Investment Summit: Indonesia’s Journey Continues
Seven government ministers speak at annual US-Indonesia Investment Summit, both assessing progress and looking to an improved future
By Peter Sean Lie
Sunday, October 28, 2018
Seven Indonesian cabinet ministers, including Finance Minister Sri Mulyani Indrawati, Minister of Trade Enggartiasto Lukita, Minister of Industry Airlangga Hartarto and communications minister Rudiantara spoke at the sixth annual US-Indonesia Investment Summit, organized by AmCham Indonesia and the US Chamber of Commerce.
Delivering her first-ever keynote address to the summit, Sri Mulyani assured investors that the economy remains sound, despite the upcoming political year. “The Indonesian government will continue to pursue the … fundamental building blocks to sustain economic growth,” she said, “no matter who is in charge in the president’s office.”
US Ambassador to Indonesia Joseph Donovan also spoke at the summit, held at the Mandarin Oriental Hotel in Jakarta on September 27, which was part of AmCham and the US Chamber’s ongoing Initiative Indonesia project, and was also attended by some 300 policymakers, executives of US companies involved in Indonesia and other business leaders.
“America wants to contribute to Indonesia’s prosperity, fostered through the private sector partnerships that naturally develop from fair and reciprocal trade, open investment environments, transparent agreements between nations, and improved connectivity,” Ambassador Donovan said.
Initiative Indonesia involves year-long activities in both Jakarta and Washington, DC under the umbrella of AmCham and the US Chamber. The summit saw the release of AmCham and the US Chamber’s annual investment report “Indonesia’s Journey,” which looks at the country’s reform agenda over the last 20 years, with a special focus on the first four years of President Joko Widodo’s administration and the positive changes it has made, highlighting developments in key specific industries and making a series of recommendations. It also compares Indonesia and four other large Association of Southeast Asian Nations (ASEAN) countries in terms of the economic and business climate.
Under this theme, the summit captured the progress of greater openness in Indonesia’s economic climate through the work of the current administration, and possible improvements to achieve greater economic prosperity.
With the support of co-hosts the Indonesian Chamber of Commerce and Industry (Kadin), the Indonesian Employers Association (Apindo) and BKPM the event drew numerous high profile panelists from government, the private sector and other stakeholders.
“From the first summit until today, our member companies have gathered to have important discussions with Indonesian cabinet ministers about the business climate and the path toward greater openness,” said A Lin Neumann, Managing Director of AmCham Indonesia.
With six panel discussions incorporating both public and private figures, the summit covered a number of industry-specific issues. From the extractive sector to financial services, the main message of each industry player was similar – the need for regulatory and legal certainty as the basis for greater investment.
Albert Simanjuntak, President Director of Chevron Pacific Indonesia and Deputy Managing Director of the Chevron IndoAsia Business Unit, said: “The role of the multinational oil and gas industry has been very important and beneficial for the government, and thus legal certainty is critical for the industry to invest more in big projects.”
Industry leaders also expressed their willingness to cooperate with the government in sharing international best practices.
“I would say on behalf of the pharmaceuticals and healthcare industry that we are more than committed to contribute to partnering with the government to make Indonesia a healthier country,” said Anil Argilla, President Director of Pfizer Indonesia.
On the government side, the summit heard progress has been made in terms of economic growth, the regulatory environment and ease of doing business. The government also reiterated its commitment to sustain economic growth, create business-friendly economic policies and attract foreign investment.
With regard to the current account deficit, Sri Mulyani emphasized the importance of immediate short-term measures to control imports, noting that while controlling imports was not the best policy option for long-term projections, it was necessary in the current environment.
“We [the government] have taken a short-term measure, making sure that imports do not continue growing unchecked,” she said.
BKPM Chairman Thomas Lembong, speaking to the Summit by video because he was out of the country, also spoke on how the government is facing up to currency market pressure. “The government is clearly determined to put Indonesia in the bucket of countries that are pursuing economic orthodoxy,” he said. “Our Ministry of Finance has revised the budget to be tighter in order to send a strong signal of fiscal prudence. Bank Indonesia is gradually but firmly raising interest rates to respond to currency market signals.”
Three steps forward, two steps back
Despite the positive words from government, a key message throughout the summit from companies was that more needs to be done.
One of the biggest issues voiced was the lack of policy coordination between the central and local governments – with good policies made by the central government often poorly implemented by local governments.
Shinta Kamdani, Vice Chairwoman of Kadin and Apindo, said, “We’ve seen the economic packages, and they are meant to deregulate. However, the harmonization of the central and local governments is still bad. Businesses still face more local regulations and this adds to the bureaucratic process.”
With regard to the Online Single Submission (OSS) system on the issuance of permits and licenses, the private sector agreed it was a revolutionary idea, but with bad implementation. Rosan Roeslani, Kadin Chairman, said that if the OSS system worked properly it would give Indonesia’s business climate a major boost.
Shinta spoke of how advocacy on bad regulations should continue despite President Widodo’s current administration coming to an end in 2019. She said advocacy should focus on specific and concrete issues, because it was no longer the time to talk about strategic, big picture issues. This was supported by offers from ministerial speakers for further public-private discussions on specific technical issues.
The US-Indonesia Investment Summit 2019 will face new challenges with a new administration and cabinet ministers, whether or not President Widodo is reelected for a second term. In relation to this, Wijayanto Samirin from the Vice President’s Office said that business associations as representatives of the private sector must do more to facilitate government engagement and public-private dialogue.
“We need our association partners to allocate more resources on working with the government in creating good policies,” he said.
“The US Chamber and American business see great opportunities in Indonesia because of recent regulatory reforms undertaken by President Widodo,” said Charles Freeman, US Chamber senior vice president for Asia. “The government has rightly focused on reducing regulations to encourage new investment opportunities. However, too many of those opportunities will remain unrealized unless the government moves expeditiously to create a more welcoming environment for foreign investment by establishing regulatory certainty.”