1 00:00:05,900 --> 00:00:09,140 Speaker 1: Welcome to Cope Time, a podcast series on Markets and 2 00:00:09,148 --> 00:00:12,510 Speaker 1: Economies from D BS Group Research. I'm Tambe, chief economist. 3 00:00:12,569 --> 00:00:17,430 Speaker 1: Welcoming you to our 97th episode. Today's episode is not 4 00:00:17,440 --> 00:00:21,020 Speaker 1: your typical coby time on March 15th. I was in 5 00:00:21,030 --> 00:00:24,119 Speaker 1: Jakarta where I sat down with former Finance Minister of 6 00:00:24,129 --> 00:00:28,200 Speaker 1: Indonesia Kati Basri at the D BS Indonesia Asian Insights 7 00:00:28,209 --> 00:00:33,009 Speaker 1: Forum 2023. What is about to follow is a recording 8 00:00:33,020 --> 00:00:34,090 Speaker 1: of our conversation 9 00:00:34,409 --> 00:00:38,619 Speaker 1: in it first. Mr Basri provides a brief presentation about 10 00:00:38,630 --> 00:00:43,340 Speaker 1: the outlook for Indonesia in the context of global macroeconomic developments. 11 00:00:43,348 --> 00:00:47,970 Speaker 1: He explains the Indonesian economy's middle path which is neither 12 00:00:47,979 --> 00:00:51,610 Speaker 1: high nor low single digit growth. And he does that 13 00:00:51,619 --> 00:00:55,750 Speaker 1: by taking into account resilient domestic demand and still positive 14 00:00:55,759 --> 00:00:58,450 Speaker 1: commodity sectors exports outlook. 15 00:00:58,939 --> 00:01:03,509 Speaker 1: Consequently, when there are global headwinds, Indonesia tends to outperform 16 00:01:03,520 --> 00:01:06,389 Speaker 1: due to its low beta nature. The flip side is 17 00:01:06,400 --> 00:01:10,230 Speaker 1: during a global upswing, Indonesia tends to underperform 18 00:01:10,860 --> 00:01:15,569 Speaker 1: on climate change and green financing. Mr Basri underscores the 19 00:01:15,580 --> 00:01:20,000 Speaker 1: daunting challenges ahead along with the massive domestic external, as 20 00:01:20,010 --> 00:01:24,870 Speaker 1: well as private public multilateral financing mix needed, removing fossil 21 00:01:24,879 --> 00:01:30,290 Speaker 1: fuel subsidy is key despite the obviously uh political impediments 22 00:01:30,300 --> 00:01:34,459 Speaker 1: in place. He then expands on the possible opportunities for 23 00:01:34,470 --> 00:01:38,050 Speaker 1: regional trade and manufacturing in the context of China us 24 00:01:38,059 --> 00:01:38,610 Speaker 1: tension 25 00:01:39,099 --> 00:01:41,839 Speaker 1: ASEAN has got to be united in setting rules for 26 00:01:41,849 --> 00:01:45,410 Speaker 1: trade and commerce. While dealing with this dynamic. According to 27 00:01:45,419 --> 00:01:45,849 Speaker 1: Mr Basri, 28 00:01:46,870 --> 00:01:49,940 Speaker 1: We then have a very nice back and forth uh 29 00:01:49,949 --> 00:01:54,419 Speaker 1: on the investment environment need for a balance between industrial 30 00:01:54,430 --> 00:01:58,470 Speaker 1: policy and private sector incentives. The importance of the services sector, 31 00:01:58,480 --> 00:02:03,459 Speaker 1: e-commerce techno nationalism. 2024 elections and the economic impact of 32 00:02:03,470 --> 00:02:06,819 Speaker 1: camp and finance strength of Indonesia's financial system in light 33 00:02:06,830 --> 00:02:10,229 Speaker 1: of global market sell off and the role of regulatory 34 00:02:10,240 --> 00:02:13,600 Speaker 1: policy to deal with that. Well, here you go with 35 00:02:13,610 --> 00:02:14,419 Speaker 1: the conversation. 36 00:02:14,910 --> 00:02:19,160 Speaker 1: Good afternoon, everybody. Uh lots to talk about. But first, 37 00:02:19,380 --> 00:02:23,770 Speaker 1: Pabu three will spend about 10 minutes talking about the 38 00:02:23,899 --> 00:02:27,228 Speaker 1: ASEAN outlook. And from that, we will take cues on 39 00:02:27,240 --> 00:02:29,538 Speaker 1: some of the current issues that are near and dear 40 00:02:29,550 --> 00:02:32,758 Speaker 1: to our hearts. Please sending, keep sending your questions. I 41 00:02:32,770 --> 00:02:35,320 Speaker 1: have a lot of questions for him too. But first, 42 00:02:35,330 --> 00:02:38,820 Speaker 1: let's hear from him about 10 minutes on the ASEAN outlook. 43 00:02:38,830 --> 00:02:39,490 Speaker 1: Pabu three. 44 00:02:40,089 --> 00:02:44,460 Speaker 2: Thank you very much. Uh timer a very good afternoon 45 00:02:44,470 --> 00:02:48,169 Speaker 2: to all of you. It is a great pleasure to 46 00:02:48,179 --> 00:02:52,679 Speaker 2: be here. I won't use my Power Point presentation because 47 00:02:53,130 --> 00:02:57,799 Speaker 2: when I saw already give all the numbers then perhaps 48 00:02:57,809 --> 00:03:00,289 Speaker 2: let me try to speak in the human language in 49 00:03:00,300 --> 00:03:02,429 Speaker 2: the next 10 minutes. Uh 50 00:03:03,169 --> 00:03:06,198 Speaker 2: I'll give a sort of like a background about the 51 00:03:06,210 --> 00:03:10,979 Speaker 2: ASEAN economic situation in general. But uh I'll be focusing 52 00:03:10,990 --> 00:03:17,360 Speaker 2: on Indonesia after that. Yeah. So let me start by 53 00:03:17,788 --> 00:03:24,100 Speaker 2: putting Indonesian's position when I saw the result of this 54 00:03:24,110 --> 00:03:29,489 Speaker 2: survey was very interesting. I believe that more than 70% 55 00:03:29,500 --> 00:03:31,039 Speaker 2: of people are optimistic. 56 00:03:31,729 --> 00:03:36,009 Speaker 2: So if you ask me, how do I describe Indonesia? 