Remarks by Ambassador Blake on “The U.S. and Indonesia: a Strategic Partnership of Promise and Opportunity” at the Foreign Policy Community of Indonesia (FPCI), Jakarta
The U.S. and Indonesia: a Strategic Partnership of Promise and Opportunity
Ambassador Djalal, distinguished guests and friends, it is my great pleasure to be here with all of you today, my last full day in Jakarta! I want first to thank my friend Dino Djalal who not only is remembered in Washington as one of Indonesia’s most dynamic Ambassadors ever, but also for his vision and inspiration to establish FPCI as probably Indonesia’s leading platform to promote positive Indonesian internationalism.
And that is a good place for me to begin, because there has never been a time when such positive internationalism is more needed. We are living in a time of increased uncertainty around the world. Many of the policies that have underpinned global prosperity and security for decades are being called into question. Slow economic growth has challenged the trust that many countries had placed in mainstream economic policies. Surging numbers of refugees and immigrants have magnified concerns of those who have not benefited from growth experienced by industrialized nations and fueled populist, sometimes reactionary, movements. We are seeing more assertive behavior from countries like Russia and China.
The British BREXIT vote has given rise to questions and concerns about globalization and free trade. Millions in my country have lost their jobs giving impetus to the populist campaigns of Donald Trump and Bernie Sanders. Economists have pointed out that those who are out of work put the onus of the blame on free trade agreements. In fact, one study found that technology and productivity growth accounted for 85% of job losses from 2000 to 2010, while trade was responsible for only 15%, and created many more jobs in other sectors. As President Obama has said, the benefits of global trade can be diffuse – people don’t always recognize lower prices they’re paying at U.S. malls are a direct benefit of expanded and freer trade.
The bottom line is that now more than ever, the world needs countries that are willing to step up to help ensure global security and prosperity. The U.S. is certainly prepared to do more than our share. As President Obama has said, “While America has never been able to right every wrong, our leadership is necessary to underwrite the global security and prosperity that our children and our grandchildren will depend upon. We do so by adhering to a set of core principles. We do whatever is necessary to protect our people. We support our allies when they’re in danger. We lead coalitions of countries to uphold international norms. And we strive to stay true to the fundamental values – the desire to live with basic freedom and dignity – that are common to human beings around the world. That’s why people all over the world look to the United States of America to lead.”
But America cannot act alone. We and the world need partners. Indonesia is a country playing an increasingly important role and one that can do even more. The world’s largest Muslim majority democracy is a powerful example that Islam and democracy are fully compatible. The role of groups like NU and Muhammadiyah is critical in discrediting violent extremism and pushing back against the hateful ideology of groups like ISIS. At the same time, Indonesia must ensure that tolerance and respect for diversity and minority rights remain an integral part of the country’s DNA.
At a time when the international community faces many challenges around the globe, Indonesia is increasing the number of forces it contributes to UN peacekeeping operations. It is now the 11th largest contributor, and is willing to send forces to difficult places. Indonesian PKO troops, known as Garuda contingents, now number 2,850 and have a significant presence in key UN peacekeeping missions, such as the Central African Republic, Mali, Congo, Sudan and Lebanon. Indonesia has contributed many resources, ranging from a mechanized infantry battalion in Lebanon to a medical battalion in the Central African Republic.
Across the world, crises related to migrants and refugees have dominated the news for some time now. Indonesia played a key role in helping resolve the refugee crisis in the Andaman Sea last year. It provided shelter to hundreds of migrants and asylum seekers who were abandoned at sea by unscrupulous smugglers. By accepting Rohingya refugees into camps in Aceh and North Sumatra, and facilitating IOM and UNHCR access and assistance to them, Indonesia set an example for the rest of the region. But more is needed from Indonesia and all other countries to help resettle and care for the swelling numbers of refugees around the world, which is why President Obama will be hosting a global refugee summit at this year’s UN General Assembly.
