As Indonesia emerges from the pandemic, businesses and investors are looking to ride on the country’s rebound from an unprecedented crisis.
December 16, 2021
Investors are keen to ride on Indonesia’s rebound.
As Indonesia emerges from the pandemic, businesses and investors are looking to ride on the country’s rebound from an unprecedented crisis. According to the Asian Development Bank (ADB) in a report released late September, the Indonesian economy is expected to grow by 3.5% in 2021, and by 4.8% in 2022, underpinned by robust exports and government spending. Supportive fiscal policy and accommodative monetary policy will also help boost growth.
Meanwhile, private consumption is projected to recover modestly before rising by 5% next year, ADB said. Investment should also strengthen in 2022 as conditions stabilize and the business climate improves.
Indonesia’s economy had a relatively mild downturn in 2020, thanks to the government’s bold, timely policies to provide fiscal stimulus and social assistance to the vulnerable to prevent long-term economic scarring. It continued to recover in the first half of 2021 due to those same policies and strong exports,” said Jiro Tominaga, ADB Country Director for Indonesia.
Keen Investor Interest
The confidence in Southeast Asia’s largest economy is reflected in rising investment in the country’s dynamic tech sector. Indonesia’s digital economy is projected to grow by almost 50% this year on the back of rapid development in the e-commerce segment, a trend that is expected to continue until at least 2025 according to the “e-Conomy SEA 2021” report by Google, Temasek and Bain & Company. The report estimates that Indonesia’s internet economy—measured in gross merchandise value—will grow to US$70 billion this year, up 49% from US$47 billion last year.
Venture capital (VC) firm Alpha JWC Ventures has capitalized on keen investor interest in tech start-ups to continue its winning streak in Indonesia over the past year. With three Indonesia-based unicorns already in its portfolio, the firm’s portfolio of companies managed to raise over a billion dollars so far in 2021 amid the pandemic.
Going forward, Alpha JWC Ventures plans to double down on Indonesia’s tech sector. With the recent close of its latest, and largest fund, the firm will be able to increase its investment ticket size significantly, and partner with its portfolio companies for longer periods. The VC’s Indonesia-focused investment approach has been validated by global organizations such as the World Bank’s International Finance Corporation and Morgan Stanley Alternative Investment Partners, who have invested in the latest fund.
Domestic Leaders Continue to Dominate
Meanwhile, Indonesian companies in more traditional sectors have also prospered during this challenging time. As the largest and most successful bread company in Indonesia, PT Nippon Indosari Corpindo Tbk continued its domestic dominance, commanding a 90% share of the country’s mass-produced bread market.
The company’s strategy to focus on developing Indonesia’s bread market has yielded positive results, and the company’s quarterly sales are already returning to pre-pandemic levels, boosted by wider distribution coverage and higher penetration. Profitability margins are also set to expand, underpinned by improved productivity and efficient cost management.
PT Arwana Citramulia Tbk, Indonesia’s ceramic tile industry leader, is another case in point. The company’s early decision to spread out its manufacturing to five locations around the country has kept costs low and its operations efficient, helping it to navigate the turbulence and maintain its leadership position. The company is also expanding into new market segments. Its latest plant, for instance, was set up to produce a new product, glazed porcelain tiles, called ARNA.
Transforming to Fuel Growth
Other companies have also pivoted their businesses to adjust to changing customer and market needs. Indonesian conglomerate Emtek Group, for instance, has managed to stay ahead of the competition by transforming from a conventional free-to-air television broadcaster into a multi-channel, multi-platform digital media company.
Today, the group owns three free-to-air television stations, one direct-to-home satellite television operator, a leading over-the-top streaming platform, an ecosystem of digital publishers, and a series of content and production companies, among other assets.
While Emtek has helped Indonesian businesses by providing them multiple platforms to showcase their products, its associate company Bukalapak is helping small businesses in the country grow. Enterprises that sign up to the Bukalapak app have access to buying millions of different products at the best wholesale prices for resale into their local community, as well as the ability to offer digital services to their customers; including paying utility bills, moving remittance money, buying travel tickets and even investing in digital gold.
Access to innovative financial solutions will play a key role in driving Indonesia’s long term economic expansion. In this regard, Bank Mandiri, the largest financial institution in Indonesia, is committed to delivering relevant financial products and services to its customers around the country. This is part of the bank’s broader mission to seamlessly integrate its financial solutions into its customers’ lives by delivering fast and simple digital banking solutions.
