INDONESIA´s HANDBOOK 2000

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CONTENTS

FOREWORD
LAND
PEOPLE
HISTORY
GOVERNMENT
DEVELOPMENT ACHIEVEMENTS
Economic Recovery
People's Welfare and Poverty Eradication
Food and Horticulture
National Logistics Agency
Investment
Agriculture
Industry and Trade
Mining and Energy
Cooperatives, Small and Medium Scale Enterprises
Transportation and Communications
Transmigration
The Law
The Environment
Defense and Security
Health
Social Affairs
Manpower
The Role of Women in National Development
Population and Family Planning
Religious Life
Education and Culture
Science and Technology
Housing and Settlement
Agrarian Affairs
The Younger Generation and Sports
Tourism, Arts and Culture
Empowerment of State Enterprises

EMPOWERMENT OF STATE ENTERPRISES

Ministry of State for Empowerment of State Enterprises/ Supervisory Board of State Enterprises has undertaken efforts that in the future state enterprises could become companies that posses capabilities to compete internationally and become world-class companies as well. To realize these various efforts have been done, namely restructuring program, profit making and privatization.

Through reform programs the Ministry bears a mission to make state enterprises be managed in a more efficient, transparent and professional manner so that the state asset in state enterprises could be beneficial to the advancement of the welfare of the Indonesian people. The endeavors to realize that goal should be done in a consistent and sustainable way through various construction and control programs. The Ministry of State has laid the foundations of these endeavors for empowerment of State Enterprises in stages.

Restructuring, profit making and privatization, which are interconnected and supported one another, are the reform steps made by state enterprises. This will create changes in paradigm of the management of state enterprises.

Reform of state enterprises has to be given highest priority. The Government has to make one policy that could state enterprises more efficient and effective so as to provide beneficial contribution both to national economy and shareholder (the government) as well as stakeholder (the public). At least there are three reasons as to why this reform is a must, namely:

(i) corporate reason,

(ii) integration of international economy and global competition reason,

(iii) national economy reason.

There are 160 state enterprises .(14 public corporations, 143 incorporates and 3 others) that as of December 1997 held an asset of Rp500 trillion. This was a huge value. However, the contribution given to the State Budget in the form of dividend was relatively low, which was Rpl,611 billion (1997) and Rp2,671 billion (1998). As for return during those years were also low far below the cost of capital, the ROA were 1.91% and 2.94% respectively. From that figures it was clear that at least there are two indications, namely the low rate of asset utility and or the low rate of business efficiency. If such condition is not immediately remedied, state enterprises would not only disincentive for its employees and the development of state enterprises itself but also bring about negative effect to the business competitiveness and national economy.

Monetary and economic crisis that started in 1997 has caused the downfall of the conditions of financial sector and real sector. Thousands even millions of Indonesians were laid off. Prices of basic food were almost unreachable by most people and inflation rate touched two digits.

The national economy has been greatly influenced by the global economy, meaning the competitiveness should be strengthened. The ever tighter competition in global market due to the involvement of huge companies from developed countries can make companies that have no competitive capabilities excluded from global market as well as from domestic market as domestic market has become an integral part of global market. To have competitive capabilities at least at the same level compared to that of companies from developed countries, reform of state enterprises is obligatory.

Performance of State Enterprises

In the framework of the implementation of Reform Program of State Enterprises a Masterplan has been introduced. This masterplan serves as the guidance for the formulation of policy in restructuring, profit making and privatization of State Enterprises. Up until now the implementation of this masterplan has shown encouraging result.

The number of State Enterprises considered to be in good and very good condition increased from 59.8% in 1997 to 68% in 1998 and those that are considered to be not very healthy and not healthy of the same period decreased from 40.2% to 32%.

The financial performance of State Enterprises outside banking and power sector showed considerable increase. The revenue from these State Enterprises increased from Rp52.6 trillion in 1997 to Rp81.7 trillion in 1998 or 55.2%. The profit gained of the same period also expanded from Rp8.5 trillion to Rpl7.7 trillion or an increase of 107%. Profit before tax also enlarged from Rp9.1 trillion to Rpl7.6 trillion or an increase of 94%.

In view of those figures it was clear that State Enterprises are ready to enter the next stage, privatization, provided the endeavors to empower the State Enterprises are carried out with good concept and also systematically.

Despite the fact that the privatization has not reached the desired target if seen from the quantity point of view, the results, have been encouraging. This could be seen in the high selling price of shares with Price Earning Ratio of 13 times and 18 times for Pelindo II and Pelindo III respectively compared to those of the same industry in ASEAN, which is only 6.5 times. Even in the privatization of PT Semen Gresik the Price Earning Ratio reached 30 times. It is an indication that the privatization of State Enterprises could give satisfactory results despite the favorable economic condition.

