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November 2012

OFFICE OF CHIEF ECONOMIST

IInnddoonneessiiaa UUppddaattee

CCoonntteennttss

Is Indonesia Ready to be a BigCountry? p.02

Minor Impacts Seen From LaborWage Increase p.08

Basis Sector Analysis and LoanDistribution of ManufacturingIndustry Sector

p.14

Reviewing Differences inAutomotive Market Trends p.26

Mandiri Leading Economic Indicator p.32Indonesia Current Data (Table) p.34

CChhiieef f EEccoonnoommiisstt

Destry Damayanti

[email protected]

AAnnaallyysstt

Faisal Rino BernandoAndry Asmoro

M. Ajie Maulendra

Nadia Kusuma Dewi

Nurul Yuniataqwa Karunia

Sindi Paramita

Reny Eka Putri

Andrian Bagus Santoso

Adjie Harisandi

Mamay Sukaesih

PPuubblliiccaattiioonn AAddddrreessss::

Bank Mandiri Head Office

Office of Chief Economist18

thFloor, Plaza Mandiri

Jalan Jend. Gatot Subroto Kav.36-38

Jakarta 12190, Indonesia

Phone: (62-21) 524 5516 / 5272

Fax: (62-21) 5210430

EEmmaaiill::

[email protected]

[email protected]

[email protected]

[email protected]

[email protected]

[email protected]

[email protected]

[email protected]

[email protected]

[email protected]

SSeeee i i mm p poor r t t aannt t d d i i ssccl l aai i mmeer r aat t t t hhee eennd d oo f f

t t hhi i ss mmaat t eer r i i aal l

Is Indonesia Ready to be a Big Country?

McKinsey Global Institute in their report said that Indonesia will be the seventh

largest country in the world in 2030. The fact is our economy in 2011 is still at the

16th rank (base on IMF calculation). Indonesia’s large population (the fourth largest

in the world), the growth of the middle class people who have better purchasing

power and the rapid growth of urban areas are the major sources of economic

growth driver of Indonesia for the next 18 years.

Minor Impacts Seen From Labor Wage Increase

The recent plan of minimum wage increase for 2013 has sparked concerns about the

economic momentum ahead. Among the provinces which have approved minimum

wage increase is Jakarta. The provincial government of the nation’s capital agreed to

increase it by 44% to IDR 2.2 mn/month from the current IDR 1.5 mn/month and will

be followed by other regions. We believe the plan on minimum wage increase will

impact manufacturing sector the most, especially on labor intensive industries.

Basis Sector Analysis and Loan Distribution of Manufacturing Industry Sector

The manufacturing industry is one of the important factors in determining the

quality of economy, especially in employment. Nationally, the manufacturing

sector’s contribution to GDP was the largest compared with other sectors. But the

contribution of the manufacturing industry continued to decline. In the third quarter

of 2012, the manufacturing industry’s contribution to GDP was 23.87%, lower than

in 2005 by 27.4%. Unlike the contribution, the manufacturing industry growth

increased.Reviewing Differences in Automotive Market Trends

Throughout the year, the automotive market in Indonesia showed unusual

development. The growth of the car and motorcycle markets always has a consistent

trend and is only distinguished by its magnitude, but this year it has a highly contrary

trend. Up to October 2012, the automotive market still showed impressive

performance and would certainly record the highest annual sales record in history.

After a decrease in the monthly sales seasonally due to reduced working days during

Eid al-Fitr, monthly auto sales rebounded at over 100 thousand units from

September 2012, and again reached the highest monthly sales record in October

2012, which reached 106.8 thousand units. Differently, for the motorcycle market,

negative monthly sales growth has been felt since the first quarter of 2012.

11.7

31.9

-8.8

11.3

25.1

29.4

26.5

30.5

10.0

22.824.6

22.9

2007 2008 2009 2010 2011 Sep-12

Manufacturing Credit Growth (% yoy) Credit Growth (% yoy)

% Manufacturing to total credit

Loan Growth of Industrial Manufacturing and Total Industry

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© Office of Chief Economist of 36

Is Indonesia Ready to be a Big Country?Destry Damayanti ([email protected])

Indonesia will be the seventh largest country in the world in

2030, outpacing the current developed countries, Germany

and the UK

(McKinsey Global Institute Report, September 2012)

The above statement would provide special pride to us,

Indonesian people, because based on the IMF calculation the

amount of our economy in 2011 is still at the 16th rank.

Besides Indonesia, other Asian countries included in the 2011

biggest countries in Asia of the IMF’s version are China, India

and South Korea. Large population (the fourth largest in the

world), the growth of the middle class people who have better

purchasing power and the rapid growth of urban areas are the

major sources of economic growth driver of Indonesia for the

next 18 years. In addition, the Indonesia’s healthy

demographic structure, which is concentrated in the

productive age (15 years to 60 years old), provides added

value for Indonesia, compared with developed countries that

are generally dominated by the elderly. Even the dependency

ratio of elderly to young people is continuing to decline until

reaching its lowest point in 2030. Thus, the next 18 years are

the golden years for Indonesia due to the momentum of

excellent economic growth.

As of the quarter 3-2012 Indonesia’s economy still showed

strong resilience against global economic shocks. The

economy still grew by 6.2% compared to the same period last

year. Meanwhile, the two Asian economic giants, China and

India, were experiencing a very significant economic

slowdown, becoming 7.4% and 5.4% from 9.2% and 7.1% in

2011. Global economic pressures apparently hit their export

earnings drastically, while the domestic economy is not

prepared to cover the negative growth in the external sector.

Moreover, the high inflationary pressures and budget deficits

in India, limited the space for the Government and the

Reserve Bank of India to provide stimulus into their economy.

This condition is different from Indonesia, where inflation is

relatively low, with the under-controlled budget deficit, which

is estimated to be 1.65% of GDP in 2013, so that Indonesia still

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had a greater space if the economy shows a significant

slowdown. Moreover, the ratio of government debt to GDP

has declined to 23% in 2012 from 39% in 2006, which also

allows the Government to optimize its debt funding sources to

support its economic development.

Meanwhile, Indonesia’s domestic economy, which is

supported by public consumption and investments, is

continuing to show its strength in sustaining Indonesia’s

economy amid slowdown in the contribution of the external

sector (exports). Growth in private consumption remains

stable even reaching 5.7% in the quarter 3-2012 supported by

the growth of the middle class people. Moreover, investments

are continuing to record double-digit growth of 10%.

Confidence of foreign investors to Indonesia also continues to

increase, even foreign direct investment (FDI) in the quarter 3-2012 reached its highest value of IDR 57 trillion, with an

uneven spread of investments in industry, mining, commerce

and transport. Expansion of business done by the Japanese

global company of Toyota and L’Oreal in Indonesia proves the

potential of Indonesia is not only as a market base but also

their production base. Indonesia’s economic growth on the

basis of the domestic economy is expected to continue in

2013, where the economy is still expected to grow to 6.5%

with a controlled inflation rate at 5% level. The BI rate is

expected to be maintained at the level of 5.75% and the

average Rupiah exchange rate is around 9,500 to 9,600.

The question is how long this condition can be maintained.

Can McKinsey’s predictions for Indonesia in 2030 be achieved?

We get lessons from four countries joining in the BRICs (Brazil,

Russia, India and China), which in 2001 by its founder, Jim

O’Neill, was expected to be super power countries, but their

economies are in fact in pretty tough conditions with high

inflation rates. One inadvertence they made is the ill-prepared

anticipation of rapid economic growth, resulting in less

balancing by growth in other sectors, such as infrastructure

and human resources, so that the economic supply side is lesscapable of balancing the growth in the demand side.

For Indonesia, the same thing could happen, if we are

complacent in anticipation of a rush of investment in our

economy. Never let the confidence of investors and the good

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performance of our economy make us complacent, making

the chores and challenges to be done and faced by Indonesia

in terms of government, businesses and people of Indonesia

as a whole not addressed well. Some of potentials possessed

by Indonesia will, if not used properly, be problems for thecountry in the future.

