LIPPO-MAPLETREE - Lippo Malls Indonesia Retail Trust - Investor ...

Executive summaryThis report provides an independent review of the Indonesian economy and retail market together with areview and market outlook of each of the subject properties in the LMIR Trust.The key findings of this report are summarised below:INDONESIAN ECONOMYIndonesia is the world’s fourth most populous country, with an estimated population in 2006 of 222 millionpeople. 130 million people live on the island of Java, the world’s most populous island. In 2005, Indonesia’sgross domestic product (GDP) was US$281 billion, ranking Indonesia as the 26th largest economy in theworld.Politically, Indonesia has changed significantly over the past decade from a political system whichemphasised consensus, unity and control towards a democracy, with a publicly elected president.Economically, the country has made significant steps towards modernisation, with the liberalisation of thepreviously restrictive investment rules and a number of economic packages aimed at increasing foreigninvestment, encouraging development in infrastructure and strengthening the financial sector.Today, Indonesia is the world’s number one exporter of liquefied natural gas (LNG) and the 17th largest oilproducer. Its manufacturing sector is now the largest contributor to GDP and international companies areshowing interest in locating manufacturing plants in the country, taking advantage of the relaxation offoreign investment rules, Indonesia’s strategic location and its low-cost employment base.Whilst Indonesia took longer than some other countries to recover from the Asian financial crisis of1997/98, GDP growth has improved considerably in recent years, from 3.8% in 2001 to 5.5% in 2006.Importantly, this trend is expected to continue, with GDP growth forecast to average 5.8% over the next fiveyears, significantly higher than global economic growth.In terms of purchasing power parity (PPP), Indonesia has recorded strong growth in per capita income(6.9% in 2005). On this basis, income levels in Indonesia are significantly higher than India but remain wellbelow China.Indonesia’s competitiveness is now much improved with the World Economic Forum ranking it 50th on theirGlobal Competitiveness Scale in 2006, its highest ever ranking.Whilst Indonesia has recorded relatively high inflation over the past two years, the EIU expects inflation tofall to approximately 6% in 2007 and 2008, due in part to the stabilisation of the local currency.Population growth has slowed in the past two decade and is expected to average 1.4% per annum between2006 and 2010. This lower growth rate should prove positive in the longer term, placing less strain onpublic services and infrastructure, reducing new entrants to the labour market and leading to higher levelsof GDP per capita.Indonesia has a relatively young population with over 80% of the population under 45 years of age. This willsee the country’s employment base increase markedly in the short to medium term.Indonesia’s population is largely concentrated on the island of Java, which accounts for nearly 60% of totalpopulation. Urbanisation has been strong, with the population living in cities growing from 22% in 1980 to46% in 2005. The Greater Jakarta, with an estimated population of 22.3 million, is one of the 10 mostpopulous cities in the world.Economic development in Indonesia has seen a significant increase of the middle income group over thepast five years. Such an increase has been a major driver of the retail sector. The middle and upper incomegroups have increased as a percentage of total households from 50% in 2001 to 64% in 2006, with a higherproportion being within urban areas and on the island of Java. It is estimated that the urban middle incomegroup in Indonesia totals approximately 66 million people.F-6