57 00:03:36,830 --> 00:03:38,199 Speaker 2: Let me 58 00:03:39,600 --> 00:03:46,080 Speaker 2: uh share my view. I called Indonesia is a disappointing country. 59 00:03:47,369 --> 00:03:49,899 Speaker 2: It disappoint the optimists 60 00:03:50,589 --> 00:03:55,240 Speaker 2: Who expect that Indonesia will grow by 10% economic growth 61 00:03:55,419 --> 00:03:58,690 Speaker 2: but will also disappoint the pessimists who keep talking that 62 00:03:58,699 --> 00:04:00,559 Speaker 2: this country will collapse every day. 63 00:04:01,550 --> 00:04:03,940 Speaker 2: So the reality is 64 00:04:04,750 --> 00:04:06,470 Speaker 2: we are not doing 65 00:04:07,610 --> 00:04:09,460 Speaker 2: uh you know, 66 00:04:10,279 --> 00:04:15,490 Speaker 2: Extremely well in the sense that the economy grew by 9-10% 67 00:04:15,500 --> 00:04:19,690 Speaker 2: or double-digit growth like some East Asian countries in Asia. 68 00:04:19,700 --> 00:04:22,769 Speaker 2: I will explain to you later on the reasons behind it. 69 00:04:23,070 --> 00:04:23,649 Speaker 2: But 70 00:04:24,738 --> 00:04:31,079 Speaker 2: despite the global situation, Indonesia will do relatively well. Yeah. 71 00:04:31,309 --> 00:04:35,118 Speaker 2: So that is why I call this disappointing country, disappoint 72 00:04:35,130 --> 00:04:40,779 Speaker 2: optimist and also disappoint the pessimists. Now, let, let me 73 00:04:40,790 --> 00:04:43,928 Speaker 2: explain to you about our position in ASEAN. 74 00:04:44,839 --> 00:04:48,209 Speaker 2: If you look at the experience for many ASEAN countries 75 00:04:48,220 --> 00:04:49,410 Speaker 2: compared to 76 00:04:50,290 --> 00:04:53,410 Speaker 2: uh the other part of the world. Uh If you 77 00:04:53,420 --> 00:04:54,539 Speaker 2: look at the 78 00:04:55,649 --> 00:05:02,579 Speaker 2: projection of the global growth for 2023 timer, uh IMF 79 00:05:02,589 --> 00:05:08,170 Speaker 2: projected that the global growth will be around 2.9% whereas 80 00:05:08,178 --> 00:05:12,450 Speaker 2: the advanced economy may grow around maybe 1.3 So the 81 00:05:12,459 --> 00:05:16,479 Speaker 2: source of growth may come from the emerging developing countries 82 00:05:16,690 --> 00:05:18,320 Speaker 2: and ASEAN countries 83 00:05:18,950 --> 00:05:21,459 Speaker 2: Will continue to grow by more than 4%. 84 00:05:22,230 --> 00:05:25,859 Speaker 2: Yeah, it is quite strong. And if you look at Indonesia, 85 00:05:25,869 --> 00:05:32,690 Speaker 2: the projection made by the IMF Indonesia will grow around 4.8%. 86 00:05:32,940 --> 00:05:36,279 Speaker 2: Much better than many countries in the region. 87 00:05:37,488 --> 00:05:41,329 Speaker 2: Yeah. And if you ask me, why is that? I 88 00:05:41,339 --> 00:05:44,409 Speaker 2: said that for two reasons. The first one is good 89 00:05:44,420 --> 00:05:49,570 Speaker 2: policy response as explained by the second one. Good luck. 90 00:05:49,709 --> 00:05:50,719 Speaker 2: Why is that? 91 00:05:52,100 --> 00:05:56,988 Speaker 2: Because the share of Indonesian export to GDP is only 25%. 92 00:05:57,600 --> 00:06:00,690 Speaker 2: So when there is a negative global spill over 93 00:06:01,790 --> 00:06:06,609 Speaker 2: And hit many ASEAN countries, I can imagine timer that 94 00:06:06,619 --> 00:06:11,760 Speaker 2: Singapore because the share export to GDP is about 180%. 95 00:06:11,809 --> 00:06:15,399 Speaker 2: Singapore will be hit severely compared to Indonesia. 96 00:06:16,089 --> 00:06:19,000 Speaker 2: In our case, the export to GDP is only 25%. 97 00:06:19,579 --> 00:06:22,420 Speaker 2: We are less integrated to the global economy. If you 98 00:06:22,428 --> 00:06:25,440 Speaker 2: ask me whether this is something by design, my answer 99 00:06:25,450 --> 00:06:28,329 Speaker 2: is no, we would like to be as competitive as 100 00:06:28,339 --> 00:06:31,040 Speaker 2: Singapore because there are many mistakes that we made. We 101 00:06:31,049 --> 00:06:34,969 Speaker 2: are not as competitive as Singapore but blessing a discuss 102 00:06:34,980 --> 00:06:37,750 Speaker 2: because we are less integrated than the impact of the 103 00:06:37,760 --> 00:06:41,950 Speaker 2: negative global spill over will be relatively limited for us. 104 00:06:42,220 --> 00:06:44,868 Speaker 2: So I can imagine a country like Singapore. Now 105 00:06:45,290 --> 00:06:50,029 Speaker 2: You may grow around zero point something to 1% for 2023, 106 00:06:50,040 --> 00:06:52,380 Speaker 2: Indonesia will grow much higher than that. 107 00:06:53,470 --> 00:06:59,019 Speaker 2: Thailand will be affected. Vietnam will be affected by this 108 00:06:59,160 --> 00:07:03,589 Speaker 2: tightening monetary policy. The decline of the volume of trade, 109 00:07:03,600 --> 00:07:07,130 Speaker 2: et cetera, the impact to Indonesia will be relatively less 110 00:07:07,140 --> 00:07:11,000 Speaker 2: compared to many countries in ASEAN. For that reason, from 111 00:07:11,010 --> 00:07:16,170 Speaker 2: the investor perspective, I would call Indonesia is one of 112 00:07:16,179 --> 00:07:18,899 Speaker 2: the least unattractive countries in the world, 113 00:07:19,359 --> 00:07:21,880 Speaker 2: not because we are doing great but because the other 114 00:07:21,890 --> 00:07:23,609 Speaker 2: part of the world are in trouble. 