In the energy sector, Indonesia’s Pertamina is also committed to transforming its operations to contribute to a low-carbon economy as it works towards building a sustainable business by transitioning to greater use of clean energy. In particular, the country’s national energy provider has set its sights on the development of geothermal, hydro- and solar-based power generation. As part of this transition, it has announced plans to support the nation’s effort to decarbonize, starting with reducing its greenhouse gas emissions, mainly carbon dioxide, by 30% before 2030.
These progressive companies have leveraged technology and innovation to grow sustainable businesses, and will lead Indonesia’s recovery as it shakes off the effects of the pandemic in the coming years.
PT Nippon Indosari Corpindo Tbk: Growing Together With Indonesian Families
The pioneer of Indonesia’s mass-produced bread industry has extended its competitive edge to further dominate the domestic market.
As the largest and most successful bread company in Indonesia, PT Nippon Indosari Corpindo Tbk. and its top-selling brand, Sari Roti, have gone from strength to strength since the firm’s establishment almost 27 years ago. The company has an overwhelming 90% market share in Indonesia’s mass produced bread market, having leveraged technology and a comprehensive distribution network to meet fast-rising demand for bread and cake products in Indonesia.
Indosari was founded by the Salim Group, the Yap family and Pasco Shikishima of Japan. Wendy Yap—the daughter of the late Piet Yap, one of the founders of Bogasari Flour Mills of Indonesia—is the President Director and CEO of the company. In 2010, Indosari became the only bread company to be listed on the Indonesia Stock Exchange, with the ticker code ROTI. In November 2017, private equity giant KKR became the company’s third-largest shareholder through a rights issue.
The Bread of Choice
The brand developed its products specifically for Indonesian tastes while using advanced technology to ensure high standards of quality and hygiene. Sari Roti products are also distributed through an extensive network, including modern trade channels such as minimarts and supermarkets, and general trade outlets such as small shops, tricycles and direct sales to homes and schools. In total, more than 70,000 sales outlets in 34 provinces bring Sari Roti closer to the daily lives of Indonesian families.
Indosari today operates 14 strategically located factories across Indonesia’s major islands: Java, Sumatra, Kalimantan and Sulawesi. Currently, these facilities bake about 5 million pieces of bread and cakes a day. One more Sari Roti plant in Sumatra is scheduled to come online next year, ensuring sufficient capacity to meet the country’s growing demand for bread over the next few years.
The company’s strategy to focus on developing Indonesia’s bread market has yielded positive results. Despite the challenges of Covid-19, Indosari’s quarterly sales are already returning to pre-pandemic levels, boosted by wider distribution coverage and higher penetration, especially in general trade channels. Profitability margins are also set to further expand on the back of operational leverage through increasing productivity and efficient cost management.
As part of the company’s commitment toward Environmental, Social and Governance (ESG), Indosari initiated a corporate social responsibility program called Sari Roti Peduli, which this year focused on supporting the Indonesian government on Covid-19 relief. The project started by providing bread donations for medical workers through hospitals and vaccination centers. However, as Indonesia’s Covid-19 cases peaked in August and September, Sari Roti Peduli extended its donations further to reach thousands of patients in Covid-19 isolation centers.
Adaptability And Strong Partnerships Key To Emtek’s Growth
Emtek Managing Director Sutanto Hartono and Bukalapak President Teddy Oetomo share the secrets of their success.
“The only constant in life is change,” as the saying goes, and in the world of business and entrepreneurship, those who adapt quickly to change are most likely to stay relevant.
Emtek Group, one of the largest conglomerates in Indonesia, is a perfect example of a company that has stayed ahead of the competition by adapting its business model, transforming from a conventional free-to-air television broadcaster into a multichannel and multiplatform digital media company.
Today, Emtek Group, which started off as a distributor of Compaq computers in the 1980s, owns three free-to-air television stations, one direct-to-home satellite television operator, a leading over-the-top (OTT) streaming platform, an ecosystem of digital publishers, a series of content and production companies, and more.
Evolution to Digital
Having taken full control of SCTV, a free-to-air television station, in 2008, Emtek acquired another free-to-air television station, Indosiar Karya Media, a few years later. Both are leading national TV stations in Indonesia.