Demographic Bonus owned by Indonesia, which is reflected by

the abundance of productive age population by 2030, if it is

not balanced with an increase in education, productivity as

well as adequate job creation will only encourage high

unemployment in Indonesia. The current Indonesia’s labor

force data, amounting to 112 million people, show that 67% of

them are in fact graduated from junior high school level and

below, thus affecting the quality of our workforce. The

currently more rampant labor issues in Indonesia should alsobe of concern to all parties. Do not get the handling of these

issues drag on and damaged the investor confidence.

The second is the slow development of downstream

industries, causing our economy is very dependent on raw

materials and imported capital goods. The implication is that

in times of economic expansion, as reflected by increased

investment, it must be balanced by an increase in imports,

which in turn suppress our balance of payments. Meanwhile,

exports continue to slow due to weaker global demand and

falling commodity prices. Therefore, not surprisingly if duringthe year 2012 the Rupiah exchange rate has depreciated

about 6% compared to the end-2011’s exchange rate, despite

fairly heavy capital inflows into Indonesia, particularly in the

form of FDI.

Tax incentives provided by the Government to some strategic

industries only affected small businesses in fact, because of

the requirements on the business scale to reach USD 1 trillion,

and employment of 500 employees. Whereas the results of

the OECD study (Sep 2012) show that 99% of the total

companies in Indonesia are Medium, Small and Micro-scaleEnterprises (MSMEs). Therefore, it should be reconsidered to

provide other forms of incentives for MSME businesses so as

to accelerate the achievement of the downstream industries

in Indonesia.

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Finally, a classic problem to be the Government’s concern is

infrastructure development to improve the connectivity within

Indonesia. Rapid investment growth without equipped with

adequate infrastructure will only lead to over-heating of

economy so as to create macroeconomic instability.Bottlenecks in land acquisition for the future should be the

government’s concern that the acceleration of infrastructure

development can begin to be realized in 2013.

Regardless of the challenges mentioned above, if they can be

handled well by our country and accompanied by all potentials

possessed by Indonesia, the space for the Indonesian

economy to grow is still quite large. The predictions made by

McKinsey are not a figment. However, of course this condition

must also be supported by the behavior of people who are

ready to accept changes as a democratic Indonesian societywith mutual respect for the freedom and interests of others

and not just imposing the will of an individual or group.

Figure 1. Indonesia economy is supported by domestic economy especially public consumptions

and investments. (Source: World Bank, BPS)

2.42.9 2.9

1.0

2.1 2.6

-2

0

2

4

6

8

2002 2007 Y-3Q12

Growth contribution (ppt)

Net export

InvestmentGovernment spending

Private consumption

Domestic

Economy

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Class

Cut-Off

(USD) 2003 (%) 2010 (%)

Low< 1.25 21.9

62.214.0

43.31.25 - 2 40.3 29.3

Middle

2 - 4 32.1

37.6

38.5

56.54 - 6 3.9 11.7

6 - 10 1.3 5.0

10 - 20 0.3 1.3

High > 20 0.1 0.10 0.2 0.20

Total Population (mn) 213 234

Class

Cut-Off

(USD) 2003 (%) 2010 (%)

Low< 1.25 21.9

62.214.0

43.31.25 - 2 40.3 29.3

Middle

2 - 4 32.1

37.6

38.5

56.54 - 6 3.9 11.7

6 - 10 1.3 5.0

10 - 20 0.3 1.3

High > 20 0.1 0.10 0.2 0.20


Figure 2. Growth in middle class will drive public consumption into hogher level. (Source: World

Bank, BPS)

Figure 3. A healthy demographic structure, which is reflected by the abundance of productive age

population, will remain until 2030. (Source: BKPM)

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5 . 8

2 3 6 . 8

5 1 3 . 1 6

7 6 . 6

3 0 0 . 0

3 2 9 . 8

3 3 1 . 7

1 8 1 . 0

0 . 7

1 , 9 0 4 . 6

S i n g a p o r e

B r u n e

i

C a m

b o

d i a

L a o s

P h i l i p p

i n e

M a

l a y s

i a

V i e t n a m

T h a

i l a n

d

M y a n m a r

I n d o n e s

i a

5 . 1 1

3 . 4

8 5 . 8 1 0 1 . 8

2 7 . 6

5 8 . 8

6 6 . 7

6 . 5

0 . 4

2 3 7 . 6

B r u n e

i

S i n g a p o r e

L a o s

C a m

b o

d i a

M a

l a y s

i a

M y a n m a r

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i n e

I n d o n e s

i a

2 1 . 0 8

2 . 7

4 4 7 .

3

6 0 2 . 1

3 0 0 . 0

3 1 4 .

9 3 9 0 .

4

3 3 . 5

1 7 . 4

1 , 1 2 4 . 6

L a o s

B r u n e i

C a m b o d i a

M y a n m a r

V i e t n a m

S i n g a p o r e

P h i l i p p i n e

M a l a y s i a

T h a i l a n d

I n d o n e s i a

Figure 4. Indonesia has largest area, largest population, and highest GDP among other Asean

countries. (Source: IMF)

In thousand SQ KmIn Million

In Billion USD

Largest Area in ASEAN Largest Population in

ASEANHighest GDP in ASEAN

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Minor Impacts Seen From Labor Wage Increase Aldian Taloputra ([email protected])

Leo Rinaldy ([email protected])

Wisnu Trihatmojo ([email protected])

The recent plan of minimum wage increase for 2013 has

sparked concerns about the economic momentum ahead.

Among the provinces which have approved minimum wage

increase is Jakarta. The provincial government of the nation’s

capital agreed to increase it by 44% to IDR 2.2 mn/month from

the current IDR 1.5 mn/month. This will likely be followed by

other regions. Then, how is the impact against

macroeconomic indicators going forward? Below are some

thoughts:

Majority of the labor force would unlikely be impacted from

this plan. Total employment reached 110.8 mn persons in

Aug12 with informal sector share remaining dominant at 60%

of total employment and the rest is in the formal sector. As

the raise will mostly affect formal sector workers, bigger

chunk of employment (around 67 mn people) will not be fully

affected by the policy (figure 5). Part of the informal labor

works in the agriculture sector which employs 38.9 mn

persons or 35% of total employment (figure 6). Therefore, the

production cost of raw food is expected to be less impacted

which is crucial for food inflation stability (the weight of volatile food towards inflation calculation amounts to 20% -

30%).

We believe the plan on minimum wage increase will impact

manufacturing sector the most, especially on labor intensive

industries (the sector employs 15.4 mn persons or 14% of total

employment). Breaking it down, the top three industries that

employed the largest labor force are i.) food, beverage &

tobacco sector, ii.) textile sector, and iii.) wood & furniture

sector. These three sectors shares 23%, 22%, and 10% of total

medium and large manufacturing employment, respectively

(figure 7).

Thus, minimum wage increases will likely impact inflation yet

by a small degree. This is considering several factors:

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1. Looking at the overall cost structure, surprisingly labor cost

is not dominant for food, beverage & tobacco sector.

Labor cost only consists 3% of total production for this

industry (figure 8). The labor cost is higher for textile

sector especially for garment (27.1% of garment total costis labor cost) (figure 9).

2. Indonesia’s inflation is calculated using the basket of goods

consumed by consumers (Consumer Price Index) not by

the basket of inputs which are used by producers

(Production Price Index). Therefore, even if there is an

increase on cost of production for industries mentioned

above, it will not be immediately passed-through to price

increase for their products sold to consumers and it will

not be as high as the increase on their production costs.

Specifically, the pass-through effect of production cost forfood & beverage sector will be harder considering the tight

competition in this sector.

3. The direct impact on consumer price inflation may come

through higher salary paid to housemaid and other

household related labor such as babysitter and housing

construction workers. The weight of housemaid salary and

the household-related workers are each around 1.2% and

1.8% respectively in CPI basket. Nonetheless, given the

informal job nature of these employments, we think the

direct impact to inflation will be relatively muted.

