INDONESIAN REGIONAL INVESTMENT FORUM ‘08, THE RITZ-CARLTON HOTEL, JAKARTA, 26 MAY 2008
KEYNOTE SPEECH BY
DR. SUSILO BAMBANG YUDHOYONO
IN INDONESIAN REGIONAL INVESTMENT FORUM ‘08
“REACHING FOR THE TIPPING POINT:
EMERGING INDONESIA 2008â€
THE RITZ-CARLTON HOTEL, JAKARTA
26 MAY 2008
Bismillaahirrahmaanirrahiim,
Assalamualaikum warrahmatullahi wabarakatuh,
Salam sejahtera untuk kita semua,
Peace be upon us,
Your Excellency Bapak Ginandjar Kartasasmita, Speaker of the House of Regional Representative,
Leaders and members of the state institutions, especially the House of Regional Representative,
Excellencies Ministers, Ambassadors, Governors, Heads of the Regents or Bupati, Mayors,
Your Excellency Tun Musahita, the Chairman of the World Islamic Economic Forum,
Distinguished business leaders, Participants,
Ladies and Gentlemen,
It is an honour to welcome all of you to this year’s Indonesia’s Regional Investment Forum. I thank every one of you for taking the time to be here today, so that we may discuss together opportunities that will benefit us all. I especially commend the Council, I also say the House, of Regional Representative or DPD, for their foresight in initiating the event. Thank you to our 300 plus international visitors from around the world who are considering Indonesia as a business partner. I am informed that some 200 projects worth almost US $19 billion will be showcased at this forum – that is three times the amount invested during the 2006 Regional Investment Forum. The next 2 days promises to be exciting days, and I encourage you to make the best of it.
I must admit at these forums, we at times feel like a matchmaker, or as they say in Indonesia, â€mak comblangâ€. And like all matchmakers, when an investor finds the right business opportunity here, we are filled with relief and pride. So please, make your day, please go and find your partner, your â€jodohâ€.
Two years ago, I also had the honor of addressing this same Forum. But we gather today under different circumstances. This is a difficult time for the world economy. The international community is suffering a double attack in the form of a global food crisis and energy crisis.
The price of oil last week was a shocking of $ 133 US dollars per barrel. In the history of the Indonesian economy, and in fact in the history of modern world economy, oil price has never been that high. And it remains volatile, and sensitive, even to the slightest jolt in oil-producing parts of the world. While this is perhaps great news for the few oil-producing nations that are flooding with petro-dollar, it is an enormous burden to the rest of the developing world where many millions are still struggling on less than a dollar a day. There is no question that if this trend continues, the world economy as a whole will suffer.
As if that is not enough, the price of food worldwide, for a variety of reasons, has also risen dramatically: the price of rice, wheat, corn, and other staple food, have grown dramatically across much of the world. President of the World Bank Robert Zoellick predicts that the present food shortage has the potential to spark social and political unrests in 33 countries, and could create a setback of seven lost years in the fight against poverty. As we gather here today, there is still no global solution to this global crisis.
That is the hard reality we all face today.
Excellencies
Ladies and Gentlemen,
Last Friday evening, with a heavy heart and after much consideration, calculation and preparation, the Indonesian Government announced our decision to reduce oil subsidies and raise the price of petroleum products by an average of 28,7 %. We had done everything we could to save money and cut oil consumption, while also explored all other options, but in the end, none of these measures were adequate to catch-up with the sky-rocketing oil price.
I realize, of course, this is a politically difficult decision, just as difficult as similar decisions we took in 2005.
But this is not a popularity contest, not when it comes to saving our economy and protecting our people. Leadership is not about taking the easy option, it is about making the necessary decisions, no matter how difficult it is.
The Friday decision to further reduce oil subsidy was the best, necessary and responsible solution to save our national economy from crumbling and protect our people from harm. The alternative would be a possible financial and economic crash similar to that of 1997, and the real loser here would be our own people.
It is important for us to understand that this is not only Jakarta’s problem. It is Indonesia’s problem, it is the problem of all the provinces, the regents, the cities, the kecamatans. We have a saying in Indonesia: â€berat sama dipikul, ringan sama dijinjingâ€, which means we are all in this together and we must come out of it together. This is true not just for the people, but also for the leaders of this country, who must think of practical solutions rather than play populist rhetoric.
The price of fuel in Indonesia was already amongst the lowest in the world, much cheaper than China, Cambodia, Singapore, The Philippines, India, Vietnam, Thailand, even cheaper from Timor Leste. At current oil price, the oil subsidies could jump from around 126 trillion Rupiah ($13 Billions), to around 200 trillion Rupiah ($21 Billions). If we do nothing and ignore the problem, the real loser would be the poor, who in real life would have much urgent need for these funds. My government already spends $6 billion US dollars annually on development programs that directly help the poor, such as improving rural education, infrastructure, and health care. This pro-poor program certainly can not be jeopardized.
