Volume 9 Edition 2 2012 - The ASIA Miner
Volume 9 Edition 2 2012 - The ASIA Miner
Volume 9 Edition 2 2012 - The ASIA Miner
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From <strong>The</strong> Editor<br />
Indonesia a hotspot for foreign investment<br />
NOT only is Indonesia’s economy South East Asia’s largest, it is also one<br />
of Asia’s most resilient and one of the hottest emerging economies in the<br />
world. Much is written about the continuing growth of China and India<br />
but Indonesia’s strengthening domestic situation, its abundance of natural<br />
resources, supportive government and strong private sector are attracting<br />
global interest.<br />
Mining is playing an important, and growing, role in the economy, particularly<br />
coal exports, but the key to Indonesia’s economic success now<br />
and into the future is its diversity with agriculture, oil and gas, and manufacturing<br />
also playing key roles. This is also ensuring foreign investment<br />
By John Miller /Editor<br />
from a range of sources. It is a big draw for global investment banks chasing fee revenue on<br />
deals and fund raisings, but which are also well aware of the inherent dangers - from corruption,<br />
poor infrastructure and a lack of transparency to market volatility.<br />
Evidence of Indonesia’s current strong economic situation include ratings agencies upgrading Indonesia’s<br />
debt, the stock market being up by a fifth since last October, a well-stocked IPO pipeline<br />
and investment banking fees growing far faster than elsewhere in Asia. Thomson Reuters estimates<br />
show that fee income in the island nation is up seven-fold, rising annually since 2000 to $391.4 million<br />
in 2011. In the same period, fee income trebled across South East Asia. It’s these type of figures<br />
that have attracted global banks to Indonesia and will continue to attract them in the future.<br />
In 2011 Indonesia’s economy grew at its fastest pace since the 1997-98 Asian crisis with experts<br />
saying the vast domestic market in the world’s fourth most populous nation is helping to<br />
shield it from the global economic turmoil impacting its export-oriented neighbours. Gross domestic<br />
product (GDP) grew by 6.5% in 2011 and is expected to show similar growth in <strong>2012</strong>.<br />
GDP has grown more than 5% in seven out of the past eight years, and even in 2009, when many<br />
countries slumped into the global financial crisis, Indonesia’s economy managed 4.5% growth.<br />
Foreign direct investment (FDI) in Indonesia grew 20% to a record $20 billion in 2011 as companies<br />
invested in everything from coal mines to car factories to tap the vast natural resources and<br />
240-million strong domestic consumer market. FDI is likely to remain robust over the medium term<br />
after Moody’s Investors Services and Fitch Ratings recently upgraded Indonesia’s credit to investment<br />
grade, a change that allows its bonds to be added to benchmark global indexes.<br />
<strong>The</strong> country’s Finance Minister Agus Martowardojo recently told the media that he expects<br />
total investments made by private sector and the government to grow as much as 10% this<br />
year, after rising more than 8% in 2011. Adding to this optimism, particularly in the longer term,<br />
is the passage of a bill throughout Parliament in December that aims to expedite land purchases<br />
for infrastructure projects and which could spur significant growth in the construction sector.<br />
Lack of infrastructure and lack of legal protections has held back Indonesia’s growth but there<br />
are signs that the government is tackling the first issue and it has taken steps in the past few<br />
years to also take on the second, with the new Mining Law providing concrete evidence of this<br />
in the mining sector. Economic experts say the country can take further steps to improve the investment<br />
climate by revising rigid labour laws.<br />
As far as mining is concerned, coal will continue to be the major economic player. Indonesia is<br />
the world’s largest exporter of thermal coal and the second largest exporter of coal overall behind<br />
Australia. A recent International Energy Agency coal report stated, “Global demand for coal will<br />
continue to expand aggressively over the next five years despite public calls in many countries for<br />
reducing reliance on the high-carbon fuel as a primary energy source...” Coal is already the single-largest<br />
source of electricity generation globally, and the report says the main reason for the projected<br />
increase in coal demand over the next five years is surging power generation in emerging<br />
economies, particularly China and India. This bodes well for Indonesia’s booming coal industry.<br />
Other mineral resources, including tin, nickel, copper, gold, silver and manganese are also<br />
major contributors to the mining industry’s input. <strong>The</strong>se resources will all play their part in the future<br />
with new coal, precious metals and base metals projects set to come on line.<br />
WWW.<strong>ASIA</strong>MINER.COM<br />
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Latin America—Mauricio Godoy, mgodoy@mining-media.com<br />
Germany, Austria, Switzerland— Gerd Strasmann<br />
strasmannmedia@t-online.de<br />
Rest of Europe—Colm Barry, colm.barry@telia.com<br />
Jeff Draycott, jeff.draycott@WOMPint.com<br />
Japan—Masao Ishiguro, Ishiguro@irm.jp<br />
Indonesia—Dimas Abdillah, dimas@lagunagroup.net<br />
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<strong>The</strong> <strong>ASIA</strong> <strong>Miner</strong>® is published six times per year by Mining Media<br />
International. Every endeavour is made to ensure that the contents<br />
are correct at time of publication. <strong>The</strong> Publisher and Editors do not<br />
endorse the opinions expressed in the magazine. Editorial advice<br />
is non-specific and readers are advised to seek professional advice<br />
for specific issues. Images and written material submitted for<br />
publication are sent at the owners risk and while every care is<br />
taken, <strong>The</strong> <strong>ASIA</strong> <strong>Miner</strong>® does not accept liability for loss or damage.<br />
<strong>The</strong> <strong>ASIA</strong> <strong>Miner</strong>® reserves the right to modify editorial and advertisement<br />
content. <strong>The</strong> contents may not be reproduced in whole<br />
or in part without the written permission of the publisher.<br />
Copyright 2011 Mining Media International Pty Ltd<br />
ISSN: 1832-7966<br />
2 | <strong>ASIA</strong> <strong>Miner</strong> | March/April <strong>2012</strong>