Summing it up, based on our estimate, every 1% increase in

manufacturing wage will contribute approximately 0.02ppt

towards inflation. Thereby, a national average of 10% - 20%

increase in manufacturing wage will contribute 0.2% - 0.4% to

inflation in 2013, depending on the proportion of these

workers that is still receiving minimum wage.

Impact on economic growth will likely be neutral assuming

that inflationary pressure will still be manageable. Higher

minimum wage provision will trigger transfer of income fromthe capital owners to the labor forces, which will have neutral

impact on the GDP. Yet, given the high marginal propensity to

consume of household (the labor provider), it tends to spend

the additional income and eventually could generate larger

economic activity. On the other side, higher labor cost could

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cause small setback on investment as it may lower the margin

of investing in Indonesia. Nevertheless, we think, robust

domestic demand and relatively intact competitive labor cost

will help offset lower margin caused by higher wages. As the

recent FDI comes to tap domestic market, reallocatinginvestment abroad will also trigger higher transportation cost.

Despite the increase, Indonesian labors are still relatively

competitive compared with peers. Specifically, Indonesia’s

wage is more competitive than Malaysia, Thailand, China, and

the Philippines and is only more costly than Vietnam,

Cambodia, and Myanmar (figure 10). Even if we use Jakarta’s

plan minimum wage for next year and assume China’s (Beijing)

wage is still unchanged in 2013, Indonesia remains more

competitive than China in term of labor costs. Meanwhile,

domestically, the choice for overseas players to invest outsidethe Greater Jakarta is still wide open as the increases in the

minimum wages set by 15 other areas are below Jakarta’s

standard (figure 11). Nevertheless, if labor unrests persist, it

could hurt FDI activities in the medium and long term.

Formal sector

40 % (44.2mn)Informal sector

60 % (66.7 mn)

Proportion of total employment 2012

0 5 10 15 20 25 30 35 40 45

Electricity, Gas&Water Supply

Mining

Financial sector

Transport & Communication

Construction

ManufacturingServices

Trade, Hotel & Restaurant

Agriculture

2012 employment (million person)

Figure 5. Informal sector dominated employment share (left figure). Agriculture sector absorbed

most employment (right figure). (Source: BPS)

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0%

10%

20%

30%

40%

50%

60%

C o n s t r u c t i o n

A g r i c u l t u r e a n d f i s h i n g

M i n i n g

H o t e l s

O t h e r s e r v i c e s

W R T

P r i v a t e h o u s e h o l d s

M a n u f a c t u r i n g

T S C

E G W

R e a l e s t a t e

H e a l t h

E d u c a t i o n

F i n a n c i a l

P u b l i c s e r v i c e s

O t h e r s

Prevalence of informal employment by industry, 2007

Figure 6. Big part of workers in construction and agriculture sectors are informal. (Source: "Informal

Employment in Indonesia" - Cuevas, Mina, Barcenas, and Rosario)

Note : EGW (Electricity, Gas, and Water), WRT (Wholesale and Retail Trade), TSC (Transportation, Communication,

and Storage).

0

10

20

30

Employment share for medium and large manufacturing

sector

Figure 7. Manufacturing sector will likely impacted the most by minimum wage increase. (Source:BPS)

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Raw material

55

Energy

25

Labor

6

Depreciation

6

Interest rate

4

Marketing

3

Fiber Making

Raw material

58.1Energy

18.5

Labor

6.4

Depreciation

6

Interest rate

4

Marketing

3

Spinning

Raw material

56.5

Energy

14.4

Labor

13.3

Depreciation

2.1

Interest rate

6.4

Marketing

7.4

Weaving

Raw material

57.7

Energy

1.4

Labor

27.1

Depreciation

1.4

Interest rate

2.4

Marketing

10.2

Garment

Raw material

60%

Packaging

27%

Overhead

10%

Labor cost

3%

Food industry

Raw material

33%

Packaging

52%

Overhead

12%

Labor cost

3%

Beverage industry

Figure 8. Cost structure for food and beverage industry. (Source: BPS)

Figure 9. Cost structure for textile industry. (Source: various sources)

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0 100 200 300 400

Myanmar

Cambodia

Vietnam

Indonesia

Philippines

China

Thailan d

Malaysia

2012 monthly minimum wage (US$)

* Indonesia = Jakarta

China = Beijing

Thailand = Bangkok

0

2

4

6

8

10

12

14

16

18

20

-20

0

20

40

60

M

a r - 0 0

D e c - 0 0

S e p - 0 1

J u n - 0 2

M

a r - 0 3

D e c - 0 3

S e p - 0 4

J u n - 0 5

M

a r - 0 6

D e c - 0 6

S e p - 0 7

J u n - 0 8

M

a r - 0 9

D e c - 0 9

S e p - 1 0

J u n - 1 1

M

a r - 1 2

YoY change (%)

man uf acturi ng wag e (yoy% ) I nf la ti on (y oy% )-RHS

Figure 10. Wage increase will likely push inflation up though minor (left figure). Indonesia’s wage

remains competitive than peer countries (right figure). (Source: various sources, Philippines

Department of Labor and Employment)

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Figure 11. List of minimum wage in various provinces for 2013. (Source: Kontan Newspaper)

No Province UMP 2012 UMP 2013 (Plan) Increase1 Aceh 1,400,000 1,550,000 10.71%

2 North Sumatera 1,200,000 1,305,000 8.75%

3 West Sumatera 1,150,000 1,350,000 17.39%

4 Riau Island 1,015,000 1,365,087 34.49%

5 Jambi 1,142,500 1,300,000 13.79%

6 Bangka Belitung 1,110,000 1,265,000 13.96%

7 Bengkulu 930,000 1,200,000 29.03%

8 West Kalimantan 900,000 1,060,000 17.78%

9 South Kalimantan 1,225,000 1,337,500 9.18%

10 Central Kalimantan 1,327,459 1,553,127 17.00%11 East Kalimantan 1,177,000 1,752,073 48.86%

12 North Sulawesi 1,032,300 1,125,207 9.00%

13 South Sulawesi 1,200,000 1,440,000 20.00%

14 Papua 1,585,000 1,710,000 7.89%

15 Jakarta * 1,529,000 2,200,000 43.88%

20.11%

2013 Minimun Wage Progress per November 20, 2012

Average

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Basis Sector Analysis and Loan Distribution of Manufacturing Industry

Sector Mamay Sukaesih ([email protected])

Development of National Manufacturing Industry

The manufacturing industry is one of the important factors in

determining the quality of economy, especially in

employment. Nationally, the manufacturing sector’s

contribution to GDP was the largest compared with other

sectors. But the contribution of the manufacturing industry

continued to decline. In the third quarter of 2012, the

manufacturing industry’s contribution to GDP was 23.87%,

lower than in 2005 by 27.4%. Unlike the contribution, the

manufacturing industry growth increased. The manufacturingindustry in the third quarter of 2012 grew by 6.36% yoy,

higher than in 2005 by 4.6% yoy, despite the slowdown in

2009 due to the global economic crisis.

Nationally, the manufacturing industry sector was dominated

by the non-oil and gas sector, amounting to 86.2% in 2011.

Food, beverages and tobacco industry provided the greatest

contribution by 35.2% of non-oil and gas industries. It was

followed by equipment, machinery and transport equipment

industry and fertilizer, chemical and rubber products industry

by 27.5% and 12.2%, respectively.

Manufacturing

industry share of the

economy declined, but

the growth rate

increased. Spatially,

the greatest

contribution of the

manufacturing

industry is West Java

province.

Manufacturing Industry and PDB Growth Non-Oil & Gas Manufacturing Industry by

Component, 2011 (%)

Figure 12. Manufacturing sector’s contribution to GDP declined but the growth increased, with the

largest share at the food, beverages and tobacco industry. (Source: BPS)

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Spatially, share of the manufacturing industry was substantial,

generally located on the Java Island. West Java Province was a

province that had the biggest share of manufacturing industry,

amounting to 22.4% in 2011. It was followed by East Java

(16.8%), Central Java (11.6%), Jakarta (10.7%), Banten (6.4%).Provinces outside Java Island, which had a manufacturing

industry share of over 5%, were East Kalimantan (6.4%) and

Riau (5.6%).

