sector in Indonesia, 2011. Lending of Commercial
Banks by Economic Sector in 2011 was mostly given to the trade sector, reaching 18.4% of total loans
or for IDR 405 tn. (Source: Bank Indonesia)

The high lending in
several regions in
Indonesia is also in line
with the high prices of
some commodities in
international markets
350
300
250
200
150
100
50
0
Correlation of Commercial Banks Loan and Regional Economy
Banking lending in Indonesia has a correlation with the major
natural resources and regional potentials in Indonesia. The
high lending in several regions in Indonesia is also in line with
the high prices of some commodities in international markets.
In this regard, lending in Sumatra and Kalimantan is fairly
affected by the world commodity price movements.
In Sumatra, lending is heavily influenced by plantation
commodity price movements, such as Crude Palm Oil (CPO)
and Rubber. In 2007 and 2008, along with the increase in CPO
and rubber prices in international markets, the lending rose
respectively to 28.8% (YoY) and 27.1% (YoY) (Figure 6). The
loan growth has increased significantly compared to 2006,
which amounted to 20.2% (YoY) only.
Meanwhile, in Kalimantan, lending is highly related to global
coal price. When the coal price rose to the highest position at
USD133.5 / metric ton in 2008, lending in the year had
increased to 31.3% (YoY) (Figure 8). Thus, further loan growth
in some areas of Indonesia is in line with the world’s
forecasted commodity prices becoming the main natural
resources of each region.
COAL, USD/metric ton (LHS)
Rubber, USD cents/pound(LHS)
CPO, USD/ton (RHS)
Jan-02 Sep-03 May-05 Jan-07 Sep-08 May-10 Jan-12
Figure 22. World Commodity Prices. Lending in some areas of Indonesia is strongly correlated with
world commodity prices as a result of the major natural resources in the region. For example, lending
in Sumatra is influenced by the development of CPO and rubber prices. Meanwhile, the lending in
Kalimantan region is highly influenced by the world’s coal prices. (Source: Bloomberg)
© Office of Chief Economist Page 31 of 68
© Office of Chief Economist Page 31 of 68
1500
1300
1100
900
700
500
300

The TPF and loan
growth in Sumatra in
2011 increased
respectively to 19%
(YoY) and 24% (YoY)
© Office of Chief Economist Page 32 of 68
Page 32 of 68
Commercial Banking Development by Region
Sumatra
Banking performance of banks in Sumatra shows a positive
development. The TPF and loan growth in Sumatra in 2011
increased respectively to 19% (YoY) and 24% (YoY) compared
to 2010, which grew 16% (YoY) and 23% (YoY). Lower growth
in TPFs compared to loans caused the Loan-to-Deposit Ratio
(LDR) of banking in Sumatra rose slow from 81% in 2010 to
85% in 2011. This condition indicates that the fulfillment of
lending by banks in Sumatra area is highly done by the flow of
funds from banks or other financial institutions outside the
banking operations in Sumatra.
If seen by the provinces in Sumatra, North Sumatra became
the largest lender and the largest TPF collector, which reached
IDR127 tn and IDR106 tn, respectively, by 2011. When viewed
from the growth of TPFs and loans, a province that
experienced the highest increase in TPF growth in 2011 was
Bengkulu by 32% (YoY), to IDR6.2 tn. Meanwhile, a province in
Sumatra that had the highest lending growth was Bangka
Belitung by 33.6% (YoY), to IDR5 tn.
Indicators 2006 2007 2008 2009 2010 2011
TPF (IDR bn) 179,233 205,921 240,512 250,615 289,559 343,544
TPF Growth (%) 29 15 17 4 16 19
Loan (IDR bn) 101,290 130,509 165,884 191,272 234,860 290,421
Loan Growth (%) 20 29 27 15 23 24
LDR (%) 57 63 69 76 81 85
NPL Nominal (IDR bn) 6,015 5,206 3,990 5,623 6,443 6,476
NPL (%) 5.9 4.0 2.4 2.9 2.7 2.2
Figure 23. Commercial Banking Indicators in Sumatra. Lending and TPFs growth in Sumatra is in line
with the national territory. Meanwhile, the commercial banking LDR in 2011 reached 85% or higher
than LDR level in 2011, amounting to 81%. (Source: Bank Indonesia)
© Office of Chief Economist

Development of
commercial bank
performance in Java
from the lending side
had increased by 24%
(YoY) to IDR1,631 tn in
2011
Java
Development of commercial bank performance in Java from
the lending side had increased by 24% (YoY) to IDR1,631 tn in
2011, an increase compared with the annual growth in 2010.
The increased lending was followed by an increase in loan
quality, which could be determined from the percentage of
Non-Performing Loan (NPL) in 2011 that decreased to 2.2%
from 2.5% in 2010. However, the TPF collection growth slowed
compared to TPF collection growth in 2010, which reached
19% (YoY) to 18% (YoY) or at IDR2,109 tn in 2011. LDR of
commercial banks in Java increased significantly in 2011, to
77% compared to 2010 amounting to 74%.
From the performance of commercial banks by province,
Jakarta was a province that is able to collect the highest TPFs
and make the highest lending compared to other provinces in
Indonesia. In 2011, Jakarta was able to collect IDR1.417 tn
TPFs, up 18.3% (YoY) and the loans that were successfully
disbursed were IDR1.080 tn, up 25% (YoY). However, Banten
was a province in Java that was capable of experiencing the
highest loan growth of 25.7% (YoY), to IDR52 tn and also
became a province with the highest growth in the TPF
collection in Java, amounting to 24.2% (YoY) to IDR70 tn in
2011.
Indicators 2006 2007 2008 2009 2010 2011
TPF (IDR bn) 957,127 1,128,520 1,306,436 1,493,354 1,784,020 2,108,993
TPF Growth (%) 10 18 16 14 19 18
Loan (IDR bn) 605,901 762,106 998,545 1,075,963 1,311,267 1,631,253
Loan Growth (%) 13 26 31 8 22 24
LDR (%) 63 68 76 72 74 77
NPL Nominal (IDR bn) 37,152 30,456 34,417 37,515 33,385 35,805
NPL (%) 6.1 4.0 3.4 3.5 2.5 2.2
Figure 24. Indicators of Commercial Banking in Java Region. Performance of banks in Java from the
lending side increased by 24% (YoY), becoming IDR1.631 tn in 2011. The increased lending was
followed by a decline in NPLs to 2.2% in 2011 from 2.5% in 2010. (Source: Bank Indonesia)
© Office of Chief Economist Page 33 of 68
© Office of Chief Economist Page 33 of 68

TPF collection and loan
growth in Kalimantan
region in 2011 were
higher than the
national growth
© Office of Chief Economist Page 34 of 68
Page 34 of 68
Kalimantan
Commercial banking activities in Kalimantan in 2011 showed a
fairly good progress. TPF and loan growth in Kalimantan in
2011 were higher than the national growth. TPF grew by 30%
(YoY) to IDR135 tn, while loan growth reached 27% (YoY),
which increased to IDR94 tn. TPF collection growth in
Kalimantan in the Compound Annual Growth Rate (CAGR)
over the period of 2005-2011 managed to have the fastest
growth than other regions in Indonesia because it managed to
reach 19.7%. Improved performance of banking was also
followed the NPL improvement in 2011 fell to 1.6%.
The highest fund collection and lending by province in
Kalimantan was in East Kalimantan, which reached IDR66 tn
and IDR42 tn, respectively. Meanwhile, the fastest TPF growth
in 2011 by province was experienced by Central Kalimantan by
34.1% (YoY), to IDR12 tn. Similarly, in terms of lending growth,
the highest growth in 2011 was experienced by Central
Kalimantan by 30% (YoY), to IDR11 tn.
Indicators 2006 2007 2008 2009 2010 2011
TPF (IDR bn) 59,712 68,609 82,023 88,586 103,443 134,966
TPF Growth (%) 30 15 20 8 17 30
Loan (IDR bn) 27,381 34,874 45,778 55,871 73,818 93,838
Loan Growth (%) 15 27 31 22 32 27
LDR (%) 46 51 56 63 71 70
NPL Nominal (IDR bn) 1,147 1,119 1,132 1,123 1,356 1,523
NPL (%) 4.2 3.2 2.5 2.0 1.8 1.6
Figure 25. Indicators of Commercial Banking in Kalimantan. TPF and loan growth in Kalimantan in
2011 were higher than the national growth. The TPF collection grew by 30% (YoY), to IDR135 tn,
while the lending growth reached 27% (YoY), to IDR 94 tn. The improved performance of banks was
also followed by the NPL improvement in 2011, which fell to 1.6%. (Source: Bank Indonesia)
Sulawesi recorded the
highest LDR and NPL
rates compared to
other regions in
Indonesia
Sulawesi
Development of commercial banking in Sulawesi in 2011 was
still improved. It can be seen in lending and TPF growth above
20%. The high lending rate was also seen from the Loan to
© Office of Chief Economist

