3rd Annual Summit of the Arab Asian Financial Forum to be held in Indonesia

Arab businessmen and real estate tycoons are showing more interest in South East Asia

With a population of more than 234 million and an area covering 1.9 million square meters, Indonesia can truly be described as the largest Islamic state. According to the Arab Asian Financial Forum (AAFF), the average Arab citizen has little or no information at all about Indonesia which has 17,507 islands, 6,000 of which are inhabited. The Annual Summit of the Arab Asian Financial Forum (www.cedarhills.com), which will take place in Hotel Mulia (Grand Ballroom) on June 5-6 2008, will try to improve trade ties and financial sector activity among Arab and Asian countries
Indonesia is one of the main oil producing countries and is an active member of OPEC, the most powerful oil cartel in the world. But despite the religious links between the Arab world and Indonesia, the trade ties between the two sides are not up to expectations.
Indonesia's main export markets are Japan (22.3 percent of Indonesian exports in 2005), the United States (13.9 percent), China (9.1 percent), and Singapore (8.9 percent). The major suppliers of imports to Indonesia are Japan (18.0 percent), China (16.1 percent), and Singapore (12.8 percent).
The 3rd Annual Summit of the Arab Asian Financial Forum will try to find new avenues whereby oil wealth can be invested into sustainable projects that can fuel the aspirations of generations to come. With “From Energy to Knowledge” as this year’s main theme of the annual summit of AAFF, bankers, insurers, and energy experts will focus on the concrete steps that have to be taken within the coming couple of years in order to develop market dynamics.
In 2005, Indonesia ran a trade surplus with export revenues of $83.64 billion and import expenditure of $62.02 billion. The country has extensive natural resources, including crude oil, natural gas, tin, copper, and gold. Indonesia's major imports include machinery and equipment, chemicals, fuels, and foodstuffs.
“Indonesian exports to Middle Eastern countries in 2005 touched $2.3 billion, up from $1.8 billion in 2001. Real GDP growth in Indonesia stood at 6.3 percent year on year in the second quarter of 2007, accelerating slightly from 6.0 percent in the first quarter,” says an executive at the Arab Asian Financial Forum.
This strong momentum is expected to be maintained into 2008, when growth is forecast at 6.4 percent, up from an estimated 6.3 percent in 2007.
Consumer confidence indicators continue to show a lack of optimism, but consumer spending nonetheless increased by 4.7 percent year on year in the second quarter, its strongest increase in 11 quarters. Falling lending interest rates and strengthening confidence in economic stability should allow consumer spending to remain an important driver of growth during the forecast period.
In addition to regional and international financial dialogue, the 3rd Annual Summit of the Arab Asian Financial Forum will also look at opportunities in Indonesia. Lower interest rates, the new investment law, efforts to encourage infrastructure investment and a new package of measures introduced by Bank Indonesia (the central bank) to stimulate bank lending will all contribute to strong private-sector investment, which grew by 6.8 percent year on year in the second quarter of this year.
Despite strong domestic demand, average inflation is estimated to have been considerably lower in 2007 than in 2006, largely because the fuel price rises in late 2005 dropped out of the base of comparison in October 2006. Rice shortages pushed up inflation at the start of 2007, but the government has relaxed its ban on imports of rice, which has tempered price rises.
The 2007 rice harvest is thought to have exceeded expectations, which will allow stocks to be replenished and will help to contain prices in 2008.
The sharp depreciation of the rupiah in August will push up import prices, but high unemployment will ensure that wage pressures remain relatively subdued. The high forecast for international oil prices should not threaten Indonesian consumer price inflation, as the government subsidizes fuel prices, and its relatively secure fiscal position means that it is unlikely to pass on the burden of higher oil costs to consumers and businesses.
The Arab Asian Financial Forum has been working hard for a few years now to improve bilateral relations between the Arab Countries and South East Asia. Notably, Arab ministers, central bank governors, and billionaires have supported the endeavor by actively participating in AAFFs annual summits in places such as Singapore and Malaysia. In recent years, Indonesian officials and business delegations made regular visits for many Arab countries and most notably the rich oil Gulf States to strengthen trade and investments.
Thee Indonesia based National Agency for Export Development (NAFED) a unit of the Indonesian Government's Ministry of Industry and trade, has set itself the export growth target in 2006 at 7 per cent as against Indonesia's total exports of non oil and gas in 2003 which touched at $57.2 billion and export growth touched 5.2 per cent.
