Friday, Dec 15, 2017
Government | Asia-Pacific | Indonesia

Indonesian Economy

Indonesia reshapes its investment environment


2 years ago

Budi Bowoleksono, Ambassador of Indonesia to the US, with President Obama in May 2014
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Budi Bowoleksono

Ambassador of Indonesia to the US

Budi Bowoleksono, Ambassador of Indonesia to the US, talks about the country’s growth, its democratic transition, the challenges it faces and the notable achievements that are putting it on global investors’ radars.

 

Since President Joko Widodo took the helm of the nation, he has managed to implement some very promising reforms. Although a lot of work has yet to be done, in the short term, what are the most pressing issues you think the government has on its hands now?

As you mentioned, as a result of a transformation that has taken place in Indonesia since 15 years ago, Indonesia has become an economic powerhouse and a stable and democratic country. Indonesia has changed from a more centralized government to become the third largest democracy in the world. During the presidency of Yudhoyono, he was successful in consolidating our democracy. This is the legacy of President Yudhoyono which also brings a smooth and peaceful transition of leadership in Indonesia.

As you may be aware, during the presidential elections, the race was very tight. We never experienced this before in the past. That tells you how our democracy is at work. A more consolidated democracy in Indonesia goes hand in hand with a more constant economic growth in Indonesia over the past one decade. These two factors make Indonesia become one of emerging economies in Asia and Pacific region. They are the legacy of President Yudhoyono in his ten-year in office as President.

Now, since President Joko Widodo assumed his term as President since October 2014, I must say that every presidency has its unique environment, and unique challenges, and consequently its own focus and priorities. The priorities of President Jokowi now are mostly to bring his promise of welfare to the people. We have everything on our plate to become an economic powerhouse in the region, from having abundant natural resources to a strong middle class, from a mature democracy to demographic dividend.

This is not without challenges, of course. For instance, President Jokowi only enjoys the support of about 37% of the Parliament, so the political dynamics are challenging for him in delivering his programs. Security-wise, too, we have a lot of issues needing to be addressed, like drugs, trafficking, terrorism, and the growing threat of extremism. As far as fighting terrorism and extremism are concerned, from time to time we are able to uproot big organizations and we have now adopted a comprehensive approach to fighting extremism. Economically also, the president has to deal with infrastructure, connecting over 17,000 islands.

These are the challenges he’s been dealing with since he took office. During his first year in office, he’s been able to address some sensitive issues, to redirect and allocate the fuel subsidies. These issues were politically sensitive in the past, but he took bold measures to reallocate subsidies to the more productive sectors, to infrastructure, to education, to health. It’s worth mentioning that he was a businessman. He knows the issues. He knows how to fix them. But of course we cannot do it in one night. We have to harmonize our rules and regulations, between the central and provincial governments. He has immense challenges to create a better and conducive environment for investment.

We strongly believe we could achieve 7% growth in two or three years’ time from now, but to be able to achieve that growth, we need foreign direct investment. To attract FDI in Indonesia, we have to have an environment conducive to investment.

Again, it’s not without its challenges. But this is the priority of the government. Also, he’s been adopting one-roof service on investments, and he is trying to see overlapping regulations in Jakarta, between institutions, the central government, and the provincial governments. Those I think are the most pressing issues that President Jokowi should deal with during the first period of his presidency. He has a lot on his plate, but he’s been working very hard to make sure that his programs and agenda can be delivered, as he promised in his campaigns.

 

We’ve seen how the US’s trade and investment focus has completely turned away from the Atlantic to head first to the Pacific in recent years. How does this help to uphold Indonesia’s economy, and in terms of attractiveness for investors, can it count as one of Indonesia’s more appealing factors?

ASEAN is a market with a population of 600 million. This is something that one cannot ignore. You cannot close your eyes. Not only in economic terms, but also the strategic role that ASEAN can play in the region. If we talk about the South China Sea, for instance, how we are going to strike and maintain a delicate balance in the region to ensure peace and stability in the area, which for more than 40 years has allowed us to have robust economic development, because of the stability in the region. ASEAN is certainly a very important player in Asia, an important instrument for Indonesia, to lift up its economy and also to lift up the level of a conducive environment for investment, to harmonize our rules and regulations, to fulfill our commitment. And then certainly the free movement of goods and services will significantly improve efficiency in terms of trade, investments, and movement of people in ASEAN.

