Agenda is below ---- - Quick Facts About Indonesia - Unity In Diversity - Religion - Colonization of The Country - Japanese Occupation and Sukarno - Suharto and Anti-Communist Purge - Economic Strengths & Weaknesses - Indonesia Culture - Japanese Business in Indonesia - Crime, Ethnic Violence & Muslim Terrorism - Political Power & Corruption - Crime & Punishment - Japanese ODA & FDI in Indonesia - China & Japan's Battle for Southeast Asia Influence - Asian Infrastructure Investment Bank (AIIB) Support - China & Japan Bidding On The High-Speed Rail - The Rail Deal - Position in Asia Pacific - Relationship With the United States - Discussion Points - Investing In Indonesia: Now Or Never? - Ease of Doing Business - South China Sea ----

1. Unno School
Global Negotiator Training Program
Swingby Corporation
July 20th, 2016
Indonesia
Clyde Unno

2. Swingby
Points of Argument
1
 Quick Facts About Indonesia
 Unity In Diversity
 Religion
 Colonization of The Country
 Jpanese Occupation and Skarno
 Suharto and Anti-Communist Purge
 Economic Strengths & Weaknesses
 Indonesia Culture
 Japanese Business in Indonesia
 Crime, Ethnic Violence & Muslim Terrorism
 Political Power & Corruption
 Crime & Punishment
 Japanese ODA & FDI in Indonesia
 China & Japan's Battle for Southeast Asia Influence
 Asian Infrastructure Investment Bank (AIIB) Support
 China & Japan Bidding On The High-Speed Rail
 The Rail Deal
 Position in Asia Pacific
 Relationship With the United States
 Discussion Points
 Investing In Indonesia: Now Or Never?
 Ease of Doing Business
 South China Sea
18:30 20:30
INDONESIA
How Powerful Is Indonesia?
https://www.youtube.com/watch?v=oGGEbYNrxNMVideo

3. Swingby
Joko Widodo
2
Quick Facts About Indonesia
 Population: 250 million people
 GDP: around $900 billion USD
 GDP Per Person: $3,800
 Gini Coefficient: medium
 Import: machinery, chemicals, fuels, and food
 Export: oil, gas, electronic appliances, wood, rubber, textiles
 Largest Muslim Population: 87% - Sunni
 Ethic Groups in Country: 300 groups
 Governmental 5 Year Plan: Social assistance and infrastructure

4. Swingby3
Unity In Diversity
3
The Indonesian national motto “Unity in Diversity” points to one of the greatest attractions of the
country. There are over 300 ethnic groups, many Indonesians may see themselves first by their
ethnic and cultural group and secondly as Indonesians. The glue that binds the people together
is the usage of the Bahasa Indonesia, the national language, and Pancasila, the national
philosophy, which stresses the doctrine of unity and universal justice for all Indonesians.
Pancasila
 Pancasila (pronounced [pantʃaˈsila]) is the official
philosophical foundation of the Indonesian state.
 Consists of two old Javanese words (originally from
Sanskrit): "pañca" meaning five, and "sīla" meaning
principles. It comprises five principles held to be
inseparable and interrelated:
1. Belief in the one and only God.
2. Just and civilized humanity.
3. The unity of Indonesia.
4. Democracy guided by the inner wisdom in the unanimity
arising out of deliberations amongst representatives.
5. Social justice for all of the people of Indonesia.

5. Swingby
Religion
The Indonesian Government is secular, and hosts a Muslim majority. Regardless, the government
recognized the following 6 official religions in its belief of free religion: Islam, Protestantism, Catholicism,
Hinduism, Buddhism and Confucianism. Soekarno bridged the contradiction about number of gods by
saying "every religion (including 'soft polytheistic' Hinduism) essentially has one highest Supreme Being to
which one subjects oneself".
Source: Wikipedia (2010)
Islam 87.2%
Christianity
9.9%
Religious Persecution And Hostility On The Rise In Indonesia
https://www.youtube.com/watch?v=FF-yu-cgn_UVideo