However, a province with a sufficiently high share of the

national manufacturing industry was not necessarily that the

manufacturing sector in the province was a basis sector.

Furthermore, this analysis will address mapping of provinces

having basis sector in the manufacturing industry sector and

bank lending to the manufacturing sector.

Province Mapping Analysis Method Having ComparativeAdvantages in Manufacturing Industry Sector

To learn more about any province which has advantages in the

manufacturing sector, this analysis applies the Location

Quotient (LQ). In the LQ analysis, variables used are the GDP

The method of

analysis used is the

Location Quotient (LQ)

and Difference Shift

(DS)

Share of Manufacturing Industry Sector by Province

2011 (%)

Figure 13. West Java, East Java and Central Java have contributed most to the national

manufacturing sector. (Source: BPS)

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value of the manufacturing industry sector and the total

provincial GDP compared to the GDP value of the

manufacturing industry sector and the total national GDP.

From the calculation, the value of LQ can be classified into:

a. LQ > 1 means that a particular sector is a particular region

is a basis sector and is an advantage of the region or has a

high potential to be developed.

b. LQ < 1 means that a particular sector in a particular region

is a basis sector and is not an advantage of the region.

c. LQ = 1 means that a particular sector in a particular region

is only able to meet its own territory.

In addition to the LQ method, this analysis also employs thedifference method between the provincial and national

manufacturing industry growths or Difference Shift (DS). If the

DS value is positive, the sector growth in the province is higher

than the national average. Conversely, a negative DS value

shows the sector growth in the province is lower than the

national average. The data used is GDP data based on the

constant prices 2000 of 2007-2011.

Provinces Having Comparative Advantages in Manufacturing

Industry

From the LQ calculation, provinces having basis sectors of

manufacturing industry were generally located on Java Island.

This was consistent with the economic corridor of Java in the

Master Plan for the Acceleration and Expansion of Indonesia's

Economic Development (MP3EI), which determined Java as a

driving corridor of national industries and services. Provinces

having basis sectors of manufacturing industry include Banten,

Riau, West Java, Central Java and East Kalimantan (figure 14).

The manufacturing industry was not a basis sector of DKI

Jakarta and East Java although the share of manufacturing

industry in both provinces to the national level was high(figure 13). LQ value of the manufacturing sector in East Java is

equal to 1, which meant the manufacturing sector in East Java

was only able to meet its own territory. Meanwhile, the LQ

value of the manufacturing sector in Jakarta was below 1,

Provinces with basis

sectors of

manufacturing

industry include

Banten, Riau, West

Java, Central Java and

East Kalimantan

7/29/2019 m Lfp 39324515



which meant the manufacturing industry in Jakarta was not a

basis sector.

Provinces that had a basis sector of manufacturing industry, in

addition to Riau Islands and Central Java, the manufacturingsector growth rate was below the national average.

Meanwhile, a province that had the manufacturing sector

growth rate well above the national average was West Papua,

although the sector was not a basis sector.

Banten province had basis sectors of manufacturing industry,

particularly non-oil and gas industries. Industries as the basis

sectors in Banten included textile, leather products and

footwear industry, basic iron and steel metal industry,

fertilizer, chemical and rubber products industry, and paper

and printing products industry and other goods industry. An

industry with the highest basis value was the basic iron and

steel metal industry. Industrial zones in Banten includedCilegon (Krakatau Steel) and Serang.

LQ Average Value of Manufacturing Industry,

2007-2011

DS Value of Manufacturing Industry,

2007-2011

Figure 14. Provinces with key sectors of manufacturing industries included Banten, Riau Islands.

West Java, Central Java and East Kalimantan (Source: BPS, processed data)

7/29/2019 m Lfp 39324515



Meanwhile, industries of the basis sectors in Riau Islands

Province included wood products and other forest products

industry, cement and non-metal mineral industry, basic iron

and steel metal industry, transportation equipment,

machinery and equipment industry and other goods industry.

Riau Islands also had the highest basis sector of basic iron and

steel metal industry.

LQ Average Value of Manufacturing Industry of Banten Province

2007-2011

Figure 15. Banten Province had the highest basis sectors in iron and steel basic metal industry.

(Source: BPS, processed data)

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Other goods industry and textile, leather products and

footwear industry, transport equipment and machinery and

equipment industry, fertilizer, chemical and rubber products

LQ Average Value of Manufacturing Industry of Riau Islands Province

2007-2011

Figure 16. Riau Islands Province had the highest basis sector in iron and steel basic metal industry.

(Source: BPS, processed data)

LQ Average Value of Manufacturing Industry of West Java Province

2007-2011

Figure 17. Industries of the highest basis sectors in West Java Province were textile, leatherproducts, & foot wear industries. (Source: BPS, processed data)

7/29/2019 m Lfp 39324515



industry are the basis of West Java Province. Although the

textile, leather products and footwear industry was the

second highest basis sector, the average growth was negative

during the period 2007-2011.

For Central Java, an industry of the highest basis sector was

the Wood products and other forest products industry. Other

basis industries included food, beverages and tobacco

industry, textile, leather products, footwear industry and

cement and non-metal mineral industry. Central Java also had

a basis sector in oil and gas industry particularly the petroleum

refining industry.

In contrast to West Java, textile, leather products, footwear

industry in Central Java had an average positive growth during

the period 2007-2011. Similarly, the wood products and otherforest products industry was the highest basis sector, with a

positive growth.

A province outside of Java with a basis sector of

manufacturing industry was East Kalimantan. Unlike other

provinces with a basis sector of manufacturing industry, East

Kalimantan had a basis sector in the oil and gas industry (the

petroleum refining industry and the liquefied natural gas

LQ Average Value of Manufacturing Industry of Central Java Province

2007-2011

Figure 18. Non-oil industry as the highest basis sector in Central Java Province is wood and other

products industries. (Source: BPS, processed data)

7/29/2019 m Lfp 39324515



industry). Non-oil and gas industry, which was the basis sector

of East Kalimantan, was the paper and printing products

industry.

Loan Distribution of Manufacturing Industry Sector

Once you know which provinces having advantages in the

manufacturing industry, we will discuss the development of loan distribution in the manufacturing industry. It is intended

to determine whether bank loan distribution is in accordance

with the basis sector mapping of the manufacturing industry.

Loan distribution of

manufacturingsector ranked the

third largest.

LQ Average Value of Manufacturing Industry of East Kalimantan Province

2007-2011

Figure 19. East Kalimantan had a basis sector in the oil and gas industry (liquefied natural gas

industry and petroleum refining industries). (Source: BPS, processed data)

7/29/2019 m Lfp 39324515



Manufacturing industry was the largest share in GDP.

However, the loan distribution of manufacturing industry was

16.4% in September 2012 or ranked.

Manufacturing industry was the largest share in GDP.

However, the loan distribution of manufacturing industry was

16.4% in September 2012 or ranked the third largest after the

loans of non-industrial origin (29.7%) and loans of wholesale

and retail trade (17.9%). Share of manufacturing industry

loans to total loans declined since 2010, from 20.5% in 2007 to

16.4% in September 2012. It shows there are still potentialsthat can be optimized in bank lending in the manufacturing

industry.

Average growth of manufacturing loans during 2007 to

September 2012 was 16.8%. The highest loan growth in the

manufacturing industry occurred in 2008 (31.9%), while the

negative growth was in 2009 (-8.8%) due to the global crisis.

