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

Overview of Indonesia and its EconomyLooking ahead, the EIU expects the nominal Rupiah exchange rate will weaken marginally to an average ofRp. 9,212 in 2007, with a further decline to Rp. 9,422 in 2008. In real terms, the Rupiah is expected to befairly stable against the US dollar in 2007-08. The Rupiah will remain exposed to the risk of volatility duringthe EIU’s forecast period, as large inflows of foreign portfolio funds in 2006 have left the Rupiah vulnerableto short-term perceptions of political risk.1.7.9 InflationInflation in Indonesia remains relatively high compared to other South East Asian economies. A majorcontributing factor in the past two years has been the sharp rise in energy prices.The crisis in 1997 led to severe inflation in 1998 and 1999, driven by the collapse of the Rupiah and therapid movement of money supply to the banking sector. However, in 1999, the return of macroeconomicstability, together with subdued economic growth, reduced inflation to around 2%, which at around 9% inthe following five years. The government’s decision to increase fuel prices by an average of 125% inOctober 2005 caused inflation to increase significantly to 17%. Inflation improved to 7% in 2006. Below isthe comparison table of average annual inflation between Indonesia and selected Asian countries.Table 1.7.11 Consumer price inflation, 1996-2006 average annual% growthCountry 96 97 98 99 00 01 02 03 04 05 06Brunei . . . . . . . . . . . . . 2.0 1.7 (0.4) 0.0 1.2 0.6 (2.3) 0.3 0.9 1.1 0.5China . . . . . . . . . . . . . 8.3 2.8 (0.8) (1.4) 0.4 0.7 (0.8) 1.2 3.9 1.8 1.5India . . . . . . . . . . . . . . 8.8 7.4 13.2 4.7 3.9 3.7 4.5 3.7 3.9 4.0 5.6Indonesia .......... 7.0 6.2 58.0 20.7 3.8 11.5 11.8 6.8 6.1 10.5 13.0Malaysia . . . . . . . . . . . 3.5 2.6 5.1 2.8 1.6 1.4 1.8 1.1 1.4 3.0 3.8Pakistan . . . . . . . . . . . 10.8 11.8 7.8 5.7 3.6 4.4 2.5 3.1 4.6 9.3 7.9Philippines. . . . . . . . . . 9.1 5.9 9.7 6.4 4.0 6.8 2.9 3.5 6.0 7.6 6.7Thailand . . . . . . . . . . . 5.9 5.6 8.1 0.3 1.6 1.7 0.6 1.8 2.8 4.5 4.9Vietnam . . . . . . . . . . . 5.7 3.2 7.7 4.2 (1.6) (0.4) 4.0 3.2 7.7 8.2 7.6Source: World Bank, World Development Indicators, 2006Note: data for Indonesia refers to urban areas/selected cities onlyStable international oil prices and a relatively strong Rupiah are expected to help contain inflationarypressures in 2007, despite stronger economic growth. As a result, the EIU has forecast CPI will average6.9% in 2007 and 6.1% in 2008. Drought and an import ban may place upward pressure on rice prices in2007. Wage pressures in 2007-08 should be subdued, given relatively high unemployment and easinginflationary pressures.1.8 Population growth and demographics1.8.1 Population growthIndonesia is the fourth most populous country in the world after China, India and the USA. The 2000Census recorded the population at 201 million, with the Central Bureau of Statistics (BPS) estimating thatthe population had risen to 222 million in 2006. Population growth has slowed considerably, averaging1.5% per annum throughout the 1990s, a result of successful family planning programs that havesubstantially reduced the fertility rate.About 95% of the population is of Malay origin, with over 300 minority groupings, including theMelanesians, Polynesians and Micronesians as well as the estimated 4 million of ethnic Chinese. Themost common religion practiced is Islam (87%), followed by Christianity (10%), Hinduism (2% mainly inBali) and Buddhism (1%).The gender profile of Indonesia is well balanced, with approximately 101 million males and 100 millionfemales based on the 2000 National Census. Most of the population was classified as of working-age(between 15-64 years old). However, among the working-age population, the majority were aged between15 and 45 years, accounting for over 51% of Indonesia’s total population. Combined with 30% of theF-18