Deposit Ratio (LDR), which reached 116% or the highest rate
compared to LDR of other regions in Indonesia.
However, for the future, commercial banks in Sulawesi need
to be more careful to approve lending because of the level of
Non Performing Loan (NPL) is recorded at a relatively highest
level compared to other regions in Indonesia. The level of NPL
in Sulawesi reached 2.7%. Although it is the higest level
compare to other regions in Indonesia, the NPL level was still
below the NPL maximum limit stipulated by Bank Indonesia,
i.e. at a maximum of 5%.
When viewed by province, South Sulawesi is a province that is
able to make the highest lending and collect the highest TPFs
in Sulawesi, which amounted to IDR53 tn and IDR46 tn.
Meanwhile, a province that managed to experience the
highest loan and TPF growth was Gorontalo. In 2011, the
Gorontalo loans grew by 33.8% (YoY), to IDR8.2 tn, while the
TPFs grew by 41% (YoY), to IDR8.4 tn.
Indicators 2006 2007 2008 2009 2010 2011
TPF (IDR bn) 37,067 43,792 51,522 59,210 66,837 82,541
TPF Growth (%) 29 18 18 15 13 23
Loan (IDR bn) 29,574 38,024 49,735 59,751 75,708 95,682
Loan Growth (%) 20 29 31 20 27 26
LDR (%) 80 87 97 101 113 116
NPL Nominal (IDR bn) 2,447 2,494 1,478 2,022 2,323 2,600
NPL (%) 8.3 6.6 3.0 3.4 3.1 2.7
Figure 26. Indicators of Commercial Banking Sulawesi. Performance of commercial banks in
Sulawesi was improved when seen from the TPFs and loans that grew over 20%. However, the NPL
level in Sulawesi region was the highest compared to other regions in Indonesia. In 2011, NPL in
Sulawesi reached 2.7%. (Source: Bank Indonesia)
The development of
commercial banking
from TPF and loan
sides in Bali in 2011
was still superior
compared to NTT and
NTB
Bali - Nusa Tenggara (NT)
The development of commercial banking from TPF and loan
sides in Bali in 2011 was still superior compared to West Nusa
Tenggara (NTB) and East Nusa Tenggara (NTT). TPFs and loans
in Bali in 2011 reached IDR45.6 tn and IDR29.8 tn,
respectively. However, TPFs in NTB grew higher than in Bali
© Office of Chief Economist Page 35 of 68
© Office of Chief Economist Page 35 of 68

© Office of Chief Economist Page 36 of 68
Page 36 of 68
and NTT, amounting to 28.3% (YoY), to IDR11 tn in 2011.
Meanwhile, NTT had the highest loan growth compared to Bali
and NTB. NTT loans grew 29.3% (YoY), to IDR10 tn in 2011.
When viewed from bank lending by the type of use, Middle
and Eastern regions of Indonesia primarily distributed them
for consumer loans. In this case, consumer lending in Bali-NT
in 2011 was relatively better than other regions in Indonesia.
It can be seen from the NPL percentage of consumer loans in
Bali-NT, which was the lowest compared to any other regions,
at only 0.7%.
Furthermore, Bali-NT offers the highest loan to the Trade,
Hotel and Restaurant Sectors than any other regions in
Indonesia. This is triggered by the rapid retail trade business in
Bali, especially in Denpasar City and Tabanan District, which is
affected by the development of new business areas and
residential areas. It is also supported by the high tourism
activities in Bali and the high growth in the construction of
accommodation facilities, especially villa, as well as the
business of food and beverage sectors.
Indicators 2006 2007 2008 2009 2010 2011
TPF (IDR bn) 30,099 36,220 42,892 48,467 56,529 69,231
TPF Growth (%) 16 20 18 13 17 22
Loan (IDR bn) 17,479 21,541 27,678 33,433 41,709 52,099
Loan Growth (%) 15 23 28 21 25 25
LDR (%) 58 59 65 69 74 75
NPL Nominal (IDR bn) 595 613 461 831 795 811
NPL (%) 3.4 2.8 1.7 2.5 1.9 1.6
Figure 27. Indicators of Commercial Banks in Bali-Nusa Tenggara. Development of commercial
banking in this region was strongly influenced by the economic development in Bali. Meanwhile, the
NPL rate of comercial banks in Bali-NT was relatively good and under 2%. (Source: Bank Indonesia)
Credit growth in
Maluku-Papua was at
the highest level of
29% (YoY)
Maluku-Papua
Development of commercial banking in Maluku-Papua in 2011
was very fast compared to other regions in Indonesia. This was
evident from the high loan growth in the region, reaching 29%
(YoY), which is highest growth compared to other regions. In
© Office of Chief Economist

the CAGR (2005-2011 period), the loan growth of this region
was also at the highest level, reaching 35%. However, the
nominal amount of loans and TPFs in this region was still the
smallest compared to other regions, amounting to IDR23 tn
and IDR42 tn.
Lending by sector in this region was primarily for the Trade,
Hotel and Restaurant Sectors, amounting to 26.4% of total
lending. Meanwhile, the highest percentage of loans per
sector compared to other regions was loans to the
Construction Sector by 8% of total lending in 2011.
In line with this, the TPF growth was also more than 20% (YoY)
in 2011, reaching 24% (YoY), to IDR42 tn. However, the LDR
level of Maluku-Papua was the lowest compared to other
areas, i.e. only 55%. The LDR figure has increased significantly
compared to 2006, which was only 26%. With the low LDR
level, the number of NPL in the region was also at the smallest
level, i.e. at 1.5% level.
Indicators 2006 2007 2008 2009 2010 2011
TPF (IDR bn) 21,273 24,771 26,782 29,452 33,741 41,801
TPF Growth (%) 62 16 8 10 15 24
Loan (IDR bn) 5,132 6,996 10,105 13,395 17,687 22,870
Loan Growth (%) 36 36 44 33 32 29
LDR (%) 24 28 38 45 52 55
NPL Nominal (IDR bn) 105 136 188 235 264 353
NPL (%) 2.0 1.9 1.9 1.8 1.5 1.5
Figure 28. Indicators of Commercial Banking in Maluku-Papua. In nominal, the amount of loans and
TPFs in Maluku-Papua was still at the smallest level compared to other regions, amounting to IDR23
tn and IDR42 tn. LDR and NPL figures of the region were also at the smallest level, i.e. 55% and 1.5%,
respectively, in 2011. (Source: Bank Indonesia)
Conclusion
From the discussion related to the development on the
banking industry per region in Indonesia, conclusions can be
drawn, among others:
© Office of Chief Economist Page 37 of 68
© Office of Chief Economist Page 37 of 68

Page 38 of 68
1. Development of Indonesia’s banking system remained
strong throughout the year 2011, despite of amidst the
financial market turmoil due to the influence of the global
economic downturn. It can be seen from the commercial
bank loan growth in Indonesia regions, which was more
than 20% (YoY) with a low NPL rate (2.17%).
2. The increase in the banking industry was also evident from
the improved loan to GDP ratio of national banks. If
related to the role of banks in each province, the higher
ratio of loan to GDRP could also show a rise for the better
bank intermediary function. However, lending in a
province is expected not only from the province itself, but
also from the lending in other provinces.
3. Concentration of the banking industry until 2011 was still
in Java and Sumatra. Lending and TPF collection about 75%
were in Java. Banks are expected to take part in other
regions by improving entrepreneurship programs in
regions in order to improve the economy, especially in
eastern Indonesia.
4. Banking lending in Indonesia has a correlation with the
major natural resources and regional potentials in
Indonesia. The lending in several regions in Indonesia is
also in line with the prices volatility of some commodities
in international markets.
5. Lending based on type of use in Indonesia was most widely
distributed for working capital loans. However, the share
of working capital loans was 48.6% in 2011, which
decreased when compared to 2007, reaching 53% of total
loans provided.
6. The highest share of commercial bank lending by
economic sector in 2011 was given to the Trade Sector of
IDR405 tn. However, the share of loans to commercial
sector decreased to 18.4% in 2011 from 21.6% in 2007 of
the total loans.
7. In Sumatra, North Sumatra became the largest lender and
the largest TPF collector, which respectively reached
IDR127 tn (36.5%) and IDR106 tn (37%) in 2011.
8. In Java, Jakarta became the largest lender and the largest
TPF collector, which respectively reached IDR1,080 tn
(66.2%) and IDR1,417 tn (67.2%) in 2011.
9. In Kalimantan, East Kalimantan became the largest lender
and TPF collector, which respectively reached IDR41.9 tn
(44.7%) and IDR66.9 tn (49.6%) in 2011.
© Office of Chief Economist Page 38 of 68
© Office of Chief Economist

10. In Sulawesi, South Sulawesi became the largest lender and
TPF collector, which respectively reached IDR53.0 tn
(55.5%) and IDR46.2 tn (56%) in 2011.
11. In Bali-Nusa Tenggara, Bali became the largest lender and
TPF collector, which respectively reached IDR29.7 tn
(57.2%) and IDR45, 6 tn (65.9%) in 2011.
12. In Maluku-Papua, Papua became the largest lender and
TPF collector, which respectively reached IDR11 tn (48.2%)
and IDR23.9 tn (57.3%) in 2011.
© Office of Chief Economist Page 39 of 68
© Office of Chief Economist Page 39 of 68