115 00:07:24,579 --> 00:07:26,790 Speaker 2: So if you are an investor, you are talking about 116 00:07:26,799 --> 00:07:30,529 Speaker 2: relative from the relative perspective, you will continue to invest 117 00:07:30,540 --> 00:07:35,049 Speaker 2: Indonesia because we have growth, we have economic growth. Palu 118 00:07:35,209 --> 00:07:41,829 Speaker 2: mentioned about this huge potential related to the rising middle class. 119 00:07:42,179 --> 00:07:45,660 Speaker 2: We have the market size, we have the resources. So 120 00:07:45,670 --> 00:07:48,390 Speaker 2: from that perspective, I won't be surprised that if the 121 00:07:48,399 --> 00:07:49,329 Speaker 2: economy 122 00:07:49,839 --> 00:07:55,329 Speaker 2: for 2023 for this year, Indonesia will perform better than 123 00:07:55,339 --> 00:07:58,769 Speaker 2: much country in ASEAN. Yeah. And then, 124 00:07:59,619 --> 00:08:02,660 Speaker 2: but the other side of the coin, when the global 125 00:08:02,670 --> 00:08:05,880 Speaker 2: economy starts to recover, then 126 00:08:06,640 --> 00:08:11,730 Speaker 2: Singapore will probably will recover faster than us because they 127 00:08:11,739 --> 00:08:18,239 Speaker 2: are more integrated compared to Indonesian economy. Now many people 128 00:08:18,760 --> 00:08:23,040 Speaker 2: started to worry about the SI PB the Silicon Valley 129 00:08:23,170 --> 00:08:24,010 Speaker 2: uh Bank. 130 00:08:24,309 --> 00:08:26,250 Speaker 2: The question is whether there will be a sort of 131 00:08:26,260 --> 00:08:30,339 Speaker 2: a systemic global risk. Again when I look at the data, 132 00:08:30,480 --> 00:08:33,750 Speaker 2: the exposure to the Indonesian economy in terms of this 133 00:08:33,760 --> 00:08:37,080 Speaker 2: banking is also relatively less. So that is why if 134 00:08:37,090 --> 00:08:40,289 Speaker 2: you look at on the financial sector until today. The 135 00:08:40,299 --> 00:08:46,229 Speaker 2: impact is relatively limited compared to many countries like in Europe. 136 00:08:46,969 --> 00:08:48,500 Speaker 2: So talking from this, 137 00:08:49,130 --> 00:08:54,619 Speaker 2: you know, comparison of Indonesia to many ASEAN countries, I 138 00:08:54,630 --> 00:09:00,030 Speaker 2: would say that Indonesia will perform better than many ASEAN countries. 139 00:09:00,210 --> 00:09:03,219 Speaker 2: If you're talking about the 2023 140 00:09:04,820 --> 00:09:08,049 Speaker 2: The only thing that we need to worry about, we 141 00:09:08,059 --> 00:09:11,909 Speaker 2: can have a discussion about a timer. The last time 142 00:09:11,919 --> 00:09:15,340 Speaker 2: I was in Davos at the World Economic Forum. Larry 143 00:09:15,349 --> 00:09:18,299 Speaker 2: Summers mentioned about the possibility of the Fed Fund rate 144 00:09:18,309 --> 00:09:22,190 Speaker 2: may go to 6% if the us economy remains strong. 145 00:09:23,210 --> 00:09:26,619 Speaker 2: So the implication is I do believe that the central bank, 146 00:09:26,630 --> 00:09:30,099 Speaker 2: the bank Indonesia need to maintain the parity with the fed. 147 00:09:31,299 --> 00:09:35,108 Speaker 2: Yeah, if that's the case, then the implication, we will 148 00:09:35,119 --> 00:09:36,789 Speaker 2: see that there will be a sort of like a 149 00:09:36,799 --> 00:09:42,140 Speaker 2: tightening cycle also in Indonesia. But because the share of 150 00:09:42,150 --> 00:09:47,270 Speaker 2: investment to GDP is relatively small compared to the consumption, 151 00:09:47,280 --> 00:09:50,270 Speaker 2: because our share consumption to GDP is about 55%,, 152 00:09:51,059 --> 00:09:54,989 Speaker 2: Then the economy will remain to grow by about 4.8%. 153 00:09:55,000 --> 00:09:55,750 Speaker 2: For that reason, 154 00:09:56,489 --> 00:09:59,359 Speaker 2: The share export to GDP is on 25%. 155 00:10:00,010 --> 00:10:03,219 Speaker 2: A couple of things that we need to anticipate is 156 00:10:03,229 --> 00:10:08,978 Speaker 2: the declining in energy commodity prices. This definitely will hit 157 00:10:09,320 --> 00:10:12,700 Speaker 2: the Indonesian export. And if you look at the data 158 00:10:13,400 --> 00:10:17,718 Speaker 2: on the fourth quarter, we have seen the export is 159 00:10:17,729 --> 00:10:18,609 Speaker 2: slowing down. 160 00:10:19,400 --> 00:10:21,929 Speaker 2: And if you look at the import, the reasons why 161 00:10:21,940 --> 00:10:25,010 Speaker 2: we are running a current account surplus because the import 162 00:10:25,020 --> 00:10:27,510 Speaker 2: dropped more significantly than our export. 163 00:10:28,169 --> 00:10:31,840 Speaker 2: Yeah, 90% of our import is made up of capital 164 00:10:31,849 --> 00:10:33,340 Speaker 2: goods and raw materials. 165 00:10:34,159 --> 00:10:36,609 Speaker 2: So if the imports start to slow down, 166 00:10:37,260 --> 00:10:41,650 Speaker 2: then we will see six months from now, the investment 167 00:10:41,659 --> 00:10:42,900 Speaker 2: will also slow down. 168 00:10:43,690 --> 00:10:47,650 Speaker 2: Yeah, under this kind of situation, it is inevitable, the 169 00:10:47,659 --> 00:10:51,500 Speaker 2: economy will slow down. But I do believe that the 170 00:10:51,510 --> 00:10:55,750 Speaker 2: impact will be relatively limited again because that's, you know, 171 00:10:55,760 --> 00:11:01,140 Speaker 2: the huge percentage of the consumption. Now let me talk 172 00:11:01,150 --> 00:11:06,589 Speaker 2: to the other issue that mentioned about the climate and 173 00:11:06,630 --> 00:11:09,479 Speaker 2: mostly you know, the the the climate change 174 00:11:10,130 --> 00:11:14,939 Speaker 2: issue related to the ASEAN countries. I think the biggest 175 00:11:14,950 --> 00:11:17,619 Speaker 2: challenge for a country like Indonesia and many countries in 176 00:11:17,630 --> 00:11:20,699 Speaker 2: ASEAN as well is about climate finance. 