Indonesia has enjoyed a GDP growth rate of more than 6% over the last few years, and is aimed to become a top ten economy by 2025 with the MP3EI plan. How do you explain the growing and resilient economy of Indonesia, while the world is facing a shift in the balance of power between countries?
As you already know, private consumption is a very important component of GDP, the others being private investment, government expenditure, and net export (export minus import). I am of course referring to the expenditure model Y = C + I + G + (X – M).
With regard to the situation in Indonesia, purchasing power in Indonesia has grown significantly during the last five years, as shown in the strong growth rates during that period.
As a result, Indonesia’s economy does not depend too much on export. We are no longer an export-led economy because our domestic demand can now significantly absorb the outputs.
When the global crisis struck, Indonesia (and also China, India and Brazil) was not significantly affected and we were able to reach GDP growth rates of over 6% when most of the developed economies were struggling.
These developments show that large emerging economies are now the leaders in global growth. Countries with large domestic demand are in a strong position to help bring global recovery.
In Indonesia, this can be attributed to good macroeconomic management by the government and sound planning by the authorities.
Having said that, there is still a lot to improve, of course, but our country seems to be on the right track.
How feasible is the MP3EI plan and what are the main issues and forthcoming challenges?
The MP3EI plan aims at strengthening the progress of economic development in Indonesia with particular focus on improving the connectivity between economic regions in the country. This is simply translated to improvement of infrastructure, as it is the backbone of any economic activity.
According to BAPPENAS [State Ministry of National Development Planning], measures in the master plan would require a funding of IDR 3.8 trillion, which could open 9.7 million new job opportunities. Reduction of unemployment will enhance domestic demand and better infrastructure will make Indonesia more attractive to foreign and domestic investors. That is how the acceleration process takes place: the positive cause and effect between investment and growth.
The main concern is how we will measure progress in Indonesia. Economic indicators are important but non-economic indicators, such as human development indicators, must never be neglected.
The Putera Sampoerna Foundation, together with other similar foundations, are working towards achieving a better future for the Indonesian people, not just in economic sense but also in other aspects as well. The challenge is how to achieve these more complete goals in improving the quality of Indonesia as a whole.
Many of our interviewees have spoken out about the incredible human capital potential in this country – like Raja Okto of HIPMI and Suryo Sulisto of Kadin. How would you define the human capital in Indonesia?
The most important capital in any economy is the human capital, and therefore continuous improvement of this factor of production is of the utmost importance. Human capital can be an asset if they are significant not only in number but also in quality.
Indonesia’s large population is an asset, but without purchasing power, it would be a liability. The challenge now is on how to improve the population’s purchasing power. We cannot rely on the government to create jobs; we must promote education and entrepreneurship so everybody can create jobs.
Everyone in our society can be an asset (a problem solver rather than a problem). That is why the Putera Sampoerna Foundation was established. Improvement in human capital will lead to improvement in technological achievements, which means higher quality of outputs in all aspects. If this can be achieved, the said acceleration process (investment-growth relationship) will no doubt take place.
Putera Sampoerna Foundation was founded in 2001 and has come such a long way since.
What was your motivation and inspiration behind the establishment of your foundation?
As citizens of the world and of this diverse nation, we share a common goal, which is to bridge the cultural divide. In order to do this, we need quality leaders who are able to empathize with their peers across the ocean, those who are able to reach consensus through compromise.
To have these quality leaders in the future, we need to nurture our human capital, especially the young generation in Indonesia.
By establishing the Putera Sampoerna Foundation, I want to nurture Indonesia’s future leaders and equip them with leadership skills, intellect, good morals and sound ethics, so that they can guide the country in facing global challenges and be agents of change in bridging the cultural divide.
What are the mission and values behind this commitment?
To create future Indonesian leaders of high caliber and entrepreneurs with good moral fiber to meet global challenges, leaders who are analytical, knowledgeable and socially responsible, leaders who are altruistic yet pragmatic in their approach, as we enter an age of globalization.
Putera Sampoerna Foundation has greater aspirations and goals than just CSR programs. It has been transformed from a philanthropic organization to a social business institution.
In your opinion, what is a social business institution and how does it differ from any other social organization?
A social business institution is devoted to creating social improvement in the country or even in the world. A social business stands outside the realm of the profit-seeking world. Its goal is to solve social problems by using business methods, including the creation and sale of products or services. A social business institution is able to generate revenues through its business units, revenues that will be used to fund its social problem- solving programs. A social business is designed to be sustainable and ensures the sustainability of its programs.