Up until June 1999 the earning of revenue from privatization and dividend has reached a value of Rp8,012.01 billion out of Rpl7 trillion which is the target in the 1999/2000 State Budget. The revenue earned from the privatization of FT Pelindo II, FT Indofood-Phase I and PTTelkom and another Rp7,192.1 billion was the revenue from dividend (outside revenue of Bank Indonesia and Pertamina).

The coming of world-class investors resulted in the dual positive impact, namely the recovery of confidence of the market and at the same time the stability of rupiah exchange rate.

21st century is a tough challenge for business world as the rapid progress in science and technology makes the markets integrated into a bigger market which is the global market, within which companies from around the world struggle to compete. Thus, comparative advantage should be developed into competitive advantage through the development of an efficient corporate structure and professional human resources.

Preparation for Continuation of Reform Concept of State Enterprises

After studying the characteristic of today's competitive companies, it is believed that world class State Enterprises is a middle class company according to the world standard. The company has integrated focus and specialized core competencies, global oriented and led by world class CEO.

World class State Enterprises would serve as the vehicle for Indonesian youngsters to study to become the future leaders of Indonesian corporate and at the same time would create new standard for Indonesian companies that have the capabilities to compete and to play a role in international market. World class State Enterprises could become the main pillar to establish competitiveness of Indonesian economy since in global market competition is no longer among countries but among companies.

The main step in the process towards the establishment of world class State Enterprises is by undertaking consolidation of State Enterprises in certain sector in the form of Holding Company. Thus, economic scale and value enhancement could be reached. For that purpose further studies both on the concept and the implementation plan need to be done.

Human resources would be the deciding factor in realizing the above objective. Detailed program will be formulated to produce at least 20 world class privatization CEOs by the year 2005. The program to develop the top management is achieved through maturity mechanism of holding company with international economic scale as well as through support provided by the Institute for the Development of Corporate Leadership.

This institute was established by State Enterprises Foundation of Development Leadership owned by State Enterprises that feel the need to have a training ground for CEO and top management to become world class executive.

This institute also serves as the assessment center for high potential executive to be forged as world class CEO through fast tracking mechanism.

Foundation Establishment of Corporate

Strong corporate foundation in the management is needed to transform State Enterprises into world class companies. Corporate foundation is the key and dominant factor in the success and the achievement of business target that is needed to be done by State Enterprises includes: Masterplan; Corporate Management System; Corporate Management Information System; Corporate Leadership; Corporate Governance and Ethics; Planning and Controlling; Incentive and Remuneration System; Employee Unity and Harmony.

The President of the Republic of Indonesia officially launched these eight foundations on May 5, 1999 at the State Palace, Jakarta. These foundations would be the basis of all State Enterprises to expand their business to become world class State Enterprises.

PT TIMAH TBK

Historical Background

Tin was firstly discovered in Bangka Island in the early 18thh Century and started mined commercially in 19'h Century by the Dutch East Indies Company (VOC). Several small low shaft furnaces were built near Pangkalpinang, Belinyu, Mentok and Toboali to smelt tin ore. In 1720, tin mining exploration had been expanded and financed by Dutch businessmen under the VOC which then monopolized and controlled the whole tin mining operation In Bangka Island. In 1816, the Dutch Colonial Government took over the tin mining in Bangka Island, and put it under the management of a body named "Bangka Tin Winning Bedrijf (BTW)." While the tin mining in Belitung and Singkep Islands were transferred to private companies, namely the Gemeenschappelijke Mijnbouw Maatschapplj Biliton (GMB) in Belitung Island and "NV Stannum" in Singkep Island.

With the nationalization of Dutch companies in Indonesia, the management of tin mining was then tinder the control and management of "Biro Umum Perusahaan Tambang Negara (BUPTAN)." In 1960, the government of Indonesia established a state-owned tin company (BPU Tambang Timah) to supervise three state-owned tin companies in Bangka, Belitung and Singkep.

In 1968, the three state-owned companies and the "Mentok Tin Smelter" was merged into "PN Tambang Timah." Then in August 1976, the status of PN Tambang Timah was changed into PT (Ltd) Tambang Timah, which has four production units, namely: Bangka Tin Mining Unit in Bangka: Belitung Tin Mining Unit in Belitung; Singkep Tin Mining Unit in Singkep/Karimun Kundur; and Mentok Tin Smelter Unit in Mentok. Furthermore, since October 1996, the company has become a go public company listing in Jakarta Stock Exchange, Surabaya Stock Exchange and London Stock Exchange with the Government of Indonesia as the prime share holder.

