COMPETITION BUSINESS ACTIVITIES AND PROSPECTS OF THE COMPANY AND SUBSIDIARIES

The main competitors of the Company and its subsidiaries in the domestic market among others are PT Adaro Indonesia Tbk., PT Bayan Resources Tbk., PT Berau Coal Energy Tbk., PT Bumi Resources Tbk., PT Indo Tambangraya Megah Tbk., PT Harum Energy, Tbk. and PT Tambang Batubara Bukit Asam Tbk. Among these competitors, PT Bumi Resources Tbk and PT Adaro Indonesia Tbk produce coal with quality similar to quality of coal produced by the Company and its subsidiaries. The main competitors of the Company and its subsidiaries in export markets among others are coal producers from Australia, South Africa, China and India. The Company believes in its capability to compete since it has competitive advantages compared to other coal producers. Meanwhile, the shortage of coal supply in China and India, and because of the big flood in Australia which led to the cessation of coal production activities and delayed ability to provide coal supplies, has resulted in reduced competition in the export market in the short term. In addition, with a favorable geographical position, The Company and its subsidiaries have a competitive advantage over other competitors in international markets.

13. BUSINESS STRATEGY AND DEVELOPMENT PLAN

The Company and its subsidiaries continue to strive to improve performance and to achieve long term sustainable growth. To achieve this goal, the Company and its subsidiaries determine the primary business strategy which includes:  Increase in coal production The Company plans to increase the coal production capacity from 2.0 million tons in 2010 to become 40 million tons in the period of eight years ahead. The biggest contribution of this increase in production capacity is planned to be obtained from Kusan and Girimulya blocks in the coal mining area of BIB.  Improvement in mining cost efficiency The company has a competitive advantage in terms of mining operational costs by the open-cut mining method, relatively low stripping ratio and the proximity of the mining location to port facilities. The Company is committed to continue striving to improve the efficiency of coal production costs in the long run by selectively choosing mining contractor services, coal transportation and shipping contractors in line with an increase in coal production capacity of the Company.  Development and improvement of customer relations The Company and its subsidiaries are committed to continue to foster good relations with current existing customers. In the meantime, considering that currently most of coal sales of the Company and its subsidiaries are