It’s a pleasure to be here today at President University.
I want to thank Pak Juandi for inviting me to speak and Pak Chandra Setiawan, the rector for President University, for arranging my visit.
I spend much of my time meeting with current government officials and Indonesian leaders but it is usually much more fun to meet with the future leaders of Indonesia, many of whom I know are sitting here today.
I want to congratulate the University and all its faculty members who, in 13 years, have taken an idea and turned it into a leading university in Indonesia. You are certainly doing a great job in fulfilling your mission to be a world class university that produces leaders in their fields and communities.
I have been told that at a previous Embassy event with my predecessor, the students asked good economic and political questions during an extended Q&A session; I hope we can do that today as well.
Today, I would like to discuss the U.S. economy, our economic diplomacy in Indonesia and the region, as well as the Indonesian economy.
First, let’s discuss the U.S. economy. How many of you know who Mark Twain is? Any literature majors here today?
Mark Twain is one of America’s finest novelists. Around 1900, a New York newspaper reported that he had died when in fact he was still very much alive. He would live another 15 years after his reported death.
When he was told that a newspaper reported that he had died, Mr. Twain replied, “The reports of my death are greatly exaggerated.”
Since 2008, many have written off the U.S. economy. We did suffer a very deep recession in 2008 and 2009. Such a recession had not been felt by most Americans.
In fact, any American under the age of 81 had never seen a year like 2009. That is how many years of generally good economic times the U.S. has enjoyed since the Great Depression ended in 1933.
But the reporting about the death of the U.S. economy is like the reports of Mark Twain’s death: greatly exaggerated!
The U.S. economy is still growing; it is still the biggest in the world; it is still an engine of growth for other countries; and it is still the most innovative and dynamic economy in the world.
Since many of you are business majors, let me give you some numbers to support my point:
Our economy is growing. In 2014, the U.S. economy is expected to grow more than 3.0%. Some of you may be thinking that is not much. Indonesia, for example, is expected to grow over 5% in 2014.
But our economy is so big that a 3% increase will create an additional $500 billion in GDP. In one year, our economy will grow more than the entire economy of the Philippines, Singapore, or Vietnam.
In other words, every year, our economy creates another Philippines or another Singapore. In fact, the size of our economic growth in one year will be equal to the 30th biggest economy in the world, larger than the entire economy of 150 other countries.
Our economy remains wide-open to trade. Any of you have been to a U.S. shopping mall or a Walmart know that we are a consumer spending nation that likes to buy things that are made in other countries.
Our 2013 imports were $2.3 trillion, benefitting thousands of companies and millions of workers around the world. That is $500 billion more than any other country imports. For perspective, Indonesia’s total 2013 imports were $186 billion.
Investors recognize the strengths of our economy. According to the UN, in 2012, we were the number one recipient of Foreign Direct Investment. We received $167 billion in FDI in 2012. The ten countries of ASEAN received $111 billion combined in FDI in 2012. The size of our market combined with our open, transparent, and accountable economy makes us the favored location for investors.
Many think that we don’t produce anything anymore; that everything is made in China today. Although China is the leading manufacturer, the U.S. is still the 3rd largest manufacturer in the world, producing mainly high value, high quality goods.
With a steep drop in energy prices due to our shale gas industry, manufacturers are now returning to the U.S. Since 2010, the U.S. economy has added more than 520,000 manufacturing jobs.
But numbers don’t tell the whole story. The foundation of our economy is innovation, entrepreneurship, and risk-taking. Our ability to create new businesses and turn them into world leaders, in some cases, creating new industries, is second to none. Let me give you a few examples.
How many of you use Facebook? Facebook practically started the social media industry but it did not start until 2004. By the time Mark Zuckerberg started Facebook, President University was beginning its third year as a university. Today, Facebook is one of the most recognized companies in the world.
How many of you have done a search using Google? Larry Page and Sergey Brin started Google in 1998. It is now the most visited website in the world. They did this in less than 16 years.