Figure 20. Loan distribution in the manufacturing industry ranks the third largest. (Source:BI)

Credit

(IDR Bn)

Share

(%)

Credit

(IDR Bn)

Share

(%)

Agricultures, Hunting and Forestry 131,784.8 5.2 Real Estate, Business, Ownership, and Business

Services

140,338.3 5.5

Fisher 5,228.2 0.2 Government administration, Defese and Compulsory

social security

2,777.8 0.1

Mining and Quarrying 93,978.3 3.7 Education Services 4,482.7 0.2

Manufacturing Industry 420,406.3 16.4 Health Services and Social Activities 8,126.3 0.3

Electrici ty, Gas and Water 68,386.1 2.7 Community, Sociocultura l,Entertainment and Other

Individual Services

43,645.8 1.7

Construction 98,999.2 3.9 Individual Services which Serve Households 709.3 0.0

Wholesale and Retail Trade 457,612.7 17.9 International Agency and Other Extra Agency

International

515.7 0.0

Provision of accomodation and eating and drinking 39,520.1 1.5 Business Activities which are not clearly defined 40,235.4 1.6

Transportat ion, Warehousing and Communicat ions 114,610.8 4.5 Loans to Non Industria l Or ig in 760,019.0 29.7

Financial intermediaries 124,462.1 4.9

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When viewed from the Non-Performing Loan (NPL), the NPL

level of the manufacturing industry declined since 2011, from

4% in January 2011 to 2.7% in September 2012. But the NPL

level in the manufacturing industry was still above the

national loan. In September 2012, the NPL level of the

manufacturing industry ranked the 7th highest out of a total

of 19 sectors. Although NPL of the manufacturing industry wasstill above the recorded national rate of 2.1% in September

2012, the NPL level of the manufacturing industry was still

under the NPL of the wholesale and retail trade sector (3%).

Spatially, over 50% of loan distribution of the manufacturing

industry was in DKI Jakarta (57.2%). It was followed by East

Java (14.9%), West Java (7.7%), Central Java (6.2%), North

Sumatra (5.9%) and Batam (1.4%). The development of

manufacturing loan share to total loans in provinces with

advantages of manufacturing industry (West Java, Central

Java, Banten, Riau Islands and East Kalimantan) showed adecline in 2007-2011. In addition, the NPL level in the

provinces having advantages in the manufacturing industry is

still below the NPL level of the national manufacturing

industry (figure 22). It shows there are still potentials that can

be optimized in banking lending for the manufacturing

Loan Growth of Industrial Manufacturing and Total Industry

11.7

31.9

-8.8

11.3

25.1

29.4

26.5

30.5

10.0

22.8 24.6 22.9

2007 2008 2009 2010 2011 Sep-12

Manufacturing Credit Growth (% yoy) Credit Growth (% yoy)

% Manufacturing to total credit

Figure 21. Loan distribution in the manufacturing sector ranked the third largest. (Source: BI)

7/29/2019 m Lfp 39324515



industry in the areas with advantages in the manufacturing

industry.

Percentage to National Manufacturing Loan byProvince (%)

Percentage Manufacturing Credit to TotalCredit, 2011 (%)

Figure 22. Loan distribution of 57.2% was for the manufacturing industry sector in DKI Jakarta.

(Source:BI)

NPL of Manufacturing Industry Loan (%) NPL of Manufacturing Industry Sector by Province (%)

Figure 23. NPL of manufacturing sector has declined since the beginning of 2011. Provinces having

advantages in the manufacturing sector have NPL under the national level (Source:BI)

7/29/2019 m Lfp 39324515



Reviewing Differences in Automotive Market TrendsFaisal Rino Bernando ([email protected])

Contrary Trends

Throughout the year, the automotive market in Indonesia

showed unusual development. The growth of the car and

motorcycle markets always has a consistent trend and is only

distinguished by its magnitude, but this year it has a highly

contrary trend.

Up to October 2012, the automotive market still showed

impressive performance and would certainly record the

highest annual sales record in history. After a decrease in the

monthly sales seasonally due to reduced working days duringEid al-Fitr, monthly auto sales rebounded at over 100

thousand units from September 2012, and again reached the

highest monthly sales record in October 2012, which reached

106.8 thousand units. Cumulative sales up to October 2012

have reached 923.1 thousand units (23.7% yoy), exceeding

sales in 2011 amounted to 894.2 thousand units. We

expectauto sales this year will enter a new era by penetrating

1 million units and is in the range of 1.10 to 1.15 million units,

growing by 23-28% yoy.

Differently, for the motorcycle market, negative monthly salesgrowth has been felt since the first quarter of 2012. In fact,

the historical trend in recent years showing the monthly

growth trend, which was increasing at every beginning of the

year, is not seen this year. With sales that only reached 5.96

million units up to October 2012 (-14% yoy), the motorcycle

market in 2012 was expected to be in the range of 7 to 7.2

only million units or slower at approximately 10-13% yoy.

7/29/2019 m Lfp 39324515



Why Did Correction only Occur in Motorcycle Market?

As widely discussed, the decrease in the motorcycle market is

certainly a result of the enactment ofminimum down-payment

(DP) policy for consumer financing, including cars and

motorcycles. The question is why did the market correction

only occurin the motorcycle market, while the car market iseven more ferocious? Obviously this is an interesting fact to

be discussed. The reason is that the interest rate as one factor

in the rise and fall of automotive sales (since 80% of

automotive sales use financing services) does not apply in the

motorcycle market. Moreover, the recent interest rate is

relatively low with the continuously decreasing trends. Even

when seeing the correlation, the motorcycle market is more

sensitive to the interest rate compared to the car market. The

motorcycle market, that is usually in line with the car market

trend, is highly opposite at this moment. In fact, theinfluence

of down-payment factor is more dominant than the interestrate for the motorcycle market.

Why is down-payment very influential on the motorcycle

market? This shows that down-payment applied for

motorcycle financing was very low. In fact there were

Figure 24. Monthly car and motorcycle sales (unit). Opposite trends occur in both markets since the

first quarter of 2012. (Source: Gaikindo, AISI)

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

J a n

F e b

M a r

A p r

M a y

J u n

J u l

A u g

S e p

O c t

N o v

D e c

2008 2009 2010 2011 2012

300,000

350,000

400,000

450,000

500,000

550,000

600,000

650,000

700,000

750,000

800,000

J a n

F e b

M a r

A p r

M e i

J u n

J u l

A g s

S e p

O k t

N o v

D e s

2008 2009 2010 2011 2012

7/29/2019 m Lfp 39324515



consumers who could bring home a motorcycle without down-

payment, despite the relatively high interest rate. Moreover,

proportion of consumers with low down-payment is much

higher in motorcycle market than that of car market. Before

the minimum down-payment regulation was applied, morethan 60% of motorcycle financing applied down-payment

below the current regulation of 20%. Meanwhile, over 70% car

financing has been complying with the current regulation

before it is applied.

In addition, commodity prices that tend to fall as currently

occurring also affect the automotive market, especially the

motorcycle market. The data show that there is a strong

positive correlation between commodity prices andautomotive market. No wonder when the commodity prices

boomed in 2008, sales of cars and motorcycles grew higher, by

40% and 33% yoy, respectively.

Figure 25. Relationship between lending rates & automotive sales and proportion of consumers

with down-payment above/below 20% (%). Lending rate does affect automotive sales (correlation

>80%). Proportion of consumers with low down-payment is much higher in 2W market than that of

4W market. (Source: BI, MoF, Gaikindo, AISI)

0

5

10

15

20

25

Ja

n-

01

No

v-

01

Se

p-

02

J

ul-

03

M

ay-

04

M

ar-

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Ja

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No

v-

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M

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No

v-

11

Se

p-

12

0

20,000

40,000

60,000

80,000

100,000

120,000

Inflation (%, yoy) BLRKK (%) 4W Sales (Unit)

0

5

10

15

20

25

Ja

n-

01

No

v-

01

Se

p-

02

J

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0100000200000300000400000500000600000700000800000

Inflati on (%, yoy) BLRKK (%) 2W Sales (Uni t)

<20, 63.7

<20, 23.2

>20, 36.3

>20, 76.8

2W 4W

7/29/2019 m Lfp 39324515



Increasing Income Does Affect Demand for Automotive

How about the Automotive Demand Prospects for the Future?