6. Swingby5
Colonization Of The Country
Colonial era
• The Dutch established the Dutch East India Company(VOC) and
throughout 17th and 18th centuries, the company became the dominant
European power in the archipelago.
• The VOC was dissolved in 1800, after a short British rule, the Dutch state
took over the VOC possessions in 1816.
• Problem: corruption, bad management. Led to bankruptcy, and
Dutch state took control
Liberal Colonial Indonesia
• 1830: a system of forced cultivations and indentured labor was introduced,
the Cultivation System, and this system brought wealth.
• 1870, the system was eliminated and from1901 the Dutch adopted what
they called the Ethical Policy which increased investment indigenous
education and modest political reform.
• Problem: A tolerant regime was replaced by repressive regime,
which wanted full Indonesian independence from the Dutch. New
regime was ultimately conquered by the rising youth leader, Sukarno.
Source: Indonesia Investments
cultivation system
Source: nusabeans.xyz
Coin from VOC days

7. Swingby6
Japanese Occupation & Sukarno’s Presidency
Japanese Occupation of Indonesia
1942-1945: During and after WWII, Japanese took over Indonesia
from Holland, in hopes of gaining oil. According to Japanese records,
Indonesians welcomed Japanese as saviors from harsh Dutch rule.
August 17th, 1945: Sukarno and Hatta declared Indonesian
independence (2 days after Nagasaki atom bomb).
Problem: First, Japanese were welcomed, but there was much
hardship later: not enough food, water, clothing, medicine. There
was forced labor for construction projects and administrative
mismanagement of basic needs.
Sukarno’s presidency
Sukarno, leader of the Indonesian independence movement and
Indonesia’s first president (1949-66), who suppressed the country’s
original parliamentary system in favor of an authoritarian ‘Guided
Democracy’ and who attempted to balance the Communists against
the army leaders. He was deposed in 1966 by the army under
Suharto.
Source: Indonesia Investments
Japanese army training Indonesian boys
Source: Wikipedia
Sukarno was a close friend of Mao
Japanese Samurai :who contributed to Indonesian independence
https://www.youtube.com/watch?v=z9tYurVJKG4Video
Dutch woman speaks of forced sexual enslavement on her family by Japanese milita
https://www.youtube.com/watch?v=9-gUUG2ELvs&spfreload=10Video

8. Swingby
Suharto & Anti-Communist Purge
7
Suharto (1921- 2008) was the second president of Indonesia, holding the office for
31 years from the ousting of Sukarno in 1967 until his resignation in 1998.
• He led troops against an attempted coup on September 1965 then the blame
was placed on the Indonesian Communist Party
Anti-communist purge, also known as the September 30 movement in 1965
• A campaign of mass killing was underway, which resulted in the death of
hundreds of thousands of alleged communists
May 1998 riots of Indonesia, also known as the 1998 Tragedy
• Mass violence of ethnic Chinese, and more than a thousand people died.
• Triggered by economic problems like food shortages and mass unemployment.
• Eventually led to the resignation of President Suharto
While the ironic thing is Suharto, who tops corruption rankings, died on January 28,
2008, one day before the UN anti-corruption convention was held in Indonesia.
World’s three most corrupt leaders

9. Swingby
Economic Strengths & Weaknesses
Weaknesses
Corruption
Governance
Disasters
Ethnic/regional violence
Economic weakness
Strengths
 Strong Labor Force:120 million
66% of the population area
between 15-64 (2015)
 World Bank's estimate of
Economic Growth between 2015-
2016 will be 5.6%
 Increasing urbanization average
income
 Rapid & stable economic growth
in diversified economy
 By 2030, will be 7th largest
economy (2015: 15th)
 Government is serious about
eliminating corruption
 $450 billion budget necessary for
infrastructure development from
2015-2019.
 Comparison: Vietnam (10
year) needs $500 billion
 Kalimantan, Sulawesi and
Sumatra are catching up as
emerging markets of the world
Source: World Bank
 Infrastructure
 Lacks educational diversification
 Wants to join TPP but needs to
overcome protectionism
 High wages are relative
 Low per person income