These are just two examples of American innovation. American companies are leaders in most industries, whether it is Apple in technology, Chevron in oil and gas, Pfizer in pharmaceuticals, Boeing in planes, Stanford and many other universities in education, GE in turbines, or Microsoft in software. Whatever industry you are interested in pursuing as a career, I am sure you will find an American company as one of the leaders in that industry.
This leads me to my second point. Why and how does this matter to Indonesia and the Southeast Asia region?
Our economic partnership with Indonesia is important to both countries. Two of the five working groups in the U.S. – Indonesia Comprehensive Partnership – the energy working group and the trade and investment working group – are focused on economic issues that affect both our countries. This partnership, established in 2010, deepens our ties through the economic integration and opportunity it presents.
In 2013, we were Indonesia’s 4th largest export market and we were the largest buyer of Indonesian rubber products, clothes, shoes and sneakers, fish, coffee and tea, furniture products, toys, and musical instruments, to name a few.
Anyone recognize a pattern in what we buy from Indonesia? We are not simply buying natural resources from Indonesia like coal, but rather we are the most important buyer in many labor-intensive manufacturing industries. In other words, many Indonesians have good-paying manufacturing jobs today because the United States is not only open to Indonesian exports, but a leading consumer of those exports.
By some estimates, Indonesia exports to the United States account for 2.5 million jobs in Indonesia.
We are not, however, simply buyers of your products. We are really partners with Indonesia and Indonesian companies. Since 1898, when the company that eventually became ExxonMobil began exploring for oil and gas in Sumatra, American companies have been major investors in Indonesia, creating jobs, bringing new technology, and providing social programs such as housing, education and health services.
According to a study conducted by Ernst and Young, Paramadina Public Policy Institute, and Gajah Mada University, American companies in the past eight years have invested $65 billion into the Indonesian economy, primarily in the oil and gas, mining, and manufacturing sectors. If the business and regulatory environment in Indonesia is conducive to further investment, American companies expect to invest another $61 billion in the next five years.
That is a lot of investment. There are almost 200,000 Indonesians working directly for American companies in Indonesia and another 1.7 million jobs have indirectly been created by American investment. Indonesians make up 95% of the workforce in American owned companies, with many Indonesians in the senior management levels.
And U.S. companies pay a fare wage. The average wage of an Indonesian working for an American company is more than two times the minimum wage in Jakarta.
In the U.S., we have a saying “show me the money.” American companies clearly have shown Indonesia the money when it comes to investment.
But American companies are doing more than simply investing their money. They are also investing in Indonesians. Large American companies in Indonesia spend, on average, about $2 million per year on staff training alone.
Think about that. How many scholarships to President University would $2 million dollars fund? That is how many Indonesians are receiving work-related training to make them more valuable in the workforce and more competitive in the global economy.
American companies are also investing in Indonesian communities. Through CSR programs around the country, American companies spend on average almost $6 million per year to improve the lives and livelihoods of Indonesians. There are programs for almost anything – from people with disabilities, to scholarships for education, to entrepreneurship programs creating small businesses, to improving health services and cleaning up the environment.
In Balikpapan, I visited a batik fabric manufacturing facility that employs handicapped Indonesians and produces beautiful fabric for sale. This facility is operated by American company Chevron.
In East Java, near Surabaya, ExxonMobil has a program that is providing health care services, improving education infrastructure, creating economic opportunities, and supporting youth activities to thousands of families that live near their gas pipeline.
How many of you had a glass of water today? How far did you have to walk to get that water? Maybe 10 meters? Maybe 50 meters? In Ngraho (eN-ra-ho), the residents had to walk 15 kilometers to get water for drinking, cooking, or washing. Under ExxonMobil’s program, it built water towers and trained residents on its usage and maintenance so that they now don’t have to walk any farther than you do to get water. Think of all the benefits to a family now that they don’t have to walk 15 kilometers one-way simply to get water.