And while the free-to-air business was thriving, Emtek believed that the dominance of free-to-air operators in terms of advertising revenue would not last, says the company’s Managing Director Sutanto Hartono. “We knew that there would be a tipping point where new technology may disrupt the industry. So, we decided to extend the business model—to become a multiplatform media company,” he adds.
In 2014, the company created its own OTT streaming platform, Vidio, which has since grown to become the largest OTT platform in Indonesia, with over 62 million monthly active users. It has also become the largest local original series producer in the country. Recently, Vidio made headlines by attracting US$150 million of investment from private equity firm Affinity Equity Partners, at a US$750 million pre-money valuation.
Understanding changing behaviors, including the increasing amount of time being spent on consuming content on social media platforms, Emtek, via its indirect subsidiary Indonesia Entertainment Group (IEG), has also acquired a stake in RANS Entertainment, one of the largest media influencer companies in Indonesia.
It’s All in the DNA
Besides being agile, Hartono believes that Emtek’s “collaborative and partnership DNA” is also one of the key factors in its success.
“It would have taken too long for us to build new capabilities ourselves, therefore we believe it is better to partner with others to expand. However, you need a different kind of DNA in order to have a strong partnership—you need to be able to give and take,” Hartono says. “I am proud to say that we have a fairly solid track record when it comes to partnerships. The majority of our partnerships are very long-lasting.”
Hartono adds that the company’s strong reputation for partnerships also helps open doors to new opportunities, including investments in the Southeast Asian super app Grab, and Bukalapak, one of the largest e-commerce companies in Indonesia.
Leveraging the robust ecosystem of media and digital platforms in its portfolio, Emtek is committed to solidifying its leading position in Indonesia through continuous innovation in product development, as well as by forging further strong partnerships.
Bukalapak Empowers Indonesian Entrepreneurs
While Emtek has helped many Indonesian businesses by providing them with multiple platforms through which to showcase their products—as well as developing the nation’s creative content industry—its associate company, Bukalapak, has also played a major role in this sphere. In particular, Bukalapak has helped in developing the nation’s small-and-medium enterprises (SMEs) by enabling mom-and-pop stores to grow in the increasingly digitized and competitive new world.
According to Bukalapak President Teddy Oetomo, the company has enabled more than 8.7 million Mitras (mom-and-pop stores) to grow their business sustainably. Once these stores have signed up to the Bukalapak app, they have access to buying millions of different products at the best wholesale prices for resale into their local community, as well as offering digital services to their customers such as paying utility bills, moving remittance money, buying travel tickets and even giving them the option of investing in digital gold.
This plan to help enable the Mitras—which are mainly located in non-Tier 1 cities—to sell more products has proved key in helping the Indonesian economy grow from the ground up.
Serving Most of Indonesia
Enabling the Mitras has also helped Bukalapak to significantly differentiate itself from the other major e-commerce players in the country—which are mainly focused on growing their business in Tier 1 cities.
“If you look at Indonesia, most people only see it as a country with a large population. However, many do not take into account that only about 40 million people live in Tier 1 cities, such as Jakarta, Surabaya and Medan, and about 230 million people are living outside Tier 1 cities,” says Oetomo.
“Today, three quarters of Bukalapak’s business comes from non-Tier 1 cities, and more than half of the mom-and-pop stores in Indonesia are using our services,” he adds.
Cutting out the Middleman
For Oetomo, the main reason Bukalapak’s Mitra business is growing is that the company remains focused on addressing one issue: how to help the mom-and-pop stores—which do not have the economies of scale to compete with larger retailers—to make more money and to be more competitive.
“We connect them directly with the distributors, so that they get the best pricing. We have also developed a process where, if they are able to place their orders by 6pm, they will receive their goods the following morning,” says Oetomo. “This is why I tell investors that we are not just the typical e-commerce player, we are an all-commerce player—one that has an online-to-offline strategy as well.”
Although Bukalapak has secured the lion’s share of the mom-and-pop stores, Oetomo says that the company’s outlook remains very bright, as there are still a lot of untapped opportunities.