If we see the potential, the Indonesian automotive market will

still grow in the higher rate. The increasing middle incomepopulation will certainly affect the increasing purchasing

power in the automotive market. A study conducted by the

Carnegie Endowment shows that there is a strong positive

correlation between income per capita (based on purchasing

power parity) and average income elasticity for car ownership.

Data of cross country say that when a country’s per capita

income is below USD 3,400, the elasticity is 0.6only. This

means that every 1% increase in per capita income of a

country, there is a rise in carownership of 0.6%. Elasticity

increases sharply to 1.9 when a country’s per capita income is

in the range of USD 3,400-10,000, slightly decreases to 1.6when the per capita income in the range of USD 10,000-

25,000, and drops drastically to 0.9 when the per capita

incomeis above USD 25,000 . The study is confirmed with what

happened in Indonesia. Indonesia’s per capita income reached

USD 3,400 in 2006. And since 2007 until now, in the state of

Figure 26. Relationship between soft commodity prices and automotive sales. Strong positive

correlation between commodity prices and automotive market, especially Non-Java market. (Source:

Bloomberg, Gaikindo, AISI)

0

20,00040,000

60,000

80,000100,000

120,000

Ja

n-

01

No

v-

01

Se

p-

02

J

ul-

03

M

ay-

04

M

ar-

05

Ja

n-

06

No

v-

06

Se

p-

07

J

ul-

08

M

ay-

09

M

ar-

10

Ja

n-

11

No

v-

11

Se

p-

12

0.001.00

2.003.004.005.006.007.00

4W Sales (Unit) Rubber Price (USD/Kg)

0

200000

400000

600000

800000

Ja

n-

01

No

v-

01

Se

p-

02

J

ul-

03

M

ay-

04

M

ar-

05

Ja

n-

06

No

v-

06

Se

p-

07

J

ul-

08

M

ay-

09

M

ar-

10

Ja

n-

11

No

v-

11

Se

p-

12

0.00

2.00

4.00

6.00

8.00

2W Sales (Unit) Rubber Price (USD/Kg)

0

200000

400000

600000

800000

Ja

n-

01

No

v-

01

Se

p-

02

J

ul-

03

M

ay-

04

M

ar-

05

Ja

n-

06

No

v-

06

Se

p-

07

J

ul-

08

M

ay-

09

M

ar-

10

Ja

n-

11

No

v-

11

Se

p-

12

0

400

800

1200

1600

2W Sales (Unit) CPO Price (USD/MT)

0

20,00040,000

60,000

80,000100,000

120,000

Ja

n-

01

No

v-

01

Se

p-

02

J

ul-

03

M

ay-

04

M

ar-

05

Ja

n-

06

No

v-

06

Se

p-

07

J

ul-

08

M

ay-

09

M

ar-

10

Ja

n-

11

No

v-

11

Se

p-

12

0200400600800100012001400

4W Sales (Unit) CPO Price (USD/MT)

7/29/2019 m Lfp 39324515



the market without shock, the growth of the car market was

relatively highand started to be higher than the growth of the

motorcycle market.

And what about the motorcycle market prospects for thefuture? Will it begin to decline due to the continuously

increasing demand for cars in line with the income per capita?

Indeed, when referring to the study above, the increased

share of the middle class occurring in Indonesia could pose a

potential shifting of the motorcycle market to the car market

for specific consumer groups.

If we refer to the World Bank classification of middle-class, the

middle-class composition is divided into four groups:

groupswith spending of USD 2-4, USD 4-6, USD 6-10 and USD

10-20 per day. From simple simulation we did, it appears thatgroups expected to be able to repay the carfinancing, both for

low-cost car (often called Low Cost Green Car or LCGC) and

Low Multi-Purpose Vehicle (MPV), arein the upper-middle

(USD 10-20 per day). However, the group portion is relatively

small, which is 1.3% of the total population. Meanwhile,the

portion of three groups below it (middle and lower-middle) is

much higher, amounting to 55.2% of the total population.

Thus, the three groups are still potential for the motorcycle

market development.

Figure 27. Population composition by expenditure and dependency ratio. 50 million additional

middle income population in 7 years or about 7 million per year. (Source: World Bank and BPS)

Class Cut-Off (USD) 2003 (%) 2010 (%)

Low< 1.25 21.9

62.214.0

43.3

1.25 - 2 40.3 29.3

Middle

2 - 4 32.1

37.6

38.5

56.54 - 6 3.9 11.7

6 - 10 1.3 5.0

10 - 20 0.3 1.3

High > 20 0.1 0.10 0.2 0.20


Class Cut-Off (USD) 2003 (%) 2010 (%)

Low< 1.25 21.9

62.214.0

43.3

1.25 - 2 40.3 29.3

Middle

2 - 4 32.1

37.6

38.5

56.54 - 6 3.9 11.7

6 - 10 1.3 5.0

10 - 20 0.3 1.3

High > 20 0.1 0.10 0.2 0.20


81 mn 131 mn

7/29/2019 m Lfp 39324515



The slowdown in the motorcycle market in our opinion is just

temporary because the portion using down-payment under

the current regulation was very high. Delay in purchase and

saving for the down-payment is the most reasonable optionfor prospective motorcycle buyers in low down-payment

segment.

We expect the motorcycle market will start to pick up in the

mid next year and begin to have the similar trend with the car

market. Increase in purcashing power due to the minimum

wage increase (18.4% on average) starting next year would

help motorcycle market to recover, especially in the regions

with higher percentage increases like Riau and East

Kalimantan. However, the business climate must be

maintained, especially related to regulations on the demandside, because the potential in the motorcycle market is still

growing in the long run.

For the car market, we are more optimistic. Realized

investment, especially from the Japanese car manufacturers

to add capacity, will accommodate the increasing domestic

demand. On the other hand, the car export market also

continues to grow. Exports of Completely Built-Up (CBU) cars,

which grew very high (57.4% yoy) as of October 2012, was

higher than the growth in exports in Completely Knocked

Down (CKD) cars, which amounted to 24.2% yoy, indicatingthe growing importance of the Indonesian position as part

from the production network of the global automotive

manufacturers. Currently, Indonesia is a regional production

base of several Japanese manufacturers, especially for MPV

type cars.

7/29/2019 m Lfp 39324515



mandiri leading economic index (LEI)November 2012

Mandiri Leading Economic Index (MLEI) fluctuated in the

range of 99.1 to 100.4 during the period of January to

September 2012. The index has increased to 100.0

(+1.5%MoM) in September 2012, from a decreased 1.1%MoM

in August 2012. From several constituent indicators of MLEI

such as JCI index, export index, USD/IDR index and the volume

of total savings index showed an increase in September 2012.

It is predicted the growth in the domestic economy will still

experience a stable growth at current level from 4Q12 to

1Q13 and predicted to rise in 2Q13.

In September 2012, Indonesia’s trade balance consolidated its

surplus as exports rose 13.2%MoM. According to Central

Statistic Agency (BPS) data released, September’s exports hit

USD15.9 billion, compared to USD14.1 billion a month earlier.

The better export outcome was driven by non-oil and gas

exports, animal and vegetable oil, mechanical appliances and

ready-made clothing. Imports, meanwhile, rose 11.1%MoM in

September 2012 after a surprise 15.5% decline in August

2012.

Indonesia's GDP (gross domestic product) grew 6.2%YoY in3Q12 (was above 6.0% for the eighth straight quarter) as

domestic consumption and investment remained strong

despite a deteriorating global economy. Indonesia's economy

has so far remained resilient in the face of a global slowdown;

driven by robust investment and buoyant domestic demand in

the world's fourth most populous nation. The continued

strength of domestic consumption was highlighted by a 28.0%

jump in vehicle sales in September 2012, despite new down

payment requirements for auto purchases. Indonesia also

booked a record FDI (foreign direct investment) of IDR 56.6

trillion (or USD 5.88 billion) in 3Q12, up 22.0%YoY. Healthy3Q12 GDP numbers indicate growth for the full year is likely to

come in within Bank Indonesia's 2012 target of 6.1% - 6.5%.

