Remarks by H.E. Dr. Boediono Coordinating Minister for the Economy the Republic of Indonesia at the Opening of the 3rd Asia-Pacific Business Forum. Jakarta, Indonesia, 7 April 2006

 4/7/2006

Your Excellency, the Honorouble Tun Dr. Mahathir Mohamad, former Prime Minister of Malaysia,

Your Excellency Dr. Supachai Panitchpakdi, Secretary-General of the United Nations Conference on Trade and Development,

Ladies and gentlemen,

It is indeed a great pleasure for me to join this distinguished gathering of the captains of business and industry of the Asia and Pacific region.

This forum has the potential to contribute a significant element to the deliberations of our senior officials and ministers during the meetings of the 62nd Commission of the UN Economic and Social Commission for Asia and the Pacific. Particularly so, since the focus of this year’s 62nd Commission session is on the necessity to enhance regional cooperation on infrastructure development, including that related to disaster management, which inevitably calls for the pivotal role of the private sector. Hence, I emphasise that the topic of Strengthening Public-Private Partnerships for this Forum is highly relevant.

Governments are now operating in a global environment where the issues of peace and people’s welfare cannot be tackled alone. We are living in an interdependent world where peace and prosperity cannot be achieved without partnerships involving governments, international organisations, the business community and civil society.

The government’s relationship with the business community has become more important as the role of business in generating employment and income through trade, investment and finance has grown and states have increasingly stressed the importance of private investment in development.

Business has proven its potential to act as an influential and practical force for good.  The contribution of business to society is multi-faceted – from creating employment and income, providing technical skills and social benefits, strengthening management, to bringing market-based solutions to pressing social and environmental problems, and upholding universal principles. Responsible  businesses  have  proven  to  be  a  positive  force  in  spurring development and improving human conditions.

I think it is in this spirit that at the World Economic Forum in Davos on 31 January 1999, United Nations Secretary-General Kofi A. Annan challenged world business leaders to "embrace and enact" the UN Global Compact, consisting of a set of universal principles within their sphere of influence in the areas of human rights, labour standards and the environment. The Global Compact represents the formal foray of the UN to actively encourage the world business community to take action in support of UN goals. The most significant contribution of the private sector to the MDGs is to invest and to be successful, and to do so in a socially and environmentally responsible manner, thereby creating enormous social benefits, including employment and income.

Through responsible business practices, business is making a unique and significant contribution to implementing the Millennium Development Goals. By taking a principle-based approach to business, companies can help to ensure that sustainable development is achieved and that the benefits of globalization are shared more widely. Business leaders have a collective interest in promoting the development agenda across industries, both from an economic and a moral perspective.

What I have just elaborated on are the initiatives being implemented at the global level.

Let us now, begin to push forward endeavours to nurture public-private partnerships in our own region, the Asia-Pacific region, through the convening of this forum.

This Forum entails three tiers of interaction in our region: dialogue at the governmental level, dialogue between government and business and most importantly dialogue between business and business.

In light of this, Indonesia fully supports the efforts to enhance partnership between the private sectors and the governments. We welcome the APBF as an effective means which will yield concrete follow up measures and action plans—and at the end, in mutually beneficial business for us all.

Let me reflect on the potentials for the enforcement of such partnerships in the light of current phenomenal developments. These exciting developments are driven by intra regional investment flows and business networks, integrations of trade in Asian countries through the various initiatives and engagements of ASEAN. These include the implementation of the ASEAN Free Trade Area as well as the initial phases of free trade area agreements between the Association and China, India, Japan, Australia and New Zealand as well as within the ASEAN+ Plus Three Framework.

These region-wide agreements, combined with the numerous bilateral free trade agreements currently proliferating among our countries, indicate that we are certainly headed towards regional economic integration. Integration which would ultimately be carried out by our esteemed partners and colleagues from the private sector.

Furthermore, we have to strengthen the collaboration and coordination in attaining the goals on Millenium Development Goals, through APBF with development agencies and financial institutions, donors and supporting countries within and outside the the Asia Pacific region. Indeed, we have so much to gain from regional cooperation, propagated through the Asia Pacific Business Forum, to face common global challenges.

I hope I would not be deemed overly optimistic, if together, we in the Asia Pacific region can design and adopt our own regional version of the UN Global Compact. This would not only reinforce our regional efforts to bring about the MDGs in our region by 2015, but would boost our vision of establishing a region conducive to both the aims of business and development.   

However, we are not oblivious to the fact that business-led efforts can only be sustained and brought to scale if public institutions, the rule of law, and transparent and predictable regulatory efforts support responsible business practices.  

Please allow me, in this regard, to share some of the Government of Indonesia’s experiences in creating a more conducive climate for economic growth and investment.

Compared to other countries in the region, Indonesia has been slow in reviving its economy from the economic and financial crisis of 1997. This is basically because Indonesia has undertaken crucial steps forward towards democracy. Sometimes the process of political transition does not necessarily go hand in hand with economic advancement.