A member of the G-20, Indonesia is a regional leader as well and one that can help preserve and enhance the liberal economic order that has brought unprecedented prosperity to so many in Asia. Indonesia has the largest economy in Southeast Asia and one of the most encouraging trends here is the growing embrace of free trade with the EU, US and others. When I first got here, it was almost an article of faith that Indonesia would not be able to compete if trade barriers were eased. Today, the attitude is much more “Yes We Can!” Indonesians increasingly understand that free trade will enhance the competitiveness of Indonesian workers and create new opportunities.
President Jokowi’s vision to shift from a commodities-based economy to a more diversified one that gives renewed focus to manufactured goods, including exports, and to new opportunities such as digital and creative economies, will help drive new economic growth opportunities and provide Indonesia the resources to project its influence more globally.
Indonesia, as ASEAN’s largest country, has a crucial role in maintaining ASEAN unity and centrality in the face of challenges such as growing reclamation and militarization of the South China Sea. And it is a voice for open, transparent and more responsive government.
Indonesia’s Best Days Still Lie Ahead
Domestic trends in Indonesia suggest that Indonesia’s best days lie ahead. A new generation of young Indonesian leaders like President Jokowi himself, Governor Ahok, Mayors Ridwan Kamil in Bandung, and Bu Risma in Surabaya, are pioneering new models of good governance, and innovations in smart city and internet-based technologies that have potentially transformative impacts if fully implemented.
Likewise, a new generation of business leaders is emerging, many of whom have been educated in the U.S. They have an outward looking orientation, confidence in a stronger role for Indonesia, and the experience to begin investing overseas and raising Indonesia’s profile at global gatherings such as the World Economic Forum.
Similarly, organizations like FPCI are playing a critical role in helping Indonesia’s young people understand the crucial importance of greater global engagement by Indonesia’s young people. The dynamism of the more than 16,000 Indonesian members of President Obama’s Young Southeast Asian Leaders Initiative is a good example that augurs well for the future.
What More Can Indonesia Do to Grow Its Economy and Prepare Itself to Take on a More Internationalist Role?
President Jokowi has initiated an impressive program of infrastructure development, regulatory and tax reforms, and other measures to raise incomes, reduce poverty and ensure Indonesia’s competitiveness. The question is what more can be done to make sure President Jokowi’s efforts succeed?
I would suggest four, and the U.S. can help with each.
The first is education. Like any country, including my own, Indonesia’s ability to compete in today’s globalized world rests on its students getting the best possible education and training. Indonesia must upgrade its education capacity and quality at all levels. Indonesia already spends a significant portion of its national budget on education. It must ensure that these funds are spent wisely and transparently so that Indonesia benefits from this critical investment in its future. This will enable its young people to reach their full potential and lead Indonesian progress in new areas such as the digital and creative economies, renewable energy and information and communications technology.
A recent Asia Development Bank Report noted that 32% of college-age Indonesians are in school, up from 21% in 2010. That is encouraging. But just getting kids in school isn’t enough. Indonesia needs to build the kind of world class education that will help Indonesians to compete in the 21stcentury globalized economy. Right now, none of Indonesia’s many colleges and universities are highly placed in global rankings, and many – indeed, most – are towards the bottom of those lists.
The ADB report says “teaching staff are underqualified, facilities and equipment are inadequate and the quality of education, with a few exceptions, is poor.” Students coming out of these programs are poorly prepared to enter the job market and many find it difficult to get jobs. Other studies suggest graduates from Indonesian universities still don’t have the skills employers are looking for, whether it’s administration or engineering.
Creating a world-class education system that prepares Indonesians to succeed in the 21st century is a difficult task. I have four specific suggestions. First, Indonesia should allow foreign universities to establish campuses in Indonesia so Indonesians have access to the latest cutting edge thinking and research, at a much lower cost, as countries like Singapore and Malaysia have done for some time with very positive results.
Second, Indonesian rectors should be given the authority and training to establish partnerships with the private sector similar to those in my country, where private companies help finance the construction of labs and research facilities, provide advice on the curriculum and sometimes even part-time teachers to ensure the graduates have the specific skills that the companies need so the students can be hired when they graduate.
