Remarks of Ambassador Donovan at the Opening Session of the U.S.-Indonesia Investment Summit 2018

Remarks of Ambassador Donovan on Opening Session of the U.S.-Indonesia Investment Summit 2018 (State Dept.)

Selamat pagi, and good morning.  Selamat datang di Jakarta to our guests who have come from the United States and elsewhere in the region.  I want to thank the members and staff of the American Chamber of Commerce in Indonesia and the U.S. Chamber of Commerce in Washington for inviting me to join today’s summit.

I would also like to thank the many representatives of the Government of Indonesia who have joined us today.  An especially warm welcome to Ministers Sri Mulyani Indrawati, Hanif Dhakiri, Airlangga Hartarto, Ignasius Jonan, Enggartiasto Lukita, Rudiantrara, and OJK Chairman Wimboh Santoso.  It is a pleasure to be here to speak to this gathering of business and government partners, from both Indonesia and the United States, about our growing economic ties.

70th Anniversary and U.S. Commitment to Indonesia

This opportunity to take stock of Indonesia’s progress towards an open, prosperous economy could not have come at a better time.  2019 will be a major milestone for both of our countries as we will mark the 70th anniversary of U.S.-Indonesia diplomatic relations.  This year-long celebration will be an opportunity to not only highlight our past achievements, but also to look forward to the next 70 years of U.S.-Indonesia ties.  In the years to come, we aim to strengthen our relationship on the foundation of our shared belief in democracy, respect for human rights, and the promotion of peace, stability, and economic prosperity.

Just before coming to Jakarta to meet with President Jokowi in August, Secretary of State Pompeo announced the U.S. government’s strategy for economic engagement with this region at the Indo-Pacific Business Forum in Washington, D.C.  It was no accident that the U.S. Chamber of Commerce hosted that Forum, which, like today’s U.S.-Indonesia Investment Summit, underscored the importance of the private sector in fueling growth and commercial engagement that benefits both the United States and the Indo-Pacific region.

As part of his remarks, Secretary Pompeo noted the foundational, facilitating role the United States played in enabling the growth, development, and wealth we see across this region today.  And he noted that private sector trade, investment, and business engagement is at the center of this success.  Facilitating this engagement in Indonesia is one of my key goals as the American Ambassador here.

Indonesia’s history since Reformasi has been a story of great social and economic progress, and the United States is proud of the ways in which we have contributed to that success.  This progress is something we see every day around us, but sometimes take for granted.  Just think of the contrast between Indonesia’s current situation and the not so distant past.

For example:
Twenty years ago, poverty afflicted almost 25% of Indonesians.  Today, the poverty rate is less than 10%, the lowest level in Indonesia’s history.

Twenty years ago, fewer than 1 million Indonesians, less than 1% of the population, had used the internet. Today, Indonesia is fast becoming a crossroads for the digital economy, with new private projects and public-private partnerships like the Palapa Ring bringing internet access to more than half of the country, over 143 million people, according to the Indonesian Association of Internet Service Providers.

Twenty years ago, no city in Indonesia had a modern mass transportation system, and Jakarta was among the largest cities in the world without a subway.  Today, we can see the signs of progress as MRT entrances and elevated rail tracks spring up along Jakarta’s main thoroughfares.

On these and many other measures, Indonesia has shown a record of success in development.  Of course, there is much yet to be done, but there is also undoubtedly much for Indonesia to be proud of.  U.S. companies can also be proud of the role they have played as partners in this success.

U.S. investment touches nearly every sector of the Indonesian economy, ranging from commodities, to manufacturing, to services.  This investment has played a key role in Indonesia’s economic success, providing billions of dollars in capital and helping to create jobs for millions of Indonesian workers.  Nike, for example, is celebrating its 30th anniversary of sourcing from Indonesia this year. More than 171,000 workers employed in Nike’s contract factories churned out about 143 million pairs of shoes and 41.5 million units of equipment and apparel in fiscal year 2018, sending those products to markets worldwide. Nike is just one of many U.S. companies with a long-standing commitment to doing business in Indonesia.