“There are 64 million SMEs in Indonesia. There’s a lot of work to be done. Next, we will be looking at how to enable other sectors within the SME space,” he says. “Even within the mom-and-pop space, we believe there are still a lot more products and services that can be introduced to help their businesses continue to grow.”
Emtek’s Hartono says he is also confident in the growth potential of Bukalapak, in which Emtek has a 25% stake. “Bukalapak is super important to Emtek for multiple reasons, but the most important reason is that it allows us to engage with our audience online via our multi-digital platforms, as well as offline. It helps to provide a complete customer experience journey,” says Hartono.
A commitment to its workers, local communities and the environment are central to the ongoing success of Indonesia’s leading ceramic tile manufacturer.
Since its founding in 1993, leading Indonesian ceramic tile company Arwana has gone from strength to strength, building several new factories around Indonesia and becoming one of the region’s largest ceramic tile producers, and the ninth-largest in the world. As well as continuous R&D and consistently upgrading to new technologies, much of the reason for the company’s ongoing steady growth is Arwana’s commitment to its workers, local communities and the environment.
Arwana started out as a limited liability company, opening Plant 1 at Tangerang, Banten in 1995 with a capacity of just under 3 million square meters of tile products per year. As of 2021, the company has built four more plants, with new production lines added and upgraded. This has allowed Arwana to grow its production capacity by more than 20 times, to about 65 million square meters of tile products per year, across five factories located in South Sumatra, East Java and Banten.
Just six years after commencing production, Arwana listed on the Jakarta Stock Exchange (now the Indonesia Stock Exchange) and conducted its IPO (stock code ARNA) in July 2001. This was followed by bumper dividends and stock splits in 2009 and 2013. Continuing its expansion, the company recently added Plant 5B to its Mojokerto based operations to produce a new product line of glazed porcelain tiles called ARNA.
Tiling the Land
The key product that has propelled the company to success is competitively priced ceramic tiles in a vast range of patterns and designs. “When we began in 1995, we lacked experience and our average selling price was about US$5.50 per square meter. Nearly 30 years later, it is US$2.50 per square meter— while improving profitability—because we are very focused and hands-on,” explains Arwana’s Co-founder and President Tandean Rustandy.
Arwana’s various products are sold under the entry-level brand Arwana, the mid-level brand UNO, and the new high-end brand ARNA. Marketing is handled by the company’s subsidiary Primagraha Keramindo, which has established a network of 44 sub-distributors handling 33,000 retail outlets nationwide. This has pushed Arwana’s market share to over 20%.
A Holistic Approach
Though the company’s growth has been swift, Arwana is aiming to be the best—but not necessarily the biggest—on a number of fronts.
The company decided to spread out its manufacturing early on, positioning its factories in five locations around the country, mainly chosen based on population density. This reduces logistical costs and the challenge of transporting tiles around the Indonesian archipelago while also cutting delivery times.
The distribution network fans out from these five plants to the company’s 44 distribution centers, which cover all of the major cities and most of the big towns in Indonesia. This gives Arwana a nigh-ubiquitous presence in the country, not only as a product, but also as an employer that is increasingly woven into the fabric of the nation.
This multiple-location strategy also mitigates the potentially negative impact that a mega-factory might have, while enabling Arwana to adhere to its vision of contributing to Indonesia’s development by creating jobs, generating tax revenue, and taking on social and environmental responsibilities. As a result, the company has established good relationships, maintained by each factory’s management, with local governments and communities. And, by contributing employment opportunities, it has helped spawn independent ancillary businesses in the vicinity of its factories.
As Tandean points out, “Small businesses sprout up in response to our presence, resulting in a visible improvement in the locality’s prosperity. We also add directly to this with many programs and projects.”
“”Success is achieved through innovation, creativity and efficiency. Protect the environment, conserve energy, produce high quality products, invest in the best technology and find and nurture the best human resources.”
Factory management strives to improve local communities by planting trees, improving the habitability of local homes, and building public infrastructure and facilities. There is, on average, 30% green space on factory grounds, and nearly 70% at Factory IV, where employees can even grow their own vegetable.
“The green spaces are good for the mental health and well-being of employees, and also contribute to absorbing some of the factory’s carbon footprint,” Tandean says.
Arwana is also deeply committed to developing its human resources, viewing them as crucial stakeholders. Indeed, the company’s management believes that happy and stress-free workers are not only more productive, but can become multi-generational fixtures within the company.