We do hope that when we implement the AEC (ASEAN Economic Community), it will bring more prosperity for countries, like Indonesia. Again, this is not without challenges. We have to meet these targets and standards that have been agreed on. As the biggest economy in Southeast Asia and an important and key player in ASEAN, Indonesia will be at the forefront to ensure that the integration of the ASEAN Community in 2015 will be to the benefit of the ordinary people in ASEAN.

 

We spoke about the country’s infrastructure needs; Indonesia is made up of 17,000 islands. The cost of logistics and electricity is still very high. And the need to revamp existing infrastructure has been voiced by the President himself. What are the most pressing needs in terms of infrastructure for the nation, and how can the government create more favorable PPP models to bring in more US investors?

These are very good questions, because again, infrastructure, building more ports, to connect the islands is something the President has started already. He’s started building seaports already. The newly formed coordinating Ministry for Maritime Affairs tells you how the maritime sector ranks very high on his agenda right now. He wants to connect the islands, to bring more goods and services to the remote areas, especially in the extreme east of Indonesia, where goods and services are extremely expensive. Bringing goods and services there from Jakarta is sometimes more expensive than bringing goods and services to Europe. This is why my President is committed to build more seaports and more roads and railroads.

In short, the infrastructure will be the first priority of my President to connect all islands in the country, especially in building sea highways. He also instructed related ministers to improve efficiency in port handling. I’ll give you the comparison with other countries. Indonesia is still very expensive and it will take a longer time in dwelling time. Now, he is focused on making goods competitive by revamping the dwelling time in seaports. Electricity is another very important aspect. The government has already decided to produce 35,000 megawatts of electricity (in five years); this is a gigantic undertaking, but it’s what our country needs. With the US, we have very encouraging cooperation, because we want to bring more and more electricity to Indonesia, not only from the US, but also from other countries because 35,000 megawatts is not a small thing. It’s not easy. In doing this in Indonesia, again, we have a limitation, that’s why we’re looking at close cooperation with countries like the US.

 

We all know Indonesia is rich in many things: culture, food, and natural resources. This aims to bring an upgrade to the content of its exports. How can the industrial fabric of the nation evolve to enter more competitive markets, and also maintain a bigger market share?

First, industries certainly play a very significant role in our exports because supply sides are very instrumental. The government now focuses on the production of goods in which we have a strong competitive advantage. We are starting to produce more and more specialty coffee. It’s not just coffee, but specialty coffee, like clothing, we concentrate on more added value. That is why the government strongly promotes creative economy. We try to produce these kinds of products, not merely just as a production base or adopting a footloose industry policy. We want to promote more and more joint ventures to strengthen our industries. This is what Indonesia has been trying to promote.

Another sector that Indonesia has been promoting is tourism. A lot of people know Bali, and then Bali only. The brand of Indonesia as a top destination is renowned; in relative terms the shift in the economy is lower than its neighboring countries like Malaysia or Thailand, who have done significant country branding campaigns. What can be done in your opinion, to increase the impact of tourism within the economy, and what opportunities for investment do you see for the US to come into the sector?

Two things: promotion and improvement of tourist destinations in Indonesia in all aspects. Indonesia is a beautiful country; it has so many tourist destinations. I can hardly mention how many beautiful tourist destinations there are in Indonesia. For instance, if you want to go diving, we have not only many but unique diving spots. Tourism in Indonesia is not about nature only, but it includes culture, as well.

First promotion, we have to strengthen further promotional efforts to make it more coordinated with a better targeted market, and then embark on cooperation with more tour operators, not only with the US. Not many US tourists have visited Indonesia so far, because of various reasons. For instance, first they prefer to go to Mexico. It takes a 25-hour flight to Indonesia, so they should have strong reasons to go to Indonesia. This is what the embassy and I try to convince them. It is worth it to go and spare their precious time and visit Indonesia.

Indonesia is not only Bali, for sure. Indonesia has a lot to offer. Now Komodo Island is becoming more and more important. There, we have organized so many events already, we have what we call, “Sales”, that’s again to put Indonesia more and more onto international maps. We have, not the Tour de France but something similar – that is now becoming more and more popular, the Tour de Singkarak cycling race.

It’s the government’s continued effort to promote Indonesia further. When we have the opportunity we will promote this through our culture in the US. Definitely, the investment in this sector is wide open for US companies here. I will be more than happy to come to speak to anybody here to promote Indonesia’s tourist destinations. The embassy has put this high on our agenda as a priority, because we organize so many events here. We have a very strong collaboration with the Smithsonian and with other institutions. People are looking for the opportunity to collaborate with us.