7/29/2019 m Lfp 39324515



97.0

97.5

98.0

98.5

99.0

99.5100.0

100.5

101.0

101.5

102.0

Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12*

94.0

96.0

98.0

100.0

102.0

104.0

106.0

108.0

MLEI (lhs) MCEI (rhs)

2010 2011 2012

Oct Nov Dec Oct Nov Dec Jun Jul Aug Sep*)

MLEI 100.6 101.2 100.3 99.5 99.8 99.2 99.1 99.6 98.5 100.0

Change (%MoM) 0.9 0.5 (0.9) (0.6) 0.3 (0.6) (0.6) 0.5 (1.1) 1.5

MCEI 99.9 99.8 99.6 101.2 101.0 100.9 98.7 98.3 98.7 98.1

Change (%MoM) 0.9 (0.1) (0.2) 0.6 (0.2) (0.1) (1.1) (0.4) 0.4 (0.6)

note : *) preliminary

Index > 100 and increasing indicates expansion

Index > 100 but decreasing indicates downturn

Index < 100 and decreasing indicates slowdown

Index < 100 but increasing indicates recovery

Changes in parentheses indicate negative numbers

LEI and CEI are composite indices for predicting the movement of GDP (Gross Domestic Product) so they can beuseful as an early warning on the movement of Indonesian economy. LEI is used to predict the movement of

GDP in the next 6 months, while CEI is used to predict the movement of GDP in the same month. LEI and CEI

composite indices are formed from several indicators deemed important in studying the movement of

Indonesian economy.

7/29/2019 m Lfp 39324515



MACRO ECONOMIC INDICATORS AND FORECAST 2009 2010 2011 2012F 2013F

National Account

Real GDP (% yoy) 4.6 6.1 6.5 6.3 6.5

Domestic Demand (% yoy) 5.5 5.2 5.4 7.2 7.7Real Consumption: Private (% yoy) 4.9 4.6 4.6 5.0 5.3

Real Gross Fixed Capital Formation (% yoy) 3.3 8.5 8.8 11.9 12.2

GDP (USD bn) - nominal 539 707 846 909 1,051

GDP per capita (USD) - nominal 2,337 2,981 3,509 3,711 4,231External Sector

Exports (%yoy,USD) - Merchandise (14.3) 32.1 26.9 (4.5) 9.5

Imports (%yoy,USD) - Merchandise (24.0) 43.7 30.8 9.3 10.2

Trade Balance (US$ bn) 30.9 30.6 33.9 10.3 10.0

Current Account (% of GDP) 1.9 0.8 0.2 (2.2) (2.1)

Current Account (USD bn) 10.7 5.1 1.7 (20.4) (22.0)

External Debt (% of GDP) 32.1 27.4 25.3 25.9 24.6

International Reserves (USD bn) 66.1 96.2 110.1 115.7 126.8

Import cover (months) 8.1 8.5 7.6 7.3 7.4

Rp/USD (period average) 10,408 9,087 8,776 9,398 9,510Rp/USD (year end) 9,470 8,963 9,000 9,670 9,461

Other

BI rate (% period average) 6.9 6.5 6.6 5.8 5.8

BI rate (% year end) 6.5 6.5 6.0 5.8 5.8Headline Inflation (% yoy, year end) 2.8 7.0 3.8 5.0 5.0

Headline Inflation (% yoy, period average) 4.3 5.3 5.1 4.5 4.8

Fiscal Balance (% of GDP) (1.6) (0.6) (1.5) (1.6) (1.1)

S&P's Rating - FCY BB- BB BB+ BB+ BB+

S&P's Rating - LCY BB+ BB+ BBB- BBB- BBB-

MACRO ECONOMIC INDICATORS AND FORECAST 2009 2010 2011 2012F 2013F

National Account

Real GDP (% yoy) 4.6 6.1 6.5 6.3 6.5

Domestic Demand (% yoy) 5.5 5.2 5.4 7.2 7.7Real Consumption: Private (% yoy) 4.9 4.6 4.6 5.0 5.3

Real Gross Fixed Capital Formation (% yoy) 3.3 8.5 8.8 11.9 12.2

GDP (USD bn) - nominal 539 707 846 909 1,051

GDP per capita (USD) - nominal 2,337 2,981 3,509 3,711 4,231External Sector

Exports (%yoy,USD) - Merchandise (14.3) 32.1 26.9 (4.5) 9.5

Imports (%yoy,USD) - Merchandise (24.0) 43.7 30.8 9.3 10.2

Trade Balance (US$ bn) 30.9 30.6 33.9 10.3 10.0

Current Account (% of GDP) 1.9 0.8 0.2 (2.2) (2.1)

Current Account (USD bn) 10.7 5.1 1.7 (20.4) (22.0)

External Debt (% of GDP) 32.1 27.4 25.3 25.9 24.6

International Reserves (USD bn) 66.1 96.2 110.1 115.7 126.8

Import cover (months) 8.1 8.5 7.6 7.3 7.4

Rp/USD (period average) 10,408 9,087 8,776 9,398 9,510Rp/USD (year end) 9,470 8,963 9,000 9,670 9,461

Other

BI rate (% period average) 6.9 6.5 6.6 5.8 5.8

BI rate (% year end) 6.5 6.5 6.0 5.8 5.8Headline Inflation (% yoy, year end) 2.8 7.0 3.8 5.0 5.0

Headline Inflation (% yoy, period average) 4.3 5.3 5.1 4.5 4.8

Fiscal Balance (% of GDP) (1.6) (0.6) (1.5) (1.6) (1.1)

S&P's Rating - FCY BB- BB BB+ BB+ BB+

S&P's Rating - LCY BB+ BB+ BBB- BBB- BBB-

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Disclaimer: This material is for information only, and we are not soliciting any action based upon it. This report is not to beconstrued as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer orsolicitation would be illegal. The information herein has been obtained from sources believed to be reliable, but we do notwarrant that it is accurate or complete, and it should not be relied upon as such. Opinion expressed is our current opinion as of the date appearing on this material only, and subject to change without notice. It is intended for the use by recipient only andmay not be reproduced or copied/photocopied or duplicated or made available in any form, by any means, or redistributed toothers without written permission of PT Bank Mandiri Tbk. Additional information is available upon request. For furtherinformation please contact: Office of Chief Economist, Ph. (021) 524 5516/5272 or Facs. (021) 521 0430.

INDONESIA CURRENT DATA

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct

Exchange Rate

End of Period IDR/USD 9393 10900 9390 8978 8855 9200 9069 8990 9023 9146 9189 9400 9433 9467 9581 9589 9608

Average IDR/USD 9354 1167 9462 9021 8886 9040 9059 9071 9020 9251 9175 9320 9442 9451 9505 9565 9599

Monetary Sector

Base money M0, eop IDRtn 379.58 344.69 402.12 518.45 566.28 568.78 613.49 594.08 578.96 586.03 596.59 604.98 627.36 634.99 657.96 638.87 648.11

Narrow money M1 IDRtn 450.06 456.79 515.82 605.38 665.00 667.61 733.99 696.32 683.25 714.25 720.92 749.45 779.41 771.79 772.42 795.51

Broad Money M2 IDRtn 1,649.66 1,883.85 2,141.38 2,469.40 2,677.79 2,728.74 2,877.22 285.49 284.97 291.19 292.72 299.20 305.03 305.48 308.90 312.55

Outstanding Loan IDRtn 995.11 1,313.87 1,446.81 1,783.60 2,128.72 2,169.61 2,223.69 218.34 222.77 229.15 234.34 241.17 248.00 249.87 253.92 258.42

Outstanding Deposit IDRtn 1,459.44 1,673.82 1,914.11 2,208.72 2,396.28 2,450.33 2,596.33 2,540.24 2,567.36 2,624.51 2,636.04 2,697.10 2 ,735.35 2,738,926 2,761,230 2,799,056

Lending rate (working capital) % p.a 13.00 15.22 13.69 12.83 12.36 12.31 12.16 12.09 12.02 12.01 11.86 11.78 11.79 11.78 11.73 11.70