Education is an important part of Arwana’s investment in its people’s futures, and the company offers scholarships for employees’ academically promising children and graduate degree scholarships for qualified military officers. There are also early childhood education and kindergarten classes that take place at the factories. In addition, the company has set up free clinics and sponsored numerous community activities, including raising funds for school supplies and for local orphaned children.
Building on Success
According to Tandean, “Success is achieved through innovation, creativity and efficiency. Protect the environment, conserve energy, produce high-quality products, invest in the best technology, and find and nurture the best human resources. We stay ahead of the curve and break the path, not follow it. Meeting new and unfamiliar challenges just makes us stronger and more resilient.”
Looking to the future, Tandean adds: “We will continue to serve the country and communities and foster our human resources. Though we do some export, our main focus is domestic, upholding excellent quality and value for our customers.”
Alpha JWC Ventures: Doubling Down On Indonesia’s Tech Sector
Southeast Asia’s leading venture capital firm is poised to continue its winning streak with the close of its latest fund.
In just six years, Alpha JWC Ventures has blossomed to become the leading venture capital firm in Indonesia and the region as a whole. The company is Southeast Asia’s best-performing early-stage venture capital firm, with around US$630 million in assets under management (AUM) across three funds.
Currently, Alpha JWC Ventures counts three tech unicorns among its stable of companies: Indonesia’s largest “buy now, pay later” platform Kredivo; Southeast Asia’s largest secondhand automotive marketplace, Carro; and online brokerage platform Ajaib. The firm was the first institutional investor for each of these startups, all three of which crossed the billion-dollar valuation mark this year amid the pandemic.
Alpha JWC Ventures launched its first fund of US$50 million in 2016, which was deployed into 23 early-stage companies in Southeast Asia, most of them in Indonesia. More than 90% of these companies have since received follow-on funding. The firm’s second fund, closed in 2019, was oversubscribed at US$143 million, and has been invested into 30 companies.
The performance of the two funds has been impressive so far. The first fund’s total value to paid-in (TVPI) has reached 3.72x, while its internal rate of return (IRR) stands at around 37%. The second fund has a TVPI of 3.45x and an even higher IRR of 87%.
Significantly, the firm has generated nine exits so far, including the sale of business media company DealStreetAsia to Nikkei, regional co-working space network Spacemob to WeWork, and Vietnamese enterprise SaaS company Base.vn to the country’s largest technology firm, FPT Corporation.
Closing the Year with a Bang
Alpha JWC Ventures’ winning streak has continued unabated in 2021 despite the challenges posed by the pandemic. The firm’s portfolio companies have collectively raised more than a billion dollars so far this year, with the majority raising follow-on funding within a year of Alpha JWC Ventures’ initial investment.
“We are at the inflection point in Indonesia’s digital economy. Covid has accelerated digital adoption, which led to stronger traction and higher revenue for some of the companies. We have quite a lot of companies that reach profitability at operating level and, because of this, we are confident to see more unicorns coming out from Indonesia,” says Co-Founder and General Partner Jefrey Joe.
Joe also attributes the firm’s success to the breadth and depth of its team. “We have one of the region’s largest VC teams to help the founders with their human capital, fundraising, business operations and strategies. We have been doing this for years, even before the pandemic, so when the pandemic hit, we did not need to shift gears and try a new approach in portfolio management—we continue what we do best: putting all hands on deck to support these companies.”
Beyond the three unicorns already in its portfolio, Alpha JWC Ventures has another 11 that are nearing unicorn status. These include Indonesia’s fastest growing grab-and-go coffee chain, Kopi Kenangan; Indonesia’s largest B2B marketplace, GudangAda; healthy consumer goods producer Lemonilo; and Southeast Asia’s largest peer-to-peer platform, Funding Societies.
Beefing up its War Chest
With the recent close of its third fund, Alpha JWC Ventures is set to make more waves in the coming years as it doubles down on the Indonesian tech market. Last month, the firm raised US$433 million in Southeast Asia’s largest early-stage fund.
With the enhanced war chest, Alpha JWC Ventures will be able to increase its investment ticket size up to US$60 million in multi-stage funding, yet invest as low as US$100,000 in seed stage. The VC’s sector-agnostic and Indonesia-focused investment approach has also been validated by global organizations such as the World Bank’s International Finance Corporation (IFC) and Morgan Stanley Alternative Investment Partners, who have invested in the latest fund.