Ahmed Mohammed Al Midfa, Chairman of the Sharjah Chamber of Commerce and Industry (SCCI), said: "Given the cultural bonding UAE and Indonesia shared, there was need to further strengthen the trade relation between the two countries. Under the auspices of His Highness Dr Shaikh Sultan bin Mohammed Al Qasimi, Member of the Supreme Council and Ruler of Sharjah, we are constantly exploring opportunities to develop trade with brotherly countries."
Apart from the trade ties, the Arab Asian Financial Forum says that UAE companies showed keen interest in investing in Indonesia.
Etisalat last month has taken a 15.97 per cent stake for Dh1.6 billion in Excelcomindo, the third largest mobile operator in Indonesia.
Etisalat has acquired 1.132 billion ordinary shares of the telecom from Rajawali Group. The deal will give Etisalat the right to nominate a seat on the Board of Commissioners and one seat for the Board of Directors of the telecom company.
Excelcomindo has around 13 million mobile subscribers in Indonesia, representing a market share of approximately 14 per cent as of 30 September 2007.
In addition, Excelcomindo has built one of Indonesia’s highest quality mobile networks, with fiber optic transmission infrastructure covering all major cities. This raises the number of subscribers in the companies that Etisalat manages or contributes towards to over 50 million subscribers with a total population of 832 million people across Africa, the Middle East and Asia.
The Arab Asian Financial Forum is supported by various large financial institutions. This year’s Annual Summit is sponsored by AlBaraka Banking Group (ABG) (Platinum Sponsor), International Investment Group (IIG) (Gold Sponsor), Trust International Insurance and Reinsurance Company (Silver Sponsor), Intaj (Silver Sponsor), Tadamon International Islamic Bank (Bronze Sponsor), Al Salam Bank (Bronze Sponsor), Aman Insurance and Reinsurance Company (Bronze Sponsor), Credit Libanais (Breif Bag Sponsor) among others.
Saudi Arabia’s Kingdom Holding Company also announced plans to increase its investment in Indonesia's tourism and hotel sector, the chairman of the company said.
Chairman Prince Awalid bin Talal bin Abdulazizal Saud, the world's 13-richest man, made the remarks at the press conference after meeting Indonesian President Susilo Bambang Yudhoyono at the presidential office.
However, the chairman declined to disclose how much more the company is going to invest in Indonesia.
The Kingdom Holding Company owns total assets of $20.3 billion, according to the Forbes Magazine.
"We are committed to strengthen our position in Indonesia. We have been looking for certain opportunities in the hotel industry that we hope to materialize in coming months," he said.
The Kingdom Holding Company has already invested in two luxurious hotels and the banking sector in the Indonesian capital of Jakarta, said Awalid.
"We already have presence in Mandarin Hotel and Four Seasons Hotel and the City Group, banking Industry," he said.
On certainty of investing in Indonesia, Awalid praised the country's newly-passed investment law by the Indonesian parliament.
Officials said that Indonesia is among the most beautiful multi-faceted and fascinating holiday destinations in the world. It offers beautiful beaches for swimming, trekking tours through spectacular volcanic landscapes, one of the most beautiful golf courts and diving in unique underwater worlds.
They added that nearly 5 million foreign tourist had visited Indonesia during the year 2006. Of this, an estimated 56,000 tourists were from the Middle East. This is against 38,337 visitors during 2004. Indonesia targets a minimum of 6 million visitors from across the globe in 2007.
"In the first seven months of 2007, Indonesia attracted a little more than 2.5m guests from the world over, which marked a distinct increase of around 13 per cent. The year 2008 is to add another 20 per cent. And the booming Qatar is certainly our target", one Indonesian said in Doha.
“Tourist operators expect more than 300,000 Arab tourists to visit the islands of Indonesia in 2008 thanks to the extensive promotion TV campaigns. They added that investors are planning to spend $3 billion in the construction of hotels and beach resorts in at least 12 islands in Indonesia,” says an AAFF representative.
The Annual Summits of the Arab Asian Financial Forum have been covered by the most prestigious members of the regional and international press, including the likes of Asia News Channel, Al-Jazeera, and CNBC Arabia.