U.S. confectionary giant Mars operates a cocoa research center in Sulawesi. Research completed there has led to an increase in cocoa yields per hectare by up to five times. This will lead to expanded output, more exports, and higher incomes to the more than 600,000 farmers in Sulawesi.
This is why the growth of the U.S. economy and the success of American companies matters to the growth and success of the Indonesian economy and Indonesian businesses.
American companies, create Indonesian jobs, provide skills to Indonesian workers, and give back to Indonesian communities.
For the same reasons the health of the U.S. economy is good for Indonesia, it is also good for all of Asia.
Under President Obama’s leadership, America is committed to our rebalance to Asia. The U.S. has deep ties to this region based on geography, culture, history, and business.
The rebalance is based on the understanding that in today’s globalized, interconnected world, we all have a stake in each other’s success. Just like the success of the U.S. economy can benefit Indonesia, the success of Asia can benefit the United States.
As President Obama said in explaining the rebalance in Australia, the overarching objective of the United States in the region is to sustain a stable security environment and a regional order rooted in economic openness, peaceful resolution of disputes, and respect for universal rights and freedoms.
To pursue this vision, the United States is implementing a comprehensive, multidimensional strategy: strengthening alliances; deepening partnerships with emerging powers such as Indonesia; building a stable, productive, and constructive relationship with China; empowering regional institutions like ASEAN; and helping to build a regional economic architecture that can sustain shared prosperity.
These are the pillars of the U.S. strategy, and rebalancing means devoting the time, effort and resources necessary to get each one right. Here’s what rebalancing does not mean. It doesn’t mean diminishing ties to important partners in any other region.
It does not mean containing China or seeking to dictate terms to Asia. And it isn’t just a matter of our military presence. It is an effort that harnesses all elements of U.S. power—military, political, trade and investment, development, and our values.
The centerpiece of our economic rebalancing is the Trans-Pacific Partnership or TPP—an agreement between 12 Asia-Pacific economies from Chile and Peru to New Zealand and Singapore. The TPP is not an American-only initiative but is built on shared commitment to high standards, eliminating market access barriers to goods and services, addressing new, 21st century trade issues, and respect for a rules-based economic framework.
We always envisioned the TPP as a growing platform for regional economic integration. The vision is becoming a reality as the number of TPP partners has grown from seven in 2009 to twelve today. The TPP is already a major step toward APEC’s vision of a region-wide Free Trade Area of the Asia-Pacific.
The TPP is attractive because it is ambitious but achievable. It is intended to be an open platform for additional countries to join – provided they are willing and able to meet the TPP’s high standards.
But overall, the TPP is also an absolute statement of U.S. strategic commitment to be in the Asia-Pacific for the long haul.
This leads me to my third and final point. As the largest economy in ASEAN, Indonesia is an important economic partner to the United States and its rebalance to Asia even if it is not yet part of the TPP. Just as Indonesia benefits from a growing U.S. economy, the United States can benefit from a growing Indonesian economy with a rising middle class.
In my first four months in Indonesia, I have been impressed with the wide-range of opportunities for investment here, your strong economic fundamentals and investment grade ranking, and your growing economic importance in regional groupings like APEC.
Indonesia sailed through the global financial crisis in 2008 and has transformed its economy since the Asian Financial Crisis in 1998. Indonesia is the second fastest growing economy in the G20 and has been for several years.
All of this should make any Indonesian justly proud. But as they say when analyzing stocks, past performance is no guarantee of future results. With China’s growth slowing, commodity prices falling, and global liquidity getting tighter, Indonesia will need to find new ways to sustain its growth trajectory and to ensure inclusive development throughout the country.
The next administration will have many challenges: Tackling corruption, improving the rule of law, building infrastructure, creating jobs, increasing productivity and competitiveness, reducing greenhouse gas emissions, solving land issues, to name a few.
Indonesia is ranked 120 by the World Bank for ease of doing business. This is frankly too low to ensure long term success and far behind your competition such as Singapore, Thailand, Malaysia, and Korea.
