Interview: Shinta Widjaja Kamdani
How do you rate the current level of economic cooperation between the public and private sectors?
SHINTA WIDJAJA KAMDANI: We have reached a new partnership level in terms of working with the government. I think the government has recognised the need for business to be involved in creating policy. It is also important for businesses to be involved at the executive level. This administration really believes that what is happening on the ground is important, and that is where the private sector comes in. Without business input, policies risk being impractical. This was seen with the launch of the tax amnesty programme. The success of the programme was due to great collaboration between the government and the private sector.
However, some restrictions remain under the economic nationalism backdrop. Moreover, there are still some challenges in the field preventing businesses from capitalising on economic packages, for instance, due to unsynchronised regulation between local and central government. We understand that it is not easy to meet everybody’s demands. That is why we are now being more proactive in partnering with the government.
How prepared is Indonesia to compete when future international trade agreements are signed?
KAMDANI: Competitiveness is a very big issue for Indonesia. While our position in the World Bank’s ease of doing business index improved from 91st in 2017 to 72nd in 2018, some indicators and reports show that competitiveness is still a challenge. We cannot afford not to be a part of global trade, because global is the new local. Indonesia does not want to be reliant on outside markets, and needs to focus on the domestic sphere without falling to the temptation of protectionism. On the other hand, joining the global value chain will also bring benefits such as more investment, a more competitive edge and increased productivity. We need to realise that in order to export, we need to import, and we need to be a part of the global value chain. Our main exports are raw materials and unprocessed minerals; in 2014 manufacturing made up just 41% of total exports, and only 7% was considered high-tech. We have the right people, but we don’t yet have the right tools and skills. With investment, more high-skilled people will enter the workforce and better technology will be adopted, and that will be good for our industries.
Indonesia is lagging behind other emerging markets in acquiring global talent. This will affect the country’s capacity to develop its high-tech industry. We need to find the right balance between liberalisation and protectionism. We have a huge domestic market, and this has to be our priority, but we want to be in the globalised economy by involving ourselves in important free trade agreements. The government acknowledges this, and that is why we have launched agreements with the EU and Australia. Now the process has started, the private sector has a role to play by providing input to the government on various points.
What are the main challenges for doing business in the country’s secondary cities?
KAMDANI: Basic infrastructure is still underdeveloped in many areas. Limited road access, slow broadband connections and unreliable energy supply are some of the main features. The need for infrastructure in auxiliary cities is urgent if the government wants to trigger growth. Public funding is limited, and it is hoped that the private sector will take the lead. However, public-private partnerships in such areas face challenges associated with land acquisition and regulatory uncertainties.
The government aims to achieve 6.1% growth in 2018. To attain this target, the key is to boost investment. There have been great investments in recent years, but there is still room for improvement. What we need is a catalyst, and from my observation and discussions with various stakeholders, cutting down bureaucracy could be this catalyst, most notably in secondary cities. This should be the focus if we want to move forward.
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