The differences between social business institutions and other foundations/social organizations include the fact that a social business does not merely rely on charitable donations, as opposed to foundations/social organizations that do, and hence its sustainability. A social business is designed exclusively to deliver social benefits. There is no thought of creating profit for any investor. As a result, it becomes very powerful, and its attention to the social cause is totally undivided.
Having said that, a social business is allowed to earn a profit, on condition that the profit stays with the institution and is used to expand the social benefits that it provides. On the other hand, a profit-seeking company, even with its strong CSR commitment, will inevitably be limited in its contributions to social causes. Profit comes first, and then social features are added – provided of course that those features do not interfere with maximizing profit, while a charitable organization’s contribution to social causes is limited by the number of donations it receives from donors. Thus, limiting the impact and sustainability of its programs.
Education, women’s empowerment, entrepreneurship, and disaster relief are your main concerns.
What are the reasons behind these 4 pillars as a Pathway to Leadership?
Education is the key to everything. I believe that education is the basic and key factor for a country to grow. Without having educated human capital, a country would not be able to grow and compete with other developed countries. And with a population of over 230 million, Indonesia needs more people with entrepreneurial skills. During the financial crisis, it was proven that small & medium enterprises survived better than the big companies, and they were even the ones who contributed more to the economic recovery. Having more entrepreneurs in the country will support Indonesia’s economic growth and create more job opportunities for this populated country.
Also, women play a key role in a family and have the greatest influence on the values and disposition of our youth who will become our future leaders. Empowered women create empowered families, and empowered families create an empowered nation.
Finally, as we all know, Indonesia is located on the “Ring of Fire”, and hence prone to natural disasters. As citizens of this country, we are obliged to be compassionate and help those who are in need of our help during these disasters.
Can you tell our readers what challenges you are facing?
We wish to partner with as many corporations and institutions as we can. The more parties involved in our programs, the more people we can help in Indonesia. The more children who come from disadvantaged families can go to school and have quality education for a brighter future.
One of the main aims of your foundation is to shift from a ‘profit-seeking’ business mindset to a ‘concern to help the greater community,’ How do we teach the younger generations?
I understand the concept of social business is not common in Indonesia. Most of us are still accustomed to the concept of philanthropy and charitable organizations that help the greater community through philanthropic programs.
But, the question here is how do you ensure the sustainability of your programs? This is where the social business concept comes in. As I mentioned earlier, if we only focus on profit, our social activities will be limited as these activities will depend on how much profit we earn. On the other hand, if our focus is on helping the greater community, then our energy will be concentrated on reaching that goal by developing sustainable programs that the communities can eventually manage by themselves in the long run.
We need to constantly communicate this view to the young generations, so that their mindsets would differ from their elders’ mindset.
You said the main issue is education, but how can we teach this young generation to think with this mindset (thinking about the community)?
You have got to sit there and keep the messages going. That is why we need the media. We have found that people do not really understand the extent of the problems that are out there. There is just an assumption that government is going to take care of it. There are a few hundred thousand seats at universities short for the graduates coming out of high school. We have got a long way to go, and government cannot do it all. We are not competing with government and we are not government, but we can supplement and help them along. We are running in tandem, if you will.
For example, we can run our schools using a very meritocratic system. If you have a high average, you stay in my school, and if you do not, I will kick you out. The Government cannot do that. At the end of the day, if you have to provide education for everyone, the level of education goes down. If you look at our universities here, the tuition fees are like $2,500 to $3,000 per year, but what kind of education can you get for that? If you compare Indonesia’s spend per student compared to Malaysia and Singapore (we do not even have to talk about the US and Europe) we are way behind. But again, government has a different set of problems than we do. We can start providing for the brightest and give them assistance; they are going to be the future leaders of this country. But we can pick and choose who we want.
When we select kids, not only are they academically smart, but also we look whether they have leadership potential going forward. Government cannot do that.
At what age are you selecting students?
Right now we are accepting from 15 years of age, so the last three years of high school. I will personally guarantee that they will get a tertiary education once they are in our high schools. You have panels to identify the students’ potential. I think our selection process is very rigid, but if you look at our students you can see that they are very outgoing and they are not worried about who they talk to. They can talk to CEOs for example and they hold their own.
Are you looking at behavior patterns as well as academic skills?
Yes. Firstly, you have to be in the top 5% academically in junior high. Then we look at your leadership abilities or potential. It is very sad, because like in one of our academy last year, we had 8,000 applicants and 3,000 of them would have qualified under our process, but we could only accept 250. One girl made it all the way to the second-last round, and did not make it. She messed up, and that is sad. We tracked her from her village, and she had to travel 12 hours just to get to the school. Our executives said that we could take her under our wing, but we cannot make those exceptions. So I am saying that there is a lot of human capital that we are missing out on.