Similarly, Indonesia is ranked quite low and far behind its competitors in economic freedom as restrictions in trade and investment, high levels of corruption, and an ineffective rule of law have led to a “mostly unfree” ranking by the Heritage Institute.
A cynic might question the values of such indexes. But if you chart the GDP of countries with the Ease of Doing Business ranking and the Economic Freedom ranking, you will notice that the richest countries like Singapore and the United States are ones that score the highest in ease of doing business or economic freedom.
If you remember one thing from my speech, it should be that Indonesia has the potential and ability to grow 6% or even 7% or more every year.
You have tremendous opportunities and prospects. As famous consulting firms keep telling everyone, Indonesia has the potential to be one of the 5-7 largest economies in the world in 15 years with rising influence regionally and globally.
But Indonesia can no longer look only inward for its growth. It needs to make structural reforms to move to the next phase of its development. The focus should be on creating a productive, internationally competitive, and labor-intensive manufacturing sector. Such a manufacturing sector should be export oriented and not only focused on the Indonesian domestic market, even if such a market is 245 million people.
To do so, Indonesia needs to do three things. First, it needs to improve its infrastructure and improve connectivity. Roads, ports, rails, and power – Indonesia needs more and better quality infrastructure.
Second, related to infrastructure, it needs to reduce logistic costs. It is difficult to be an export-oriented manufacturing center when logistics costs are so high. Lastly, Indonesia needs to re-orient its labor markets and trade and investment laws to be more open and accommodating to foreign investment in order to attract investment capital and technology transfer.
With these three things, Indonesia will be able to compete in the region and globally. It will create the sustainable growth that will create jobs, provide good wages, and opportunities for you, your younger brothers and sisters, your children and someday your grandchildren.
And throughout Indonesia’s transformation to a global, competitive economy, the United States and Indonesia will be economic partners, each benefitting from the other countries success and growth. If successful, this partnership can not only enrich Americans and Indonesians, but can be a driving force for all of Asia.
Thank you again for this opportunity.
It’s a pleasure to be here today at President University.
I want to thank Pak Juandi for inviting me to speak and Pak Chandra Setiawan, the rector for President University, for arranging my visit.
I spend much of my time meeting with current government officials and Indonesian leaders but it is usually much more fun to meet with the future leaders of Indonesia, many of whom I know are sitting here today.
I want to congratulate the University and all its faculty members who, in 13 years, have taken an idea and turned it into a leading university in Indonesia. You are certainly doing a great job in fulfilling your mission to be a world class university that produces leaders in their fields and communities.
I have been told that at a previous Embassy event with my predecessor, the students asked good economic and political questions during an extended Q&A session; I hope we can do that today as well.
Today, I would like to discuss the U.S. economy, our economic diplomacy in Indonesia and the region, as well as the Indonesian economy.
First, let’s discuss the U.S. economy. How many of you know who Mark Twain is? Any literature majors here today?
Mark Twain is one of America’s finest novelists. Around 1900, a New York newspaper reported that he had died when in fact he was still very much alive. He would live another 15 years after his reported death.
When he was told that a newspaper reported that he had died, Mr. Twain replied, “The reports of my death are greatly exaggerated.”
Since 2008, many have written off the U.S. economy. We did suffer a very deep recession in 2008 and 2009. Such a recession had not been felt by most Americans.
In fact, any American under the age of 81 had never seen a year like 2009. That is how many years of generally good economic times the U.S. has enjoyed since the Great Depression ended in 1933.
But the reporting about the death of the U.S. economy is like the reports of Mark Twain’s death: greatly exaggerated!
The U.S. economy is still growing; it is still the biggest in the world; it is still an engine of growth for other countries; and it is still the most innovative and dynamic economy in the world.
Since many of you are business majors, let me give you some numbers to support my point:
Our economy is growing. In 2014, the U.S. economy is expected to grow more than 3.0%. Some of you may be thinking that is not much. Indonesia, for example, is expected to grow over 5% in 2014.
