AmCham Indonesia Governor Arian Ardie's remarks at the EODB Symposium in Bali, the first formal meeting of the U.S.-Indonesia Commercial Dialogue, on 12 December 2011.

I would like to extend my greetings on behalf of the Board of Governors of AmCham Indonesia. We have more than 500 members representing more than 200 US companies and their Indonesian partners. AmCham welcomes the efforts of the Indonesian and US governments to include the private sector in their trade and investment talks and believes that Commercial Dialogue and the EODB Symposium is a great first step.
'Ease of doing business' is not the first phrase which comes to mind for the average US investor seeking to invest or trade with Indonesia. More often, the litany of issues and risk are in the forefront of the discussion. You have heard them all before and they do need to be solved if we are to maintain and grow a robust trade and investment regime.

Rather than focus on the issues which hamper investment and trade, I would like to examine some of the policies and initiatives which have laid the foundations for trade and investment in the past and what we learn as we look forward.

Indonesia has done very well when it took a long-term perspective in terms of attracting investment and laying the foundations for long-term sustainable growth. Three examples come to mind. The first was the Production Sharing Contract in the oil and gas industry. This standardized contract was revolutionary when first introduced by Indonesia in the late 1960s. It attracted not only investment capital, but much needed technology for the development of an important national resource. It enabled Indonesia to become a significant exporter of oil and be on the forefront of the development of LNG. US companies became early and significant investors by virtue of the PSC.

The next example is the development and launching of the Palapa Satellite system. In hindsight, it seems obvious that this breakthrough technology was the only way to unite Indonesia's thousands of islands into a unified whole. At a time when more than 50% of the population was living below the poverty line, food self-sufficiency was still a few years off and digital communications were barely on the drawing boards, it was a bold step. Again, this was done in partnership with US companies and technologies.

The final example will probably be considered controversial, but I believe has done more and will continue to do more to define the social, political and ultimately economic landscape of Indonesia and that is the process of administrative decentralization. Necessitated by an over-concentration of power in the center, while still attempting to maintain overall unity, a huge amount of power and administrative authority was given to district governments. On one hand, it has unleashed the economic power of the regions previously tied to the center, enabling unprecedented levels of growth during uncertain economic times. On the other hand, it has sown great amounts of confusion about permitting and licensing processes.

What do these three examples have in common? They were bold steps undertaken by the government based upon a clear vision, which increased transparency and often put economic power into the hands of those who had the least but could contribute the most to growth. All of them were also done with the aid and support of US companies and government. We have done great things when working together and will continue to do so in the future.

So where will we need to be investing in the future to sustain and build upon what has been achieved so far? Three sectors hold the key: renewable energy, infrastructure especially that which promotes regional trade, and education.

Electricity, especially that which is derived from renewable sources, is crucial for the continued development of regions outside of the Java Bali grid. These areas have the greatest potential for growth but cannot do so without consistently available electricity. Renewable energy also decreases the need for diesel-powered plants and hence also helps reduce increasingly expensive subsidies.

Investment in and the development of infrastructure, especially that related to storage and movement of agricultural and manufactured goods, is vital to the sustained growth of the regions.

Investment in education also has multiplicative benefits providing educated workers to meet the demands of tomorrow's workplace as well as creating an industry in itself that becomes a major employer at the higher levels.

The US has a strong role to play in the development of these industries which have been and continue to be the backbone of US economy. The technology, capital and human resources that US companies have to offer in these industries can serve to create a sustainable economy in Indonesia.

Investment in these sectors can only be achieved if the investment and trade infrastructure is in place. This means: a well functioning and regulated banking sector; a robust insurance sector that facilitates infrastructure investment, repairs or replaces damaged or destroyed commercial/industrial businesses, and manages professional liability risk; a transparent regulatory environment; and, respect for contracts and consistent enforcement of law. These are all necessary precursors to sustained investment.

Developing the necessary environment for sustained investment is not going to be easy, but it can be achieved with cooperation among the private sector in dialogue and partnership with the public sector. AmCham was closely involved with one positive example in the renewable energy sector. A well-meaning government regulation had reserved the development of renewable energy projects less than 10MW for SMEs. In practice, however it precluded not only large companies, but most SMEs from making investments in these power plants. AmCham, working together with Kadin and other chambers, brought this to the attention of both the Indonesian and US governments. It subsequently became an item of the bilateral trade agenda and was fixed by the Indonesian government. As a result, the renewable energy sector has seen a tremendous increase in investment much of which has been domestic. It does demonstrate that when the private sector cooperates and works in conjunction with our governments we can achieve changes which benefit all.

In improving our bilateral trade and investment climate, the US government has a role to play as well. The launching of the Indonesia compact under the Millennium Challenge Corporation is a welcome development which places emphasis on reform and quantifiable progress in exchange for focused economic aid for sustained development. The US must however not lose sight of the fact that, due to the size of its economy, all actions taken or not taken have ripple effects which can even be felt here on the other side of the Pacific. The chaotic process of budget approval and the raising of the debt ceiling impact not only US equity and debt markets, but those in Indonesia as well. We also need consistency in the trade regime, such that it is dictated by economic forces and not by legislated action stemming from a narrow understanding of the Indonesian dynamic. US borders must remain open and easily accessible to facilitate educational and trade exchanges, sales and marketing trips and the general process of developing trust, face to face both on Indonesian soil as well as American.

The initiatives being discussed today and hopefully codified during the Commercial Dialogue on Wednesday are an important step towards creating a broad sustainable bilateral trade and investment relationship. We applaud the efforts and commitment of both the US and Indonesian governments in bringing us together. We look forward to continuing to build our strong working relationship with Kadin and Apindo as well as our US colleagues from USASEAN and other business and bilateral organizations such as AICC, USINDO and GSJHCC. We thank you for letting us be part of this dynamic partnership.