You are basically providing education. How do you provide them with values?
Once my people told me that if we did not provide them with boarding facilities, we could double the amount. But for me, three years at boarding school is important. That way we can inculcate them. From day one, they are told that this is not a gift just because they are smart. It is an investment in them so that they can invest back. It is not a free gift. If you go to our schools, have kids from 24 different provinces and five different religions.
MRS KATIE SAMPOERNA: That really embodies the sense of unity and diversity, which this country is founded upon. You are creating a sense of values of what it is to be Indonesian.
MRS MICHELLE SAMPOERNA: Correct. There was a girl who came and taught the Javanese kids how to dance and sing their legendary songs.
Everybody is put at the same level at boarding school, and a network is also created.
It is like a support system and if you go to our school you will see it. They have never been on a plane before or out of the county, and all of a sudden they are all the way in Jakarta. Kids are kids – you are going to be homesick and you are going to cry. But they have learnt that the support system from the other students is more important than us trying to baby them.
MRS MICHELLE SAMPOERNA: It creates links quickly. When the Muslim kids go home and the kids left in the campus get fever and they cry because their brothers and sisters have left, but they are only gone for two weeks! It is very emotional, and this emotional bond takes place exceptionally quickly.
Most of them do not speak English, but from day one all of our courses are in English. So when they graduate out of our school, they will be fluent in English and will qualify for any English-speaking university. Our kids outperform any school in science and math. We excel in this. It is a meritocratic system, so we take the smartest of the smartest. We just have to mould them so that they have leadership qualities. We want all our students to be smart, leaders and entrepreneurs, and they must have values. If you sit here and tell the kids that they are here as an investment and this happens every day, you are going to leave that school with values.
Do you actually tell your students that they are going to be the new elite of the country? Isn’t that too much responsibility?
No, we do not say that. But we say that they are on a mission.
MRS MICHELLE SAMPOERNA: And this is what we expect from you and vice versa. We are in a business partnership, so if we give you this, you will give us this.
But they all know that they are the smartest, but that does not count, because you are all smart.
I like the fact that they know that it is like a business contract. I think that develops business acumen in terms of mentality.
We started off by giving scholarships, but I refuse to give scholarships. If you give a scholarship, the kid things that they are entitled to it because they are smart. We only provide student loans. We have to find patrons like Exxon and the large companies to sit there and basically adopt the kids. They are supporting what I call the assistance portion. Once they enter tertiary education, I expect that assistance portion to keep going. Then we add a commercial loan onto that. I expect that if I invest in a student, I am entitled to 20% of their income, but I am a nice guy so I give you the option to buy back my equity when you can afford it.
MRS MICHELLE SAMPOERNA: That may initially sound like a lot, but when you work out the actual numbers, had you not be given the opportunity, you would be earning what? If you make it to the end and graduate with a master’s degree, you would know that if you just had an undergrad degree you would not be able to pay back the loan. We have done the calculations and we know what the base salary is.
If you do not pay us back the assistance portion, then how are we going to pay for the next kid? You do not have a minimum you have to pay – you will pay me 20% of your income, but hopefully you are Bill Gates. We do not have the laws like in the US where there is a cap so you can only charge students a specific amount. This is not a commercial loan. I believe that the NPLs (non-performing loans) will be a lot lower, because I have had them for three years anyway. This idea of giving back is therefore already part of their DNA. When I first tell people that I am going to take away 20% of their income, people look at me and say that is a little rough. But it is a business proposition. There is a risk involved. But if you put it in terms of an investment, then everything changes.
Do you have partnerships with international universities or plans to have these?
Right now if you look at our college, which is going to be a university, we have collaborative programs with Cornell and MIT. It will not be compulsory to go abroad. My target is 1,000 in and 1,000 out, which means that you have to have a student body of 8,000. If everybody goes to Cornell, that is 2.4 billion a year. That cannot be done. That is why I started the university here. The problem is that here you have the brightest kids and the level of tertiary of education in this country is low, so how do you make it work? We have a program with Cornell where they are willing to give us a curriculum so we can keep them here with a Cornell curriculum for 2 or 3 years. Then you can go and finish off in the States if you want to, and the credits will be accepted basically in any American university. You do not learn anything in the first two years in the States – it is like boot camp, because they do not trust the high school systems, so they have to start all over. So why would you send your kids to the States for that? We keep on looking for ways to save money.