177 00:11:21,739 --> 00:11:23,349 Speaker 2: Yeah, it's about climate finance 178 00:11:24,890 --> 00:11:29,809 Speaker 2: mentioned about jet P $20 billion money available. 179 00:11:31,210 --> 00:11:32,200 Speaker 2: I'm sure that 180 00:11:33,190 --> 00:11:38,419 Speaker 2: any ASEAN countries will commit to achieve this net zero emissions. 181 00:11:39,289 --> 00:11:43,880 Speaker 2: In our case, we already sort of like put our 182 00:11:43,890 --> 00:11:48,590 Speaker 2: target more ambitious than before. I was involved in the 183 00:11:48,599 --> 00:11:52,729 Speaker 2: independent level expert group for the COP 27. But one 184 00:11:52,739 --> 00:11:56,549 Speaker 2: thing that I have to say that climate financing for 185 00:11:56,559 --> 00:11:59,479 Speaker 2: the energy transition, this is not an easy thing 186 00:12:00,090 --> 00:12:02,909 Speaker 2: because we need to mobilize fund probably about 187 00:12:04,039 --> 00:12:07,950 Speaker 2: two or 3% of the global GDP. We are talking 188 00:12:07,960 --> 00:12:14,130 Speaker 2: about $100 billion. The question is how do ASEAN countries 189 00:12:14,140 --> 00:12:15,729 Speaker 2: including Indonesia, 190 00:12:16,530 --> 00:12:20,319 Speaker 2: you know, can mobilize fund related to this? My response, 191 00:12:20,330 --> 00:12:23,559 Speaker 2: my answers to it is there will be a combination 192 00:12:23,570 --> 00:12:26,559 Speaker 2: between domestic resource management, 193 00:12:27,250 --> 00:12:33,090 Speaker 2: external and the fiscal framework to attract the philanthropy and 194 00:12:33,099 --> 00:12:36,640 Speaker 2: the private sector because there is no way that this 195 00:12:36,650 --> 00:12:40,960 Speaker 2: financing for climate could be entirely financed simply by the 196 00:12:40,969 --> 00:12:44,260 Speaker 2: government spending. So like in the case of Indonesia, if 197 00:12:44,270 --> 00:12:49,590 Speaker 2: you look at the composition, Indonesia probably need about $28 198 00:12:49,789 --> 00:12:50,280 Speaker 2: billion 199 00:12:50,859 --> 00:12:53,109 Speaker 2: for the issue of the climate finance. If you look 200 00:12:53,119 --> 00:12:54,750 Speaker 2: at the allocation of budget 201 00:12:55,479 --> 00:12:59,858 Speaker 2: In our total government budget, in terms of this climate 202 00:12:59,880 --> 00:13:04,359 Speaker 2: is still relatively limited, it's only about 1%. Yeah, so 203 00:13:04,369 --> 00:13:06,989 Speaker 2: it's still relatively limited. But there are a couple of 204 00:13:07,000 --> 00:13:10,530 Speaker 2: things that the government can do. The first one is 205 00:13:10,539 --> 00:13:11,718 Speaker 2: the budget allocation. 206 00:13:12,460 --> 00:13:13,869 Speaker 2: I think the government 207 00:13:14,750 --> 00:13:18,820 Speaker 2: Did a good job last September when they adjusted the 208 00:13:18,830 --> 00:13:23,239 Speaker 2: fuel price by about 30% at that time. Because without 209 00:13:23,250 --> 00:13:27,449 Speaker 2: adjusting the fuel price, then the relative price between fossil 210 00:13:27,460 --> 00:13:32,239 Speaker 2: fuel and renewable energy will not attract the investment into 211 00:13:32,250 --> 00:13:35,200 Speaker 2: renewable energy. So the first things that the government needs 212 00:13:35,210 --> 00:13:39,780 Speaker 2: to do is to adjust the fuel price, reduce the 213 00:13:39,789 --> 00:13:42,059 Speaker 2: fossil fuel subsidy. 214 00:13:42,650 --> 00:13:45,880 Speaker 2: But the thing is it's easier to be said than 215 00:13:45,890 --> 00:13:46,940 Speaker 2: done because 216 00:13:47,820 --> 00:13:51,690 Speaker 2: nine months from now, it's election, 12 months from now 217 00:13:51,700 --> 00:13:55,219 Speaker 2: it is an election. So we probably have to wait. Yeah, 218 00:13:55,469 --> 00:13:58,659 Speaker 2: the other possibility is to mobilize one through the 219 00:13:59,729 --> 00:14:02,659 Speaker 2: carbon tax, the pean tax, 220 00:14:03,690 --> 00:14:07,710 Speaker 2: this is from the domestic resources. The second one is 221 00:14:07,719 --> 00:14:11,500 Speaker 2: probably this has been discussed in the in the World 222 00:14:11,510 --> 00:14:16,309 Speaker 2: Bank and IMF as well about how to expand the 223 00:14:16,320 --> 00:14:18,679 Speaker 2: concessional loan. Yeah, 224 00:14:20,010 --> 00:14:22,880 Speaker 2: the S D R from the IMF has been sort 225 00:14:22,890 --> 00:14:27,239 Speaker 2: of like, you know, extended to the Regional Development Bank 226 00:14:27,250 --> 00:14:30,669 Speaker 2: to support the climate finance and this all this money 227 00:14:30,679 --> 00:14:34,380 Speaker 2: can be used to the risking to invite the philanthropy 228 00:14:34,390 --> 00:14:40,049 Speaker 2: and private sector to you know, to support the climate 229 00:14:40,059 --> 00:14:41,719 Speaker 2: finance for the energy transition. 