10. Swingby9
Current Economic Situation: Slow Growth
 17% of company's expense is on logistics
 2.1% of GDP is invested in China & India
 December 2014, fossil fuel and electricity sector receive USD $33.2 billion subsidies (15.3% of country's total
spending) to boost the poorer segments of society, but was pushing the public too close to poverty.
 In early 2015, fuel subsidy was then diverted to state-owned enterprises and cities for infrastructure development
 If the new subsidy proposal (June 2016) on diesel fuel is accepted, subsidy allocation will drop from IDR 63.7 trillion
(USD 4.75 billion) to IDR 40.6 trillion (USD 3.03 billion), which will cause current levels at IDR 1,000 (USD 0.07) to
go down to IDR 350 (USD 0.03) per liter for all residents in Indonesia.
 Increased natural disaster risks
 Power plants are shifting from oil to gas &
coal
 Difficulty attracting investments due to many
land-right and laws
 Behind plans: health, welfare, education in
Indonesia
 High cost in extreme weather due to
blackouts
Source: http://blog.euromonitor.com/2015/02/look-beyond-the-surface-when-selecting-new-emerging-markets.html
https://www.iisd.org/gsi/sites/default/files/ffs_indonesia_newsbriefing_June2016_eng.pdf

11. Swingby10
Current Economic Situation: Subsidy Reallocation
Fuel subsidy
savings in 2015
allowed major
investments in
social welfare and
infrastructure
through increased
budgets for
ministries, state-
owned enterprises
and transfers for
regions and
villages.
Source: http://www.greengrowthknowledge.org/blog/what-can-you-afford-year-without-fuel-subsidies
$15.7
Billion
US
Subsidy saving amount:
$2.59Bil.
$11.06Bil.
$4.71Bil.
https://www.youtube.com/watch?v=8BPitayGVGk&t - t=1m53sVideo
From slums to the palace: Indonesia's President Widodo Subsidy

12. Swingby
Japan-Indonesia Economic Relations
11
 Indonesia is Japan's major supplier for natural rubber, liquefied natural gas, coal, minerals,
paper pulp, seafood such as shrimp and tuna, and coffee.
 Indonesia has been regarded as a major market of Japanese automotive and electronic
goods.
 Approximately 1,000 Japanese companies operate in Indonesia which employ
approximately 300,000 people.
Japan, Indonesia to Boost Economic, Security Ties 2015/03/23
https://www.youtube.com/watch?v=H8dhAHNNSagVideo

13. Swingby
Indonesia Culture
12
Indonesian Culture
https://www.youtube.com/watch?v=igIu-shinvIVideo

14. Swingby
Who are Indonesian?
13
What Indonesian people are like
https://www.youtube.com/watch?v=CRcJSN1gmeoVideo

15. Swingby14
 According to a 2014 BBC World Service Poll,
70% of Indonesians view Japan's influence
positively, with 14% expressing a negative view,
making Indonesia one of the most pro-Japanese
countries in the world.
 Japanese direct investment in Indonesia is no
longer limited to traditional sectors but now also
include retail, media, and consumer products
sectors.
 Japanese restaurant chains such as Ootoya,
Yoshinoya, and Ebisu Curry, fashion, retail and
household appliances stores such as Sogo and
MUJI, and bookstores such as Books Kinokuniya
have recently entered the market in Indonesia.
The investment of these new corporations is
encouraged by the success of several Japanese
companies.
 Ajinomoto is planning the construction of a new
USD $50 million factory in Indonesia.
Japanese Businesses in Indonesian Markets
[MV] Mae Shika Mukanee (Hanya Lihat Ke Depan) - JKT48
https://www.youtube.com/watch?v=1eEngMCVyUEVideo

16. Swingby15
Crime, Ethnic Violence & Muslim Terrorism
Hatred is targeted at rich Chinese and Christians (Kalimantan, Moluccas, Sulawesi).
Muslim Terrorists
Largest Muslim population (88%, mostly moderate)
Al-Quaeda, Islamic State:
Reasons for radicalization：
1. Political exclusion,
2. Feelings of great injustice,
3. Feelings of western domination
Links with Middle-East for funding and ideological support
 Some radical Muslims in Indonesia (very few from 200 million Muslims) have ties to stricter
Middle Eastern Islam. Some of those have connections to terrorist organizations.
Counterterrorism squad
https://www.youtube.com/watch?v=JcwWs7POKtcVideo
Source: http://www.indonesia-investments.com/business/risks/radical-islam/item245
Jakarta Terror | 9 News Perth