For example, Chevron, throughout its 90 years in Indonesia, has provided local, high-quality jobs that raise income levels and generate government revenues close to $200 billion (almost 3 quadrillion rupiah) for Indonesia.  Not only are 97% of its 4,700 employees here Indonesian, but Local Business Development (LBD) programs in Riau, East Kalimantan and West Java have led to more than 7,800 contracts for Indonesian companies, creating nearly 52,000 jobs and procuring more than 1.6 trillion rupiah ($120 million) in goods and services from LBD partners.

In the case of another major U.S. investor in Indonesia, Freeport Indonesia contributed more than 23 trillion rupiah ($1.6 billion) in community development funding between 1992 and 2017.  That is in addition to the 256 trillion rupiah ($17.3 billion) Freeport’s Indonesian subsidiary, PTFI, paid to the Indonesian government over the same time in taxes, royalties, and dividends.  As I noted to the press during a visit to Papua this past weekend, I fully endorse President Jokowi’s vision of a win-win outcome on Freeport’s operating rights extension negotiations with the Indonesian government.  A win-win solution will provide certainty for Freeport’s future investment and ensure a continued commitment to human and economic development in Mimika and beyond.

U.S. companies’ investments in Indonesia extend to the latest technologies as well.  Earlier this month, Cisco announced at a meeting with President Jokowi that Indonesia will become the first country in Southeast Asia to join its Country Digital Acceleration program.  This program will help Indonesia make public services more efficient, increase local innovation, and digitize the country’s small and medium businesses.  This commitment is on top of the 212,000 Indonesian students Cisco has already trained with the latest information technology skills needed to succeed in the global IT workforce and the modern digital economy.

Not to be outdone, other U.S. tech companies are investing in Indonesian entrepreneurs.  Google is training 100,000 Indonesians to develop android apps nationwide.  Facebook Indonesia just launched “Laju Digital,” a program aimed at giving digital literacy training to small and medium businesses, regional governments, students and communities in 15 cities, including 10 cities in Eastern Indonesia like Gorontalo, Kupang, Manokwari, and Mataram.

The U.S. government also has a long history of providing assistance to overcome barriers to trade and investment and enabling private sector partnerships that build prosperity for citizens of both our countries.

This summer, President Jokowi inaugurated Indonesia’s first commercial-scale wind farm at Sidrap, in Sulawesi.  That project was developed by the private sector, a U.S.-based firm known as UPC Renewables, and was made possible by the U.S. government’s Overseas Private Investment Corporation (OPIC), which provided $120 million (about 1.6 trillion rupiah) in financing.  Today, 70,000 Indonesian households are able to enjoy clean, affordable, reliable power as a result of this partnership.

These projects help to address gaps in power, infrastructure, and connectivity development, not through a government mandate, but by facilitating partnerships between the private sector and the local partners who know best how to meet Indonesia’s needs.

Indonesia’s Place in the Indo-Pacific Strategy

Although I’m sure we could name dozens of other examples of U.S. engagement, I would like to save some time for us to talk about the future of the U.S.-Indonesia economic relationship.  Keeping in mind the progress we have seen in the past 20 years, to say nothing of the past 70, what should our aspiration be for the coming decades?

Driven by its young population, growing middle class, and expanding use of new technologies, Indonesia will play an even greater leadership role in the integration and development of the Indo-Pacific region.

Certainly, one of our aspirations for Indonesia’s future is a flourishing trade relationship with the United States.  I was especially pleased to see Minister of Trade Enggar lead a delegation of private businesses to Washington D.C. in July to explore ways to expand our bilateral trade, and I welcome Minister Enggar’s call to increase our bilateral trade to $50 billion (about 700 trillion rupiah) a year.  The United States believes that our bilateral trade should be free, fair, and reciprocal so that it can grow to its full potential, whether that is 50, 100, or 150 billion dollars in the years to come.

Earlier in my remarks, I noted that shortly before his visit here, Secretary Pompeo unveiled the U.S. strategy for advancing a free and open Indo-Pacific.  America, and the entire world, has a stake in the prosperity and stability that flows from that vision.  Indonesia lies, quite literally, at the center of this region.  America wants to contribute to Indonesia’s prosperity, fostered through the private sector partnerships that naturally develop from fair and reciprocal trade, open investment environments, transparent agreements between nations, and improved connectivity.