230 00:14:42,369 --> 00:14:46,950 Speaker 2: Before I conclude timer, then we can have a discussion 231 00:14:46,960 --> 00:14:47,479 Speaker 2: about it. 232 00:14:48,630 --> 00:14:52,969 Speaker 2: The other important thing that I would like to touch 233 00:14:52,979 --> 00:14:56,700 Speaker 2: related to the Indonesia and ASEAN issues is about 234 00:14:58,020 --> 00:15:01,789 Speaker 2: us, China tension and R ce P 235 00:15:04,299 --> 00:15:07,630 Speaker 2: I think this is my personal opinion, of course, 236 00:15:08,599 --> 00:15:11,250 Speaker 2: since I'm no longer in the government, I can talk 237 00:15:11,260 --> 00:15:13,729 Speaker 2: based on my own opinion. 238 00:15:14,349 --> 00:15:18,119 Speaker 2: Seems to me that ASEAN countries, we don't have the 239 00:15:18,130 --> 00:15:20,479 Speaker 2: luxury to choose between us and China, 240 00:15:22,210 --> 00:15:24,929 Speaker 2: it is very difficult. But I can see in the 241 00:15:24,940 --> 00:15:28,479 Speaker 2: case of the tension between us and China, this is 242 00:15:28,489 --> 00:15:32,359 Speaker 2: the only issue that both Republican and Democrats are bipartisan. 243 00:15:33,270 --> 00:15:36,719 Speaker 2: So looking at this, maybe this tension will continue for 244 00:15:36,729 --> 00:15:37,419 Speaker 2: quite some time. 245 00:15:38,400 --> 00:15:41,859 Speaker 2: Yeah, we have to stay this, this issue will stay 246 00:15:41,869 --> 00:15:42,479 Speaker 2: with us. 247 00:15:43,239 --> 00:15:46,369 Speaker 2: So the question is what can we do what the 248 00:15:46,380 --> 00:15:51,770 Speaker 2: Indonesian and Asean countries can respond to it. Here is the, 249 00:15:51,780 --> 00:15:54,690 Speaker 2: the idea of the R CE P is very important. 250 00:15:54,700 --> 00:15:59,239 Speaker 2: I recall back in 2011, when Indonesia was the chair 251 00:15:59,250 --> 00:16:00,570 Speaker 2: of the ASEAN. At the time, 252 00:16:02,109 --> 00:16:07,539 Speaker 2: we realize that it's not possible for any individual ASEAN 253 00:16:07,700 --> 00:16:10,799 Speaker 2: countries to deal bilaterally with China. 254 00:16:12,200 --> 00:16:14,669 Speaker 2: It is very difficult. So one way to do it 255 00:16:14,679 --> 00:16:19,400 Speaker 2: is we have to take ASEAN as a single entity. 256 00:16:19,650 --> 00:16:23,580 Speaker 2: So ASEAN plus China ASEAN plus Japan, ASEAN plus Korea, 257 00:16:23,590 --> 00:16:27,280 Speaker 2: et cetera. So that is why this R C become 258 00:16:27,289 --> 00:16:31,159 Speaker 2: very important, not only from the economic perspective, but also 259 00:16:31,169 --> 00:16:35,260 Speaker 2: from the geopolitical perspective. And somehow this will reflect the 260 00:16:35,400 --> 00:16:39,590 Speaker 2: ASEAN position related to the US China tension. The good 261 00:16:39,599 --> 00:16:41,710 Speaker 2: news is with the US China tension. 262 00:16:41,919 --> 00:16:45,539 Speaker 2: We will see some reallocation from China into some Southeast 263 00:16:45,549 --> 00:16:48,969 Speaker 2: Asian economy to enter the market, the US market, 264 00:16:49,799 --> 00:16:52,539 Speaker 2: you know, from the back door. And I think countries 265 00:16:52,549 --> 00:16:56,630 Speaker 2: like Vietnam already take the advantage. And if the government 266 00:16:56,640 --> 00:17:00,700 Speaker 2: could pass the bill, the emergency state law regarding the 267 00:17:00,710 --> 00:17:04,599 Speaker 2: omnibus law, then we do hope that the investment will 268 00:17:04,609 --> 00:17:07,859 Speaker 2: also come to Indonesia. So I leave it up here, 269 00:17:07,869 --> 00:17:10,649 Speaker 2: timer and certainly be happy for the conversation. Thank you 270 00:17:10,660 --> 00:17:11,409 Speaker 2: very much. 271 00:17:11,660 --> 00:17:14,170 Speaker 1: Thank you very much. Past three, I want to stay, 272 00:17:17,420 --> 00:17:20,239 Speaker 1: I want to stay with ASAP. And you pointed out 273 00:17:20,250 --> 00:17:23,589 Speaker 1: a very important issue that is close to our heart DB, 274 00:17:23,599 --> 00:17:27,930 Speaker 1: sitting in Singapore with operations in China. And ASEAN is 275 00:17:27,939 --> 00:17:31,349 Speaker 1: trying to understand that under R E P. And the 276 00:17:31,359 --> 00:17:36,270 Speaker 1: context of the China U conflict would ASEAN economies be 277 00:17:36,280 --> 00:17:38,310 Speaker 1: able to attract Chinese capital 278 00:17:38,630 --> 00:17:41,639 Speaker 1: because under RCEP, you can have 40% value added in 279 00:17:41,650 --> 00:17:44,949 Speaker 1: your home country and then produce the rest in a 280 00:17:44,959 --> 00:17:48,930 Speaker 1: partner RCEP country and export it under that country's manufacturer name. 281 00:17:49,160 --> 00:17:52,060 Speaker 1: So a Chinese company can come to Indonesia with 40% 282 00:17:52,069 --> 00:17:52,698 Speaker 1: value added 283 00:17:53,430 --> 00:17:57,020 Speaker 1: build here, assemble complete here and export. 284 00:17:57,689 --> 00:18:01,179 Speaker 1: You were there during the G-20. Is your sense that 285 00:18:01,189 --> 00:18:04,449 Speaker 1: Chinese capital will play a large role in Indonesia's development 286 00:18:04,459 --> 00:18:05,229 Speaker 1: going forward? 287 00:18:05,689 --> 00:18:07,699 Speaker 2: Um This is a very good question. 