3-month deposit rate, eop % p.a 7.42 11.97 6.85 7.06 7.11 6.99 6.81 6.68 6.52 6.31 6.00 5.89 5.76 5.67 5.61 5.69

Overnight rate, eop % p.a 4.50 9.40 6.24 5.72 5.05 4.55 4.55 4.02 3.75 3.76 3.76 3.93 4.05 4.06 4.09 4.10 4.18

Prices

Headline CPI (2007=100) Index 155.5 113.86 117.03 125.17 128.74 129.18 129.91 130.9 130.96 131.05 131.32 131.41 132.23 133.16 134.43 134.45 134.67

Year on year inflation rate % 6.59 11.06 2.78 6.96 4.42 4.15 3.79 3.65 3.56 3.97 4.50 4.45 4.53 4.56 4.58 4.31 4.61

Month on month inflation rate % 1.1 -0.04 0.33 0.92 -0.12 0.34 0.57 0.76 0.05 0.07 0.21 0.07 0.62 0.70 0.95 0.01 0.16

Year to date inflation rate % N/A 11.06 2.78 6.96 2.85 3.20 3.79 0.76 0.81 0.88 1.09 1.15 1.79 2.50 3.48 3.49 3.66

Wholesale Price Index (2000=100) Index 217 238.0 167.35 177.87 184.64 184.94 185.76 187.11 187.77 188.54 189.45 189.72 190.22 190.76 191.81 192.11

Trade

Export USDbn 10.86 8.69 13.35 16.83 16.96 17.24 17.20 15.49 15.69 17.25 16.17 16.82 15.44 16.10 14.04 15.90

Oil USDbn 2.51 1.24 2.50 3.26 3.06 3.52 3.60 2.97 3.35 3.48 3.56 3.72 2.89 2.91 2.78 2.77

Non oil USDbn 8.36 7.45 10.85 13.57 13.90 13.71 13.60 12.51 12.33 13.76 12.61 13.11 12.55 13.17 11.26 13.13

Import USDbn 6.81 6.29 10.33 13.15 15.53 15.39 16.34 14.55 14.86 16.32 16.93 17.03 16.72 16.35 13.81 15.34

Oil USDbn 2.39 0.98 2.10 2.64 3.28 3.45 3.63 2.98 3.49 4.00 4.12 3.44 3.35 2.76 3.31 3.44

Non oil USDbn 4.42 5.31 8.22 10.50 12.25 11.94 12.71 11.53 11.37 12.31 12.81 13.60 13.37 13.60 10.50 11.90

Trade Balance USDbn 4.06 2.40 3.02 3.68 1.42 1.84 0.86 0.94 0.83 0.93 (0.76) (0.21) (1.28) (0.25) 0.23 0.56

Output

GDP (current price) IDRtn 1034.86 1274.29 1450.82 1670.52 1921.56 1972.35 2050.09 2122.81

G DP (c on st an t p ri ce at 20 00 ) I DR tn 493.37 518.94 547.54 585.10 623.96 632.77 650.58 671.47

Real Growth % YoY 5.88 5.20 5.43 6.89 6.49 6.32 6.37 6.17

Capital Market

JCI Index, eop Index 2745.83 1355.41 2534.36 3703.51 3790.85 3715.08 3821.99 3941.69 3985.21 4121.55 4180.73 3832.82 3955.57 4142.33 4060.33 4262.56 4350.29

Volume, avg shares mn 3155.65 1743.25 3422.10 3965.38 4905.28 3098.96 3496.38 4045.49 3482.60 2751.16 4407.93 3092.99 2936.69 2529.66 2624.87 3796.55 3916.49

Value, avg IDRbn 4340.55 1454.61 2332.42 3959.30 3885.67 2870.38 2684.29 3269.50 4161.39 3773.30 4103.34 3967.34 3216.60 3347.23 3068.91 3518.67 3623.31

Consumer Confidence Index 99.10 90.60 108.70 109.30 116.20 114.30 116.60 119.20 111.70 107.30 102.50 109.00 114.40 113.50 115.70 117.70 119.50

2007 2008 2009 20102011 2012

Indicators Unit

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OOvveerrsseeaass OOf f f f iicceess

Hongkong Branch7

thFloor, Far East Finance Centre

16 Harcourt Road, Hongkong

Tel: 852-2527-6611

Fax: 852-2529-8131

Singapore Branch

3 Anson Road #12-01/02, Springleaf Tower

Singapore 079909

Tel: 65-6213-5688

Fax: 65-6438-3363

Cayman Islands Branch

Cardinal Plaza 3rd

Floor

30 Cardinal Avenue, PO Box 10198,

Grand Cayman, KY1-1002, Cayman IslandsTel: 1-345-945-8891

Fax: 1-345-945-8892

Bank Mandiri (Europe) Limited, London

Cardinal Court (2nd

Floor),

23 Thomas More Street

London EIW IYY, United Kingdom

Tel: 44-207-553-8688

Fax: 44-207-553-8699

Shanghai Representative Office

3401, Bank of China Tower

200 Yin Cheng (M) Road,

Pudong New Area, Shanghai, 200120

People’s Republic of China

Tel: 86-21-5037-2509

Fax: 86-21-5037-2507

Dilli Branch – Timor Leste

Avenida Presidente Nicolao Lobato

No.12, Colmera

Dilli – Timor Leste

Tel: +670-331-7777

Fax: +670-331-7190/74444

Mandiri International Remittance Sdn.Bhd.

Wisma Mepro, 29 & 31 Jalan Ipoh 51200 Kuala

Lumpur, Malaysia

Telp : +60-3-4045-988

Shanghai Branch

1201-1204 Bank Of Shanghai Tower

168 Yin Cheng Zhong Road , Pudong, Shanghai

200120

People’s Republic Of China

Phone : (86-21) 20332603

Fax : (86-21) 20282817

HHeeaadd OOf f f f iiccee

Plaza MandiriJl. Jend. Gatot Subroto Kav. 36-38

Jakarta 12190, Indonesia

Tel: (62-21) 526 5045 – 526 5095

Fax: (62-21) 526 8372 – 526 5008

Website: www.bankmandiri.co.id

Zulkifli Zaini

President Director & CEO

Tel: (62-21) 3002 3067, Fax: (62-21) 526 3459

Riswinandi

Deputy President Director

Tel: (62-21) 3002 3028, Fax: (62-21) 526 3408

Abdul Rachman

Director Institutional Banking

Tel: (62-21) 3002 3839, Fax: (62-21) 526 3671

Sentot A. Sentausa

Director Risk Management

Tel: (62-21) 3002 3454, Fax: (62-21) 526 8213

Budi Gunadi Sadikin

Director Micro & Retail Banking

Tel: (62-21) 3002 3079, Fax: (62-21) 252 1585

Ogi Prastomiyono

Director Compliance & Human Capital

Tel: (62-21) 3002 3666, Fax: (62-21) 252 1585

Pahala N. Mansury

Director Finance & Strategy

Tel: (62-21) 3002 3089, Fax: (62-21) 526 8213Fransisca N. Mok

Director Corporate Banking

Tel: (62-21) 3002 3847, Fax: (62-21) 252 1585

Sunarso

Director Commercial & Business Banking

Tel: (62-21) 3002 3087, Fax: (62-21) 252 1585

Kresno Sediarsi

Director Technology & Operation

Tel: (62-21) 524 3092, Fax: (62-21) 526 3617

Royke Tumilaar

Director Treasury, FI & Special Asset Management

Tel: (62-21) 3002 3057, Fax: (62-21) 5296 4053

Mansyur S. Nasution

EVP Coordinator Consumer Finance

Tel: (62-21) 3002 3075, Fax: (62-21) 5296 4116

Riyani T. Bondan

EVP Coordinator Internal Audit

Tel: (62-21) 3002 3722, Fax: (62-21) 5296 4116

Ventje Raharjo

EVP Coordinator Change Management Office

Tel: (62-21) 3002 3076, Fax: (62-21) 526 8213

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