But our economy is so big that a 3% increase will create an additional $500 billion in GDP. In one year, our economy will grow more than the entire economy of the Philippines, Singapore, or Vietnam.
In other words, every year, our economy creates another Philippines or another Singapore. In fact, the size of our economic growth in one year will be equal to the 30th biggest economy in the world, larger than the entire economy of 150 other countries.
Our economy remains wide-open to trade. Any of you have been to a U.S. shopping mall or a Walmart know that we are a consumer spending nation that likes to buy things that are made in other countries.
Our 2013 imports were $2.3 trillion, benefitting thousands of companies and millions of workers around the world. That is $500 billion more than any other country imports. For perspective, Indonesia’s total 2013 imports were $186 billion.
Investors recognize the strengths of our economy. According to the UN, in 2012, we were the number one recipient of Foreign Direct Investment. We received $167 billion in FDI in 2012. The ten countries of ASEAN received $111 billion combined in FDI in 2012. The size of our market combined with our open, transparent, and accountable economy makes us the favored location for investors.
Many think that we don’t produce anything anymore; that everything is made in China today. Although China is the leading manufacturer, the U.S. is still the 3rd largest manufacturer in the world, producing mainly high value, high quality goods.
With a steep drop in energy prices due to our shale gas industry, manufacturers are now returning to the U.S. Since 2010, the U.S. economy has added more than 520,000 manufacturing jobs.
But numbers don’t tell the whole story. The foundation of our economy is innovation, entrepreneurship, and risk-taking. Our ability to create new businesses and turn them into world leaders, in some cases, creating new industries, is second to none. Let me give you a few examples.
How many of you use Facebook? Facebook practically started the social media industry but it did not start until 2004. By the time Mark Zuckerberg started Facebook, President University was beginning its third year as a university. Today, Facebook is one of the most recognized companies in the world.
How many of you have done a search using Google? Larry Page and Sergey Brin started Google in 1998. It is now the most visited website in the world. They did this in less than 16 years.
These are just two examples of American innovation. American companies are leaders in most industries, whether it is Apple in technology, Chevron in oil and gas, Pfizer in pharmaceuticals, Boeing in planes, Stanford and many other universities in education, GE in turbines, or Microsoft in software. Whatever industry you are interested in pursuing as a career, I am sure you will find an American company as one of the leaders in that industry.
This leads me to my second point. Why and how does this matter to Indonesia and the Southeast Asia region?
Our economic partnership with Indonesia is important to both countries. Two of the five working groups in the U.S. – Indonesia Comprehensive Partnership – the energy working group and the trade and investment working group – are focused on economic issues that affect both our countries. This partnership, established in 2010, deepens our ties through the economic integration and opportunity it presents.
In 2013, we were Indonesia’s 4th largest export market and we were the largest buyer of Indonesian rubber products, clothes, shoes and sneakers, fish, coffee and tea, furniture products, toys, and musical instruments, to name a few.
Anyone recognize a pattern in what we buy from Indonesia? We are not simply buying natural resources from Indonesia like coal, but rather we are the most important buyer in many labor-intensive manufacturing industries. In other words, many Indonesians have good-paying manufacturing jobs today because the United States is not only open to Indonesian exports, but a leading consumer of those exports.
By some estimates, Indonesia exports to the United States account for 2.5 million jobs in Indonesia.
We are not, however, simply buyers of your products. We are really partners with Indonesia and Indonesian companies. Since 1898, when the company that eventually became ExxonMobil began exploring for oil and gas in Sumatra, American companies have been major investors in Indonesia, creating jobs, bringing new technology, and providing social programs such as housing, education and health services.
According to a study conducted by Ernst and Young, Paramadina Public Policy Institute, and Gajah Mada University, American companies in the past eight years have invested $65 billion into the Indonesian economy, primarily in the oil and gas, mining, and manufacturing sectors. If the business and regulatory environment in Indonesia is conducive to further investment, American companies expect to invest another $61 billion in the next five years.