Third, I challenge KADIN to create a working group to think strategically about which sectors of the economy are likely to generate the most new jobs in the next 10-15 years, then work with the Government to choose the faculties that already do the best work in these areas. Graduate students in those faculties should be sent to the best universities in the world (hopefully mostly in the U.S.!), maximizing use of the LPDP scholarship program, so they can come back ready to establish their home university in Indonesia as a center of global excellence in, for example, the digital or creative economy.
Fourth, improve connectivity so Indonesian university students can take advantage of the incredible Massive Open Online Courses available from universities like MIT and Stanford, but also take advantage of practical courses from private companies. One American company, Coursera, provides instruction online in a variety of subjects from data science, to digital marketing to machine learning. Coursera already has over 100,000 users in Indonesia, despite not having an office in Indonesia!
President Jokowi is right – the vast archipelago of Indonesia cannot prosper unless it is better connected, both internally and externally. The country is now hard at work to upgrade crucial infrastructure like power, roads, ports, shipping and airports. But it’s not just roads and ships that are needed. In today’s world, access to communications is perhaps the most important infrastructure you can build to accelerate change and open the doors of opportunity to anyone with a smartphone and a wireless signal.
Accelerating IT infrastructure development can unleash powerful forces for economic prosperity. While the government has improved access to the internet at schools, still far too many classrooms remain unconnected. Right now only a small minority – almost all in large urban centers – enjoy the broadband access needed to fully take advantage of the full range of educational resources, including online courses, resources, and special mentoring that can help them overcome the barriers of distance and poverty.
Access to the internet also is the key to increasing productivity. For example, thanks to the power of connectivity, fishermen in Lombok are already increasing their catch, getting higher prices, and fishing more safely. How are they doing it? Through the mFish app, sponsored by the Department of State and developed by Tone, a U.S. company, in conjunction with Indonesian partners. The app helps fishermen get information on weather and sea conditions and the location of fish; uses GPS maps to improve safety; and supports sustainability by making it easy for them to log their catch. Connectivity makes it all possible.
Today Tone is also working on other apps that will help women in rural areas use their smart phones to establish small businesses like hair or nail care salons, and that will help farmers access training and information on better seeds and markets. Some Indonesian companies are making inroads in mobile banking. And the growth of Tokopedia and Matahari Mall already show the extraordinary promise of e-commerce.
As the dynamic Minister Rudiantara expands broadband access through the Pelapa Ring project, American companies such as Google, Facebook, and Microsoft are prepared to take a lead role in working with the Government of Indonesia to help develop the infrastructure, and training for the next generation of technopreneurs in Indonesia.
Third, Creating an Inviting Business Environment
Greater connectivity and improving the quality of human resources are two basic preconditions for economic success in the 21st century. But even the best connected, smartest entrepreneur will struggle to succeed if the rules of the game are unclear, tilted against him or her, or can be manipulated to create a competitive disadvantage. This is where governments have a crucial role to play in creating an operating system that encourages businesses through clear rules that are predictably and fairly enforced.
Under Coordinating Minister Darmin Nasution, the Government has made important progress in streamlining permitting and reducing regulations. But at a time when encouraging economic activity tops Indonesia’s priority list, too many regulations limit ownership stakes or mandate specific investments as the price of doing business and therefore encourage investors to look elsewhere. Regulations that limit ownership stakes introduce additional uncertainty and create rent-seeking opportunities, but offer little in the way of promoting economic development. In most cases, as long as companies follow the law, pay their taxes, and create jobs and wealth, who owns them should be irrelevant.
In addition to providing more incentive-based inducements to prospective investors, Indonesia should also do more to consult your most committed stakeholders, your existing investors, on how to improve the investment climate. New investors seek out existing investors to learn of their experiences so existing investors must have a good story to tell! A recent study estimated that U.S. companies have $60 billion in new investment capital that awaits the right set of opportunities. But in today’s globalized world, investments go to those countries that are the most welcoming.