288 00:18:08,689 --> 00:18:12,760 Speaker 2: Uh We will see some of it but not as 289 00:18:12,770 --> 00:18:16,770 Speaker 2: much as to Vietnam because the the country that the 290 00:18:16,780 --> 00:18:19,329 Speaker 2: one who really take the benefit of it. I think 291 00:18:19,339 --> 00:18:21,939 Speaker 2: so far is Vietnam. Yeah 292 00:18:22,530 --> 00:18:26,170 Speaker 2: and the other country that also take the benefit it 293 00:18:26,180 --> 00:18:30,569 Speaker 2: is outside the ASEAN is Bangladesh because if you look 294 00:18:30,579 --> 00:18:33,849 Speaker 2: at the R M G, the ready made garment, most 295 00:18:33,859 --> 00:18:37,510 Speaker 2: of the companies in China actually move it to Bangladesh. 296 00:18:37,520 --> 00:18:39,469 Speaker 2: But I do believe one of the reasons behind it 297 00:18:39,479 --> 00:18:43,189 Speaker 2: is because the investors are waiting for the omnibus allow 298 00:18:43,530 --> 00:18:46,020 Speaker 2: and hopefully you know this 299 00:18:46,640 --> 00:18:52,680 Speaker 2: emergency state law about this, this p about this omnibus 300 00:18:52,880 --> 00:18:55,479 Speaker 2: will be approved by the parliament soon. And after that, 301 00:18:55,489 --> 00:18:59,209 Speaker 2: we will see that more capital come into Indonesia, 302 00:19:00,010 --> 00:19:05,140 Speaker 1: you saw in Park Luo's presentation, the dynamics around the 303 00:19:05,150 --> 00:19:08,400 Speaker 1: E V and the battery ecosystem. And again, just going 304 00:19:08,410 --> 00:19:10,199 Speaker 1: back to China and Chinese investment. 305 00:19:10,540 --> 00:19:13,310 Speaker 1: The Chinese are very keen on finding areas where they 306 00:19:13,319 --> 00:19:16,458 Speaker 1: can get the backward linkage. Um And you may have 307 00:19:16,469 --> 00:19:19,920 Speaker 1: even noticed in the pas presentation, the two companies he 308 00:19:19,930 --> 00:19:22,680 Speaker 1: had one was a Korean company, one was a Chinese company. 309 00:19:22,770 --> 00:19:27,910 Speaker 1: So on this area around backward linkage of metals mining 310 00:19:28,050 --> 00:19:30,979 Speaker 1: E V. What's your sense of both M N C 311 00:19:30,989 --> 00:19:33,349 Speaker 1: Western M N C as well as Chinese investment. Uh 312 00:19:33,359 --> 00:19:34,969 Speaker 2: time I was 313 00:19:35,739 --> 00:19:38,708 Speaker 2: I was at MFI was the one who 314 00:19:39,760 --> 00:19:42,770 Speaker 2: implement the idea about this 315 00:19:43,670 --> 00:19:47,930 Speaker 2: Uh this incentivized for the export at that time was 316 00:19:47,939 --> 00:19:52,910 Speaker 2: back 2014. So we introduced a policy that we uh 317 00:19:52,920 --> 00:19:58,958 Speaker 2: if companies export the raw materials, they need to pay 318 00:19:58,969 --> 00:20:03,510 Speaker 2: a prohibitive tax. So that's the the the the uh 319 00:20:03,520 --> 00:20:07,169 Speaker 2: the the the first move. So with this kind of 320 00:20:07,180 --> 00:20:10,959 Speaker 2: policy would call it it downs streaming policy. You will 321 00:20:10,969 --> 00:20:11,899 Speaker 2: see the impact 322 00:20:12,280 --> 00:20:16,510 Speaker 2: on the you know the increase the value of export, 323 00:20:16,520 --> 00:20:21,688 Speaker 2: et cetera. The investment coming in Indonesia, even the Economist magazine, 324 00:20:21,699 --> 00:20:23,409 Speaker 2: praise us related to that. 325 00:20:24,089 --> 00:20:24,780 Speaker 2: But 326 00:20:26,000 --> 00:20:30,290 Speaker 2: I think we need also to be very careful as 327 00:20:30,300 --> 00:20:34,410 Speaker 2: an economist if the relative price 328 00:20:35,020 --> 00:20:36,349 Speaker 2: very high 329 00:20:37,069 --> 00:20:41,479 Speaker 2: because this export ban, then the implication is there will 330 00:20:41,489 --> 00:20:45,010 Speaker 2: be an innovation in another country to come up with 331 00:20:45,020 --> 00:20:48,599 Speaker 2: a new product. So we can learn the experience from 332 00:20:48,609 --> 00:20:50,319 Speaker 2: the rubber, 333 00:20:50,910 --> 00:20:55,060 Speaker 2: Indonesia produced rubber and rubber price was very high. And 334 00:20:55,069 --> 00:20:58,139 Speaker 2: as a result there was a synthetic rubber at the time. 335 00:20:58,300 --> 00:21:02,459 Speaker 2: If you recall, when the Middle East began to embargo 336 00:21:02,469 --> 00:21:06,319 Speaker 2: oil back in the seventies, then shale gas started to 337 00:21:06,329 --> 00:21:07,099 Speaker 2: kick in, 338 00:21:07,339 --> 00:21:10,160 Speaker 2: you know, renewable energies start to kick in. So my 339 00:21:10,170 --> 00:21:14,119 Speaker 2: response to it, this is really the opportunity for us 340 00:21:14,130 --> 00:21:18,709 Speaker 2: but needs to be combined with the competitive policy as well. 341 00:21:18,719 --> 00:21:23,339 Speaker 2: Indonesia should be part of this global supply chain. So 342 00:21:23,349 --> 00:21:27,629 Speaker 2: I don't know, I'm not, I'm not an expert about battery, 343 00:21:27,650 --> 00:21:30,770 Speaker 2: but I won't be surprised if in the future, 344 00:21:31,270 --> 00:21:33,780 Speaker 2: you know, one of the elements of battery is no 345 00:21:33,790 --> 00:21:38,089 Speaker 2: longer only about lithium, but something else because once the 346 00:21:38,099 --> 00:21:41,379 Speaker 2: relative price is too high, then there will be an 347 00:21:41,390 --> 00:21:46,239 Speaker 2: incentive to do an innovation. That's basically how the market works. 