Indonesia – Reinventing Itself Into an Economic Powerhouse

Jakarta during monthly Car Free Day, on the la...
Image via Wikipedia

Bring up Indonesia into a conversation about finances and someone may look at the speaker funny. The reaction is fully understandable as the country has taken some major hits, especially in 1998 when its economy contracted by 13%. It was hit hardest by the Asian currency crisis. Its population was adversely affected by the money failure. Add into this the fact the fall of Suharto and his dictatorship, it looked like Indonesia was down for the count.

Rebuilding the nation’s finances took time, but the government was up to the task. A transition from a dictatorship to democracy was implemented, with President Yudhoyono creating economic policies and reforms that made Indonesia a more attractive place for foreign investment. One example was to circulate money beyond Jakarta and enable it to be accessed by those living in the further reaches of the country. A form of democracy was given to the money flow, giving the average citizen the opportunity to gain some form of wealth. No more keeping a majority of the money concentrated in the country’s capital.

The government has many issues to overcome before Indonesia can fully realize its potential. That is not to say that they’ve sat idle, but it does take time to fix the very broken infrastructure that was a legacy of the Suharto regime. Steps have been taken to repair the damage, ones such as obtaining access to outsider financing.

Outsider financing in the form of investment by other countries is seen as what the country needs to fully realize its potential. Currently the major issue that Indonesia faces is building a stable infrastructure. Much of the future growth is seen to be in its natural resources, but without roads, there is no access. Provided the current government stays on its path, it’ll get the loans it needs and more.

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Accessing Natural Resources While Preserving the Land in Indonesia

Indonesia is full of untapped resources, ready for mining companies to come in and profit from them. The government feels that everyone can benefit, from the businesses to the locals that reside in the areas. However, the country has an eye towards preserving its rich forest heritage while moving forward at the same time.

Forestry Minister Hasan has stated that certain sections of the country are rich in minerals, but will exercise caution when it comes to exploiting them. Laws are in place to prevent mining from destroying the forests while still allowing a specific amount of land to be accessed. However, there will be no open mining allowed in the protected areas. As long as the companies operate within the law, they will not be hindered by the government.

The country is looking to use a multi-pronged approach to the mining of resources. One is to preserve and protect forests, another is to manage the mining itself to allow for companies to profit, and one is to offer opportunities to the local residents. It’s all about balancing everyone’s desires. Mining companies want access to rich deposits, but they’re in forest preserves. Residents want to harvest trees for income, but again, the wood is in protected areas.

A solution is offered in the form of limited access. A mining company can gain access to 20 hectares of land in a specified area, and the locals can obtain a license to harvest lumber. Everyone wins under this mandate. Local economies develop, allowing them to expand and find other means of income, such as employment with mining companies. The mining companies can hire locals with their knowledge of the area to better exploit what they’re able to, thus increasing profits. And the forests and local climate benefit by not being stripped down to the earth.

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Alternative Methods to Find Business Funding

Many reasons exist for a business to need a loan for something. Equipment needs replacing, an expansion becomes necessary, or extra materials need to be purchased to meet demand. All of these are ways in which a business operator keeps growing their bottom line, but sometimes seed money is necessary to do so. Banks being tight with loans don’t help the situation any.

So what is the small to medium sized business owner to do? Sitting back on their heels won’t get them anywhere. The risks of standing still are just too great. Opportunities are missed and competitors can get a jump ahead. It’s always worth a try to go back to the bank with a revamped loan request, but they’ll probably still say no. It’s at this point when it’s time to look elsewhere.

Start looking into local or small commercial banks that are within reach. Those that run a commercial bank are well versed in the risks they take when funding businesses. However, they’re more likely to take a chance because of that knowledge. A business owner will have more success in getting the funds they need in a reasonable amount of time.

If there are no commercial banks available, look into credit unions. Credit unions have a reputation as being more conservative than banks, but not always. They’re actually looking to turn this image around and are courting the small business owner. Just like a bank, credit unions do work to turn a profit and are actively looking to attract the business customer. The advantage here is that the CU’s work to build a relationship with their clients as opposed to treating them like a number.

There are more ways of finding financing for a business but it may take some work. Don’t ever stop trying because someone somewhere will lend the money.

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Taking Advantage of Geothermal Energy in Indonesia

Geothermal energy
Image by Peter Nijenhuis via Flickr

Natural resources continue to be the world’s primary source of supplying energy and Indonesia is on the cusp of exploiting theirs. Natural gas, coal and geothermal are its major resources with the government looking at geothermal for producing a large amount of power. However, going this route for industrial purposes requires a hefty investment.

Geothermal is quickly becoming the next darling of the renewable resources crowd. It provides power without having to tap into some form of fossil fuel or natural gas. While it does come with its own issues, it’s inevitable that a new energy resource is going to have hiccups until it’s as commonplace as burning coal.

It works by drilling wells in order to reach thermal springs that are deep underground. The hot water or steam that rises can be used to power generator turbines in the power plant. And when a well is not available, other options exist. Again, wells are drilled, only instead of water, it’s reaching rock. Water can be poured onto the hot rock which will turn into steam. The steam will then, once again, turn the turbines and generate electricity.

Indonesia estimates their geothermal reserves to be a minimum of 27,000 megawatts spread across 265 separate locations in the country. This is a substantial amount of energy that’s waiting to be tapped, and one that can greatly reduce reliance on other forms of energy such as fossil fuels.

So far the Energy agency estimates that 5000 megawatts of power fueled by geothermal energy will be online by 2014. Further construction of plants is currently restricted by lack of funds. The country is looking for international investment to assist with its goals. Taking into consideration that Indonesia is poised to see solid growth in the years to come, energy investment should be something to consider.

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Break Down the Break Even Point to Stay Afloat

Business have costs, that’s a given. It’s investigating the costs and finding the baseline is what allows a business to sink or swim. Knowing how much something costs from the get go is information that tells the owner where to adjust pricing in order to cover the outflow.

It’s important to have this information down from the get go. Not doing so turns into a common theme of businesses that fail. The basics are left behind in the rush of making money. Profits get taken out and used elsewhere instead of paying attention to the bottom line. That causes the business to scrape by until enough has come back in to purchase the steady selling items. Overall it’s just plainly a poor idea to go this route, but then again, not everyone is cut out to operate their own business.

The starting point should be by making use of a spreadsheet. Either a physical or computer generated one, it doesn’t matter. Let’s use a machine that manufactures widget parts for an example. In one column goes the machine cost including maintenance. Enter the labor, material cost and finished piece price into the following column headers. This is breaking down what it costs to run the machine and produce the widget, supplying the baseline output for that particular piece.

Once this knowledge is at hand, it now becomes a matter of figuring out a final price for the entire widget. Cost and profit go into that number. The cost is the amount of money needed to produce the item. Profit is the excess that is made from selling the item. Now a sensible decision to make is putting some or all of that profit back into purchasing more widget making material. This is one of the basic tenets of running a business, one that many ignore at their own peril.

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