“We are grateful to have a great list of local, regional and global investors. We started with a strong investor base in Indonesia, from corporates and tech companies to family offices. Then we grew our investor base in Fund 2 with LPs [limited partners] from Japan, Korea and other Asian countries, as well as Europe. The growth continues for Fund 3, where we welcomed even more global investors. We believe this is the beginning of more global investors coming and supporting Indonesia’s tech industry,” says Co-Founder and General Partner Chandra Tjan.
The enlarged funding will also allow alpha JWC Ventures to partner with their portfolio companies for longer, and continue to add value to these enterprises in a more meaningful way. The firm also plans to boost its team by hiring more experienced professionals from different backgrounds.
“A larger base of top-quality investors also means more opportunities for strategic partnerships and alliances for our portfolio companies, which will be value-adding in their growth and expansion plans,” adds Tjan.
Investing in Next-generation Startups
Since its establishment in 2015, alpha JWC Ventures has identified potential winners based on the strength of each startup’s founders. As the region’s technology sector matures, the company is primed to work with the next generation of tech entrepreneurs; a younger, untapped space that it believes will be able to generate 100x returns.
“The quality of companies and founders in Indonesia has increased significantly in the past couple of years compared to what I saw in the early 2010s. While their canvases are still relatively blank, these new founders have learned from older startups’ past journeys. Most of them have worked in these startups too, so they have seen firsthand what it takes to build a good startup. As such, the possible solutions that they can bring to consumers are limitless,” says Tjan.
He also believes that the time taken to become a unicorn has been shortened considerably. For instance, Ajaib only took 2.5 years to become a billion-dollar enterprise—the fastest in Indonesia. “With accelerated digital adoption and more educated consumers, it will take less time for tech startups to reach the billion-dollar valuation mark in the future.”
Doubling Down on Indonesia
Looking ahead, Alpha JWC Ventures believes that Indonesia still presents plenty of opportunities for savvy investors. The World Bank forecasts Indonesia’s economy to rebound by 3.7% in 2021, and accelerate to 5.2% in 2022.
In particular, Alpha JWC Ventures sees opportunities in Indonesia’s Tier 2 and Tier 3 cities, companies offering SME solutions, as well as those in the deep technology sector.
“Indonesia is on a growth trajectory and there is a clearer path to exits, which is resulting in more investors entering the market to help build the ecosystem. That’s why we’re getting strong interest for our Fund 3 and portfolio companies,” says Tjan.
Going forward, Alpha JWC Ventures is set to continue setting the pace for VC investment in Indonesia and the rest of Southeast Asia. The firm is also seeking to make a broader social impact through its investments.
“Our performance shows the world that there is a lot of value to be created in Southeast Asia, especially in Indonesia. Indonesia’s digital economy is in its ascendency and this is the inflection point—things will just get better with post-pandemic economic recovery and the growth of many promising startups, including our own,” says Joe.
Indonesia’s national energy company aims to become a world-class global player by prioritizing its sustainability initiatives and ESG implementations, as well as accelerating digitalization, forging more collaborations, and improving global competitiveness, productivity and efficiency.
With rising concerns over climate change, governments around the world are rallying to achieve net-zero emission goals while corporations are realigning business strategies with a greater focus on sustainability.
Pertamina, Indonesia’s state-owned energy company, has announced that it will support the nation’s effort to decarbonize, starting by reducing its greenhouse gas emissions.
“Our operational energy efficiency in refinery and upstream facilities, flare gas utilization, waste heat recovery and the increasing utilization of geothermal energy, all contribute greatly towards the reduction of emissions,” says Nicke Widyawati, the President Director and CEO of Pertamina, who was featured in the Forbes list of the World’s 100 Most Powerful Women in 2020 and 2021.
As the largest company in Indonesia involved mainly in oil, natural gas and renewable energy, Pertamina plays an important role as the guardian of Indonesia’s energy security, while its wide range of activities affect the lives of millions of people in the country. As it transitions to the greater use of clean energy, the company will explore the development of geothermal as well as hydro-and solar-based power generation.