 

Tourists today have become more adventurous, but you also have the lazy tourist, who thinks: “I just want to go to Mexico for a weekend”. Indonesia for years has been over performing but definitely underselling itself. There’s something for everyone – this is a very important message to send to the US audience.

That’s precisely what this embassy has been doing. I myself try to spend one day during the week in Capitol Hill to speak to everybody about what we are, not many of them know about Indonesia. My colleagues here have so many programs with schools, universities, community groups, to further promote Indonesia. Once people know Indonesia they are very impressed. Again, we need to continue doing this, I speak to my colleagues to speak to anybody and everybody to introduce ourselves and tell them who we are.

 

Since 2010 the US and Indonesia have shared a common institutional framework, and this comprehensive partnership articulates relations between Washington and Jakarta, very specifically. What are the issues that affect both countries?

There are some issues. Despite these continued strengthened bilateral relations, we still have problems, here and there. One that I can mention is unfortunate misperception. Some people still have this old and traditional mental judgment towards Indonesia; this is what we need to adjust. They think that Indonesia, Islam and Muslim are always identical with some countries in other regions, which we are not! Indonesia is the largest Muslim population in the world but we are not an Islamic State; that tells you who we are. We observe the holidays of all religions in Indonesia. Hinduism for instance. Here at the embassy, you can hardly find any Islamic signs at all in this building. Instead, you can find easily a three-meter Hindu statue there. That again tells you who we are. Indonesia has been promoting pluralism, tolerance, but some people still think Indonesia follows the old paradigm which we are working hard to address.

I’d like to talk about the US media. Over recent months, ISIS and terrorism in the name of Islam is all we hear on the news. The Islamic community worldwide has been badly hurt with these misconceptions; you know yourself that Indonesia cannot be categorized in any of these misconceptions. As a matter of fact, Indonesians for centuries have lived in unity and in peace, practicing many religions.

In Indonesia, Islam and democracy go hand in hand. Islam and the advancement of women are in harmony, as well as Islam and economic growth. This is what Indonesia needs to voice and amplify in a stronger way here. Because if you address it here it’s not only for the Americans, but also for the world.

 

In terms of security of the region, Indonesia has taken a strong stance. How can Indonesia help change these perceptions, these misconceptions about Islam and interreligious countries?

First, when we talk about tolerance it’s not without challenges; you can see it in the news. We still have this problem. Even this morning I saw two Indonesian pilots (on the TV), that we are investigating now, who are perhaps joining ISIS. We have nationals which are in Syria, in Baghdad up to now, that’s the fact, that the government is dealing with it. But again judging from what we used to experience before, this is something very much controlled by us now. We know everyone now, because again and again what the government has been doing so far is to adopt a more comprehensive approach. Not only repressive, but preventive; it is equally important. Those who committed a heinous crime have to go through and face justice. We put them in jail; in jail we prepare them, not only for themselves but also for their community, so when they are released, the community can accept them. The problem is, what we notice is, those who committed these heinous crimes usually come from the marginalized parts; socially, economically, culturally also. This is why my government is trying to empower the country economically, culturally, socially also. We have a comprehensive approach, and it has been successful so far. We want to share this with the other countries, the US too.

On every occasion, we state this and I believe during my President’s visit (to the US) he will also bring this message, not only for America but for the rest of the world. This is not falling from the sky. We’ve been working very hard to nurture it, and now we try to strike the balance. Indonesia is multicultural, multiethnic. We want to share our experience, we don’t want to be patronizing, we don’t want to be lecturing; we want to share with other countries. That is why we are very active in promoting interfaith dialogues everywhere. We have a mosque here in Silver Spring [Maryland], not only for prayer but also for functions to promoting tolerance. Only recently, during Ramadan, we were all fasting in the evening, we had what we call Iftar. Ten days ago we had what we call the Interfaith Iftar. Obama invites us to Iftar every year. Minister Kerry organized what he called the Eid Reception.

 

I can see the passion you have for your country and for letting everyone know the good things that it has. Going a bit more personal, what is it that drives you? What is it that inspires you every day to come here, do your job, and work with your wonderful team?

Every day I have to better myself. No matter how small the improvement is. That’s always in my heart, here, every day. Because again, an assignment here in the US is very strategic for Indonesia, it is very important. Our responsibilities are huge here, not only to promote Indonesia but also to pursue our national interests, in many aspects, as we discussed. So my passion here is that every day I and my team have to make betterments and improvements. No matter how small it is, it is always worth it, to fight for. 



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