US EPA Statement About CPO “Failure”: Should We Worry?
M. Ajie Maulendra (ajie.maulendra@bankmandiri.co.id)
EPA studies show
that biodiesel
produced from
palm oil cannot
reduce greenhouse
gas emissions in a
minimum amount
of 20% as required
in the U.S.
During the last 10
years, Indonesia’s
CPO export market
share to the United
States never
exceeded 1%.
EPA announcement
In early 2012, the national oil palm industry had another less
pleasant news to hear regarding impact of CPO (Crude Palm
Oil) to environment. Although the national oil palm sector was
several times battered by bad news related to environment,
this case was a bit different because it came from the land of
Uncle Sam. An agency in the United States (U.S.) engaged in
the environment sector, namely EPA (Environmental
Protection Agency) had issued an announcement related to its
studies that biodiesel and renewable diesel produced from
crude palm oil do not meet the environmentally friendly
requirements. The EPA studies show that biodiesel produced
from crude palm oil cannot reduce greenhouse gas emissions
in a minimum amount of 20% as required in the U.S.
These study findings have not become a trade regulation of
the U.S. government and are still open in receiving any input
from various parties, indeed. Even when the EPA study
findings are approved as a regulation that limits the crude
palm oil imports from Indonesia, we really do not need to
worry. The U.S. is not an important market for Indonesia’s
CPO exports, because during the last 10 years, Indonesia’s
CPO export market share to the United States never exceeded
1%. Compare to the CPO export market shares to India,
amounting to 30%, to China amounting to 15% and to
Netherlands amounting to 8%. These three countries have
long been noted as main destinations of Indonesia’s CPO
exports.
In addition, if the findings of such studies are passed as a trade
regulation of Indonesia’s CPO imports to the United States, all
of imports will not be completely stopped because the U.S.
still requires Indonesia’s CPO for food and household needs,
because the EPA’s studies are limited to crude palm oil uses
for biodiesel and fuel alternative energy.
© Office of Chief Economist Page 40 of 68
Page 40 of 68
© Office of Chief Economist

10 16 14 27
Reasons behind the action
Afterwards, what is the United States’ background in issuing
the announcement regarding the environmental impact of
crude palm oil? The author assumes two things, namely it is
purely due to environmental factors or is as a form of a
regulation on the trade protection from the U.S. government.
We begin with the environmentally friendly issues through a
trend of biodiesel uses in the U.S. Biodiesel is seen as one
alternative energy that is more environmentally friendly than
petroleum so that modern countries begin to campaign
biodiesel uses to reduce pollution and negative impacts to the
environment. The U.S. itself through EPA has its own
measures concerning biodiesel that can be used for fuel,
which can reduce greenhouse gas emissions at a minimum of
20%. When the studies conducted by EPA found that biodiesel
produced from crude palm oil has failed to meet its
requirements, CPO cannot be accepted in the United States to
be produced as biodiesel.
91
261
© Office of Chief Economist Page 41 of 68
© Office of Chief Economist Page 41 of 68
358
316 317
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011*
Figure 29. Biodiesel Consumption in the US. At the beginning of 2005, the consumption of biodiesel
began to increase dramatically and peaked at 358 million gallons in 2007. The consumption slowed
down in 2010 due to the U.S. economic slowdown and the discontinuation of a Federal biodiesel
producer tax credit. The credit, which expired in December 2009, was reinstated in December 2010
and therefore with the recovering economy spurring back biodiesel consumption in the U.S. (Source:
EIA, US Department Energy)
229
665

As a comparison, in
a year, 3.7 tons / ha
of CPO can be
produced, while
soybean oil’s
production is only
0.4 tons / ha (a
study of the Oil
World).
Others/Anim
al Fats
39%
PKO&CNO
6%
© Office of Chief Economist Page 42 of 68
Page 42 of 68
Soya Oil
20%
Sun Oil
10% Rape Oil
11%
The second issue is about international trade protection
policies. Biodiesel uses in the U.S. will continue to increase in
the future, meaning the need for vegetable oil as a raw
material for biodiesel would be even higher. Vegetable oil in
the U.S. that is currently used to make biodiesel is soybean oil
because the U.S. is known as the world’s largest soybean
producing countries.
However, the presence of soybean oil as a raw material for
biodiesel is potentially replaced by CPO because CPO price is
cheaper than soybean oil. The historical data (during 2005-
2011) show that the CPO price in average is lower about 20%
than soybean oil price. This condition, is caused by the CPO’s
productivity that is much higher than the soybean oil’s. As a
comparison, in a year, 3.7 tons / ha of CPO can be produced,
while soybean oil’s production is only 0.4 tons / ha (a study of
the Oil World). Based on these facts, it seems reasonable for
the U.S. if it tends to begin to make soybean farming
protection in its country because of fear in competing with
CPO.
Palm Oil
14%
World Vegetable Oil Consumption
PKO&CNO
5%
Sun Oil
7%
Others/Anim
al Fats
24%
Rape Oil
13%
Soya Oil
24%
Palm Oil
27%
Figure 30. Palm Oil as the most competitive vegetable oil. Cheaper price and more productive plant
compared to other oilseeds make CPO become the most consumed vegetable oil in the world today.
(Source: Oil World)
The U.S. is currently importing crude palm oil from Malaysia
and Indonesia, although the crude palm oil consumption share
in the U.S. is still small compared to soybean oil but it is
expected to continue to increase in the future in line with the
biodiesel needs.
© Office of Chief Economist

Indonesia and
Malaysia should be
able to make
counter arguments
by other studies that
are more
comprehensive and
support that
biodiesel production
from crude palm oil
does not relevant
with those proposed
by EPA.
1.5
Millions
0.4
1.8
Export CPO to India
Export CPO to China
0.5
2.3
Indeed, the reasons underlying the EPA announcement is still
ambiguous, if it is purely related to the environment,
Indonesia and Malaysia should be able to make counter
arguments by other studies that are more comprehensive and
support that biodiesel production from crude palm oil does
not relevant with those proposed by EPA. When the findings
of the counter study are contrary to the EPA announcement,
the problem maybe settled at that point. Nevertheless, if in
fact the reason is for trade protection, the discussion can be
difficult because there will be some of non-economic factors
and non-environmental factors playing there. However, if
trade protection is the background, Indonesia would not need
to worry thinking about the economic impacts.
0.8
2.8
1.1
2.6
1.4
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Figure 31. Indonesia’s CPO exports to China and India. CPO exports to China and India, i.e. the
biggest markets of Indonesia’s CPO, have shown an increasing trend for 10 years. Since 2001,
Indonesia’s CPO Export to China has grown by 22% in average, while to India by 15% in average.
(Source: International Trade Statistics)
Don’t worry, be confident
Some say that the government worries that the U.S. trade
protection efforts can be extended to other countries
(including Indonesia CPO’s biggest markets, i.e. China and
India), meaning other countries will also limit the crude palm
oil imports from Indonesia due to environmental issues. It
© Office of Chief Economist Page 43 of 68
© Office of Chief Economist Page 43 of 68
2.5
1.8
3.3
1.4
4.8
1.8
5.5
2.6
5.3
2.2

So far, India and
China seem to
ignore the CPO
negative issues
against
environment; it is
evidenced by the
volume of their
crude palm oil
imports from
Indonesia, which
continue to grow.
The studies
conducted by EPA
would seem fairer if
a comprehensive
comparison against
all vegetable oils
(including soybean
oil) is made, in order
not to seem to
marginalize CPO
producing countries.
© Office of Chief Economist Page 44 of 68
Page 44 of 68
seems that the same unlikely happens. So far, India and China
seem to ignore the CPO negative issues against environment;
it is evidenced by the volume of their crude palm oil imports
from Indonesia, which continue to grow. It is only Europe that
has made the similar issue, but in fact the CPO trade with
them continues to run normally until now.
In addition, the government is currently prepared to prove
that CPO is environmentally friendly through the Indonesian
Sustainable Palm Oil (ISPO), which is a certification that must
be acquired by national plantation and palm oil processing
companies. The set of facts should not necessarily make
Indonesia desperate by the U.S. trade protection possibility.
For the author, a thing to be considered from the EPA
announcement is a matter of fairness related to the research
findings that seem to marginalize CPO producing countries.
The studies conducted by EPA would seem fairer if a
comprehensive comparison against all vegetable oils
(including soybean oil) is made, in order not to seem to
marginalize CPO producing countries. A valuable lesson to
learn from this incident is the government and the related
parties should continue to socialize at the international level
and the fact implementation as well as the international
standard regulation that the CPO production practices do not
conflict with the environmentally friendly principles. Thus, we
have a counter attack against negative issues on trade political
atmosphere. Another valuable lesson is quite related to the
author’s assumption to the U.S. government’s attitude to do
protection amidst the free trade era. The protectionism is
exemplary because it reflects high nationalism and it is not
eroded by trade liberalization jargons.
© Office of Chief Economist

Coal Market 2012: Future Remains Bright
Ahmad Subhan (ahmad.subhan@bankmandiri.co.id)
The global demand
for coal is marked
by uncertainty. The
coal demand will
be in line with GDP
growth
The global outlook for coal demand and supply in 2012 is marked by
uncertainty. From the demand side, recovery from financial crisis
has been fragile in many countries, casting doubt on future growth
rates. The economic uncertainty in some region such as US and
Europe make it difficult to predict coal demand over the shortmedium
term but is certain that the growth in developing countries
– lead by China and India – will lead demand growth in recent years.
Power generation for electricity is the largest end user of coal, as
electricity demand is closely correlated with economic growth, so, is
coal demand will be in line with GDP growth. The economic
recession in 2009 affected electricity demand all over the world,
which led to a stagnation in global coal consumption for the first
time in the past decade. Nevertheless, the concentration of coal
demand in 10 ten importers developing countries and its
importance in fast growing emerging markets was helped the global
demand: while global oil and gas consumption fell measurably in
2009, the consumption of coal only stagnated.
Coal is the second most important primary energy source behind oil.
Throughout the past decade hard coal consumption increased by
more than 70% from 3 700 mn ton (Mt) in 2000 to an estimated 6.3
bn ton in 2010. This boost in coal demand corresponds to rising coal
usage, which currently amounts to approximately 720 000 ton every
day. Despite strong growth from renewable energy, coal will
continue dominate the market for next decades.
© Office of Chief Economist Page 45 of 68
© Office of Chief Economist Page 45 of 68

