Keynote Address by H.E. Dr. SUSILO BAMBANG YUDHOYONO PRESIDENT OF THE REPUBLIC OF INDONESIA at The President Executive Club â??Government Strategy on Foreign Investment and on World Oil Crisisâ? Cikarang, 12 October 2005

 10/12/2005

Bismillahirahmanirahiim
Assaiammu’alaikum Warrahmatulahi Wabarakatuh

Mr. Setyono Djuandi Darmono,
Ambassador Edward Lee, Chairman of Board of Governors of the President
Executive Club,
Excellencies,
Distinguished Members of President Executive Club,
Ladies and Gentlemen,

Good afternoon.

I am glad to be here to address distinguished members of the President Executive Club in this Holy Month of Ramadhan.


I am pleased to see so many CEOs and President Directors here today. The last time I was in a room with so many “Presidents” was in the United Nations last month. Of course, the difference is that they were running a country, which I imagine is easier than running a company.

Although we belong to different professions, but there is one thing that binds us together in our respective professions: KEEPING TRUST.


We all know the value of building and maintaining trust, with your partners, with your creditors, with your clients and customers, with your staff and workers, with your community. And that is why I am here today : to have an open, sincere dialogue with you and to reaffirm our trust in one another.

You have been with us for many years, some good, some not-so-good. You have long been a key part of our social and economic progress, and a part of our community. You have been with us long enough to understand Indonesia better than anybody else. And I am sure you have stayed here long enough to be able to sense the exciting new dynamism which has sprung throughout this great country. I want to remind you today that you too are part of that new dynamism.

Let me therefore state a point that I am sure many of you know already : The time to invest in Indonesia is now ! Not later. Now !
 
If you look around the world, Indonesia is one of the most transformed countries in recent years. We have become the world’s third largest democracy, a country that has conducted 2 peaceful elections, in 1999 and in 2004, with a voting turn-out of around 90 %, one of the highest in the world.

I also think that
Indonesia also ranks among the most resilient nations. We survived the shock of the financial crises, and the political and social transitions that followed. Remember back in 1998, 1999, and 2000. We endured constitutional crises, ethnic conflicts, natural disasters, and terrorist attacks. And look how we coped with the tsunami and bounced back. We are a nation that is strong in will, and with a lot of heart.
 
And best of all, Indonesia is a country that is growing. Growing in strength. Growing in opportunities. I will talk later on the opportunities that actually are open to you to be part of our national development.
 
Despite the horrible tsunami, and despite the steep rise in oil price internationally, our economy grew from 5.1 percent last year to 5,9 % the first semester this year. We expect economic growth of around 5;5 percent this year.
 
Between January- September 2005 investment grew by 123 %, foreign and domestic, from US $ 3,7 billion to US $ 8,4 billion. Between January to August this year, total exports grew by 24 %, compared to the same period last year, which is rather phenomenal. This includes a very sharp 24,6 % growth of non-oil exports. The breakdown is even more encouraging : mining products by 98,4 %, agriculture exports up by 26,4 %, manufacturing by 18,6 %. Indeed, we are now seeing an encouraging picture where growth is no longer driven by consumer demands but by a surge in investment and exports.

This is taking place in a context of fiscal sustainability. This year, we are aiming at a budget deficit of 0.9 %, and we aim to have a balanced budget before 2009.
I am determined to maintain and accelerate this positive momentum. I will continue to pursue a “triple track strategy” that consists of three major undertakings. First, to stimulate growth through greater exports and investment. Secondly, to promote employment by improving the performance of the real sector. And third, to alleviate poverty by promoting rural development and agriculture. This triple track economic strategy strategy is “pro-growth,” “pro-job creation” and “pro-poor.” It is also pro- business—small business, medium business, big business. It is not to be misunderstood because for me it is quite clear that business creates job for the poor, and stimulate growth. It is actually nothing wrong with the concept of pro-business, in tandem with pro-poor, pro-growth, and pro-employment.

