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According to most economic observers, the role and potential of Indonesia, in an increasingly interconnected world, has often been overlooked and underrated.
At an event in Jakarta for alumni and friends of the ANU College of Business and Economics (CBE), a panel of senior and recent alumni shared their vision of the New Indonesia. Dr Lili Ing, Ahmad Fauzi Nur and Gracia J J Mambrasar (Billy) discussed their observations about Indonesia’s future.
Dr Lili Ing is the Lead Advisor to the Minister of Trade of Indonesia. She is also the Founder of the ‘Indonesian Economy’, a society of economists around the world who work on the Indonesian economy. Dr Ing obtained her PhD on International Trade from ANU in 2009.
Could you share some insight on the current rise in trade tension between the US and China?
We face serious challenges from these scenarios. The world economy is growing at 3.2% this year, which is much lower than what had been predicted. We face two main challenges.
First, there has been an increasing number of trade barriers. For instance, within the G20 countries, the number of import restrictions increased by three and half times just between October 2018 and May 2019. About USD 355 billion or 18.3 % of the world trade are affected by import restrictive measures.
Second, after 75 years of trade liberalisation, the multilateral trading system – the World Trade Organization (WTO) - is facing serious challenges. By December this year, the WTO will only have one panel member, which means that by early next year the body might only be history. This implies that we are going to witness an increase in the number of bilateral agreements as well as regional trade agreements, combined with punitive unilateral actions. Many countries in trade of economic difficulty can apply punitive actions because they know that the WTO is not going to work.
Despite the ongoing trade tensions, Indonesia will continue to become more integrated in the world.
What should Indonesia’s response be in such challenging trade circumstances?
With the current leadership and their vision, Indonesia aims to achieve a 5.2% economic growth this year and 5.3% in the next three years, based on exports and investments. Since Indonesia’s independence, economic growth has basically relied on our consumption, which contributes nearly 50-60% of our total Gross Domestic Product (GDP). For these reasons, it is time for Indonesia to change its base to exports and investments. There are a few actions that are already underway in line with this way of thinking.
First, on investments, we are going to see a very liberalised way of foreign direct investments to attract more investments. This will result in a transference of technology as well as an increase of employment opportunities. On exports, we will start to diversify our export, which has usually been resource intensive. More than 51% of our exports rely on the resource intensive goods, but we are now trying to shift this more into manufacturing and high value added goods.
Indonesia will also actively engage in a number of bilateral and regional agreements as well as expanding our exports in non-traditional markets. Currently, we are negotiating with the 16 ASEAN countries through the Regional Comprehensive Economic Partnership (RCEP). We are also engaging with South Korea and the European Union, along with a number of non-traditional markets such as Eurasia, Tunisia, Morocco, number of other African countries.
Despite the ongoing trade tensions, Indonesia will continue to become more integrated in the world.
With one of the largest populations in the world, human capital itself becomes the real capital…Indonesia’s main asset is its human resources.
Ahmad Fauzie Nur is the Director of Operations of PT Kawasan Industri Wijayakusuma (KIW) (Persero) and the Commissioner of PT Putra Wijayakusuma Sakti. He won the Indonesia Future Business Leader Award 2018 from SWA Magazine. He obtained his Master of Business (Accounting) from ANU in 2008.
Given your industry experience in the private and business sector, what is your vision of Indonesia over the next 10 years?
Indonesia’s main asset is its human resources. In the last five years, the government focused on infrastructure and development. Now in the next few years, in addition to expanding its infrastructure, the government will look to advance human capital development. With one of the largest populations in the world, human capital itself becomes the real capital.
At a national-level meeting two years ago, the President shared his worry about the slow growth of investment in Indonesia. He had mentioned three key problems: standardisation, integration and coordination. These are common issues that foreign companies face while entering the Indonesian market.
We need to solve these problems by welcoming foreign investors so that Indonesia can win the competition to support the economic growth. The communication among investment stakeholders must be clear. Thus, standardisation, integration and coordination, are the main challenges, in terms of the investment environment here. I believe that in the next ten years, Indonesia has a great opportunity because of its resources.
This is the time for opportunity in Indonesia through innovation and tangible ideas.…for collective work to create impacts in society.
Gracia J.J. Mambrasar (Billy) was formerly a sustainability specialist for BP Global Projects Organization. He is the Founder and CEO of Kitong Bisa Foundation, which had focused on the entrepreneurial education field in eastern Indonesia since 2009. He obtained his MBA degree from ANU in 2015.
You work in the non-governmental sector of the country, mainly in Papua. What is your vision of Indonesia in the next 10 years and what is the biggest challenge in Papua?
There are many great things happening in Indonesia but there is one constant – inequality, not in Papua but everywhere. We can talk about growth and strategy and reaching optimum targets but most of the 250 million people in Indonesia are living below the poverty line.
When I was at ANU, and then later in the US, I had an opportunity to learn about social entrepreneurship. At that time I met a lot of people who did fantastic work in helping the government and the private sector have a lot of impact by starting a lot of innovations. This represented many of the demographics, particularly the millennial demographic.
I am nearly 35-years-old and I see a lot of people my age who look confused and stressed about how slow the government is working or how private sectors are being so selfless.
Hence, I decided to help the situation by stepping out of my comfort zone and starting a not-for-profit organisation. We sell services and make impact.
This is the time for opportunity in Indonesia through innovation and tangible ideas. It was actually in a marketing class convened by Professor Vinh Lu, where I learnt about innovation and stakeholders, and their work to create impacts in society.
Last week, I had an opportunity to meet the President along with 23 social innovators, who find solutions to fix social problems. Attendees included people who created apps to fight illiteracy in rural Indonesia or a platform for people to generate money to start their own businesses. In order to spread development across Indonesia, organic social innovation is something that the government must start investing in.
I believe social innovation can help the government accelerate and enhance the development of Indonesia.
The event in Jakarta offered a terrific opportunity for our alumni community to meet, network, and reminisce over their time at ANU. CBE will host more of these events in Australia and overseas in the coming months. Click here for more details.