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Long a stalwart of Indonesia’s economic development, particularly in terms of exports, the country’s mining and quarrying industry maintains a steady presence despite fluctuations in global commodity prices and domestic mining policies. Claiming some of the world’s most expansive reserves of valuable minerals and largest operational mines, the sector has seen some of the highest levels of investment of any industry in Indonesia’s economy in recent years. Uncertainties regarding legislation, along with the implausibility of the full implementation will likely remain after Indonesian elections in 2014 as the politically and socially sensitive ramifications of these issues give politicians little incentive to reform these policies ahead of a campaign. However, the country’s vast mineral reserves combined with an expected rebound in global demand and commodity prices should help to ensure that the current production downturn proves to be little more than a temporary blip. This chapter contains interviews with Rozik B Soetjipto, President Director, Freeport Indonesia; Alwinsyah Lubis, President Director, Antam; and a viewpoint from Colin Ong, Managing Partner, Dr Colin Ong Legal Services and President Arbitration Association Brunei Darussalam.

Endowed with substantial energy reserves spread across its vast territory, Indonesia has been among the region’s largest producers and exporters of fossil fuels for decades. While this trend shows little sign of changing, the sector is in the midst of a dramatic shift in the composition of its resources. With crude production in decline, natural gas is taking on an increasingly important role in terms of exports and domestic use. Indonesia’s oil and gas sector will remain a strong contributor to the country’s economy in terms of its export revenue through increasing shipments of natural gas as well as domestically through its taxation and production-sharing agreements. This chapter contains an interview with Karen Agustiawen, President Director, Pertamina, and a roundtable with William Lin, President, BP Asia Pacific; Abdul Hamid Batubara, Deputy Managing Director, Chevron Indonesia; Richard Owen, President Director, ExxonMobil Indonesia; Lukman Mahfoedz, President Director, Medco Energi; and Roberto Lorato, President Director, Premier Oil Indonesia.

Indonesia’s insurance sector stands out as the fastest growing and most promising in South-east Asia, within a region that’s largely seen as the most attractive for the world’s major underwriters. Supported by rapid economic expansion spurred by domestic consumption in the past decade, the sector has averaged a compound annual growth rate of 20% in gross written premiums and 26% in assets since 2007. Islamic insurance is expanding rapidly, with a 10-fold increase in contributions reported since 2010. Strong regulatory enforcement will be crucial to addressing low-penetration. If the long-awaited consolidation into better-capitalised underwriters is able to aid greater innovation in products and distribution channels, Indonesia’s current rapid growth should rise exponentially. This chapter includes an interview with William Kuan, President Director, Prudential Indonesia.

Indonesia’s domestic exchange is dominated by foreign investors motivated by capital gains. Less than 1% of the local population invests in Indonesia’s exchange, and those that do tend to prefer buy-and-hold strategies. Corporations have expanded their bond offerings amid a favourable market of low interest rates, high demand and a risk-free government yield curve. While the government works to diversify the onshore dollar bond offering, new hedging instruments are gradually being developed for onshore futures markets. The scope for currency features, among other areas, is considerable. Despite the political uncertainty that has arisen in the run-up to the elections in 2014, brokerages are forecasting a rally in equities during the second half of 2013 that will be more significant that that achieved in the fourth quarter of 2012. Inflows into the bond and equity markets are likely to be sustained, given the loose monetary policies in Western economies. This chapter contains and interview with Eko Yuliantoro, President Director, Bahana Securities, and a viewpoint from Veronica Lukito, CEO, Ancora International.

Banking institutions currently account for around 77% of financial sector assets, while the sector’s overall penetration rate remains among the region’s lowest. The banking market remains highly fragmented, with 120 commercial lenders in 2012, alongside a much larger number of smaller institutions. Amidst rapid loan growth, average default rates for the country have dropped to historically low levels, though some suspect they will rise again in 2013. Relatively insulated from the volatility of international markets and supported by strong domestic consumption and rising incomes, Indonesian banks stand on healthy footing with high profitability and sufficient liquidity to expand their physical presence and lending. This chapter contains an interview with Darmin Nasution, Governor, Bank Indonesia.

Indonesia’s place as the largest economy in ASEAN presents a strong value proposition for investors. Already achieving one of the world’s most consistent economic growth rates of above 6% since 2007, with only a minor dip to 4.6% in 2009, Indonesia has continued to impress global investors as more export-oriented economies have wavered. The BKPM has forecast that Indonesia will attract $40bn in total direct investment during 2013, having become the fourth-most-popular destination for FDI in 2012. This chapter contains interviews with M Hatta Rajasa, Coordinating Minister for Economic Affairs; M Chatib Basri, Chairman, Indonesia Investment Coordinating Board; Gita Wirjawan, Minister of Trade; Suryo Sulisto, Chairman, Indonesian Chamber of Commerce and Industry; Prijono Sugiarto, President Director, Astra International; and Edwin Soeryadjaya, Chairman and Co-founder, Saratoga Capital.