17. Swingby16
Political Power & Corruption
 To increase transparency in Indonesian
accounting, adopted accrual accounting in
2015
 Corruption
 Index 118, improving since 1998
 Under Suharto a small network of
military/friends (Chinese businessmen,
family benefiting from company
privatizations)
 Corruption Eradication Commission
 Post 1998: Decentralization makes
corruption less predictable & widespread
 Lack of a institutions for promoting business
environment
 Increased Informal labor sector where majority
of unemployed workers migrated to. 55-65% of
employment considered informal labor
(agriculture, construction)
 Informal labor: part of an economy that is
neither taxed, nor monitored by any form of
government
Source: http://anticorruptiondigest.com/anti-corruption-news/2016/06/15/indonesia-no-corruption-in-sumber-waras-land-
acquisition/#axzz4Ed92X2wy
http://businessperspectives.org/journals_free/ppm/2015/PPM_2015_02%20spec.issue_M_Suparman.pdf

18. Swingby17
Crime & Punishment
Due to its conservative culture, crime is harsh
and punishable by death.
• In 2015, total of 14 foreigners were shot
under death penalty for drug trafficking
crimes. Those included Dutch, Brazilian,
Vietnamese, Malawian, Nigerian, Australia.
 Due to the recent drug smuggling incident
and previous negative history with Australian
foreigners, Australians still need travel visas
to enter Indonesia
 Australia accounts for 12% of all foreign
visitors to Indonesia (as of 2015)
Talk to Al Jazeera - Joko Widodo: 'A strong message to drug smugglers 5min.
https://www.youtube.com/watch?v=D_S3TjQ4T-s#t=1m40sVideo

19. Swingby18
Japanese ODA & FDI in Indonesia
Year 2009 2010 2011 2012
Total 2,884 3,026 2,249 1,998
1
Japan
1,416
Japan
1,594
Japan
1,031
Japan
822
2
Australia
342
Australia
356
Australia
447
Australia
606
3
France
303
France
348
US
262
US
195
4
US
274
US
263
Germany
214
Germany
126
5
Netherlands
167
Germany
185
Netherlands
78
Netherlands
46
2013 Foreign Direct Investment (FDI) in Indonesia
(by country) f
Source: Reuters, JETRO
• Since 1987, Indonesia was the largest recipient of the Japanese Official Development Assistance
(ODA), which is on a cumulative and annual basis
• Japan has long been the largest foreign investor into Indonesia
• Does Japan (US ally) have more soft power/influence over Indonesia than China?
Amount of Development Assistance Committee (DAC)
Countries' & International Organizations' ODA Disbursements to
Indonesia
($ million USD)

20. Swingby19
China & Japan's Battle for Southeast Asia Influence
 Economic development in Southeast Asia is a
potential benefit for Japan's economy
 FDI and overseas development assistance could
limit the influence of Chinese economics in
Southeast Asia
 Japan could help contribute to more regional
stability if they would balance power in the South
China Sea China is not only aiming to receive
economic benefit, but also to expand
its penetration into Southeast Asia,
hoping to lead to more power and
influence.
 Built a 'maritime silk road'
 Established the Silk Road Fund
 Established the Asian
Infrastructure Investment Bank
(AIIB)
Southeast Asia would rather not
succumb to Beijing's dominance in
the area
Japan is hoping to build partnerships with key states
in the region. They have established partnerships with
Vietnam, Philippines, Indonesia, and Malaysia.
Japan has ambitious plans for regional infrastructure
investments. Tokyo is now taking action.
http://nationalinterest.org/feature/china-japans-battle-influence-southeast-asia-14006

21. Swingby20
Asian Infrastructure Investment Bank (AIIB) Support
Widodo greatly supports the Chinese-led Asian Infrastructure Investment Bank in hopes that this
will help provide more opportunities – already, aerospace and rail deals have resulted.