348 00:21:46,250 --> 00:21:49,879 Speaker 2: So for Indonesia, while people are still preparing for the 349 00:21:49,890 --> 00:21:53,369 Speaker 2: new innovation, we need to do something to improve the 350 00:21:53,380 --> 00:21:55,659 Speaker 2: quality and also the competitiveness. 351 00:21:57,020 --> 00:22:00,880 Speaker 1: It's very fashionable these days for governments to talk about 352 00:22:00,890 --> 00:22:04,979 Speaker 1: manufacturing and jobs around manufacturing. You see in the US 353 00:22:04,989 --> 00:22:08,219 Speaker 1: the build back better bill, even the Inflation Reduction Act 354 00:22:08,229 --> 00:22:10,719 Speaker 1: has a lot of buy American component. The idea is 355 00:22:10,729 --> 00:22:13,430 Speaker 1: to bring jobs back to America. You see in India, 356 00:22:13,439 --> 00:22:16,670 Speaker 1: the whole making India initiative that has been pursued over 357 00:22:16,680 --> 00:22:19,750 Speaker 1: the last half a decade. It's again about manufacturing. And 358 00:22:19,760 --> 00:22:22,150 Speaker 1: as we have heard from Palau and we have heard 359 00:22:22,160 --> 00:22:24,079 Speaker 1: from others in the government of Indonesia, there is a 360 00:22:24,089 --> 00:22:25,169 Speaker 1: desire to do that 361 00:22:25,810 --> 00:22:28,979 Speaker 1: But what about the service sector? This country is increasingly 362 00:22:28,989 --> 00:22:34,219 Speaker 1: service friendly. We see tremendous uh penetration of social media 363 00:22:34,229 --> 00:22:39,500 Speaker 1: and outsourcing capabilities. So why are we always fixated on 364 00:22:39,510 --> 00:22:41,560 Speaker 1: manufacturing jobs and not services 365 00:22:41,569 --> 00:22:42,159 Speaker 2: jobs? 366 00:22:43,140 --> 00:22:45,849 Speaker 2: This is a very good question. Let me respond to 367 00:22:45,859 --> 00:22:49,270 Speaker 2: the manufacturing first as well. Yeah, I think 368 00:22:50,089 --> 00:22:54,290 Speaker 2: we are talking about the returning of the industrial policy now. Yeah, 369 00:22:54,650 --> 00:22:58,550 Speaker 2: somehow this is good, but we need to be very 370 00:22:58,560 --> 00:23:03,270 Speaker 2: careful on this as well because in Indonesia, let me 371 00:23:03,280 --> 00:23:05,629 Speaker 2: be frank and honest with you, we had an experience 372 00:23:05,640 --> 00:23:08,819 Speaker 2: in the past that government is very bad in picking 373 00:23:08,829 --> 00:23:12,099 Speaker 2: winner but losers are very good in picking government. So 374 00:23:12,109 --> 00:23:14,319 Speaker 2: you start with the industrial policy, 375 00:23:14,569 --> 00:23:18,079 Speaker 2: there will be an implication that probably some companies that 376 00:23:18,089 --> 00:23:21,709 Speaker 2: politically very well connected with the government will take the 377 00:23:21,719 --> 00:23:22,640 Speaker 2: advantage of it. 378 00:23:23,229 --> 00:23:27,930 Speaker 2: Yeah, so this industrial policy can be justified as long 379 00:23:27,939 --> 00:23:32,139 Speaker 2: as you ensure about the transparency about the governance, you know, 380 00:23:32,150 --> 00:23:36,800 Speaker 2: et cetera. Now talking about the surfaces sector. One thing 381 00:23:36,810 --> 00:23:41,880 Speaker 2: that perhaps if you're talking about surfaces basically in Indonesia, 382 00:23:41,890 --> 00:23:44,739 Speaker 2: in terms of the surfaces we really lack behind because 383 00:23:44,750 --> 00:23:48,500 Speaker 2: the limited quality of the human capital, I just came 384 00:23:48,510 --> 00:23:52,420 Speaker 2: back from India last week for the G-20. 385 00:23:52,800 --> 00:23:54,129 Speaker 2: And I can see 386 00:23:54,770 --> 00:23:58,780 Speaker 2: like if you're talking about bangalore. Yeah, I would imagine 387 00:23:58,790 --> 00:24:01,810 Speaker 2: correct me if I'm wrong, I'm not an expert about India, 388 00:24:02,040 --> 00:24:07,229 Speaker 2: but Bangalore will not exist without Silicon Valley because so 389 00:24:07,239 --> 00:24:12,510 Speaker 2: many Indus uh Indian diaspora in in Silicon Valley, they 390 00:24:12,520 --> 00:24:17,040 Speaker 2: have the network, et cetera, Indonesia, we still not on 391 00:24:17,050 --> 00:24:21,020 Speaker 2: that stage. So that is why in terms of this, 392 00:24:21,400 --> 00:24:24,040 Speaker 2: you know, services sector, etcetera, I think 393 00:24:24,459 --> 00:24:28,359 Speaker 2: the sort of like to be part of this the 394 00:24:28,369 --> 00:24:32,589 Speaker 2: global supply chain of production network is rather different. Yeah, 395 00:24:32,969 --> 00:24:36,369 Speaker 2: so this will take some time. But one thing that 396 00:24:36,380 --> 00:24:39,469 Speaker 2: is also important but I know this is very, very 397 00:24:39,479 --> 00:24:44,819 Speaker 2: sensitive and controversial is about e-commerce. This is something that 398 00:24:44,829 --> 00:24:48,889 Speaker 2: we probably have to look at in the future. Because 399 00:24:48,900 --> 00:24:50,369 Speaker 2: if every country, 400 00:24:50,650 --> 00:24:54,780 Speaker 2: yeah in the world try to sort of like do 401 00:24:55,000 --> 00:24:59,540 Speaker 2: restrict the data flows, et cetera, then maybe the growth 402 00:24:59,550 --> 00:25:03,489 Speaker 2: on the digital technology will be relatively limited. This is 403 00:25:03,500 --> 00:25:06,660 Speaker 2: not unique to Indonesia or other or other countries doing 404 00:25:06,670 --> 00:25:09,020 Speaker 2: the same thing as well. So there are a couple 405 00:25:09,030 --> 00:25:11,469 Speaker 2: of issues that we have to look at it. Yeah, 406 00:25:11,479 --> 00:25:16,329 Speaker 2: especially on the before I forgot on the digital technology. 