As we reduce the oil subsidies, we will intensify our efforts to help the poor and near poor throughout the country. We will provide 15 kilograms of rice every month for 19,1 million poor families. We will provide unconditional cash hand out for the next 7 months. We will allocate more funds for education for the poor. We will intensify micro-credit for the poor. And all this will deliver better economic justice, because Government funds will be used to help the poor who need them most, rather than subsidize those well-to-do who do NOT need to be subsidized.
Distinguished guests
Ladies and Gentlemen,
I do believe that the hard decision announced on Friday will help retain optimism about our future prospects.
My government remains as committed as ever to our triple track strategy of pro-growth, pro-job, and pro-poor.
That means achieving higher growth through exports and investments, stimulating the real sector to create employment, and promoting rural and agricultural development to reduce poverty. And in this grand project, the role of the local government and private sector is totally critical.
Indeed, I urge all of you to use this gathering as an opportunity to think local, think global, think positive, and think big.
I urge all of you to use this gathering to explore ways on how we can invest wisely. How can we invest in such a way that our children and grandchildren will not regret our decisions. How can we invest in such a way that our planet does not have to sacrifice itself to monetary game. How can we invest in such a way that our long-term goals are not jeopardized by our short-term goals. In today’s world of food shortages and rising energy prices, let us try to make this forum a Green forum.
This year is rather special for us because we are celebrating 100 years of national awakening, 80 years of Youth Pledge, and 10 years of Reformasi – all at the same time. There are plenty of signs that Indonesia is now beginning to roar again like the lion that it can be.
Look at the growth rate of our economy: even as it slows down a little now to 6.3%, it remains one of of the fastest growing economies in the world, and it is the highest since the crisis. In fact, growth in non-oil and gas sector is higher at 6,8% last year. Foreign investment has increased some 73 %, and domestic investment is equally robust. We have reduced the poverty rate from 17.8 % in 2007, to 16.6 % today. Our debt to GDP ratio – at 32,7 % in 2007 – is the lowest in history, and so is our debt to service ratio, which is at 21,5 %. Our foreign reserve is the highest ever. Our credit rating is the best ever since the crisis. Our GDP per capita is also at the highest ever.
I am also proud of how democracy in Indonesia is progressing. The most significant political trend in Indonesia since 2004, I would say, is the rigorous blossoming of local democracy. Local elections have been sweeping our country, and by the end of 2008, all of our local Government officials will have been directly elected by the people. By the end of 2008, the political dynamics will be dramatically changed, and the pyramid of democracy will have been completely turned upside down, driven solely by the will of our people.
That is an amazing achievement considering the iron grip Jakarta once had on the provinces. That iron grip has also been replaced by fiscal decentralization, with some 33% of the government’s total expenditure allocated to the regions – and this money comes from, I should say, and this money comes with a caveat, that it must be spent with transparency and accountability.
We admit that decentralization has not been trouble free. Many local governments had issued ad-hoc regulations that contradicted national policy. While we encourage local control, these regulations had to be annulled, and hundreds more are waiting for annulment. Legal certainty is vital to investors: that is why we are actively synchronizing local and national policy to ensure that local regulations do not contradict national regulations.
And I remind every single local official out there that any corruption on your part will ultimately cost you dearly. Investors have lots of choice in today’s global economy. If they feel they are being mistreated, they will take their money elsewhere. Think about how your actions today will affect your choices tomorrow. And please, impart this message to everyone in your district, including those in the transportation and distribution businesses.
But as I stand here today, I see representatives from some very successful regions.
Another promising trend is that local governments are becoming more innovative and savvy. They know that in order to draw investors, they must offer incentives. Sragen and Sidoarjo in East Java, for example, have enacted a one-door investment policy that has proven an effective incentive for investors, so that they don’t have to deal with some 20 government offices like in other districts. The Governor of West Sumatra has introduced a Pact of Integrity in his governance. The Governor of Papua has introduced a bottom-up approach to development, empowering the villages in his province. The Bupati of Jembrana is providing free education and health service. Some places, like Purwakarta district and Cirebon city, have taken the initiative to instill a regulatory impact assessment, essentially doing a cost-benefit analysis prior of a planned regulation. Others, like Makassar and East Kalimantan have held routine public dialogs between the business community, the general public, and the government, about development plans. At the very least, this shows a vibrant civil society, one that thinks about its economic and social well-being. And their example reflects the Indonesia of today:a country that is trying its best to manifest its potential as not only a regional giant, but a global one.
Let me remind all the investors in this room indeed what a global giant Indonesia can be. We are, literally, a giant. Our market alone exceeds some 220 million people. Those numbers also translate into a vibrant labor force. We have abundant natural resources, although I am a mindful that we must take greater care of the gifts Nature has bestowed upon us.