So you see we are very much in this together. Our economy cannot grow unless you, the private sector, also grow. And there is no better opportunity for you to grow than now.
That is why I attach great importance to creating better conditions for your business. My objective is to make
Indonesia an easy, safe and profitable place to invest.

We are now in the process of submitting an investment legislation to the Parliament. This Law will radically change the way business is done in
Indonesia. The law ensures that foreign and local investors receive equal treatment, and freedom to repatriate profits and guarantees against nationalization. It has a clause on dispute settlement. It also provides various incentives to encourage partnerships between big business and small and medium enterprises.

This investment law will be supported and complemented by four sets of regulations. It will have a definitive list of sectors that are open and sectors that are open on certain conditions to private investors. It will have a clear incentives framework, which is related to the draft tax law. It will have a clearer solution to some overlapping regulations and procedures required by the central and regional governments. And it will ensure simpler procedures, which would also cut down the cost of setting up a business in Indonesia.
 
Reforms in taxation and customs are also underway.
 
We are modernizing our labor regulations to bring about a more fruitful partnership between management and labor.


We are enhancing coordination between the central and regional governments in order to prevent overlaps and contradictions. We have already cancelled 400 such regulations. More will follow. We studied a lot of regulations and we will ensure that there will be no regulations that contradict to each other.
 
And as I am sure you have seen and read in the media, we will press on in our fight against corruption. We know that anti-corruption is good for Government, good for the people, and good for business.
 
We will not only touch the corruption cases or the bad world in the police side, the attorney general and also in the court system. Nobody in this country is untouchable. Justice sector reform is directed to all sectors of justice and I am working very hard to make sure that the work of the police and the attorney general is good and better from time to time. I do hope another part of justice sector will work And of course it is good for us to make sure that Indonesia will have better legal framework, better legal certainty for all of us.
 
I will also reactivate and personally lead the National Team for the
Development of Exports, consisting of the ministers relevant to investment.
They will be reporting to me regularly. The Team will help resolve strategic
issues faced by the business community.
 
Through the mechanism of this Team, I will hold an “Informal President’s Investors Forum” (IPIF) every four months. I plan to hold the first lPlF in November, next month. I will listen to all concerns, complaints, from the business leaders. I will be glad if you could talk directly, straightforward, what part of our government that does not do good business practice. It is very important for me to have a correct input because I do hope that the machinery is functioning not only in Jakarta but down in the region. So, with the IPIF, I do hope that we will solve the real problem. My responsibility with my Government is to find solution to solve the problem. This will be in the format of a round table discussion with business leaders so that I can listen to the business sector’s urgent concerns and respond to them. I plan to hold the first IPIF in November, next month.

The sum of all this is to make
Indonesia even more competitive. Of course, Ladies and Gentlemen, our objective is to have a better climate for doing business in and with Indonesia. I do hope that costs will go down, productivity will climb, businesses will grow, efficiency will rise, opportunities will expand, profits will multiply, and there will be greater prosperity for all.

I was pleased to read this morning in the International Herald Tribune of a comment made by Mark Matthews of Merryl Lynch, based in Singapore, who said he would clearly chose an Indonesian equity over Google. He stated a number of reasons for this

  • one company, Telkom, that comprises just 14 % of the Jakarta Composite Index had more sales than Google;
  • Indonesia drew excess demands last week for its biggest overseas debt sale;
  • and the Government is doing the rights in addressing the country’s economic problems, which has only increased investors’ confidence.
    Those were his words, not mine. And of course, I don’t want to argue with him.
 
As we plan ahead, one of the issues that we will continue to face is the energy situation. This is an issue that has across the board effect : on our budget, on government spending, on balance of payments, on business, on our daily activities.
 
I am aware that like our economy, your investment too is affected by the unprecedented rise of oil prices. I know you suffered from the worldwide hike of oil price, like all of us in Indonesia. And, 1 like companies in other countries as well.
 
So, now let me talk about our strategy and policy regarding the oil crisis and energy security. This is another key challenge for my Presidency.

As one of the oil exporters,
Indonesia once enjoyed an oil boom from 1970 to the middle 1980s. But the bonanza is now over. Our energy consumption and demands have risen dramatically, which places enormous challenge to our energy sector.
 