That is a lot of investment. There are almost 200,000 Indonesians working directly for American companies in Indonesia and another 1.7 million jobs have indirectly been created by American investment. Indonesians make up 95% of the workforce in American owned companies, with many Indonesians in the senior management levels.
And U.S. companies pay a fare wage. The average wage of an Indonesian working for an American company is more than two times the minimum wage in Jakarta.
In the U.S., we have a saying “show me the money.” American companies clearly have shown Indonesia the money when it comes to investment.
But American companies are doing more than simply investing their money. They are also investing in Indonesians. Large American companies in Indonesia spend, on average, about $2 million per year on staff training alone.
Think about that. How many scholarships to President University would $2 million dollars fund? That is how many Indonesians are receiving work-related training to make them more valuable in the workforce and more competitive in the global economy.
American companies are also investing in Indonesian communities. Through CSR programs around the country, American companies spend on average almost $6 million per year to improve the lives and livelihoods of Indonesians. There are programs for almost anything – from people with disabilities, to scholarships for education, to entrepreneurship programs creating small businesses, to improving health services and cleaning up the environment.
In Balikpapan, I visited a batik fabric manufacturing facility that employs handicapped Indonesians and produces beautiful fabric for sale. This facility is operated by American company Chevron.
In East Java, near Surabaya, ExxonMobil has a program that is providing health care services, improving education infrastructure, creating economic opportunities, and supporting youth activities to thousands of families that live near their gas pipeline.
How many of you had a glass of water today? How far did you have to walk to get that water? Maybe 10 meters? Maybe 50 meters? In Ngraho (eN-ra-ho), the residents had to walk 15 kilometers to get water for drinking, cooking, or washing. Under ExxonMobil’s program, it built water towers and trained residents on its usage and maintenance so that they now don’t have to walk any farther than you do to get water. Think of all the benefits to a family now that they don’t have to walk 15 kilometers one-way simply to get water.
U.S. confectionary giant Mars operates a cocoa research center in Sulawesi. Research completed there has led to an increase in cocoa yields per hectare by up to five times. This will lead to expanded output, more exports, and higher incomes to the more than 600,000 farmers in Sulawesi.
This is why the growth of the U.S. economy and the success of American companies matters to the growth and success of the Indonesian economy and Indonesian businesses.
American companies, create Indonesian jobs, provide skills to Indonesian workers, and give back to Indonesian communities.
For the same reasons the health of the U.S. economy is good for Indonesia, it is also good for all of Asia.
Under President Obama’s leadership, America is committed to our rebalance to Asia. The U.S. has deep ties to this region based on geography, culture, history, and business.
The rebalance is based on the understanding that in today’s globalized, interconnected world, we all have a stake in each other’s success. Just like the success of the U.S. economy can benefit Indonesia, the success of Asia can benefit the United States.
As President Obama said in explaining the rebalance in Australia, the overarching objective of the United States in the region is to sustain a stable security environment and a regional order rooted in economic openness, peaceful resolution of disputes, and respect for universal rights and freedoms.
To pursue this vision, the United States is implementing a comprehensive, multidimensional strategy: strengthening alliances; deepening partnerships with emerging powers such as Indonesia; building a stable, productive, and constructive relationship with China; empowering regional institutions like ASEAN; and helping to build a regional economic architecture that can sustain shared prosperity.
These are the pillars of the U.S. strategy, and rebalancing means devoting the time, effort and resources necessary to get each one right. Here’s what rebalancing does not mean. It doesn’t mean diminishing ties to important partners in any other region.
It does not mean containing China or seeking to dictate terms to Asia. And it isn’t just a matter of our military presence. It is an effort that harnesses all elements of U.S. power—military, political, trade and investment, development, and our values.
The centerpiece of our economic rebalancing is the Trans-Pacific Partnership or TPP—an agreement between 12 Asia-Pacific economies from Chile and Peru to New Zealand and Singapore. The TPP is not an American-only initiative but is built on shared commitment to high standards, eliminating market access barriers to goods and services, addressing new, 21st century trade issues, and respect for a rules-based economic framework.