For instance, it is a lot cheaper for you to go to community college in the States and then transfer out. These are the types of things we are looking at. At the end of the day you will still get a Cornell or MIT masters or whatever, but if you achieve that, you do not have to spend four or five years in Cornell. You can finish college in three years in the States basically. The average kid takes 15 hours and the slackers and partygoers take 12 hours credits.
MRS MICHELLE SAMPOERNA: So anybody going from a British style education system and into American tertiary education, in general they are bored for the first two years, and this is dangerous because they can derail their entire education process. When my brother who did O-Levels and A-Levels went into freshman and sophomore year, it was kind of ridiculous. But there are strategies. I chose to do five classes, and even that was super manageable.
I think our kids should be able to do 18 to 21 hours in the first 2 years at least.
When developing future entrepreneurs, what piece of advice would you give when people go through their working day?
If you look at the mindset of an entrepreneur, it is not just about making money. You can be a manager of a warehouse and be entrepreneurial by trying new systems. It is just daring to sit there and look at things from outside the box. That is what I am saying – as part of the DNA of our kids, it is important to get the entrepreneurial spirit at a very young age. They dare to try new things.
MRS MICHELLE SAMPOERNA: Whenever you see the progress that our kids make, they are very uninhibited, which is not very Indonesian. The other important thing to point out is that boarding schools are not part of our culture here, unless you go to a military academy. Perhaps 20 years ago that was the thing to do for your son, but not anymore. We are talking about village parents here. They had their kids over to us, and that is a huge responsibility for us. You need to meet them. They are bold and confident, and speak enough English so that you can understand them. They are encouraged to yell out, jump and shout out answers, and that is not culturally acceptable in this country. Here you will see the teacher ask a question and the children jump to try and answer it. They are expressing themselves; they are not told to sit down and keep quiet. You jump because it is a free world – who is going to get there first?
We spent a good 2 to 3 weeks getting the kids to jump at the questions. For 15 years you are told to keep quiet and not ask questions, and not question anything. We do a lot of activities and games in the first 3 weeks. When you see this happening, you have to constantly remind yourself of where they come from. They are different; they are not like us.
MRS NENNY SOEMA: When we visited them and there was the worry that if we take 20% of their salary as a way of giving back, to our surprise all of them fully understand this concept and they said of course they are going to do that. In fact they prefer the 20% in comparison to the fixed interest rate, where they would still have to pay, even if they did not have a job. That means that they can always manage their cash flow. That is a conscience contract and a moral obligation.
MRS MICHELLE SAMPOERNA: We are looking for sponsors for the kids coming out. The scholarship from Cornell is not just for the individual – it is extended to the cooperative. Cornell understood this. Otherwise, we become a recruitment field for American universities, because they are chasing after the best of the best. They understand what the mission is and what it means for the country and for individuals. The scholarships from Cornell are extended to the cooperative, which provides a student loan to the student.
Even if they do not pay, at the end of the day we can quantify it. You are paying the student loan and the assistance portion out of your 20%. I am getting you the scholarship, therefore I assist you, so you will pay me back and I can quantify what that Cornell degree is worth.
MRS MICHELLE SAMPOERNA: They know that they should have any access to Cornell otherwise. That is where there is a deeper understanding.
MR SAMPOERNA, you received the ‘Peace Through Commerce Medal Award 2011’ from the US government, you are a successful business man committed to his country and to people working entirely for the Sampoenra Foundation. What do you think is your biggest achievement ?
I think my biggest achievement is the fact that my wife has been married to me for 44 years!
What final message would you like to send to the readers?
We believe that you have a moral obligation to do. I was fortunate enough to have the resources. Giving money is easy, but giving your time is not. Even if you do not have the resources to organize your good work if you will in a business environment, you should still look at programs that various NGOs have. If you can sit there and participate in a program where you can see tangible results from your own contribution, you will get much more satisfaction. If you say that you cannot afford to assist one student, but you get four of your buddies and between the five of you, you can, and then you track that student going through, by the time that student finishes, you will feel great. Just giving money away does not give you the same satisfaction.
I would say that even if people do not have the resources for philanthropic purposes, they should still try to take part. I do not give a damn how rich you are – you can never give enough. When the press visited one of the schools, I was asked why I was doing this and my answer was really simple – I said 24 provinces are represented there with the brightest kids, and you saw them all. Our parliament is made out of 500 and can you imagine if all 250 were members of parliament and how much faster this country would grow? That is the whole concept. It is not just about making 250 parliamentarians. We try to have an impact in that area. We need leaders with value systems.