Let me be clear:  We are committed to expanding our economic engagement in the Indo-Pacific region and in Indonesia.  We will continuously strive toward the goal of a trade and economic relationship that abides by the principle of partnership economics – freedom and openness, a commitment to democracy and good governance, and respect for local autonomy and national sovereignty.

As part of “America’s Indo-Pacific Economic Vision,” we announced a number of initiatives focused on enhancing the development of energy, infrastructure, and the digital economy – sectors essential to the Indo-Pacific’s economic future.  Through the Digital Connectivity and Cybersecurity Partnership, the Infrastructure Transaction and Assistance Network, and the Asia Enhancing Development and Growth through Energy initiatives, the U.S. government will support the efforts of world-class U.S. private sector companies, like those gathered here, to develop markets and to build partnerships.

Meeting the needs of Indo-Pacific nations in energy, infrastructure, digital economy, and human resources development will take a staggering amount of investment.  The Asian Development Bank estimated that $26 trillion will be needed by 2030.  Indonesia’s current infrastructure push likewise needs trillions of rupiah to succeed.  We recognize that no government can mobilize the resources to accomplish these tasks alone.  But we also know there is over $50 trillion of private capital sitting on the side-lines in banking centers such as London, New York, and elsewhere.  By using government resources to catalyze private business opportunities, by creating a level playing field for U.S. firms to compete in Indonesia, we can create the conditions that will bring this private investment off of the sidelines and into productive enterprise.  Only then will we be able to achieve our vision for the Indo-Pacific and a vibrant U.S.-Indonesia economic partnership.

To catalyze private sector economic engagement, government regulations should foster, rather than stifle, private initiative.  Rules made with the best intentions often have unintended consequences.  Local content and manufacturing requirements, for instance, may aim to increase opportunities for local firms, but have the effect of discouraging economic partnerships.   High technology companies think twice about investing in Indonesia when they hear that they may have to manufacture locally in order to hold a patent.  Internet and financial services companies slow down the introduction of new services when they learn about limitations sharing data across borders.  As private businesses stay on the sidelines, options dwindle for Indonesian consumers and entrepreneurs, who see higher prices for fewer products.

I often say that the best advocates for new investors in Indonesia should be the investors and businesses who are already here.  In fact, the treatment of current economic partners is one of the most powerful signals that a government sends to the world about its readiness for greater economic partnership.

Conversely, when long-standing market participants depart a country because of perceived changes in the rules or contracts or unfair treatment by partners or governments, it sends a warning to potential investors to think carefully before entering a market.

For example, U.S. companies remain keen on investing in Indonesia’s infrastructure sector through an open bidding process.  But it can be discouraging to these potential investors when they see other U.S. companies that are ready to invest over $3 billion (about 40 trillion rupiah) in power generation in Indonesia, but are frustrated by an incumbent monopoly.  And when U.S. companies that have long operated in Indonesia and that planned to invest hundreds of trillions of rupiah (tens of billions of dollars) in the years ahead, are seemingly treated differently than state-run companies, it can send the wrong message that Indonesia views foreign investment with suspicion.

Economic engagement and partnership between U.S. and Indonesian firms has been essential to building Indonesian prosperity and creating the conditions for continued success.  For this reason, it remains important for Indonesia to continue to improve its investment climate to attract foreign investment and to pursue policies that treat companies equitably, regardless of whether they are domestic or foreign.  A level playing field for competition best serves everyone’s interests.

The United States – our government, our companies, and our people – stands ready to expand our economic relationship with Indonesia.  We are grateful to have been partners with Indonesia over the past 70 years.  We look forward to continued cooperation to create an environment that maximizes the shared potential of our people and businesses to achieve even greater success in the years to come.

Most of all, I look forward to hearing today from you, our business and government partners, to learn more about your plans for investment and mutually beneficial trade.

Collectively, the stories you tell will reflect the essence of our vision for economic engagement in Indonesia and the broader region – a vision to promote peace, stability, and prosperity.  I look forward to joining conversations with you today to discuss how we can make these aspirations a reality.

Thank you for your attention, and to the U.S. Chamber of Commerce and the American Chamber of Commerce in Indonesia for organizing this event.

(as prepared for delivery)