Pertamina has several Environmental, Social and Governance (ESG) programs that are geared towards decarbonization. In conjunction with its 64th anniversary, the company has also identified six “go” themes—go sustainable, go green, go collaborate, go digital, go productive and go global.
In terms of environmental goals, Pertamina focuses on three key areas: addressing climate change; reducing its environmental footprint; and protecting biodiversity.
Over the years, the company has successfully reduced its energy consumption and intensity, leading to a reduced carbon footprint.
“Last year, we succeeded in reducing greenhouse gas emissions by 27%. Going forward, we are targeting 30% by 2030, in line with Indonesia’s commitment to reduce emissions as stated in the Paris Agreement,” says Widyawati.
The government has plans to reduce as much as 314 million tons of carbon dioxide equivalent in 2030, of which 183 million tons, or more than 50%, is a target for the new and renewable energy (NRE) sector.
“To be able to provide significant results in mitigating climate change with the current business landscape, the global oil and gas sector must reduce emissions by at least 3.5 gigatons of carbon dioxide equivalent annually by 2050,” explains Widyawati.
To protect biodiversity, Pertamina has started a flora and fauna conservation program that aims to preserve 87 endemic animal species, most of which are critically endangered, and 52 endemic plant species.
Pertamina’s social responsibility efforts are centered on five areas: health and safety; prevention of major accidents; employee recruitment, development and retention; innovation and research; and community engagement and impact.
In the area of health and safety, Pertamina continues to aim for zero accidents while operating a stringent “contractor safety management system” (CSMS).
Up to October, the incidence of Covid-19 cases at Pertamina has been 0.21%, which is lower than Indonesia’s national average of 0.8%, while the death rate stands at 0.76%, which is far below the national average of 3.37%.
The company has built three hospitals for emergency Covid-19 treatments in Simprug, Tanjung Duren and Wisma Haji Pondok Gede, Jakarta, and has offered free vaccinations for all employees while ensuring that all parties across the supply chain adhere to the company’s CSMS.
As part of its commitment to improve employee welfare, Pertamina provides a discrimination- and harassment-free workplace, while offering salaries and remunerations, including pension plans, that are above the regional minimum wage.
The company also supports diversity, inclusion and gender equality. It applies a zero-gap gender pay ratio while one-third of the Board of Directors are women and 16% of management roles across the entire company are held by women.
There is a special recruitment scheme for people with disabilities while younger employees below 40 are groomed for senior roles, filling up to 17.5% of management positions.
Pertamina recognizes the importance of training and education and has offered 2.5 million learning hours for employees in 2020 while targeting 250 hours of training per employee per year from 2021. In terms of education and training resources, the company provides a university, a health, safety and environment training center and a maritime training center, as well as capacity building in decarbonization and sustainable energy development. As part of its corporate social responsibility initiative, the company assists business entrepreneurs through its “Small Medium Enterprises & Partnership Program”. Pertamina also offers a platform for students to showcase their talents on the popular annual science competition called “Pertamina Cerdas”.
On the national level, the company’s “One Price Fuel” and the “One Village One Outlet” programs ensure that the population across the vast Indonesian archipelago has access to affordable energy.
To improve corporate governance, the company initiated the “New Pertamina Clean Charter” in June 2020 as part of its Anti-Bribery Management System.
The Charter, signed by the company’s entire Board of Directors and Board of Commissioners, outlines the requirement to manage the company professionally, avoid conflicts of interest, prevent bribery, uphold trust and integrity, and adhere to the principles of good corporate governance.
Within the Charter are guidelines or code of conduct which encourages traits like professionalism, trustworthiness and integrity, among others.
“The New Pertamina Clean Charter is expected to become a new culture and set of values for Pertamina’s officers and workers,” says Widyawati.
Pertamina aims to further improve its Good Corporate Governance score, which stood at 92.85% in 2020, and to achieve 100% compliance in reporting asset obligations.
Extending beyond the company, Pertamina’s clean charter will be made accessible to the general public. To do this, the company is coordinating with law enforcement agencies such as the Corruption Eradication Commission, the Indonesian National Police, the Attorney General of the Republic of Indonesia and the Indonesian National Armed Forces.
Transitioning to NRE, Pertamina has identified eight strategic initiatives. Among them is a plan to increase the capacity of its geothermal power plants from 672mw in 2020 to 1,128mw by 2026.