The global oil price problem has already become a factor in the weakening of the Rupiah against the US Dollar. It imposes a huge pressure on our budget and fiscal. It burdens our economy. And its corrosive impact on our welfare is already felt, not only in Indonesia but elsewhere. And this hampers our attempt to achieve a high and stable economic growth.
 
Huge price disparity between domestic and international market provides more reasons for opportunist and smugglers to conduct their illegal activities. Smuggling and illegal fuel stockpiling continue to plague our fuel supply and distribution.
 
The answer to these problems is a comprehensive energy policy for Indonesia. I launched this package of policy on 31st August 2005.
 
First, we must increase our domestic oil production and build more refineries. This means more investment in oil exploration, and more investment to build new refineries. Indonesia’s total oil production now stands at just below 1,1 million barrels per day, and with new oil finds and refineries we aim to raise it to around 1,4 million by 2009. Here, there are boundless opportunities for the private sector to start or even expand your investment in energy sector. Yes, this is an open invitation to everyone.
 
Second, we are intensifying efforts to diversify our energy sources. We encourage the use of gas, coal, solar, bio-diesel, and other sources of energy. By so doing, not only are we anticipating the oil scarcity, but we are also protecting our environment.
 
Third, we must wisely use our energy and conserve the energy in an efficient manner. Turn off your lights when you don’t need them anymore, wear short sleeve shirts so that you use less air conditioner, and take public transport. It needs an innovation of non-fuel energy for transportation.

Fourth, I have ordered our security apparatus to take very firm action against fuel smugglers. The order has yielded some tangible results. Many of these heartless criminals are now spending time in jail. 400 people are in jail now because they are committed to smuggling, illegal logging and other types of smuggling. More will follow, I promise.
 
Fifth, we are rectifying our oil subsidy and pricing policy. We had an untenable situation where those who could afford to pay for higher fuel price enjoyed the bulk of our subsidies. As a result, much of the Government budget was used uneconomically, whereas they could be used more effectively to invest in our people to pay for the education of the poor, to provide cost4ree health services to the poor, to build infrastructure, We have made significant readjustment to rectify this with the new budget, which has been approved by the Parliament.
 
This is the basic drive of our policy to uplift the fuel subsidy and shift it to improve the welfare of the poor.
 
Please do not worry about the sustainability of fuel and electricity supply as well as the supply of other forms of energy. My Government will ensure that fuel and electricity you essentially need to run your industry is not only secured but also sustainable.
 
In that regard, I have three particular messages to you.
First, use this difficult situation as a starting point to enhance your efficiency, thus, competitiveness.

Second, I encourage the private sector, along with my Government, to venture in the energy industry and in searching for alternative energy.
 
Third, I hope you will continue to grow with us by investing in our economy and our people. Your success will be much more meaningful if followed by the practice of good corporate governance and corporate social responsibility. I hope you will continue to take an active role in assisting and developing our community. And as times become difficult for the short term, we all need to work harder and closer to improve industrial relations. We all need to take care of one another. Remember short-term pain, long-term gain.
 
A few days ago, I declared October “the Month of National Solidarity”. It is meant to signal that we are all in this together, and we need to help one another. The time to show our solidarity, our zeal as a community, is now. All of you in Jababeka can be an example in this. You belong to one of the most dynamic industrial areas in the whole country, with 1,040 companies of all size, supported by 150,000 able workers. You can boast of a total contribution of US$ 10 billion to our GDP. I am proud that you all are actively taking part in this Month of National Solidarity, and I hope this spirit solidarity will last well after the month is over.
 
Finally, once again, I thank you for staying with us all these years. You were our trusted partners during the last economic crisis. And you are now the engines of our economic dynamism. I look forward to working with you for our common prosperity.
 
Wassalammu’alaikum Warrahmatulahi Wabarakatuh

Jakarta, 12 October2005
PRESIDENT OF THE
REPUBLIC OF INDONESIA
Dr. Susilo Bambang Yudhoyono