Figure 32. Developing Countries Will Lead The Global Demand ; The GDP growth in the top 10 coal
importers will be stabilize in 6-8% pa for next decades. Now coal is the second most important
primary energy source, but in the next 5 year coal will be replaced oil position to be the first one.
(Source: Wood Mackenzie Coal Market Service – Jan 2012)
The global demand
for coal is forecast
to slow 4.2% pa in
2012-13. The
worsened outlook
for the EU and the
US has not had a
substantial impact
on forecasts for
China and India
China imported 182
million ton of coal in
the whole of 2011
and for 2012 china
coal import will be
flat in 9.8% or 200
million ton of coal
EIU’s monthly coal outlook (Jan 2012) said, the global demand for
coal is forecast to slow to an average of 4.2% pa in 2012-13, down
from an estimated 5.4% in 2011. Demand growth will ease in 2012
as the global economy slows, before picking up moderately in 2013.
The worsened outlook for the EU and the US has not had a
substantial impact on forecasts for China and India. China will
continue to provide by far the largest spur to coal demand during
the period (although efforts to curtail emissions are likely to have
some impact). India will be another important driver of demand, as
it continues to pursue its rural electrification plans. Demand in the
EU is forecast to ease in 2012, owing to a sharp deterioration in
economic performance in the euro zone, meanwhile the US
consumption is also forecast to drop in 2012, owing to the
increasing use of natural gas in electricity generation and as the
economy slows in that year.
China Coal Market: Key Driver for the Next 5 Years
The moderate projection of coal demand will be impact the global
coal market, China imported 182 mn ton of coal in the whole of
2011, up 10.8% from the previous year, according to sources from
the National Development and Reform Commission. And for 2012
many players believe the china coal import will be flat in 9.8% or
200 mn ton of coal.
© Office of Chief Economist Page 46 of 68
Page 46 of 68
© Office of Chief Economist

The demand for coal
in China in 2011 was
boosted by the
decline in
hydropower
generation. In 2012
the increase in
thermal power
generation for 2012
will be growth at a
6.9% YoY
In the supply side, the China’s minor imbalance in domestic market
would impact the rest of global supply side. China’s share in global
coal production is almost 44.8% or four times that of Saudi Arabia’s
production of oil. Its, the China’s domestic coal market is more than
three times the entire international coal trade. Therefore, any
imbalance between Chinese production and demand has the ability
to have a large impact on global coal trade and price.
If we took a look closer what happen the coal market in China we
will find the fact after a strong year in 2011, China’s coal demand to
see slower growth in 2012 and 2013. China’s exports are slowing
down given the problems in other economies, such as the debt crisis
in Europe and slow recovery of the US. The demand for coal in
China in 2011 was boosted by the decline in hydropower generation
(down 7.8% YoY in 11M11) given the draught in major hydropower
provinces. More thermal power has been generated to make up the
shortfall, resulting in a 14.7% YoY increase in thermal power
generation in 11M11. It remains to be seen whether the abnormally
dry weather will recur in 2012.
The slower projection of economic growth in 2012 and assuming a
12% increase in the utilization of hydropower generation capacity,
the increase in thermal power generation for 2012 will be growth at
a 6.9% YoY, down from 9.6% YoY increase from last record.
Together with other minor changes in the output growth forecasts
of its key downstream industries, the demand growth for coal in
China will be correction from 7.6% YoY in 2011 to 6.0% for 2012 and
expect the demand growth to further slow to 5.8% YoY in 2013.
Annual Power Generation 2009 2010 2011e 2012e 2013e
Total PowerGeneration(bn kWH) 3.497,8 4.206,5 4.701,1 5.114,3 5.553,1
YoY (%) 7,1% 20,3% 11,8% 8,8% 8,6%
Thermal (bn kWH) 2.981,4 3.330,1 3.790,1 4.051,7 4.345,6
YoY (%) 7,2% 11,7% 13,8% 6,9% 7,3%
Hydro (bn kWH) 554,5 721,0 712,4 797,9 860,1
YoY (%) 4,4% 30,0% -1,2% 12,0% 7,8%
Nuclear(bn kWH) 69,3 73,9 86,8 103,5 140,0
YoY (%) 1,3% 6,6% 17,5% 19,2% 35,3%
Wind(bn kWH) 26,9 51,0 75,4 101,8 122,2
YoY (%) 105,9% 89,6% 47,8% 35,0% 20,0%
Biomass & Solar(bn kWH) 30,5 42,4 61,0 85,2
YoY(%) 39,0% 43,9% 39,7%
Figure 33. China’s Source of Power Generation. The growth in China’s coal demand will be decrease
from 9.4% YoY in 2011 to 6.0% YoY in 2012 and further to 5.8% YoY in 2013 amid slower thermal
power generation growth. But in term of volume thermal coal still dominate with portion more than
80%. (Source: NBS, BOCI Research estimates)
© Office of Chief Economist Page 47 of 68
© Office of Chief Economist Page 47 of 68

In the supply side,
China’s raw coal output
increase 6.7% YoY in
2012 and then 8.4% YoY
in 2013, about 47% and
37% of additional
output in 2012 and
2013 come from Shanxi
Province, Shaanxi
Province and Western
Inner Mongolia
Growth in China’s Coal Demand and
Output
© Office of Chief Economist Page 48 of 68
Page 48 of 68
In the supply side, China’s raw coal output grew 10.7% YoY to
3.78bn tonnes in 2011, and it will be expect to increase 6.7% YoY in
2012 and then 8.4% YoY in 2013. The projections are based mainly
on new capacity to be completed based on the information
collected from various companies and sources. With the based on
forecasts, China’s coal output will still fall short of demand in 2012,
but the deficit will narrow. However, there have always been delays
about 60% of the new capacity that originally expected to be
completed in 2012.
Bank of China Investment Group, estimate about 47% and 37% of
additional output in 2012 and 2013 to come from Shanxi Province,
Shaanxi Province and Western Inner Mongolia, the key production
bases of higher quality thermal coal in China. The others 19% and
23% of additional coal production in 2012 and 2013 to come from
eastern Inner Mongolia, the key production base of lignite. The coal
produced there cannot be used in most power plants. About 12%
and 15% of new coal production capacity to be completed in 2012
and 2013 should come from Xinjiang Autonomous Region, which is
too far from the main market in coastal areas. Hence, the domestic
supply of quality thermal coal should remain relatively short.
2012e 2013e
Increase in coal demand (m tonnes) 231 237
Capacity of mines (m tpa)
in which :
354 397
in eastern Inner Mongolia 114 119
in Xinjiang Autonomous Region 44 58
Increase in coal output (m tonnes)
in which
in Shanxi, Shaanxi and western Inner
255 338
Mongolia 119 338
Total coal demand (m tonnes) 4069 4307
Total coal output (m tonnes) 4035 4373
Growth in China’s Coal Import
Figure 34. China Coal Balance and Imports. 47% and 37% of additional output in 2012 and 2013 to
come from Shanxi Province, Shaanxi Province and Western Inner Mongolia. China will be dominate
the pacific market accounting nearly 50% of the Pacific total 2030. (Source: BOCI Research estimates
and Wood Mackenzie Coal Market Service – Jan 2012)
© Office of Chief Economist

The progress in
upgrading small
mines in Shanxi
Province face many
problem: lack of
funding, problems
with consolidated
mines, higher
priority on safety
and troublesome
procedure
The others issue
related output gap in
domestic coal
market is the
bottleneck in railway
capacity for
domestic coal supply
until the completion
of Central Southern
Shanxi Railway in
2014
However, the progress in upgrading small mines in Shanxi Province
as crucial part of the coal industry consolidation launched in mid-
2009, has been far slower than expected. For instance, the technical
upgrades of six mines with total capacity of 3.9m tpa of Lu’an
Environmental Energy have been delayed by at least one year to
2013 at the earliest. There are a few key problems:
Lack of funding. Most of the consolidated mines are not whollyowned
by the state-owned big coal mining groups. The cost of
loans of these mines is usually 20% above the benchmark rates and
these loans require guarantees. As the big coal mining groups
reckon the cost of debt is too high and they are not willing to
guarantee the loans as guaranteeing too much will jeopardize their
own credit ratings.
Problems with consolidated mines. Typical problems include overstatement
of reserves or coal quality of the consolidated mines.
Some sellers of small mines even made up false financial
statements to hide liabilities. They then escaped after receiving
money by selling some of the stakes in the mines. The big coal
mining groups not only have to pay the hidden debts, the absence
of a stakeholder makes it difficult to go ahead with the required
legal procedure.
Higher priority on safety. After the coal mine accident at a mine of
China National Coal Group in September 2011, Shanxi provincial
government has given higher priority to safety. The construction of
some mines has slowed down for safety reasons.
Troublesome procedure. It takes 36 approvals from various
government departments for a mine expanded from consolidated
small mines through technical upgrade to start production. The
lengthy approval process has slowed down the overall process.
The others issue related with output gap in domestic coal market is
the bottleneck in railway capacity for domestic coal supply. The
capacity of coal-carrying railways has been tight in recent years, and
this should persist in 2012. Among the major coal-carrying railways
from key production bases to the main market along the coast,
total increase of capacity only 64m tonnes. This includes a 20m
tonnes increase for both Daqin Railway and Shenshuohuang
Railway, 14m tonnes for Taiyuan-Shijiazhuang Railway and 10m
tonnes for Houma-Yueshan Railway. The railway bottleneck will
remain until the completion of Central Southern Shanxi Railway in
2014. The recent scaling back of railway investment will only result
in possible delays in completion. The railway capacity constraints
© Office of Chief Economist Page 49 of 68
© Office of Chief Economist Page 49 of 68

