1. THE 21C CHALLENGES TO BRIDGE INDONESIA AND AUSTRALIA AS A BASE FOR IORA
Dorodjatun Kuntjoro-Jakti, PhD.
Professor Emeritus
Faculty of Economics & Business
University of Indonesia
(SOCS5105 International Collaborative Study Experience, The University of Western Australia – Universitas Paramadina, Juli 2017)

2. INVESTMENT GRADE RATING
We finally succeeded in getting back our investment grade rating in July 2017, which we last seen in 1997 when the Thai Baht crisis hit the Rupiah abruptly and causing market panic.
President Soeharto resigned in 1998 in the face of mounting social frustration and political anger. From end of 1997 all the way to the most liberal general election in April 2004, the drive of “Reformasi, Demokratisasi” continued. The interim government of President Habibie and President Megawati Soekarnopoetri cooperated fully with IMF and CGI to stabilise and restart growth. Indonesia’s rating by 2004 was CCC with a spread of 1000 bp.
The general election of 2004 and 2009 – the first two open-democracy election exercises, which brought in President Soesilo Bambang Yudhoyono – occurred peacefully. The economy and businesses started moving beyond expectations, despite the global financial crisis.

3. Republic of Indonesia
Rating
Moody's
S&P
Fitch
Foreign Currency Rating
Long term
Baa3
BBB-
BBB
Outlook
Positive
Stable
Review/Credit Watch
None
Short term NR
A-3 F3
Local Currency Rating
Source: HSBC – The VIEW. Asia’s Bond Markets. July 2017
Prof. Dorodjatun Kuntjoro-Jakti, PhD.

4. RATING Investment rating Baa3 Reformasi, Demokratisasi, Desentralisasi
1st Open & Direct General Election
2ND
3RD
BBB+
BBB
BBB-
BB+ BB B+ B B-
CCC+
CCC
CCC- CC
Investment grade
Asia monetary crisis hit in
Subsidized Oil price doubled
Global economic crisis in 2008
BBB-
Baa1
Baa2
Baa3
Ba1
Ba2
Ba3 B1 B2 B3
Caa1
Caa2
Caa3
Indonesia was “investment grade” before the 1998 crisis
Baa3
BB+
Non Investment grade
Prof. Dorodjatun Kuntjoro-Jakti, PhD.

5. Prof. Dorodjatun Kuntjoro-Jakti, PhD.

6. Immense size of indonesia
The reasons for Indonesia’s long and costly to recovery and growth lie in the facts:
Of its immense size of territory as indicated by hi-cost transportation
Of its population size
And by the continuing volatility in global commodity market

7. INDONESIA ARCHIPELAGIC
UNCLOS 1982
SOUTH CHINA SEA
PACIFIC
INDIAN OCEAN
Jakarta Geopolitical Forum 2017

8. INDONESIA ARCHIPELAGIC SEA LANES UNCLOS 1982
SLOC MALACA
SOUTH CHINA SEA
PACIFIC
INDIAN OCEAN
ALKI I
ALKI IIIC
ALKI IIIB
ALKI II
ALKI IIIA
Note: ALKI = SLOC (Alur Laut Kepulauan Indonesia = Sea-Lane of Communication)
Jakarta Geopolitical Forum 2017

9. TWENTY LARGEST COUNTRIES AND THEIR POPULATIONS, SELECTED YEARS
(millions)
Prof. Dorodjatun Kuntjoro-Jakti, PhD.

10. The Economist, Jul 8th 2017
Prof. Dorodjatun Kuntjoro-Jakti, PhD.

11. (irrational exuberance)
- Too strong upside
The Economis
Jun 26th 2008
(irrational exuberance)
Prof. Dorodjatun Kuntjoro-Jakti, PhD.

12. The Economist commodity-price index
- Too strong downside
The Economist commodity-price index
(irrational gloom)
Prof. Dorodjatun Kuntjoro-Jakti, PhD.

