Remarks by Ambassador Blake at UIN, Bandung
UIN Rector Dr. Mahmud, faculty, students, ladies and gentlemen,
Good morning everyone. It is a pleasure to be here at this wonderful institution. I want to thank the UIN leadership for this valuable opportunity to speak on two subjects of great importance, how trade can help Indonesia meet its economic goals and how we can work together and improve cooperation on education.
Relations between the U.S. and Indonesia reached a new peak with the recent successful visit of President Jokowi to Washington in late October to meet with President Obama. The two Presidents elevated our relations to a Strategic Partnership; announced announcement of over $20 billion in new U.S. investment and business deals; and enhanced cooperation on strategic regional and global challenges, including to further develop our important trade relationship.
We also welcomed President Jokowi’s announcement in DC of Indonesia’s intent to join the Trans-Pacific Partnership, an important decision that I will return to shortly.
President Jokowi has set out an ambitious agenda to increase Indonesia’s economic growth and to reduce poverty. To reach his targets, he has rightly pointed out that Indonesia can no longer rely simply on exporting commodities and consumer spending to drive growth. Today, I would like to discuss how trade can be a major pillar of Indonesia’s strategy to achieve the President’s goals of economic growth and poverty reduction. Indonesia can play to its strengths and prosper without closing its borders.
Why is Trade Important?
First of all, why is trade important? Because it allows countries to specialize in the goods and services they produce most efficiently, while benefitting from the production that other countries can do most efficiently and cheaply. That way, consumers in an open trading system can buy the best products and services at the lowest prices.
Let’s take the example of tempe. I had never had tempe before I got to Indonesia, but now it is among my favorite foods. Now tempe, as you know, is made from soybeans. Soybeans are tough to grow in Indonesia – they do much better in a temperate climate.
The United States is a great place to grow soybeans – in fact, we grow more soybeans than any country in the world. Much more than we need. So we export soybeans, and Indonesians buy quite a bit of our soybeans, at prices much cheaper than you would pay if you had to rely on domestic soybeans, which are very tough to grow here. Conversely, Americans love coffee. But it is hard to grow coffee in the US so we import a lot of coffee from countries like Indonesia and Kenya.
These are examples of how trade creates opportunities. For consumers, trade means lower prices and a wider choice of goods and services at a range of quality levels that suit every need. For an economy like Indonesia’s, in which consumer spending is an important component of economic growth, ensuring that consumers have access to a wide range of products and services at the lowest prices is a good way to ensure that growth continues and the benefits of growth can be enjoyed by more people.
For industries, trade creates opportunities for innovation or expansion into new territories. Manufacturers can expand their sources for new technology, tools and inputs and can also take advantage of new markets for their products. They can improve their efficiency and leapfrog technologies to better serve their customers, whether at home or abroad.
For governments, expanding trade creates opportunities to both broaden and strengthen their economies. When countries are less dependent on one export commodity or group of commodities, or less dependent on the ebbs and flows of the domestic market, that is good for economic stability.
Trade Reduces Poverty
Trade is also one of the best ways to reduce poverty. Study after study has shown that reducing barriers to trade helps the poor by lowering prices of imports and keeping prices of basic goods affordable.
A group of Nobel prize winning economists and other economic experts recently reviewed 169 proposed Sustainable Development goals to determine which new goals could most effectively reduce poverty rates world-wide. They found that the most cost effective, by a large margin, was reducing barriers to trade. According to these experts, reducing trade barriers in Asia alone would increase annual per capita incomes in developing countries in this region by as much as US $1,900 (or Rp 25 million/ year).
No region of the world has illustrated better the benefits of adopting more outward looking trade policies than Asia. Japan in the 1960s and 70s; the Asian Tigers (Hong Kong, Singapore, South Korea and Taiwan) in the 1970s and 80s; China in the 1990s and 2000s; and Malaysia, Thailand and Vietnam more recently all leveraged trade to increase growth.
I did a quick review of World Bank data for all these countries, specifically looking at trade volumes as a percentage of GDP. Since the 1980s, all the economies that have seen trade as a percentage of GDP increase have also seen their national incomes rise the most. That includes the biggest and the smallest of these economies. Put another way, those countries that opened up most to trade, as a rule, have seen their incomes rise and poverty fall the most. Those that have not have seen incomes grow more slowly.
So what does all this mean for Indonesia?