Page 50 of 68
will continue to limit effective domestic coal supply, thus supporting
the domestic coal price.
China’s Major Coal-Carrying Railways
Expected Increase in Capacity of Major Coal-Carrying Railways
Figure 35. China Coal Carrying Railways. The railway bottleneck will be constraint until the
completion of Central Southern Shanxi Railway in 2014. The railway capacity will continue to limit
effective domestic coal supply, thus supporting the domestic coal price. (Source: BOCI Research
estimates)
EIA calculated in the coming years, the Chinese coal industry will
face several major challenges in meeting its growing demand for
coal. First, new mines will need to be developed and production
increased in existing collieries (coal mines, including all buildings
and equipment). Second, congested domestic transport
infrastructure will require expansion and improvements to ship
additional coal from production centres to demand hubs. Some new
mines are located very far from major industrial cities, which will
inevitably lead to transportation challenges. Third, productivity and
efficiency gains must be achieved to keep coal affordable for
consumers. Finally, as China aims to reduce the environmental
impact of its coal consumption, significant investments will be
needed for upgrading power plants. Chinese authorities are
© Office of Chief Economist Page 50 of 68
© Office of Chief Economist

In the LPS, Chinese
hard coal imports
to almost double
from 92 Mtce in
2010 to 180 Mtce
in 2016. In the HPS,
hard coal imports
to drop by 58%
from 92 Mtce in
2010 to 39 Mtce in
2016.
currently in the process of restructuring and consolidating the coal
mining industry and have ambitious plans to ramp-up nuclear and
renewable electricity production. The development of coal
production, and hence the future level of Chinese imports, is
dependent on how fast this reorganization takes place and when
investments are made.
Due to these unknowns, EIA have made two possible scenarios, One
scenario assumes that Chinese coal production and infrastructure
expansion can’t keep up with domestic coal demand. This scenario
referred to as the low Chinese production scenario (LPS-low
production scenario), assumes a continued strong demand for
imported hard coal. The other scenario, referred to as the high
Chinese production scenario (HPS-high production scenario),
assumes that Chinese coal production increases at higher rates
during the outlook period. As a consequence, Chinese imports
demand will be lower.
Figure 36. LPS and HPS Scenario. In the LPS, Chinese hard coal imports almost double from 92 Mtce
in 2010 to 180 Mtce in 2016. In the HPS, Chinese hard coal imports to drop by 58% from 92 Mtce in
2010 to 39 Mtce in 2016. (Source: EIA, Medium-Term Coal Market Report 2011)
In the LPS, Chinese hard coal production grows from 2,399 Mtce in
2010 to 2,913 Mtce in 2016. This production level causes Chinese
hard coal imports to almost double from 92 Mtce in 2010 to 180
Mtce in 2016. In the HPS, Chinese production grows to 3,054 Mtce
in 2016. This production level causes Chinese hard coal imports to
drop by 58% from 92 Mtce in 2010 to 39 Mtce in 2016.
The difference in Chinese seaborne imports, which reaches its
maximum of 141 Mtce in 2016, has various implications for
© Office of Chief Economist Page 51 of 68
© Office of Chief Economist Page 51 of 68

As power plants
commencing this
year are expected
to operate fully by
next year,
Indonesia’s
domestic coal
consumption could
grow by 12% to
83Mt in 2012
© Office of Chief Economist Page 52 of 68
Page 52 of 68
seaborne hard coal trade. High imports (LPS) tighten the seaborne
hard coal market and call for suppliers world-wide. Compared to
the HPS, which results in lower imports, the utilization of export
mining and infrastructure capacity is higher on a global scale. Given
a tight market situation with high Chinese imports, several suppliers
provide higher volumes than they would with lower Chinese
imports.
Indonesia Coal Market: Still Waiting Use of Coal Power
In early 2006, PT Perusahaan Listrik Negara (Persero) (PLN) had
assignment to build coal-fired power plants in 35 locations in
Indonesia. They include 10 power plants (7,360MW) on the islands
of Java and Bali, and the others (2,502MW) are constructed on
outside Java and Bali. In first plan completion of the project, which
is known as the first-generation 10,000MW project, was scheduled
for 2010-12. But until the end of 2011 only four projects on Java
Island and one project in southwest Sulawesi, with a total capacity
of 2,895MW, have been fully operated. Another on Java has been
partially commissioned. Delays in financing as well as constructionrelated
problems (such as land acquisition) have been the main
problem. Power projects in Java and Bali are, on average, 8 months
behind schedule, while the delays on the other islands are even
more severe is around 12-18 month. Despite the initial setback, 10
power plant projects to be ready this year. All will be located in Java
and Bali. These will have total electricity output of 2,347MW.
Progress on the 10,000MW first phase of generation, as of 30 Sept
2011:
• 2,245 MW is already in operation, with an additional 1,260 MW
coming by the end of year. This will translate to about 12.3mn
metric tonnes of coal that will be kept domestically in FY12E.
• 2,305 MW will come on stream in FY12E; additional 8mn metric
tonnes in FY13E
• 1,710 MW coming in FY13E-FY14E; additional 6mn metric
tonnes in FY14E –FY15E.
• Including phase 2 – 12,600 MW of coal -generating capacity –
44.1mn metric tonnes of domestic demand.
With the power plant projects coming online and additional
demand from others sector, domestic coal consumption to grow by
10.4% YoY in 2011 to 74Mt (from around 67Mt in 2010). As power
plants commencing this year are expected to operate fully by next
year, Indonesia’s domestic coal consumption could grow by 12% to
83Mt in 2012, about in line with DMO figure of 82Mt.
© Office of Chief Economist

Figure 37. Progress of Fast Track I 10000 MW. As 2,875MW of power generation capacity comes on
stream in FY11E, the increase in power generating capacity could translate into additional 10mn
metric tonnes of coal demand; plus additional 2mn metric tonnes of demand from new power plants
coming on stream in FY12E. (Source: JP Morgan - PLN)
Newly developed
deposits are often
located farther away
from existing
infrastructure
require substantial
complementary
investments into
port and railway
capacities
Ramped up Indonesian coal production has accounted for much of
the growth in global coal supplies in recent years. However, there is
persistent uncertainty about the operating environment,
particularly in term of infrastructure availability.
Newly developed deposits are often located farther away from
existing infrastructure and thus require substantial complementary
investments into port and railway capacities. Projects in mature
mining regions often experience deterioration of product qualities
or mining conditions. These factors put fundamental upward
pressure on future infrastructure availability. A major problem in
coal supply chain investment is the involvement of various
stakeholders with differing objectives. In the past, this has caused
situations where supporting or complementing investments, e.g.
into railway lines or port capacities were not synchronized and
coordinated with mining investments, resulting in temporary
overcapacities or bottlenecks along the supply chain.
© Office of Chief Economist Page 53 of 68
© Office of Chief Economist Page 53 of 68

Indonesia coal
production may
reach 380 million
tonnes in 2012 or
14.4% higher than
the Energy and
Mineral Resources
Ministry production
target of 332 million
tonnes
183.9
196.0
© Office of Chief Economist Page 54 of 68
Page 54 of 68
201.1
234.3
According to the Indonesian Coal Mining Association, Indonesia coal
production may reach 380 mn tonnes in 2012 or 14.4% higher than
the Energy and Mineral Resources Ministry production target of 332
mn tonnes. They believe the estimate production was reasonable
since last year's production had already reached almost 360 mn
tonnes. The government's target was lower than the association's
estimates because the government did not take into account small
mining companies. For 2012 The Ministry of Energy and Mineral
Resources only targeted 332 mn tonnes of national coal production,
a 1.52% increase from last year’s 327 mn ton target. The targeted
increase is small, due to domestic coal supply problems caused by
delays in power plant constructions this year. Director General of
Mineral and Coal at the Ministry of Energy, summoned all domestic
coal users to know the volume of their coal needs. In the near
future, the Ministry will also summon coal producers to urge them
to fulfill domestic coal demand. For this year they expect domestic
demand to reach about 82 mn tonnes and export at 250 mn tonnes.
291.2
312.1
367.7
2006 2007 2008 2009 2010 2011 2012E
Figure 38. Indonesia Coal Exports and DMO Alocation. The growth of coal exports in 2012 will be
reach 367.68 million tones or up by 17.8% from 312,13 million tonnes in 2011. Electricity demand
still dominated DMO allocation for 2012 (Source: Director General of Mineral and Coal at the
Ministry of Energy)
Although domestic coal demand continues to grow, we believe the
consumption still below the allocation of DMO (domestic market
obligation) this year which reach 82.07 mn tonnes. This condition is
based on several factors first: The achievement of domestic coal
consumption in 2011 only 67 mn tonnes (85% of the DMO allocation
78.9 mn tones), which means a surplus of 12 mn tonnes. Second:
additional targets PLN coal usage- as the largest consumer
© Office of Chief Economist