Welcoming capital investment and technology transfer go hand in hand with welcoming foreign professionals. You don’t get one without the other. Yet virtually every foreign company I know mentions the growing problems they have getting work permits for their expatriate staff as one of the key obstacles to doing business.
Fourth, Judicial Reform
One of the biggest challenges to prosperity in Indonesia is the lack of faith in the judicial system. The recent investigations and arrests in the Supreme Court administration have tarnished the reputation of the Indonesian legal system and underline concerns that legal decisions are influenced by money and power and not by the facts of cases and the law. But for the ordinary Indonesian citizen and businessman who cannot or will not pay, justice for sale means a system that cannot protect their rights.
As the Government considers options for judicial reform, one welcome and easy measure would be to facilitate easier access to international arbitration. A second is to increase transparency. As the great American Supreme Court Justice Louis Brandeis once said about America’s own legal system, “Sunlight is the best of disinfectants.” Requiring greater transparency in the operations of the courts, the police and the public prosecutor’s office would be a good start. Public reporting of assets for judges, court officials and other public servants working in the legal system should be required. Corrupt judges and others in the legal system should be severely punished because they are in a position of public trust and hold enormous power.
The bar association should exercise greater professionalism to supervise its members, and lawyers who engage in corrupt activities should be punished and disbarred. The police should be required to disclose any party that files a criminal report against another so that the person accused has the opportunity to confront his or her accuser and challenge the accusation during the investigation process. Empowering an independent Judicial Commission to make enforceable decisions in cases of judicial and attorney misbehavior would be another positive step. Court decisions can be required to be in writing and published in a timely manner, setting forth detailed reasons for the decisions made.
Let Me Now Turn to U.S. –Indonesian Relations
I leave Indonesia more convinced than ever of Indonesia’s promise and of the vital importance of continuing to strengthen U.S.-Indonesian relations. Our relations have never been better after our two presidents upgraded our relations last October to a Strategic Partnership. An Indonesian decision to join the Trans-Pacific Partnership would provide an enormous boost to your efforts to improve Indonesia’s competitiveness and open new markets and job opportunities. Even more importantly, growing cooperation between our scientists, our educators, our NGOs and so many others is creating a web of private relationships and partnerships that form the bedrock of our strong relations.
But so much more can and should be done. First, we should continue to prioritize sending more Indonesian students to pursue their higher education in the United States. They will be crucial bridges between our two societies, and will drive new people-to-people partnerships in every area I have spoken about today.
Second, we should sustain our excellent law enforcement cooperation to fight terrorism, and increase our military cooperation to support Indonesia’s efforts to expand its maritime domain awareness and its ability to enforce its jurisdiction over its territorial waters and exclusive economic zone.
Third, we should sustain our efforts to be leaders in the global effort to fight climate change by accelerating the shift to renewable energy, by adopting industry-leading sustainable palm oil and forestry practices, and by improving law enforcement and corruption eradication in the natural resource and wildlife protection domains.
Fourth, we should continue our joint efforts to eliminate illegal fishing, establish marine protected areas to protect vital habitats so marine species can recover and thrive, combat the growing problem of ocean debris, and most importantly, support the rules-based order that has brought about peace and prosperity in the Asia Pacific for many decades.
I have laid out an ambitious agenda. But as President Obama said as he first began running for office, Yes we can! And if we can, a strengthened more outward oriented Indonesia working with strategic autonomy, but in close partnership with the United States, can make a great difference in the world.
So as I prepare to leave tomorrow, I shall miss the many friends I have been fortunate to meet, including many friends in this room. I have had the extraordinary opportunity to travel to 26 provinces and experience extraordinary cultural heritage such as Borobudur at sunrise while listening to the call to prayer, Indonesia’s unparalleled bio-diversity such as the thriving orangutan population in Kalimantan’s Tanjung Puting National Park, and extraordinary diving in Raja Ampat and Komodo.
Even though I am retiring from Government, I look forward to working in my personal capacity to continue to support the growing partnership and friendship between the U.S. and Indonesia. Thank you all for coming today. I would be glad to take a few questions.