From serving to driving Indonesia's growth

World Bank – CIIP Implementation Conference Washington DC – USA, October 17, 2013

R.J. LINO President Director

PT. Pelabuhan Indonesia II (Persero)

Delivering lasting transformation at IPC

1. Includes NE, SE, and S. Asia 2. Includes domestic Note: Container flows based on forecasts excluding empties and transshipment but including domestic for intra-regional trade; some trades excluded for display purposes; CAGR based on 2007-2015 Source: BCG analysis, Singapore case study

Global container flows by main trades, 2015 (M TEUs)

Indonesia an important link in global trade

2 | ENERGIZINGTRADE ENERGIZINGINDONESIA

Rise of middle class drives domestic demand Indonesia’s middle class and affluent population expected to grow by 70 M by 2020 ~

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Tremendous growth and potential to domestic trade

Fast growing, vibrant domestic trade routes

Note: Province to province origin-destination goods flow for all means of transportation (sea, air, land), CAGR 2006-2011 Source: OD Matrix - Ministry of Transportation 2006 and 2011

Inter-island trade has increased ~5x from 2006 to 2011

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However, Logistic inefficiency currently bottleneck for growth

It is cheaper to ship goods from Jakarta to Hamburg

than to Padang

Source: Shipping companies, Quotes from domestic logistic company (2012), BCG analysis

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The transformation story of IPC

Stage 1 (2009 and before)

Pelindo II

Starting point: "Massive internal

and external challenges"

Stage 2 (2009 – 2012)

Indonesia Port Corporation

Transformation Part I: "Serving Indonesia"

Stage 3 (2012 and beyond)

Indonesia Port Corporation

Transformation Part II: "Driving Indonesia's growth"

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Starting point in 2009: Massive internal and external challenges

Low trust to management

Internal challenges External challenges

Negative public & customers perception

Low employee affiliation New regulation opening the port

market

Low employee and asset productivity

War for talents

Lack of entrepreneurship and energy

More demanding and sophisticated customers

7 | ENERGIZINGTRADE ENERGIZINGINDONESIA

The creation of our new logo symbolizes change, strength, optimism and agility. It becomes a symbol of pride within the organization for everyone to stand behind

As we take the company forward

Defining the new identity

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The recipe for success: ongoing improvement on soft and hard infrastructure

Grooming of talents

Soft infrastructure Hard infrastructure

Procurement of new handling equipments

Improvement of operations: handling method, process

Improvement of new facilities Improvement of service:

24/7 operations

Land optimization & configuration Deployment of Information & Communication Technology

Development of new ports

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Reorganizing The Terminal Operator

Significant impact achieved for IPC

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Source: IPC

Doubling container

traffic in 3 years

Strong growth in

revenue and profit

Improved public and

customer perception

Ranking of logistics

performance index

improved

2,4 2,5 2,6 2,9

3,1 3,3 3,4

3,6 3,9 3,8

4,6

5,7

6,4

2006 2010

3

7

8

6

4

2

2000

5

2004 2002 2012 2008

Container traffic at Tanjung Priok (million TEUs)

0

1

2

3

4

5

6

7

8

2011 2012 2010 2009 2008

IPC Revenue (Rp Tn)

+1%

+39%

EBIT

75 59

Multiple awards won

• Asia’s Best Container

Terminal Award Year 2011

& 2012

• INSA’s Version Best

Container Terminal Year

2010 & 2011

• Asia HRD Award Year

2012

2010 2012

Example: Long lasting impact created in Pontianak Port

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15 Zero

Wealth-driven demand will likely generaten new ‘hotspot’ for domestic container trade

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PHASE 1 PHASE 2 DEVELOPMENT : 2012 – 2017 ESTIMATE PROJECT COST : US $ 2,5 Billion LENGTH OF BERTH : 4000 M DEPTH : - 16 M LWS First Operation Container Terminal (CT 1) will start in 2014 Container Terminal : 3 Terminal AREA : 132 Ha CAPACITY : 4,5 MILLION TEUs/Year Oil & Gas Terminal : 2 Terminal AREA : 48 Ha CAPACITY : 10,0 MILLION M³ /Year

DEVELOPMENT : 2018 – 2023 ESTIMATE PROJECT COST : US $ 2,2 Billion LENGTH OF BERTH : 4000 M TOTAL CY AREA : 300 Ha DEPTH : - 20 M LWS First Operation Container Terminal Phase 2 will start in 2021 Container Terminal : 4 Terminal AREA : 300 Ha CAPACITY : 8,0 MILLION TEUs/Year

Newpriok port development plan

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Setting up Newpriok for success

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PCS / INAPORTNET: Putting logistics community (B2G-B2B) onto single platform

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Port Community System: INAPORTNET National IT platform for flow of document, information and payment for: B2G

(Port and Custom), G2G and B2B. Service: Vessel and Cargo. Domestic and International. Port service and logistics service (transportation)

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Service Roadmap : National SUPER PORTAL