Assuming the
proportion of
domestic demand
still 85% from
DMO allocation
the volume for
export market will
be reach 367.68
million tonnes.
Since Nov-11 coal
market finally hits by
economic slowdown.
For 2012 the price
will be 118/tonnes.
The price will be
recover to USD
127.5/tonnes in 2013
dosmestik - is expected to rise only 8-10 mn tonnes to 39.6 mn
tonnes while the DMO allocation to PLN reaches more than 57.2 mn
tonnes. Third: from the supply side; the company must face the
problem spread of the mine site, the quality and volume of coal is
less as needed, until the domestic pricing.
To date only 63 mining companies are required to supply coal to
domestic consumers. DMO's largest quota this year assigned to PT
Bumi Resources Tbk (Bumi), the nation's largest coal producer,
which is 19.27 mn tonnes, or approximately 23.47% of total DMO.
PT Adaro Indonesia, a subsidiary of PT Adaro Energy Tbk (ADRO),
are required to supply 11.74 mn tonnes for domestic and PT Kideco
Jaya Agung, a subsidiary of PT Indika Energy Tbk (INDY) to supply
8.03 mn tonnes. Assuming the proportion of domestic demand still
same with last year (85% from DMO allocation) the volume for
export market will be reach 367.68 mn tones or up by 17.8% from
312,13 mn tonnes in 2011.
As the one world’s prime exporter of thermal coal, Indonesia needs
to further study a plan to ban the sale of lower-quality coal from
2014. Until now the government hasn’t set a target for when the
ban will be applied or which type of coal it will affect because it is
seeking feedback from miners. The ministry has drafted a decree to
prohibit the sale of coal with a heating value of less than 5,700 kilo
calories a kilogram to overseas markets, where miners will have to
upgrade the heating value of the fuel if they want to ship it. The
government may wait until technology for upgrading low-rank coal
into higher-grade fuel is widely available before applying the ban.
Indonesia has an estimated 61.3 bn tonnes of coal reserves, of
which 65 percent is low-rank, according to the Indonesian Coal
Mining Association.
The Price: Short Term Correction
Thermal coal prices rose sharply in the first quarter of 2011, to an
average of USD129/tonnes (their highest level since the third
quarter of 2008), owing to concerns about supply from Australia
following severe flooding in Queensland and sustained strength in
consumption. The early and severe start to winter in the northern
hemisphere offered further support to prices, as did the prospect of
reduced nuclear power in Japan and a switch to coal-fired
electricity. Prices eased somewhat in the second quarter, to
USD120/tonnes, as coal participated in the sell-off in commodities
in May. Despite the deteriorating global economic picture and falls
in other commodity prices, coal prices held up, averaging
USD120.6/tonnes in the third quarter of 2011. However, after
holding up well at USD120 per ton levels in 3Q11, the spot coal
© Office of Chief Economist Page 55 of 68
© Office of Chief Economist Page 55 of 68

Page 56 of 68
prices in November have started to reflect market weakness, falling
to USD113-114/tonnes. The forward curve for future prices has also
shifted to reflect negative market expectations for 2012. Recent
price movements show the economic slowdown finally hits the coal
market. For 2012 consensus price for thermal coal will be
weakening down 3.1% from contract average price 2011’s of
USD121.8/tonnes, the price level for 2012 to be around
USD118/tonnes. The price will be recover to USD127.5/tonnes in
2013 as affected that demand from key importers such as China and
India should remain robust while import from North Asia (Japan,
South Korea, Taiwan) should remain steady.
Figure 39. Coal Price Outlook 2012. Coal price will be relatively softening landing in 2012 (3.1%) and
a recovery in 2013 (8.0%). In medium term IEA coal price in Asia will rise from USD127 a ton in 2011
to USD138 a ton by 2016. (Source: Bloomberg)
In the medium term the IEA forecast average thermal coal price in
Asia will rise from USD127 a ton in 2011 to USD138 a ton by 2016.
This is well above the USD40-USD80 level of the early 2000s, but is
below the record USD200 a ton level hit in 2008. The International
Energy Agency said the general positive trend for thermal coal
prices over the next five years will be supported by mining
companies struggling hard to expand their output quickly enough to
meet the demand, particularly from Asia.
© Office of Chief Economist Page 56 of 68
© Office of Chief Economist

Property Sector (Apartment) Outlook in 2012
Sindi Paramita (sindi.paramita@bankmandiri.co.id)
Positive
development of
the property
sector is expected
to continue in
2012.
Indonesia property sector in 2011 showed a positive trend. This is
supported by solid domestic economic fundamentals, continuously
increasing demand, supported by growing sources of financing.
Development of the property sector is expected to continue in
2012. In 2012 the developers are starting to add the property
projects, including residential such as apartments along with better
economic conditions and increasing purchasing power.
Based on the selling price, apartment can be divided into five
segments, namely lower, middle, upper-middle, upper, and luxury.
Meanwhile, based on the purposes, apartment can be categorized
into two sub-sectors, namely strata title apartment or condominium
and rental apartment.
Strata Title Apartment
Increasing Demand Continues
BI rate trends that tend to decline in 2011 are expected to continue
through 2012. We forecasted BI rate to be stable at 5.75% until the
end of the year even with the assumption that government will
increase subsidized fuel price by 33%. The government has lowered
the BI Rate at the lowest level to 5.75% since 2005 in order to
accelerate loans to the real sectors, such as manufacturing and
production, and also to increase the level of consumption. This
condition will certainly drive the demand for condominiums in the
future. It is seen from the condominium sale growth for 2011 of
7,987 units. The figure grew 84.7% (YoY) compared to the sales in
2010 of 4,325 units.
However, there will be a regulatory risk to consider this year. BI
recently released a new regulation on Loan to Value (LTV) for
property mortgage loan. In the regulation, LTV is now restricted to
maximum 70%, applicable to all property type mortgage of a size
above 70 m2, including landed-houses, strata residential and
apartments. The implementation started on 15 March, with 3
month socialization period until 15 June. Impact of the regulations
will be mainly seen in the upper-middle class in the short term. The
sale of the segment will likely to delay because the buyer needs to
generate more down payments. In the long run, this regulation
could create strong fundamental for property sector.
© Office of Chief Economist Page 57 of 68
© Office of Chief Economist Page 57 of 68

From the supply
side, an addition
of 18,140
condominium
units is expected
to occur in
2012….
© Office of Chief Economist Page 58 of 68
Page 58 of 68
Large Sum of Supply in 2012
From the supply side, an addition of 18,140 condominium units is
expected to occur in 2012, assuming no delay in the projects. This of
course will enhance the market competition that will impact on the
level of sales.
There are 12 new condominium projects that were launched in the
late 2011, including Nifarro, Sea View Condominium Green Bay
Pluit, Ciputra World Jakarta and Woodland Park Residence.
From a location perspective, condominiums in Jakarta are mostly
located in the CBD area (26.1% of the total). CBD is the business
district located on Jalan Sudirman, Kuningan, Thamrin, Gatot
Subroto and Satrio. Outside the CBD, the greatest supply is located
in North Jakarta and West Jakarta at 23.0% and 21.0%.
In 2011, around 8,000 condominium units within 28 proposed
projects were launched in Jakarta. The majority is the middle
segment (62.5%), followed by upper-middle (23%) and upper class
(14.5%).
Cummulative Supply, Sales and Sales Rate of Condominium
(unit)
Figure 40. Condominium Supply and Sales in Jakarta. On an annual basis, the condominiums supply
and sales in Jakarta increased. In 2011, condominium sales rate reached 95.2%. Condominium supply
in 2011 reached 85,713 units with cumulative sales of 81,582 unit. (Source: Cushman & Wakefield)
In the future, the development of apartments for sale in the primary
residential areas will continue to target the upper segment as seen
in previous years. Meanwhile, for the CBD area, developers will be
© Office of Chief Economist

more interested to build apartments for sale that target the middle
to upper segments given the limited land in the area.
Figure 41. Condominium supply in Jakarta. The supply of condominiums is mostly located in the CBD
by 26.1%. Outside the CBD, the greatest supply of condominiums is in North Jakarta and West Jakarta.
(Source: Jones Lang Lasalle Procon)
Condominiums in
the CBD area
have a good
absorption rate
and the highest
price increase.
East Jakarta
0.9%
North Jakarta
23.0%
Distribution of Condominiums in Jakarta by
Municipality
(%)
West Jakarta
21.0%
South Jakarta
13.4%
Price Tends to Increase
Selling price of apartments in Jakarta since 2009 tends to increase.
On condominium projects, the most popular location is especially in
the CBD. Condominiums in this strategic area have a good
absorption rate and the highest price increase. The average selling
price of condominiums in the CBD area was recorded at IDR19,9
million per m2 in the fourth quarter of 2011. This figure rose by
6.1% (QoQ) or 20.7% (YoY). Meanwhile, the average selling price in
the residential areas that include Kebayoran Baru, Senayan,
Menteng, Pondok Indah, Permata Hijau and Kemang (primary
residential areas) was recorded at IDR18,7 million per m2. The
figure grew by 4.4% (QoQ) or 17.7% (YoY).
Selling Prices of Apartments in Jakarta
(IDR million / m2)
CBD
26.1%
Central Jakarta
15.7%
Location 4Q10 3Q11 4Q11
Growth
QoQ YoY
CBD Area 16.49 18.75 19.90 6.13% 20.68%
Prime Area 15.90 17.93 18.72 4.41% 17.74%
Figure 42. Condominium Sales Price in Jakarta. Price of condominiums in the CBD in the fourth
quarter 2011 reached IDR19,9 million / m2. The figure was up by 6.1% (QoQ) or 17.7% (YoY). (Source:
Cushman & Wakefield)
© Office of Chief Economist Page 59 of 68
© Office of Chief Economist Page 59 of 68