13. Since late 1980s the global economy also continue to be unstable – the so-called New Normal

14. KRISIS EKONOMI MAKIN SERING TERJADI: “THE NEW NORMAL”
 Crisis: The worst in 3 decades (!)
The Jakarta Post, November 15, 2008
Events which were calculated to occur once in 20 years in fact occurred much more regularly indicating that risk management assumptions did not reflect the distribution of the actual outcomes
(Blankfein, FT, 9/2/2009)
Prof. Dorodjatun Kuntjoro-Jakti, PhD.

15. INDONESIA

16. Source: The Heritage Foundation (2017)

17. Source: The Heritage Foundation (2017)

18. Source: The Heritage Foundation (2017)

19. Prof. Dorodjatun Kuntjoro-Jakti, PhD.

20. The Economist, Jul 8th 2017
Prof. Dorodjatun Kuntjoro-Jakti, PhD.

21. The Economist, Jul 8th 2017
Prof. Dorodjatun Kuntjoro-Jakti, PhD.

29. Macroeconomic stability and credibility
Budget deficit < 2% of GDP
Current Account Deficit < 2% of GDP
Debt < 30% of GDP
Short-term Debt < 5% of GDP
Unemployment around 5%

30. Source: HSBC – The VIEW. Asia’s Bond Markets. July 2017
Prof. Dorodjatun Kuntjoro-Jakti, PhD.

31. Source: HSBC – The VIEW. Asia’s Bond Markets. Juni 2017
Source: HSBC – The VIEW. Asia’s Bond Markets. July 2017
Prof. Dorodjatun Kuntjoro-Jakti, PhD.

32. The Economist, Jul 8th 2017
Prof. Dorodjatun Kuntjoro-Jakti, PhD.

33. Challenges Dependency Ratio increases Poverty
Hingga 2030 – the beginning of aging society
As life expectancy rise
Poverty
Gini Coefficient - remain stubborn at 0.4
The Poor – subsidy entitlement
Funding for development will raise

34. Indonesia’s Potential: demographic bonus  BONUS DEMOGRAFI
DEMOGRAPHY is destiny
Indonesia’s Potential: demographic bonus  BONUS DEMOGRAFI
Indonesia has the fourth ranking population in the world, with million people (2010), and the working age population is close to 70% of the total population. Population growth rose to 1.49% in 2010.
Indonesia’s window of “demographic bonus” (only if it accompanied by better quality education to produce skilled workers and more job creation) will close in the next decade, as the dependecy ratio (i.e. ratio of young and elderly to working age) will start to rise after 2030.
INDONESIA: Age Structure of Population and Dependency Ratio (%),
Source: Government of Indonesia (2011), “Master Plan: Acceleration and Expansion of Indonesia Economic Development
Prof. Dorodjatun Kuntjoro-Jakti, PhD.

36. Overview of Indonesia’s insurance industry

37. Non-bank Financial Services and GDP (annual Growth rate)

38. Key highlights - MAY OF 2017 -
LIFE INSURANCE
Premium Adequacy to Claim Paid Ratio
169.0%
Premium Adequacy to Claim Paid and General Expenses Ratio
144.6%
Premium and Investment Yield Adequacy to Claim Paid Ratio
196.0%
Premium and Investment Yield Adequacy to Claim Paid and General Expenses Ratio
167.7%
Cession Ratio
3.5%
Investment to Gross Technical Reserve Ratio
115.9%
GENERAL INSURANCE
214.7%
157.2%
229.4%
168.0%
42.17%
123.5%
REINSURANCE
266.7%
240.4%
278.8%
251.4%
38.2%
112.1%
Source: Indonesia Financial Service Authority (2017)

39. Size of Life Insurance industry
Source: CEIC Data

40. Life Insurance
Net Premium
Number of Policy
Source: CEIC Data

41. Distribution of Policy and Premium
Life Insurance: Distribution of policy insured in 2015
Non-Life Insurance: Distribution of Premium earned in 2015

42. Prof. Dorodjatun Kuntjoro-Jakti, PhD