The other initiatives include: participating in a joint-venture with an Indonesian company to produce batteries for electric vehicles; constructing a methanol plant for gasification; building an environmentally friendly refinery; increasing clean energy capacity; implementing a circular carbon economy; and increasing the production of dimethyl ether (DME) as an alternative fuel.
Pertamina is also exploring the potential use of green hydrogen as a climate-friendly renewable energy with significantly lower carbon emissions at its power station in Ulubelu.
The company has set a target to achieve a production goal of 10 gigawatts of NRE by 2026 by implementing carbon capture, utilization and storage (CCUS) projects such as those in the Sukowati and Gundih oil and gas fields, and continuing to develop clean energy from geothermal operations.
Pertamina has introduced Green Energy Stations (GES), with 99 already in operation, to cater to both normal and electric vehicles. GES are energy efficient as they are solar-powered, offer cashless transactions and they make high-grade fuel available to motorists driving the latest fuel-efficient vehicles. To further decarbonize and reduce greenhouse gas emissions, 5,000 Pertamina gas stations will be converted and powered by solar energy with a total capacity of 910mw.
“The use and application of CCUS technology helps with Pertamina’s transition to using clean energy. This low-carbon technology will support Pertamina’s business sustainability in the future,” says Widyawati.
For its entire NRE initiatives, Pertamina will allocate around 9% of its total capital expenditure for the 2020 to 2024 period, more than double the international industry benchmark, which averages at 4.3%.
Collaborating for Success
Collaboration is an important aspect of Pertamina’s business. The company has formed partnerships with around 66,000 micro- to small-sized enterprises, around 22,000 of which are managed by women entrepreneurs.
To provide access to liquified petroleum fuel for rural communities as well as providing jobs and improving livelihoods, Pertamina is working with the government to roll out more than 4,000 mini fueling stations, or Pertashops. “At last count, 3,218 such outlets are in operation across the country,” says Widyawati.
Pertamina’s continuing pursuit of innovation has also resulted in the creation of Green Energy Stations, which provide not just conventional fuel for vehicles, but also solar-powered charging ports for electric vehicles.
Leading the company’s digitalization efforts is the Pertamina Integrated Command Center, which utilizes technology to ensure that the company’s operations run smoothly. It also churns out real-time data and manages a performance dashboard that monitors all the company’s six subsidiaries, which are: upstream (focusing mainly on exploration, extraction and production of raw materials); refining and petrochemical; commercial and trading; power and NRE; gas; and shipping.
The command center also monitors the movement of vessels used by the company to transport cargo like crude oil, the company’s 24,000-kilometer gas line, fuel stocks at all terminals, depots and gas stations, and sales transactions, among others.
The company’s international assets are managed by Pertamina Internasional Eksplorasi dan Produksi (PIEP). In the upstream business, PIEP’s oil and gas field assets are spread across 13 countries, which are: Algeria, Malaysia, Iraq, Canada, France, Italy, Namibia, Tanzania, Gabon, Nigeria, Colombia, Angola and Venezuela.
To date, PIEP has contributed as much as 49.9 million barrels of oil, with a value of around US$2.8 billion, to meet Indonesia’s domestic demand and help to stimulate the national economy.
The company’s marketing team continues to grow the market, especially in Asia, Africa and Australia, while managing worldwide demand for petroleum-based products like aviation and marine fuel, diluted crude oil and lubricants, among others. Cargo is delivered by the company’s 11 shipping vessels, with three of them having certificates of compliance from the United States Coast Guard.
Ultimately, Pertamina aims to be a world-class energy player by being globally competitive, highly productive and efficient, while prioritizing its sustainability initiatives, accelerating digitalization and strengthening its collaborations.
“We will support Indonesia’s energy transition by implementing climate-friendly business strategies and building a portfolio of renewable energy sources so that the country will have more options for clean power in the future,” says Widyawati.
Despite the pandemic-induced economic slowdown, Pertamina continues to be profitable and remains committed to supporting climate-friendly objectives. The company has just completed a management restructuring exercise and is aiming to achieve a target of US$93 billion in revenue by 2024. Last year, the company made a net profit of US$1 billion.
“We hope that Pertamina, as an energy company of Indonesia, will energize everyone to contribute towards a greener future by reducing global carbon emissions,” says Widyawati.