Tin Mining Exploration

PT. Timah holds mining area over more than 17,700 square kilometers spreading inland and offshore in the Java Sea and eastern part of Sumatra Island. The line activities of tin exploration in Indonesia is done in Bangka, Belitung, Kundur, West Kalimantan and eastern part of Sumatra. The activities are covering geological mapping, geophysical research, geochemical study and drilling.

In inland mining, PT. Timah uses private sectors at more than 300 sites across the inland mining areas controlled by the company. Approximately half of total mining output is attributed to these operations.

PT. Timah also employs a fleet of bucket line dredges varying in capacity from 7 to 24 cubic feet in bucket size with operating speeds of up to 28 buckets per minute. This powerful fleet operates several kilometers offshore to depths of around 50 meters below sea level, mining over 3.5 million cubic meters of material every month.

At present, PT. Timah has 22 dredge ships operating offshore of Bangka and Kundur Islands along the year. One of those dredge ships called Kundur I is the newest as well as the biggest one owned by PT. Timah. It was operated at the beginning of 1998 with the drilling capacity of more than 50 meters.

All tin ores produced by dredges are washed in the washing plant, which is located at Mentok, in the northwest corner of Bangka Island. High grade concentrate about 75% tin containing is sent to the smelter center located at Mentok. Beside Cassiterite (tin) several other involved minerals are also produced by the washing plant such as lirnenite, Quartz, Zircon, Monazite, Pyrite, Xenotime, Wolframite, Kaoline, Anatase, Cuprite, Limonite, Hematite, Galena, Siderite and Tourmaline.

Smelting Plant

PT. Timah has established the largest tin smelting operation in the world. Completed in 1966, the plant has undergone further increase in capacity to culminate in the addition of a seventh furnance which raised capacity to 50,000 tons in 1997.

Tin concentrates both from the washing plant (offshore mining products) and inland mining are conveyed into bins in the smelting plant by belt conveyor which also transport the other raw materials such as Anthrocite and Limestone. The product of refining operation is refined tin with a minimum purity of 99.92% for Banka brand and 99.85% for Mentok brand and cast into ingots. The waste gas from furnance containing dust and fume is passed through a cooler and filter system. Flue dust and fume are recovered and recycled to the first stage smelting. The clean gas is blown out through the stack.

FT. Timah prides itself in setting uncompromising standards of quality for itself. Currently, the company's product include: Banka Tin (99.99% Sn). Mentok Tin (99.85% Sn) and Banka Tin Low Lead (99.93% Sn & 0.01% Pb). Both Banka Tin and Mentok Tin are LME (London Metal Exchange) registered brands. The quality control under Quality Management System of ISO 9002 has been certified by SGS.

Tin Metal Marketing

Banka Tin is sold directly to the customers and may not be reexported. while Mentok Tin is classified as trader's Tin. PT. Timah produces tin metal in the following forms or shape: 1. Normal ingot (about 25 kg each bar): 2. Small ingot (about 17.5 kg each bar): 3. Tin anode (special form tin metal used directly in tin plate industry): 4. Tin shots (in the form of tin droplets which is made on special order for several industries in the USA). Meanwhile, to respond international concern for the environment. PT. Timah has begun to produce Low Lead Tin with less than 0.01% Pb.

Human Resources

One of the key initiatives behind the management plans of PT. Timah for improved productivity and diversification into other minerals is the ongoing development of the company's human resources.

In anticipation of a more international profile for PT. Timah in the future, the company has opened the BIO (Bangka Island Outdoors) center drawing upon the experience of some of the best management outward bound training schools worldwide.

BIO, which will also be available to outside companies, delivers a curriculum to broaden and strengthen leadership, management and individual skills for executives.

Beyond 2000 The successful listing of PT. Timah Tbk a holding company in Jakarta. Surabaya and London Stock Exchanges represents the beginning of a  significant new-chapter in the company's history.

Today, PT. Timah has the largest tin mining operation in the world. It has a reputation for quality and cost leadership. The growing demand for tin will sustain PT. Timah over the short term. The International Tin Research Institute in London continues to find enterprising new uses for tin as a green metal replacing harmful materials such as lead.

Looking beyond 2000, a detailed blueprint for the company's future has already been prepared.


Dredges mine to a depth of 50 meters, employed by PT TIMAH, bangka

PT PUPUK SRIWIJAYA

PT Pupuk Sriwijaya (PT Pusri) is a state-owned company. It was the first South-East Asian Fertilizer Plant and was founded in 1959. This "Pusri I" urea plant operated in 1963 with a capacity of 100,000 tons of urea per annum.

In 1974 the second urea plant "Pusri II" had built with a capacity of 380,000 tons per annum (since  1992 its capacity increase to 570,000 tons per annum) and ammonium with capacity of 261,000 tons per annum.