© Office of Chief Economist Page 60 of 68
Page 60 of 68
Hong Kong
In contrast to
condominiums
that are
dominated by
local buyers,
rental apartments
are dominated by
expatriates or up
to 68% of total
tenants.
Singapore
Japan
India
Taiwan
China
Cambodia
Thailand
Phillipines
Malaysia
Indonesia
If seen from Asia, the price of apartments in Indonesia is still
considered the lowest price by USD1,791/m2. This price is much
lower than prices in Hong Kong and Singapore, which reach
USD19.232/m2 and USD16.272/m2.
3,300
2,407
2,182
1,781
Figure 43. Selling Prices of Apartments in Asia. Apartment prices in Indonesia are included in the
lowest prices in Asia. Apartments with the highest rates in Asia include those in Hong Kong and
Singapore, which reach USD19.232/m2 and USD16.272/m2. (Source: Global Property Guide)
Rental Apartment
Selling Prices of Apartments in Asia
(USD/m2)
3,750
7,112
6,932
16,272
13,855
12,913
19,323
Rental apartment can be divided into three types based on the
nature, i.e. Serviced Apartment, Purposed Built Rental Apartment
and Apartment for sale to be put in lease by the owners or Condofor-lease.
Demand for Rental Apartments is Dominated by Expatriates
The same trend occurred in rental apartments, where an increase in
rental demand occurs. In contrast to condominiums that are
dominated by local buyers, rental apartments are dominated by
expatriates or up to 68% of total tenants. Demand for rental
apartments is generally derived from short-term business travelers
and tourists.
Purposed built rental apartment and serviced apartment enjoyed
the highest occupancy rate in 2011 compared to condo-for-lease,
standing around 80%. This figure grew 0.7% (QoQ) or 10.1% (YoY).
Short-lease accommodation demand coming from sports events,
© Office of Chief Economist

…..rental
apartments will
be increasingly
under pressure
from apartments
for sale to be put
on lease by the
owners or the
condo-for-lease
government and corporate groups and local families during the
holiday season, which boosted occupancy.
Occupancy rate of condo-for-lease in 2011 was recorded at 65.7%
or grew 4.2% (QoQ) or 1% (YoY). The majority of tenants selected
accommodation based on accessibility to the main activity locations
due to continuing traffic in the city.
Addition of Supply from Condo-for-Lease
In the future, the trend of apartment for sale development will
continue. Meanwhile, rental apartments will be increasingly under
pressure from apartments for sale to be put on lease by the owners
or the condo-for-lease. In general, the development of the vertical
residential property is more attractive to investors than end users,
especially with the demand for rental at the centers of activities,
such as hospitals, expatriate communities, universities, work
environments.
From the supply side, there are seven rental apartment projects
scheduled to be completed for 2012. They include The Grand Hyatt
Residence Palace and Plaza Senayan Tower C & D. Therefore, the
total supply of rental apartments in 2012 is expected to grow 754
units. Later in 2013 to 2014, it is estimated there will be additions of
503 units coming from the Ciputra World Jakarta.
Cumulative Supply of Rental Apartment
unit
36.71 38.267 41.460 TOTAL
2,465 2,449 2,335
3,238 3,750 4,127 Purpose-built
Rental
Apartment
31,092 32,068 35,228
2009 2010 2011
Serviced
Apartment
Condos-forlease
Figure 44. Cumulative Supply of Rental Apartment. The supply of rental apartments mostly comes
from apartments for sale put on lease or condo-for-lease, reaching 84% of the total cumulative supply
of rental apartments in Jakarta. (Source: Cushman & Wakefield)
© Office of Chief Economist Page 61 of 68
© Office of Chief Economist Page 61 of 68

USD/m2
25
20
15
10
5
0
© Office of Chief Economist Page 62 of 68
Page 62 of 68
17.78
13.33
Rental Rates Tends to Increase
Rental rates for serviced apartments and Purposed built apartments
are higher than condo-for-lease or reach USD20.82 / m2 /month in
2011. The figure grew 14% (YoY) from the previous year, which
amounted to USD18.32/ m2 / month. Meanwhile, for the rental
rates of condo-for-lease tend to be stable at around USD13 / m2 /
month to USD15 / m2 / month.
In the future, the managers of rental apartments are likely to
continue to provide attractive facilities for the tenants, such as
flexible payment terms and varied length of rental time.
Rental Rate and Yield of Rental Apartments by Type
17.83
14.51
Figure 45. Rental Rates and Occupancy Levels of Rental Apartments. Rental rates and occupancy
levels of apartments from serviced apartments and purposed built apartments are higher than those
derived from condo for lease. (Source: Cushman & Wakefield)
Conclusion
17.93
2007 2008 2009 2010 2011
14.38
Service Apt & PB Rental Apt Condo for Lease Rent
Service Apt & PB Occupancy Rate Condo for Lease Occupancy Rent
18.32
In 2012, the condominium market is predicted to grow in line with
the improving domestic economic conditions. In terms of supply, it
will be added by units from several projects to be completed in
2012. This addition will likely increase market competition, with
potential impact to the overall sale rate. Despite the higher supply
level and competition between projects, the outlook is for higher
sales in the year ahead, stimulated by the new projects and positive
buyer sentiment.
13.71
20.82
15.03
80%
70%
60%
50%
40%
30%
20%
10%
0%
© Office of Chief Economist

In the year ahead, large sum condominiums units are expected to
be completed in the condo-for-lease sub-sector, which will likely
trigger tougher competition within the market.
The continued stability of the economy is expected to further
attract foreign companies to Indonesia, with a resultant increase in
expatriate numbers. This will most likely impact an increase in
purposed built rental and serviced apartment occupancy levels.
© Office of Chief Economist Page 63 of 68
© Office of Chief Economist Page 63 of 68

mandiri leading economic index (LEI)
March 2012
Mandiri LEI fluctuated in the range of 99.2 to 100.5 during the
period of January to December 2011. In November 2011, there was
an increase to 99.8 (+0.3%MoM), while in December 2011, the
index fell conversely to 99.2 (-0.6%MoM). From several constituent
indicators of Mandiri LEI, export indices, Rupiah exchange rates and
the volume of savings showed a decline in December 2011. It is
estimated the growth in the domestic economy will still experience
a slowdown in 2Q12.
Indonesia’s economic performance will still be influenced by
external factors, such as China’s potential economic slowdown that
will affect Indonesia’s export performance. China’s coal imports
from Indonesia were recorded down by 8.27% MoM in February
2012. Based on the recent developments, the Indonesia’s export
value in January 2012 was USD15.49 bn, or declining by 9.28%
MoM. The government of Indonesia revised the export growth
target of 15.1% to 9.9% in the Draft of the Revised 2012 State
Revenue and Expenditure Budget. This is done considering the slow
world trade growth and the impacts of the Europe debt crisis. The
IMF also expects the economic slowdown will occur in developing
countries, such as Brazil and India.
Pressure on the Rupiah exchange rate occurred due to the
strengthening of USD as the improvement in some economic
indicators in United States. Service and manufacturing sectors as
well as the United States’ finance showed improvements. The
unemployment rate fell and the unemployment level remained at
8.3% level, which is the lowest level since February 2009.
© Office of Chief Economist Page 64 of 68
Page 64 of 68
© Office of Chief Economist

102.0
101.5
101.0
100.5
100.0
99.5
99.0
98.5
98.0
Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11*
2010 2011
Nov Dec Mar Apr May Jun Jul Aug Sep Oct Nov Dec*
LEI 101.2 100.3 100.2 100.5 100.2 100.3 100.2 99.9 100.1 99.5 99.8 99.2
Change (% MoM) 0.5 (0.9) 0.2 0.3 (0.2) 0.0 (0.1) (0.3) 0.2 (0.6) 0.3 (0.6)
CEI 99.8 99.6 100.5 100.2 100.3 99.9 100.2 98.2 100.5 101.2 101.0 100.9
Change (% MoM) (0.1) (0.2) 0.2 (0.3) 0.1 (0.3) 0.2 (2.0) 2.4 0.6 (0.2) (0.1)
note : *) preliminary
Index > 100 indicates optimal economic growth
Index < 100 indicates less optimal economic growth
Changes in parentheses indicate negative numbers
LEI (lhs) CEI (rhs)
LEI and CEI are composite indices for predicting the movement of GDP (Gross Domestic Product) so they can be
useful as an early warning on the movement of Indonesian economy. LEI is used to predict the movement of
GDP in the next 6 months, while CEI is used to predict the movement of GDP in the same month. LEI and CEI
composite indices are formed from several indicators deemed important in studying the movement of
Indonesian economy.
© Office of Chief Economist Page 65 of 68
© Office of Chief Economist Page 65 of 68
105.0
104.0
103.0
102.0
101.0
100.0
99.0
98.0
97.0
96.0