But Indonesia has successfully conducted our first ever direct election in 2004, despite a myriad of challenges, including those logistical and demographical in nature. Indonesia has, thus, emerged as a fledgling democracy and is now commencing the journey towards encouraging economic growth.

A 5.6% annual growth in 2005 was still well below our pre-crisis performance, but it was the highest growth performance since the crisis. The economy has since then been recovering slowly but quite impressively. Barring exceptional circumstances we expect our economy to grow by close to 6 percent this year and in the range of 6 to 7 percent in the subsequent two to three years. Since 2004 investment and exports have increasingly become the main driver of growth.

On the stability front the trend in the past 4 years or so has been toward sustainable macroeconomic balances. Last year, due to both internal and external factors our financial markets experienced turbulence. But we are now witnessing a dramatic recovery from this turbulence. We believe that this recovery reflects a growing market confidence and the anticipation of a dramatic turn-around in growth later this year and next.

Indonesia’s positive policy and market developments are now recognized and reinforced by ratings agencies with upgrades for banks, companies and the government debt. We believe that our macroeconomic and reform strategies are now on track to deliver investment grade ratings reasonably soon, lowering borrowing costs for both the government and the private sector.

Moreover, we have adopted a three pillars strategy designed to create incentives for private investment in anticipation of higher growth later this year and especially in the years to come.

First, we need to address the investment climate issues that face all firms including importantly the infrastructure sector. Second, we need to take steps to expedite the implementation of high profile cases that are important in their own right but maybe even more important for the perceptions they create. Finally, we need to address some issues in the financial sector to restart lending and improve the structure of capital markets more broadly.

The first pillar is not difficult to describe as we have just issued policy packages in infrastructure and investment that include numerous measures in multiple areas. In both cases these packages are based on numerous surveys and discussions with stakeholders which allowed us to identify areas where there are obstacles for all or almost all investors.  The infrastructure reform agenda is organized around issues in the regulatory framework, the role of government in the provision of infrastructure and especially our partnership with the private sector, and infrastructure finance.

We have also completed another set of reforms that are included in Presidential Instruction No. 3/2006, which include measures to improve the general regulatory/investment regime. While I cannot go into detail I believe that we are proposing some reasonably radical breakthroughs. For example we propose to cut the time it takes to open a business from 151 to 30 days.

The next pillar of our reform strategy involves the acceleration of some key outstanding high profile cases. These cases take special handling as they are important in and of themselves, they often reflect unique circumstances to influence broader perceptions. Thus we have adopted a more proactive policy, for example in the case of the Cepu oil field dispute between Pertamina and Exxon-Mobil which was resolved last month. Earlier there was an agreement with Newmont on the civil charges around Buyat Bay. We are also addressing the problems hampering the implementation of 91 infrastructure projects that we offered for investment in the Infrastructure Summit in January last year. We are trying to improve project preparation and as I indicated earlier, the Government has decided that it is prepared to go forward with risk sharing on selected infrastructure projects. We are now reviewing a number of electricity and toll road projects that have been on hold for years with a view to resolving some of them using this framework.

The final reform pillar includes access to credit at reasonable cost and appropriate maturities. Financing is normally not an important problem for international investors but it is often a crucial one for domestic investors, especially for small and medium enterprises. The availability of adequate and reasonably priced sources of financing for small and medium enterprises is economically and politically important as we take the democratic route to development.

I would like to affirm that all the efforts, plans and initiatives launched by the Government would not be of the best impact, if not supported by the role and actions of the private sector. The public and private sectors are interdependent partners.

I note that in some parts of the world public-private partnership is already a practical reality in the day-to-day job of running a country. I am eager to see that happen in Indonesia as well as the whole region of Asia and the Pacific.

In addition to this, I would like to emphasize that the MDGs deadline of 2015 is fast approaching hence we should be able to come up with creative strategies and solutions to realize the MDGs in our region by that timeline. We should not be confined by conventional ways of thinking. Our mission to bring a better standard of living for all our peoples is far too sacred and important to be bogged down by a lack of commitment and innovative thinking.  Thus we should actively seek new innovative ways and means to secure the attainment of the Goals in the Asia Pacific region, including strategies that build on partnerships between the public and private sectors, to generate even more money for development and to channel resources more effectively. 

I realize that our region is by no means homogenous, economically, culturally, ethnically, demographically speaking. However, I think this condition brings forth a wealth of potential to tap into and to learn from.

I would like to conclude by stating that I am optimistic that through our commitment to collaborate we can build and change anything.

I hope that what will be achieved at this Third Asia Pacific Business Forum, among them the discussions convened, potential joint enterprises identified and lessons learned from one another, will constitute a step forward towards cementing public-private partnership in Asia and the Pacific.

In regard to the MDGs, I think the best approach to be adopted is that of partnership. Partnership among all stakeholders within our region, encompassing governments, business, civil society and academia, to form a dynamic synergy of cooperation to reach the goal of sustainable development and the eradication of poverty.

I wish you the best in the endeavours you are about to embark on through this Forum.

By Praising Allah Almighty, Bismillahirrahmannirahim, I am pleased to declare the Third Asia Pacific Business Forum open.

I thank you.