Citigroup Summary Takeaways from Citi Indonesia Investor Conference – Day 1, Indonesia Strategy:BKPM Talk

 BKPM talk — Gita Wirjawan,Chairman of the Indonesian Investment
Coordinating Board,spoke at a luncheon at Citi's Indonesia Investor
Conference on Aug.4-5.Below are key takeaways.Mr.Wirjawan,a 42-year
old former banker and a private equity principal,joined the cabinet in
October 2002.BKPM (www.bkpm.go.id)seeks to become the main
interlocutor between business and government in Indonesia.BKPM presents
investment opportunities and provide services to potential and existing and
investors.

 Investment required — The government estimates that Indonesia needs to
invest up to US$1trn during the current president ’s term of 2009-2014.By
then,the economy is expected to reach US$950bn if Indonesia grows by 6-
7%per annum.Of these total investments,approximately 15%will have to
be raised through new investments in infrastructure which are currently the
main focus of BKPM.

 Challenges faced by BKPM — These include::streamlining approval
processes and simplifying land ownership law.BKPM has streamlined
licensing processes and cut the time required to get a license to 5 hours and
at most a week.A draft land law is in the works and parliament deliberation
is expected to commence soon.A 2007 government attempt to put a price
cap on land acquisition prices for infrastructure projects through a
Presidential Decree did not bring the expected result.

 Roads and power — Indonesia is projected to require 20,000km of new
roads and 25GW of new power generation capacity over the next five years.
BKPM believes that if these and other infrastructure build-out targets are
accomplished,then industrialization will take place along with the build-out.

 Risks — What could derail the government ’s efforts in developing
infrastructure is not political,because Mr.Wirjawan believes that democracy
is well established over the past five years and the current political system is
stable.He is more concerned with potential ‘sectoral ego ’ ((turf battle)among
certain departments within the government.Mr.Wirjawan did not see much
room within the current budget to help push this infrastructure build-out,
hence private sector participation is key.He estimated that the current
budget only has no more than 3-4%‘space ’ to be spent on infrastructure.