Trade offers significant opportunities for Indonesia. First, let’s talk about the ASEAN Economic Community or AEC. ASEAN is the second-fastest growing economy in Asia after China. Today, ASEAN has a combined GDP of $2.4 trillion and a consumer base of 626 million. And both of those are likely to increase substantially because of the young populations and growing middle class of ASEAN countries. As the AEC promotes greater economic integration and allows goods and services to flow more easily between ASEAN countries, the AEC offers a significant opportunity for Indonesia to export to a much larger market than the one within its own borders.
The AEC is an opportunity, not a threat. And as the largest market in ASEAN, Indonesia can capitalize more than any other ASEAN country because it can attract investment not only to produce goods and services for the Indonesian market, but also to export to the rest of the ASEAN market. But it also must be sure that it matches or exceeds the incentives other ASEAN countries provide to investors or those investors will move elsewhere.
The Trans-Pacific Partnership
You may have heard a lot of talk about the Trans-Pacific Partnership or TPP recently. For the United States, the TPP is an important agreement that strengthens our economic security while demonstrating our deep commitment to the Asia-Pacific region.
With 12 nations participating (the United States, Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam), the TPP is a next-generation, Asia-Pacific trade agreement that will include some of the world’s most robust economies representing nearly 40 percent of global GDP.
As I mentioned earlier, during his Washington visit, President Jokowi announced Indonesia’s intention to join the TPP. This is great news for Indonesia and I commend him for taking this ambitious step in a long journey towards boosting economic growth. TPP is not about closing doors to other countries, but about multiplying the positive benefits of trade and Indonesia would stand to benefit from joining TPP.
As Minister Lembong has said, Indonesia can compete with others in the region, attracting investment and increasing trade. But if it stays on the sidelines, it risks being left behind while others reap the benefits of greater access to global markets.
So what exactly are the benefits to Indonesia of joining the TPP? Your Trade Ministry has already identified many.
- First and foremost, Indonesia will be able to greatly increase Indonesia’s exports to TPP member countries.
- TPP will allow Indonesian businesses, both large companies and SMEs, to participate more fully in the global supply and value chains, and to be integrated into the regional economy.
- Indonesian consumers will benefit as well; they will have a more diverse selection of low-price, high-quality products to choose from.
- National manufacturers using raw materials or components imported from TPP member countries will see improved price competitiveness.
- TPP will also spur Indonesia to increase its national economic competitiveness through tackling structural reforms, increasing productivity, improving its use of technology and enhancing its environment for innovation.
Let me mention one final benefit. The TPP agreement will challenge Indonesia to improve its labor, environment and service sectors. It will encourage Indonesia in its efforts to prevent corruption and maintain good governance, to simplify its rules, and strengthen innovation and IPR protection.
None of this will be easy, and it will take time. But I believe President Jokowi’s decision to join is a very wise one, and one that could be transformative for Indonesia.
Trade Helps SMEs
Now let me talk about another part benefit of trade, which is how it benefits small and medium sized enterprises or SMEs. Interestingly, it is SMEs, not large corporations that are poised to gain the most from an open trading system. Now why does that matter? Because SMEs make up the majority of businesses in Indonesia and the United States, and they are a key source of innovation and job creation. In the U.S., 98% of exporters are SMEs. Trade is a source of growth for them and for the economy in general. The same is true for Indonesia.
Another interesting fact is that the companies most active in exporting are among America’s most dynamic and productive companies. Exporters tend to be more technologically sophisticated, pay higher wages to their employees, and usually create better jobs and at a faster rate, than firms that are domestic only. Apple—with its booming sales of iPhones, iPods, and iPads all over the world— is one example of this. In addition, firms with a global reach tend to be better diversified and are in a better position to respond to new market opportunities wherever they may arise, because these companies already have very flexible infrastructures in place.
The bottom line is this: trade leads to more and better jobs for domestic workers. In the last half of 2013, U.S. exports alone accounted for nearly half of American economic growth. Over 60 percent of American exports go to the Asia-Pacific region. And throughout this decade, most of the United States’ increase in trade is predicted to be with Asian countries.
President Jokowi’s plan to improve infrastructure, ensure reliable energy supplies, streamline permitting processes, and reduce logistics costs all could make Indonesia a more attractive country in which to do business and produce for export. The world’s demand for manufactured goods will only increase over time, and with Indonesia’s young and large labor force, Indonesia is in the right place to develop this sector. Jobs in this field tend to provide higher wages and better work conditions, in turn helping Indonesia move to the next stage of the country’s economic development.
