Assalamu’alaikum Wr. Wb.
Dr. Hashim Bin Abdullah Al-Yamani, Minister of Trade and Industry, Saudi Arabia,
Mr. Abdul Rashid Bin Rashid, Chairman, Saudi Council of Chambers of Commerce and Industry,
Ladies and Gentlemen,
Friends of Indonesia,
I am greatly honored to be here today to meet all of you. I am here on a visit to strengthen and enhance relations between our two nations. And among the most significant and practical ways to achieve that is to enlarge and intensify our economic relations.
Let me therefore thank the Saudi Arabia Chamber of Commerce for arranging this Business Forum, thus giving me a unique opportunity to share my thoughts with you on how we can expand economic relations between our two countries, especially in the fields of trade and investment.
There is every reason for Saudi Arabia and Indonesia to forge and maintain strong relations. Both are known to be very independent-minded countries in the community of nations. Saudi Arabia stands in the heartland of the Islamic world, while Indonesia is home to the world’s largest Muslim population. And both our countries are striving to modernize, to carry out meaningful social reforms.
We have a long tradition of solidarity. On various occasions when Indonesia was in difficulties, Saudi Arabia was among the first of our friends to come to our aid. And we have similar views on many regional and international issues.
Hence, we share a sense of kinship that dates back as far back to the time Arab traders came to our archipelago in the 12th Century to trade and spread Islam. Today, that kinship can become greatly beneficial to our countries, and we should develop it to build a vibrant partnership between us.
Indonesia today is ready and keen for such a partnership. It took us some eight years to reach this position.
During the financial crisis of 1998, Indonesia suffered the greatest devastation among all the affected East Asian economies. We endured not only economic chaos but also political tumult.
To survive, we launched massive and sustained reforms, good governance and anti-corruption programs in both the public and private sectors.
At the same time, we took strong measures to achieve macroeconomic stability, overhaul the financial system—especially the banking sector—and strengthened our economic institutions.
In the economic field, we have managed to restore stability and we have had years of modest growth. During the past two years, growth has been quite robust, reaching 5.1 percent in 2004 and 5.6 percent in 2005. Our per capita income is now above pre crisis levels at $1283 in 2005 and is expected to be around $1600 in 2006.
In the face of rising international oil prices, we have made the necessary and painful adjustment of raising domestic fuel prices to better target our subsidy program and to improve our efficiency in the use of fuel.
We are now pursuing three basic economic objectives:
First: to accelerate sustainable economic growth through accelerated growth in investment and exports.
Second: to stimulate the real sector to create jobs.
And third: to promote development in the rural and agricultural economy since most Indonesians still rely on the agriculture sector for their livelihood.
We intend to accelerate economic growth from 4.5 percent in 2003 to 7.2 percent in 2009 so that in the next five years, our targeted economic growth will average 6.6 percent every year.
To make this possible, we are following an “infrastructure roadmap,” which entails building 1,600 kilometers of toll-roads, power plants and ports, in the next four years. The whole infrastructure effort is expected to cost US$146 billion, out of which we hope that US$72 billion or around a third of GDP, will come from the private sector.
To improve the investment climate, we are issuing new regulations to encourage public private partnership in building our national infrastructure. I am personally inviting Saudi investors to take part in this great venture, and to the upcoming infrastructure summit in September 2006.
We are carrying out a comprehensive economic and institutional reform program to create a favorable overall investment climate. The objectives of the reforms are to provide legal certainty, policy consistency and reduce the costs of doing business.
A key component of the reforms is a new investment law, which was drafted in consultation with our private business sector. We also have a tax and customs reform program to remove distortions, improve tax and customs administration, and reduce corporate tax rates.
We are deliberating on a new labor law to remove the rigidities of the labor market to the satisfaction of all concerned, including the labor sector and investors.
To bring down the cost of doing business, we are streamlining the licensing process and procedures, improving coordination and strengthening systems. We are making substantial gains in the fight against corruption.
Let me now address the question: how can we revitalize Indonesia-Saudi Arabia economic relations?