MACRO ECONOMIC INDICATORS AND FORECAST
2009 2010 2011F 2012F 2013F
National Account
Real GDP (% yoy) 4.6 6.1 6.5 6.2 6.5
Domestic Demand (% yoy) 5.5 5.2 5.4 6.1 7.0
Real Consumption: Private (% yoy) 4.9 4.6 4.6 4.6 4.7
Real Gross Fixed Capital Formation (% yoy) 3.3 8.5 8.0 9.0 11.9
GDP (US$ bn) - nominal 539 707 835 933 1,092
GDP per capita (US$) - nominal 2,337 2,975 3,464 3,809 4,393
External Sector
Exports (%yoy,US$) - Merchandise (15.0)
Imports (%yoy,US$) - Merchandise (25.0)
Trade Balance (US$ bn) 35.2
Current Account (% of GDP) 1.9
Current Account (US$ bn) 10.7
External Debt (% of GDP) 32.1
International Reserves (US$ bn) 66.1
Import cover (months) 8.1
Rp/US$ (period average) 10,409
Rp/US$ (year end) 9,470
© Office of Chief Economist Page 66 of 68
Page 66 of 68
32.2
42.0
31.1
0.9
6.3
27.5
96.2
8.5
9,086
8,963
29.2
31.2
37.7
0.3
2.9
25.6
110.1
7.6
8,841
9,091
9.9
12.1
37.7
(0.1)
(0.7)
25.2
130.0
8.0
9,108
9,124
© Office of Chief Economist
15.6
17.5
38.9
(0.4)
(4.2)
23.7
150.2
8.0
8,949
8,931
Other
BI rate (% period average) 6.9 6.5 6.6 6.0 5.5
BI rate (% year end) 6.5 6.5 6.0 6.0 5.5
Headline Inflation (% yoy, year end) 2.8 7.0 3.8 5.5 5.0
Headline Inflation (% yoy, period average) 4.3 5.3 5.1 4.7 5.1
Fiscal Balance (% of GDP) (1.6) (0.6) (1.5) (1.1) (1.1)
S&P's Rating - FCY BB- BB BB+ BBB- BBB-
S&P's Rating - LCY BB+ BB+ BBB- BBB BBB

INDONESIA CURRENT DATA
Indicators Unit
2007 2008 2009
2010
Jul Aug Sep Oct Nov Dec Jan Feb
Exchange Rate
End of Period IDR/USD 9393 10900 9390 8978 8507 8534 8813 8855 9200 9068 8975 9074
Average IDR/USD 9354 1167 9462 9021 8533 8541 8791 8886 9040 9096 9081 9036
Monetary Sector
Base money M0, eop IDRtn 379.58 344.69 402.12 518.45 555.01 625.44 565.15 566.28 568.78 613.49 594.08 578.96
Narrow money M1 IDRtn 450.06 456.79 515.82 605.38 639.69 662.81 656.10 665.00 667.61 733.99 694.59
Broad Money M2 IDRtn 1,649.66 1,883.85 2,141.38 2,469.40 2,564.56 2,621.35 2,643.33 2,677.79 2,728.74 2,877.22 282.75
Outstanding Loan IDRtn 995.11 1,313.87 1,446.81 1,783.60 1,995.84 2,054.08 2,100.81 2,128.72 2,169.61 2,223.69 218.34
Outstanding Deposit IDRtn 1,459.44 1,673.82 1,914.11 2,208.72 2,288.67 2,296.18 2,363.63 2,396.28 2,450.33 2,596.33 2,540.24
Lending rate (working capital) % p.a 13.00 15.22 13.69 12.83 12.55 12.50 12.39 12.36 12.31 12.16 12.09
3-month deposit rate, eop % p.a 7.42 11.97 6.85 7.06 6.88 6.90 7.05 7.11 6.99 6.81 6.68
Overnight rate, eop % p.a 4.50 9.40 6.24 5.72 5.82 5.88 5.31 5.05 4.55 4.55 4.02 3.75
Prices
Headline CPI (2007=100) Index 155.5 113.86 117.03 125.17 127.35 128.54 128.89 128.74 129.18 129.91 130.9 130.96
Year on year inflation rate % 6.59 11.06 2.78 6.96 4.61 4.79 4.61 4.42 4.15 3.79 3.65 3.56
Month on month inflation rate % 1.1 -0.04 0.33 0.92 0.67 0.93 0.27 -0.12 0.34 0.57 0.76 0.05
Year to date inflation rate % N/A 11.06 2.78 6.96 1.74 2.69 2.97 2.85 3.20 3.79 0.76 0.81
Wholesale Price Index (2000=100) Index 217 238.0 167.35 177.87 182.30 183.45 184.27 184.64 184.94 185.76 187.11 187.77
Trade
Export USDbn 10.86 8.69 13.35 16.83 17.43 18.65 17.54 16.96 17.24 17.20 15.49
Oil USDbn 2.51 1.24 2.50 3.26 3.80 4.09 3.93 3.06 3.52 3.60 2.97
Non oil USDbn 8.36 7.45 10.85 13.57 13.62 14.56 13.61 13.90 13.71 13.60 12.51
Import USDbn 6.81 6.29 10.33 13.15 16.21 15.08 15.17 15.53 15.39 16.34 14.57
Oil USDbn 2.39 0.98 2.10 2.64 3.80 3.81 3.42 3.28 3.45 3.63 2.98
Non oil USDbn 4.42 5.31 8.22 10.50 12.41 11.27 11.69 12.25 11.94 12.71 11.58
Trade Balance USDbn 4.06 2.40 3.02 3.68 1.22 3.57 2.37 1.42 1.84 0.86 0.92
Output
GDP (current price) IDRtn 1034.86 1274.29 1450.82 1670.52 1923.57 1921.56
GDP (constant price at 2000) IDRtn 493.37 518.94 547.54 585.10 632.43 623.96
Real Growth % YoY 5.88 5.20 5.43 6.89 6.46 6.49
Capital Market
JCI Index, eop Index 2745.83 1355.41 2534.36 3703.51 4130.80 3841.73 3549.03 3790.85 3715.08 3821.99 3941.69 3985.21
Volume, avg shares mn 3155.65 1743.25 3422.10 3965.38 5336.18 6121.77 3886.25 4905.28 3098.96 3496.38 4045.49 3482.60
Value, avg IDRbn 4340.55 1454.61 2332.42 3959.30 4225.88 5623.02 4280.52 3885.67 2870.38 2684.29 3269.50 4161.39
Consumer Confidence Index 99.10 90.60 108.70 109.30 111.80 110.60 115.00 116.20 114.30 116.60 119.20 111.70
Disclaimer: This material is for information only, and we are not soliciting any action based upon it. This report is not to be
construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or
solicitation would be illegal. The information herein has been obtained from sources believed to be reliable, but we do not
warrant that it is accurate or complete, and it should not be relied upon as such. Opinion expressed is our current opinion as of
the date appearing on this material only, and subject to change without notice. It is intended for the use by recipient only and
may not be reproduced or copied/photocopied or duplicated or made available in any form, by any means, or redistributed to
others without written permission of PT Bank Mandiri Tbk. Additional information is available upon request. For further
information please contact: Office of Chief Economist, Ph. (021) 524 5516/5272 or Facs. (021) 521 0430.
© Office of Chief Economist Page 67 of 68
© Office of Chief Economist Page 67 of 68
2011
2012

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Director Compliance & Human Capital
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Director Commercial & Business Banking
Tel: (62-21) 3002 3087, Fax: (62-21) 252 1585
Kresno Sediarsi
Director Technology & Operation
Tel: (62-21) 524 3092, Fax: (62-21) 526 3617
Royke Tumilaar
Director Treasury, FI & Special Asset Management
Tel: (62-21) 3002 3057, Fax: (62-21) 5296 4053
Mansyur S. Nasution
EVP Coordinator Consumer Finance
Tel: (62-21) 3002 3075, Fax: (62-21) 5296 4116
Riyani T. Bondan
EVP Coordinator Internal Audit
Tel: (62-21) 3002 3722, Fax: (62-21) 5296 4116
Ventje Raharjo
EVP Coordinator Change Management Office
Tel: (62-21) 3002 3076, Fax: (62-21) 526 8213
Overseas Offices
Hongkong Branch
7 th Floor, Far East Finance Centre
16 Harcourt Road, Hongkong
Tel: 852-2527-6611
Fax: 852-2529-8131
Singapore Branch
3 Anson Road #12-01/02, Springleaf Tower
Singapore 079909
Tel: 65-6213-5688
Fax: 65-6438-3363
Cayman Islands Branch
Cardinal Plaza 3 rd Floor
30 Cardinal Avenue, PO Box 10198,
Grand Cayman, KY1-1002, Cayman Islands
Tel: 1-345-945-8891
Fax: 1-345-945-8892
Bank Mandiri (Europe) Limited, London
Cardinal Court (2 nd Floor),
23 Thomas More Street
London EIW IYY, United Kingdom
Tel: 44-207-553-8688
Fax: 44-207-553-8699
Shanghai Representative Office
3401, Bank of China Tower
200 Yin Cheng (M) Road,
Pudong New Area, Shanghai, 200120
People’s Republic of China
Tel: 86-21-5037-2509
Fax: 86-21-5037-2507
Dilli Branch – Timor Leste
Avenida Presidente Nicolao Lobato
No.12, Colmera
Dilli – Timor Leste
Tel: +670-331-7777
Fax: +670-331-7190/74444
Mandiri International Remittance Sdn.Bhd.
Wisma Mepro, 29 & 31 Jalan Ipoh 51200 Kuala
Lumpur, Malaysia
Telp : +60-3-4045-988
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