This country is well placed to benefit from a greater openness to trade. The AEC and someday the TPP can make Indonesia’s economy more dynamic, more creative and ultimately competitive with anyone. An outward looking Indonesia is a strong Indonesia, one who attracts investment through incentives, and looks to new engines of growth for its economy to grow in an inclusive manner that will reduce poverty, create better and more sustainable jobs for Indonesian workers, and increase opportunity.
Let me now turn to another sector that will be critical to Indonesia’s future competitiveness: education. Education is the foundation that can allow Indonesia to compete in a globalized market. The future Indonesian workforce must be ready and able to think innovatively and creatively and critically. The U.S. is doing a lot to build education cooperation and exchanges with Indonesia.
Right now, there are many Americans who study, teach, and conduct research in Indonesia. We’ve increased student exchanges, witnessing a steady increase in the number of Indonesians studying in the United States and the numbers of Americans studying in Indonesia. But we hope to see much greater growth in the future because both our countries benefit from increased collaboration.
We are also doing a lot to teach English here. English language ability is a key skill that will help Indonesians compete globally. Through the Fulbright program, 34 young Americans are teaching English in pesantrens and high schools this year. The return of the Peace Corps Volunteers who teach English to Indonesia in 2010 is a sign of or commitment to Indonesia’s education system and people-to-people ties. There are 89 Peace Corps Volunteers throughout Indonesia, teaching English in high schools and junior high schools.
We also have 14 English Language Fellows who train teachers and improve curriculum at universities. We’re always looking for ways to promote technical and vocational education that will help Indonesians build the skills they need to compete in the modern economy.
The opportunity to study in the U.S. is another great way that Indonesians can get the skills and knowledge they need to compete. Last year, nearly 8,200 Indonesians studied in the U.S. That is welcome, but small for a country of Indonesia’s size. There are many opportunities to study in the U.S., and I invite you to consider pursuing an advanced degree in the U.S. because we offer the best quality, value, and diversity in the world.
According to a survey of U.S. colleges conducted by the nonprofit Institute of International Education, the U.S. once again is far and away the top destination for foreign university students. The number of international students in U.S. colleges and universities increased about 8% last year to nearly 886,000. China sent the largest group, with about 274,000 students.
Let me correct some misconceptions. First, some people still think it is hard for students to get a visa. That is not true! It is now easier and faster than ever to get a U.S. student visa. Most of the application process is done online, and the average wait to obtain a student visa is only three days from your interview. Most importantly, over 96% of qualified student visa applicants are approved for a student visa.
So for you students — and for you lecturers looking to get your PhDs — consider including a U.S. degree as part of your future paths. I’m personally inviting you right now to begin you journey to studying in the United States!
And to help you with that, through our EducationUSA program, we help prospective Indonesian students –students just like you! — find the right U.S. university where they can pursue the course of study that’s best for them. EducationUSA provides unbiased, accurate, and comprehensive information about studying in the United States, and best of all, their services are free.
EducationUSA advisers don’t advocate for a single university; they neutrally represent all accredited institutions of higher learning. EducationUSA can help find scholarship opportunities – through the Fulbright program or through the very generous Government of Indonesia scholarship, LPDP, the Ministry of Religious Affairs, or by helping you identify U.S. universities who provide assistance to international students. For more information about universities or scholarships, check our website at www.educationUSA.state.gov. Or even better, stick around to hear directly from an EducationUSA representative right after this.
Before I conclude, I want to shed light on the YSEALI initiative. YSEALI stands for Young Southeast Asia Leaders Initiative, and it is a program launched by President Obama in 2013 to help connect bright young people ages 18-35 in Southeast Asia who have the best ideas to solve common problems in the region. The YSEALI themes are economic development, education, the environment and civic engagement. There are exchanges on these themes to the U.S. and workshops around the ASEAN region as well as opportunities online to engage with likeminded people and a small grants program to implement your ideas. To become a YSEALI member and take advantage of these opportunities, visit the website www.youngsoutheastasianleaders.org.
In closing, I know that our bilateral relationship will only get better because of the potential of our leaders and our citizens, particularly our youth. And no one is more important than those of you in this room. We believe in you. We believe in your ability. We believe in the promise of what you can do in our open, thriving, democratic countries. We look to you to serve as bridges of understanding and collaboration between our two countries. We are now laying the groundwork for the future. It’s not easy. It’s hard work. But I know our work will bring our two countries closer together and help our countries become more prosperous, more sustainable, and more democratic. Thank you.