Our investment policy is also very attractive. We have signed the Investment Protection Agreement with 60 countries. We have signed no-double-taxation agreements with 56 countries. We adhere to a level playing field policy, so that both foreign and domestic investors are given equal treatment and opportunities. We also have a Free Foreign Capital Policy, which means that foreign investors can repatriate their capital.
And if you are worried about our anti-corruption policies, please ask any of the hundred-plus senior government officials – governors, ministers, mayors, and lawmakers among them – who have been investigated and/or prosecuted for corruption. They can tell you that we have a no tolerance policy when it comes to graft. Changes will not happen overnight; bad habits are hard to break. But every day, more and more Indonesians are saying no to corruption. They are reporting it, they refraining from taking bribes, they are walking away when asked for a “donationâ€.
In the next 2 days, we have some very large projects on offer at this forum, many of them infrastructure projects, such as the construction of the Bojonegara oil refinery, the construction of the Batam-Bintan bridges, and the construction of a railway network system and industrial area in Riau.
With all these projects, you are all given the opportunity not just to provide employment and enjoy financial rewards, but also the opportunity to make a difference not only to Indonesia, but to the world.
As the protesters not only here but elsewhere in the world grow louder, I come to only one conclusion: we are reaching an impasse in the global food and energy situation that we must quickly resolve. The need for alternative fuels is urgent and we must do all we can to develop and use them. Energy and food issues are all tied to the key issue of balancing growth with equity. If we sacrifice equity for the sake of growth, we will find ourselves in trouble further down the line.
I have always believed that for every crisis, there is an opportunity. The present international food crisis provides an opportunity for Indonesia. We are blessed with large areas of land, especially arable land; we have lots of rain; and our nations for generations have known agriculture. With the right policy, the right technology, the right partnership, and the right investment, Indonesia can, within the medium term become a major food producer in the world economy. In this way, we can help empower our farmers, our poor, and also help the world economy deal with the food crisis. I encourage all of you to explore a healthy partnership for food security and help realize this golden opportunity at this Forum.
So I remind all of you to look at the big picture, not just at the short-term benefits. I remind all of you as you proceed with your plans to consider alternative fuels when possible, to consider local needs and local markets, to promote and live by a creed of long-term social responsibility. When you think big like this – that is, thinking global and thinking local – you will be rewarded with benefits. Helping to empower local communities by sponsoring social programs may seem like a cost at the outset, but further down the line these empowered communities are the ones that will expose and prosecute corrupt officials. Providing training programs for local workers may seem like a cost at the outset, but it will improve business productivity and hence yield higher profits in the future. Safeguarding the environment may seem like a cost at the outset, but it will better ensure the long-term viability of your investment. Developing partnerships with small businesses may seem like a cost at the outset, but it will provide better services and supplies for your investment in the future.
Excellencies
Ladies and Gentlemen,
This message of community social responsibility is not only for investors, but for all local officials as well. Some regions out there may now be basking in the luxury of their natural resources. Those resources are not infinite. What does have limitless potential are Your people. What will ensure your region’s economic prosperity is not the size of your forests or the gold underneath your hills, but the skills of your work force. Invest wisely in their education – these youth are our real riches. Make a plan for their future, decide what your region offers that others don’t, and specialize. Stand out and mobilize. The economy of tomorrow is highly competitive. Figure out your comparative advantage, invest in it, promote it intensively and passionately, and thrive.
To regional government officials, I also urge you to further streamline regulations that are impeding investment in local communities. Many regulations have been annulled already, but we must constantly be on the look-out for policies that are obstacles to investment. Times change, needs change, and it is our responsibility as the government to be adaptive to these changes. In fact, I invite all local and regional officials to help each other, and to help the central government, on identifying which policies need to be amended, and which policies need to be established. My administration aims to be pro-active and responsive. Nation-building is a communal effort – we are all in this together.
And to everyone in this room, please allow me to remind you of the importance of leadership. Everyone in this room has a privileged role, whether you are in a business management position or a local councilor. You all have the privilege of setting an example to the rest of the community. I have learned from my own experience that leadership is a privilege that one should not wear lightly. Both good governance and well-performing businesses depend on leadership that is responsive, responsible, honest, hard-working, forward-looking, innovative, and firm. In this time of uncertainty, we must rely on ourselves and each other to pull our communities out of hard times. We must provide the strong and principled leadership that our people need. We must work together and brainstorm on how we can overcome our hardship. Let us use this gathering as an opportunity to work together and brainstorm on how we can overcome our hardship. Our future depends on it.
Excellencies
Ladies and Gentlemen,
By saying Bismillaahirrahmaanirrahiim, I declare The Indonesian Regional Investment Forum 2008 open.
Thank you.
Biro Naskah dan Penerjemahan,
Deputi Mensesneg Bidang Dukungan Kebijakan,
Sekretariat Negara RI