In 1976 the third urea plant "Pusri III" had built with a capacity of 570,000 tons urea per annum and ammonium with capacity of 396,000 tons per annum.

In 1977 the fourth urea plant "Pusri IV" operated with a capacity of 570,000 tons per annum and ammonium with capacity of 396,000 tons per annum.

In 1990 the urea plant "Pusri IB" with a capacity of 570,000 tons per annum had built as a replacement of Pusri I which had stopped its operation since  1987 and ammonium with capacity of 446,000 tons per annum.

The urea plant "Pusri IB" had operated in 1994 and became the first urea plant that was built by Indonesian engineering with computer system with the concept of "distributed control system."

Holding Company

Due to FT Pusri past performances, PT Pusri attained the position of Holding Company for all State-owned Fertilizer Companies, namely PT Pupuk Sriwijaya, PT Petrokimia Gresik, PT Pupuk Kujang, PT Pupuk Kalimantan and PT Pupuk lskandar Muda.

The installment of the holding bears the missions to optimize productivity, efficiency and profitability in both production and marketing fields in order to support the agricultural development program and to play more roles in national economy through petrochemical and chemical business and technology based services.

At the moment, PT Pusri Holding Company produces almost 7.5 million tons per year of many types of fertilizer i.e. urea, ammonium sulfate and super phosphate fertilizer.

PT Pusri also represent the Government of Indonesia as the share holder in joint ventures business among ASEAN countries, i.e. PT Asean Aceh Fertilizer in Lhokseumawe, Aceh and Asean Bintulu Fertilizer in Serawak, East Malaysia.

Production Supporting facilities

PT Pusri has production supporting facilities as bellows:

1.  Warehouse to store fertilizer. This warehouse can keep 95,000 tons of urea in bulk and 25,000 tons of urea in bag.

2.  Unit of fertilizer package.

3.  Port facility.

4.  Waste water treatment. As a company which aware of environmental preservation, PT Pusri and its subsidiaries have achieved ISO-14001 certifications and maintained the "Peringkat Biru Proper Prokasih" (the blue level) from Bapedal, and implemented the safety and health management system which passed the audit to get certificates and golden flag from the Department of Manpower of the Republic of Indonesia.

5."  Mechanic.

6.  Laboratory.

7.  Side products such as 02, Liquid Nitrogen, 002, and Dry Ice.

Production

Nationally, total capacity of fertilizer and ammonium production are:
•  Urea: 6,305,000 tons/annum
•  SP-36: 1,000,000 tons/annum
•  ZA: 660,000 tons/annum
•  Ammonium: 4, 144,000 tons/annum

Those feitilizer and ammonium above are produced by domestic fertilizer plants of PT Pusri subsidiaries and PT Pusri itself has four urea-ammonium plants with a capacity of urea amount 2,280,000 tons per annum and 1,499,000 of ammonium tons per annum.

Marketing and Distribution

Indonesian government entrusted PT Pusri as sole distributor for various kinds of fertilizer for farmers, such as urea, super phosphate, ammonium sulfate and potassium chloride since 1979.

This assignment required PT Pusri to develop a huge infrastructure in order to distribute more than 5 million tons of fertilizer per annum efficiently to domestic use. The distribution system developed since 1973 was known as "the Pipeline Distribution System."

In performing its duties, PT Pusri owns and engages cargo shippers, land transportation companies, warehouses, private distributors, cooperatives and other private business partners.

Engineering and Other Services

In order to maximize its accumulated operating experiences for more than 35 years, PT Pusri has established Construction and Engineering division as a Strategic Business Unit which ready to sell its competencies in plant operation, maintenance, inspection, training, and plant design and engineering.

PT Pusri accumulated capabilities used to support the development of all fertilizer industries and some other industries in Indonesia such as methanoi, melamine, urea formaldehyde, oil refinery, aromatic & olefin projects, power plant, etc.

PT Pusri established a sister company PT Rekayasa Industri which is specialized in the field of Engineering Procurement and Construction mainly for petrochemical and agrochemical industries.

Guidance for Small-scale Business and Cooperatives In accordance with the company's mission to strengthen national economy, PT Pusri has carried-out the nourishment of small-scale business and cooperatives in the form of skill and management training, financial aids, technology, and marketing.

The main goal of guidance are among others: to distribute job opportunity evenly which in turn can create new entrepreneurs in industrial sector; and to accelerate regional development particularly in rural areas. Up to May, 1999, FT Pusri has succeed in nurturing 2,547 small-scale entrepreneurs and 551 cooperatives with financial aid amounted to more than Rp56 million.

It is worth noted that among the nurtured entrepreneurs and cooperatives 12 of them have gained "Upakarti" award due to their effort in developing other small-scale entrepreneurs and cooperatives with the same pattern of Pusri.

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