We always envisioned the TPP as a growing platform for regional economic integration. The vision is becoming a reality as the number of TPP partners has grown from seven in 2009 to twelve today. The TPP is already a major step toward APEC’s vision of a region-wide Free Trade Area of the Asia-Pacific.
The TPP is attractive because it is ambitious but achievable. It is intended to be an open platform for additional countries to join – provided they are willing and able to meet the TPP’s high standards.
But overall, the TPP is also an absolute statement of U.S. strategic commitment to be in the Asia-Pacific for the long haul.
This leads me to my third and final point. As the largest economy in ASEAN, Indonesia is an important economic partner to the United States and its rebalance to Asia even if it is not yet part of the TPP. Just as Indonesia benefits from a growing U.S. economy, the United States can benefit from a growing Indonesian economy with a rising middle class.
In my first four months in Indonesia, I have been impressed with the wide-range of opportunities for investment here, your strong economic fundamentals and investment grade ranking, and your growing economic importance in regional groupings like APEC.
Indonesia sailed through the global financial crisis in 2008 and has transformed its economy since the Asian Financial Crisis in 1998. Indonesia is the second fastest growing economy in the G20 and has been for several years.
All of this should make any Indonesian justly proud. But as they say when analyzing stocks, past performance is no guarantee of future results. With China’s growth slowing, commodity prices falling, and global liquidity getting tighter, Indonesia will need to find new ways to sustain its growth trajectory and to ensure inclusive development throughout the country.
The next administration will have many challenges: Tackling corruption, improving the rule of law, building infrastructure, creating jobs, increasing productivity and competitiveness, reducing greenhouse gas emissions, solving land issues, to name a few.
Indonesia is ranked 120 by the World Bank for ease of doing business. This is frankly too low to ensure long term success and far behind your competition such as Singapore, Thailand, Malaysia, and Korea.
Similarly, Indonesia is ranked quite low and far behind its competitors in economic freedom as restrictions in trade and investment, high levels of corruption, and an ineffective rule of law have led to a “mostly unfree” ranking by the Heritage Institute.
A cynic might question the values of such indexes. But if you chart the GDP of countries with the Ease of Doing Business ranking and the Economic Freedom ranking, you will notice that the richest countries like Singapore and the United States are ones that score the highest in ease of doing business or economic freedom.
If you remember one thing from my speech, it should be that Indonesia has the potential and ability to grow 6% or even 7% or more every year.
You have tremendous opportunities and prospects. As famous consulting firms keep telling everyone, Indonesia has the potential to be one of the 5-7 largest economies in the world in 15 years with rising influence regionally and globally.
But Indonesia can no longer look only inward for its growth. It needs to make structural reforms to move to the next phase of its development. The focus should be on creating a productive, internationally competitive, and labor-intensive manufacturing sector. Such a manufacturing sector should be export oriented and not only focused on the Indonesian domestic market, even if such a market is 245 million people.
To do so, Indonesia needs to do three things. First, it needs to improve its infrastructure and improve connectivity. Roads, ports, rails, and power – Indonesia needs more and better quality infrastructure. Second, related to infrastructure, it needs to reduce logistic costs. It is difficult to be an export-oriented manufacturing center when logistics costs are so high. Lastly, Indonesia needs to re-orient its labor markets and trade and investment laws to be more open and accommodating to foreign investment in order to attract investment capital and technology transfer.
With these three things, Indonesia will be able to compete in the region and globally. It will create the sustainable growth that will create jobs, provide good wages, and opportunities for you, your younger brothers and sisters, your children and someday your grandchildren.
And throughout Indonesia’s transformation to a global, competitive economy, the United States and Indonesia will be economic partners, each benefitting from the other countries success and growth. If successful, this partnership can not only enrich Americans and Indonesians, but can be a driving force for all of Asia.
Thank you again for this opportunity.