Indonesia’s domestic market of 220 million people with growing purchasing power is a good match for Saudi Arabia, one of the largest countries in the Middle East, with a population of 26 million and per capita income of US$11,600, also with substantial purchasing power.
In 2004, total trade between Indonesia and Saudi Arabia stood at $2.4 billion. Indonesian exports to Saudi Arabia reached $418 million, whilst Indonesian imports from Saudi Arabia reached $1.9 billion. In 2005, total trade between Indonesia and Saudi Arabia increased by 40%, reaching $3.2 billion. This is made up of Indonesian exports to Saudi Arabia, which increased slightly to reach $524.2 million, plus Indonesian imports from Saudi Arabia, which increased considerably to $2.7 billion.
We are importing mainly oil and oil related products from you. Whilst we export a range of manufactured products including paper and paper products, plywood and wood products, garments and textiles, consumer electronics and food products. We hope that there can be increased efforts to increase our exports to your market, given the diversity of products that we can offer.
In 2004, Saudi Arabia was also the biggest investor in Indonesia with total value of US$ 3 billion. This covers 35 projects in sectors such as energy, oil and gas, metal, chemical industry, hotel, restaurant, real estate, and others.
In 2005, Saudi Arabia’s investment reached $ 2.1 billion. We hope that given the opportunities in Indonesia, that there will be continued investments from Saudi Arabia.
There is plenty of room for growth in bilateral trade and investments. Indonesian investors in Saudi Arabia can tap the sizable Saudi market, as well as the wider Gulf Cooperation Council (GCC) market. Likewise, Saudi investors can take advantage of the ASEAN Free Trade Area, using Indonesia as gateway to this vast Southeast Asian market of 600 million people.
Indonesian businessmen can play a role in the development of your oil and gas infrastructure by providing construction equipment and materials as well as services.
Another important area of business opportunity is in Syariah banking and insurance. Syariah banking has grown rapidly in Indonesia in the last five years at an impressive rate of 60 percent per annum. While the share of Syariah banking is still small out of the banking system, the growth has been substantial, with credit reaching some USD 1.7 billion and assets reaching around USD $2.2 billion in 2005.
There are currently four Syariah Business Units and 7 People’s Syariah Credit Bank operating some 596 offices around Indonesia in 27 provinces. Insurance companies have also opened up Syariah divisions so that there are already 30 insurance companies currently offering Syariah products and services.
I can proudly say that Bank Muamalat, a Middle East investment, is the biggest Syariah bank in Indonesia. It is now very successful and in the year of 2005, the bank has total assets equal to US$ 820 million. We encourage more Saudi investment in Indonesia and more opportunities in Syariah banking, as the potential is great. I want to acknowledge the visit of executives of six major financial institutions from the Middle East including from Saudi Arabia to Indonesia last year. I hope that such visit can be followed up into concrete actions.
In fact we have begun to seize various opportunities in economic cooperation on a bilateral basis. When my Special Envoy and a group of Indonesian business leaders visited here a week ago, they held constructive talks with their Saudi counterparts.
My Government is ready to facilitate resolution of any problems and to promote any opportunity that will emerge in this ongoing growth of our economic relations and partnership. We also hope to promote more people to people contacts between our two countries through tourism and business to business interactions.
Our two countries already have several bilateral agreements that have been followed up by our private and business sectors. I look forward to strengthening of our cooperation in such areas as agricultural development, infrastructure and oil and gas development, and the wood-based sector.
I also hope for an ever growing partnership with Saudi Arabia in the context of ASEAN and GCC economic cooperation. We see your accession to the WTO as an important component of your economic program—and we fully support it.
Once more, I thank the organizers of this Business Forum and hope that this is a promising beginning for a revitalized economic partnership and stronger friendship between our two countries. Let me assure you that my Government and I will do all we can to make this partnership fruitful.
Sukron. Thank you.
Wassalamu’alaikum Warrahmatullahi Wabarakatuh
Riyadh, 26 April 2006
PRESIDENT OF THE REPUBLIC OF INDONESIA
Dr. H. Susilo Bambang Yudhoyono