22. Swingby21
High-Speed Rail
President Widodo added 30 more countries to the travel allowance without visas. This reform is
expected to boost the tourism industry by $1 billion USD, bringing 1 million more travelers per year.
Indonesia recently accepted the bullet train bid from China (Japan lost bid) in September 2015 to boost
the economy. Australians still need travel visas to enter Indonesia (12% of foreign visitors are
Australian; 2015) due to recent drug smugglers.
 October 2014: Widodo sworn in as President
 March 2015: Abe provides loan for Municipal Rail but no progress with high speed rail; Widodo
meets Xi talks about project
 April 2015: Bid by China with much lobbying
 September 2015: Widodo cancels the project and signs with China with 100% private finance
 October 2015: China granted $5 billion deal for Phase I
Indonesia's first high-speed railway breaks ground
https://www.youtube.com/watch?v=xkhk8s9bqGQVideo

23. Swingby22
China & Japan Bidding On The High-Speed Rail
2010 Started negotiations 2015 Started negotiations
Expected completion in 2023 Expected completion in 2019
Substantial expertise in high-speed trains
Reputation as a world-class train-producer
 Late-bloomer in the industry
 China has the world's longest HSR network with
over 16,000 km (9,900 miles) of track in service as
of December 2014
Energy-efficient, high safety, earthquake-
sturdy for decades, the bullet trains have
been in operation without a single, fatal
accident
China made an alliance with Indonesian companies
and also shared high-level construction experience
with the Indonesian government
 China will support rail construction and workers'
training
 Promised 40,000 new jobs in Indonesia every year
for the train line's construction
Japan International Cooperation Agency
offered loans of $4.4 billion USD with a 40
year repayment period. Actual interest is
less than 1%
 China estimated the railway would cost $5.5 billion
USD and is offering Indonesia a 50 year year loan
that would charge a 2% annual interest
 Increased infrastructure investments from China to
Indonesia in line with the planned "Belt and Road
Routes"

24. Swingby23
The Rail Deal
 China wins
China, Indonesia sign $5.5 billion high-speed rail deal
 Japan is difficult to understand and "extremely regrettable" with no flexibility in deal
terms
 Japan's deal failed because it was too "government to government (G2G)" and not
"business to business (B2B)", the stance China took and won
 China took the side as one who wants to support building Indonesia as a nation
 Will be run by Indonesian state-affiliated corporation. No government financial
guarantee so if loss/debt repayment fails, government not liable
https://goo.gl/cFMmw4Video
Can China Connect the World by High-Speed Rail? | Gerald Chan | TEDxKFAS
https://www.youtube.com/watch?v=uRdQ_2sjF2s#t=5m20sVideo

25. Swingby24
Position in Asia Pacific
Indonesia is emphasizing strengthening relationships and
friendships with South Pacific leaders. Indonesian Minister of
Political, Legal and Security Affairs is making rounds around
the pacific to Fiji and Papua New Guinea (March 2016) to
talk about bilateral relations.
Indonesia recently provided $8 million USD in relief efforts to
victims from the Fiji cyclone in February 2016.
Fiji and Indonesia hope to increase cooperation in education,
agriculture, economy, and food security.
Indonesian Security Minister Luhut Binsar
Pandjaitan (right) shaking hands with his friend
Fiji Prime Minister Voreqe Bainimarama
during a visit to the Pacific.
Source: Fiji Newswire
Source: Asia Pacific Report, April 8, 2016

