Washington State Export Destinations 2011

Top 25 Markets and % Share of State Total

Value (Millions) $56,669

% Share 87.5

1
2 3 4 5 6 7 8 9

China
Canada Japan Korea, South United Arab Emirates Hong Kong United Kingdom Turkey Australia

11,233
8,547 6,468 3,261 2,753 2,079 2,017 1,760 1,718

17.3
13.2 10.0 5.0 4.3 3.2 3.1 2.7 2.7

10
11

Taiwan
Indonesia

1,715
1,587

2.6
2.5

16. Singapore, 1.5% 19. Malaysia, 1.3% 22. Philippines, 1.2% 24. India, 1% Source: US Census Bureau

Asian Markets as Share of Washington State Exports = 46 % Worth over $26 billion in 2011

CHINA 2012 IN REVIEW

Leadership Transition Slowing economic growth Local government debt situation Falling real estate prices Debt problems, slower growth, weak export demand Increased outbound investment Continued friction in the South China Sea

CHINA 2012 ECONOMIC GROWTH

NEW POLITBURO STANDING COMMITTEE

President Xi Jinping Premier Li Keqiang

Zhang Dejiang Yu Zhengsheng Liu Yunshang

Wang Qishan

Zhang Gaoli

CHINA 2013 OUTLOOK

Economic growth stable Exports remain depressed Real estate prices declining Debt problems slow growth Continued emphasis on innovation Increased outbound investment Continued friction in the South China Sea

OVERALL SLOWING ECONOMIC GROWTH

Percent growth, y-o-y

7 6 5 4 3 2 1
0

2013-2018

2019-2025
Total Factor Productivity Capital Contribution Labor Composition Labor Quantity

-1 Optimistic Base Pessimistic Optimistic Base Pessimistic

Sources: The Conference Board Global Economic Outlook 2013, https://www.conference-board.org/data/globaloutlook.cfm?

CHINA GROWTH AREAS IN 2013

Planning for Demographic changes Renewable energy Online retailing Infrastructure Construction / real estate Pollution mitigation and control Clean and green food products + investment in overseas agriculture Expanded acquisition of overseas resources

CHINA 2013 RISK FACTORS

Diaoyutai / Senkaku Conflict Pollution Corruption & Anti-corruption efforts Rising costs Economic inequality Bankruptcy of some smaller cities Growth of unregulated lending sector

INDONESIAS PERFORMANCE: 2012 IN REVIEW

Source: Bank of Indonesia

2012 HIGHLIGHTS
February January
Indonesia Financial Services Authority (OJK) formed Largest contract in commercial & Boeing history: Lion Air order of 230 Boeing 737 airplanes worth $22.4 billion McKinsey releases Unleashing Indonesias Potential Report: Now 16th. 2030, could be worlds 7th largest economy, surpassing Germany & UK)

September

November 21
Fitch affirmed sovereign credit rating at BBB(Outlook: Stable)

April 23
S&P affirms sovereign credit rating at BB+ (Outlook: Positive)

January

Garuda named Best International Airline

Moodys upgrades sovereign credit rating to investment grade: Baa3 from Ba1 (Outlook: Stable)

Central Bank lowers BI rate to 5.75% (from 6%)

February

Foreign exchange reserves hits highest level (2012) of $114.93 billion

Jakarta elects new Governor Joko (Jokowi) Widodo (snubs political establishment)

September

Indonesia tops Nielson Global Consumer Confidence Survey (Q3 2012) with score of 119, (alongside India).

Indonesia, as next APEC Chair, announces 2013 logo & theme: Resilient AsiaPacific Engine of Global Growth

December

January 18 April November

GOOD BUT LOWER PERFORMANCE: WHY?

Global economic uncertainty
Weak infrastructure & high logistics costs
Crisis in Europe & recession in US Instability in Middle East & Africa Slower economic growth in emerging countries esp. China & India Trade imbalance with declining exports (& burgeoning imports) Overburdened airports: Jakartas CGK at beyond capacity past 6 years Poor condition of ports: Unable to keep up with economic growth Bad roadways, bad traffic; floods Poor connectivity between towns/cities/regions Policies & regulations deemed as hindrance to businesses

Government initiatives
Strong domestic consumption driven by emerging middle class

Master Plan MP3EI (2011- 2025): Economic development Master Plan MP3KI (2011- 2025): Poverty reduction Tax incentives Highest contributor to economy: 2/3 of GDP 240 million (Worlds 4th most populous nation) 45 million consuming class (to to 135 million in 2030) Robust consumer confidence with surge in government & private sector projects Second biggest contributor: 30% of GDP Regaining of investment grade: Fitch in Dec. 2011 & Moodys in Jan. 2012 AT Kearney FDICI: Ranked #9 in the world (from 19 in 2010) 2012 realization may top $31 billion (Rp. 300 trillion), a record

Influx of investments

OUTLOOK FOR 2013 POSITIVE

Annual GDP growth target set at 6.8 % (BI forecast: 6.3% - 6.8%) Domestic consumer demand 65% of GDP = less vulnerable to Europe & US drag Fitch: Affirmed RIs investment grade at BBB- (stable outlook); boost joining BRICS Investment realization targeted to increase to Rp. 390.3 trillion (FDI $29 billion) Govt set inflation rate assumption at 3.5% - 5.5% Government to hold BI rate steady at 5.75% (since March 2012)
Household consumption (to 5.8 6.3%) & investment (to 10%) will continue to drive growth

Per capita income rising & middle class growing (to expand to > total population)

Oil & gas investment to increase: $26.2 billion: 274 work plans & budgets approved Exploding gas demand = efforts to reduce exports + expand downstream capacity
Sales of capital goods, including machine tools, will rise 8% to $27 billion

RISKS & CONCERNS

Endemic corruption/Judiciary a problem: 118 in list of 176 countries
(Transparency International)

Rising inflation from domestic fuel subsidies & power tariff hike

Weak institutions & bureaucratic inefficiencies: 128 out of 185 globally

(World Banks Doing Business)

Political uncertainty: 2014 elections

Infrastructure congested & inadequate to support growth; respond to natural disasters

Lack of institutions with strong capital structure to finance planned projects

Crisis in developed world: Threaten exports, foreign liquidity, investment growth

Emerging trend of trade deficits fueling current account deficits & hurting the Rupiah

Under-developed HR: Low-skilled workforce + Minimum pay increase not matched with increase in productivity

REASONS TO BE OPTIMISTIC + OPPORTUNITIES

Master plans to guide development & growth: Impetus for change

Relative political & economic stability: Conducive to business

Strong & growing domestic demand: Fuel growth, limit exposure to external shocks

Poverty reduction means growing middle class

Growing middle class means better qualified workforce & bigger market

Positive investment outlook thanks to strong economic fundamentals

Abundance of fertile land & natural resources

Financial markets poised for volatility: Stock market to maintain good performance

Financial stability: Investor confidence evident in influx of capital investment

PUBLIC DEBT BURDENS (% OF GDP)

AT KEARNEY 2012 FDICI