26. Swingby25
Relationship With the United States
 Relations between US and Indonesia are close and strong. Since 1950, the US Agency for
International Development (USAID) has been supporting Indonesia on food, infrastructure,
health care, public training. In 1970s, USAID helped it become self-sufficient by producing rice,
and in 2000s, helped with post-disaster assistance programs (food, water, health, economy,
tsunami, environment)
In Widodo's meeting with Obama in October 2015,
both countries want to strengthen comprehensive
partnerships in defense and economic cooperation,
and help keep terrorism at a low in Southeast Asia.
 By gaining Indonesia's support in
preventing ISIS from taking a foothold in
the country as well as neighboring
countries (Malaysia, Singapore), it will be
difficult for ISIS to grow in this region.
 In addition, the US hope that while it is fine
to deal with China, Indonesia should not
support China to gain Asian power and
dominance. Any power conflict in Northeast
Asia will be reflected in Southeast Asia. As
a result, America will not take sides to keep
continued continuity in this region.
Source: The Diplomat, Straits Times
Indonesia's Example to the World
https://www.youtube.com/watch?v=niDPBTbJqS0Video
President Obama speaks on democracy, economic growth and America's relationship to the Muslim world in a speech at the
University of Indonesia in Jakarta. November 10, 2010.

27. Swingby26
Discussion Points
 How else do you think President Widodo could speed up the economy of Indonesia?
 With which country should Indonesia strengthen ties, and why?

28. Swingby27
Investing In Indonesia: Now Or Never?
Exports: $200 billion Imports: $185 billion
Ease of Doing Business Rank: 120
Starting a business
Dealing with construction permits
Getting electricity
Registering property
Getting credit
Protecting investors
Paying taxes
Trading across borders
Enforcing contracts
Resolving insolvency
Doing Business in Indonesia - BW-IND
https://www.youtube.com/watch?v=1OQS0AGmGDM#t=5m10sVideo
Japan 34

29. Swingby28
Ease of Doing Business (2009)
Indonesian Business Culture
https://www.youtube.com/watch?v=3z8Y3LknZFoVideo

30. Swingby29
Strengths & Weaknesses of the Business Environment
Strengths
Solid basic skills and a large available
workforce
Promising reform of rules and
regulations affecting business
 Top Asian Reformer in 2010
(World Bank Doing Business)
Solid financial system
Greater formal opening of economy to
trade and investment
 New Investment Law passed in
2007
Wide array of potential clusters,
especially in natural resources-related
fields
Weaknesses
Weak logistical and communication infrastructure
Unreliable electricity supply
Labor market rigidity
Regulations and customs procedures remain
complex
Limited depth in financial systems
Weak educational quality
Legal system uncertainty for investors, especially at
the provincial level
Dominance of large business groups and state-
owned enterprises
Weak cluster collaboration and development
Lack of advanced skills
Weak science and technology system

31. Swingby
Indonesia Seizes Chinese Fishing Boat
30
On 31 May, 2016, the Indonesian military seized Chinese fishing boat and crew after it entered
Indonesia’s exclusive economic zone in seas off the resource-rich Natuna Islands archipelago.
In a statement, the Indonesia navy commander said
the seizure was intended as a notice to the world and
the boat was stopped to show it will act firmly against
violations of its jurisdiction. China and Indonesia have
a different point of view about the waters where the
incident happened. Beijing claims these parts of
Indonesian-ruled Natuna Islands are within ‘nine-dash
line’. China has said it does not dispute Indonesia’s
sovereignty over the Natuna Islands, but claims
nearby waters as part of its traditional fishing grounds.
On the other hand, Indonesia says the waters are in
tis exclusive economic zone.
Indonesia "Attacks" China in South China Sea! | China Uncensored
https://www.youtube.com/watch?v=WS5qixxt3B4Video

32. Swingby
Nine-Dashed Line & Exclusive Economic Zone
31
The nine-dash line, previously the "11-dash line", is
the demarcation line used initially by the government
of the Republic of China (Taiwan) and subsequently
also by the government of the People's Republic of
China, for their claims of the major part of the South
China Sea.
But on the other hand,
• Former Philippine President Benigno Aquino III,
"China's nine-dash line territorial claim over the
entire South China Sea is against United Nations
Convention of the Laws of the Sea
• Vietnam also rejected the nine-dash line claim
An exclusive economic zone (EEZ) is a sea zone
prescribed by the United Nations Convention on the
Law of the Sea over which a state has special rights
regarding the exploration and use of marine
resources, including energy production from water and
wind. It stretches from the baseline out to 200 nautical
miles from its coast.
South China Sea Ruling: 5 Things to Know
https://www.youtube.com/watch?v=qOeEMsdYzm4Video