407 00:25:16,400 --> 00:25:19,329 Speaker 2: One thing that I'm concerned time are related to the 408 00:25:19,339 --> 00:25:20,520 Speaker 2: recent development 409 00:25:20,900 --> 00:25:25,060 Speaker 2: is also the possibility of the two internet of things 410 00:25:25,310 --> 00:25:28,819 Speaker 2: probably in the future, there will be a China system 411 00:25:28,920 --> 00:25:32,349 Speaker 2: and the US system. So we are entering the era 412 00:25:32,359 --> 00:25:34,829 Speaker 2: of what I call the Pano nationalism. 413 00:25:35,530 --> 00:25:39,099 Speaker 2: And this one is perhaps more difficult than the trade 414 00:25:39,109 --> 00:25:43,640 Speaker 2: war because it is justified by the economic security. Let 415 00:25:43,650 --> 00:25:47,819 Speaker 2: me give an example about supply chain in terms of 416 00:25:47,829 --> 00:25:52,719 Speaker 2: this infantry method. We understand about what we call just 417 00:25:52,729 --> 00:25:55,530 Speaker 2: in time. I won't be surprised that a couple of 418 00:25:55,540 --> 00:25:58,260 Speaker 2: years from now, most of the country will no longer 419 00:25:58,270 --> 00:26:01,020 Speaker 2: adopt the just in time, but just in case 420 00:26:01,380 --> 00:26:05,199 Speaker 2: because they need to anticipate if there is a disruption, 421 00:26:05,209 --> 00:26:10,069 Speaker 2: global change, disruption, geopolitical tension, et cetera, this will make 422 00:26:10,079 --> 00:26:13,680 Speaker 2: the cost production costs much more expensive than what we 423 00:26:13,689 --> 00:26:14,429 Speaker 2: had before. 424 00:26:16,439 --> 00:26:19,379 Speaker 1: I want to stay with the digital economy for a 425 00:26:19,390 --> 00:26:21,729 Speaker 1: little longer. And although the questions that I'm getting are 426 00:26:21,739 --> 00:26:24,170 Speaker 1: all about S V B and interest rates. So wait, 427 00:26:24,180 --> 00:26:27,729 Speaker 1: we we'll come to that. Um But on, on the 428 00:26:27,739 --> 00:26:30,729 Speaker 1: digital economy side, the 429 00:26:31,630 --> 00:26:36,150 Speaker 1: entrepreneurs in Indonesia increasingly also want to join the global 430 00:26:36,160 --> 00:26:40,569 Speaker 1: zeitgeist in producing apps for Indonesian consumers. They want to 431 00:26:40,579 --> 00:26:44,750 Speaker 1: create payments distribution solutions that may look like a payment 432 00:26:44,760 --> 00:26:47,869 Speaker 1: distribution solution in China or somewhere but with an Indonesian flavor. 433 00:26:48,140 --> 00:26:51,589 Speaker 1: Um So what's your assessment of Indonesia's digital journey if 434 00:26:51,599 --> 00:26:54,448 Speaker 1: you will both at the private sector level, as well 435 00:26:54,459 --> 00:26:56,489 Speaker 1: as the public sector level, I would 436 00:26:56,500 --> 00:26:57,079 Speaker 2: say 437 00:26:57,839 --> 00:27:01,609 Speaker 2: if you know, is very proud about Indonesia. 438 00:27:02,349 --> 00:27:04,959 Speaker 2: So am I yeah, especially 439 00:27:05,800 --> 00:27:09,040 Speaker 2: related to if you're talking about digital technology. If you 440 00:27:09,050 --> 00:27:13,250 Speaker 2: mention about how many unicorns or even the cons that 441 00:27:13,260 --> 00:27:18,439 Speaker 2: we have here in Asia, in terms of this technology capability, 442 00:27:18,800 --> 00:27:23,349 Speaker 2: we are doing very well. Yeah, and this is related 443 00:27:23,359 --> 00:27:26,458 Speaker 2: to the issue of the e-commerce, et cetera, a lot 444 00:27:26,469 --> 00:27:27,270 Speaker 2: of ideas. 445 00:27:28,270 --> 00:27:32,399 Speaker 2: So in terms of this capability, the market size, the potential, 446 00:27:33,290 --> 00:27:37,140 Speaker 2: I would say that Indonesia is perhaps one of the 447 00:27:37,150 --> 00:27:40,819 Speaker 2: most potential countries in in ASEAN. 448 00:27:41,819 --> 00:27:43,709 Speaker 2: I understand country like Singapore, 449 00:27:44,810 --> 00:27:48,900 Speaker 2: they cannot afford not to have Indonesia as the market, right? 450 00:27:48,910 --> 00:27:52,180 Speaker 2: So if you look at if you're talking about many 451 00:27:52,189 --> 00:27:56,689 Speaker 2: peer to peer lending, fintech company, if you're talking about right? Healing, 452 00:27:56,829 --> 00:27:59,420 Speaker 2: if you're talking about e commerce like it or not, 453 00:27:59,619 --> 00:28:02,020 Speaker 2: you have to look at the market for Indonesia. The 454 00:28:02,030 --> 00:28:03,119 Speaker 2: potential is there 455 00:28:04,030 --> 00:28:08,400 Speaker 2: my concern now and this is related to the issue 456 00:28:08,410 --> 00:28:12,760 Speaker 2: that I uh response before I I I I I 457 00:28:12,770 --> 00:28:14,270 Speaker 2: raised before 458 00:28:15,859 --> 00:28:23,550 Speaker 2: 2012 or 20. Yeah, 2008-2022, 459 00:28:24,719 --> 00:28:27,630 Speaker 2: we were living in the fast normal world 460 00:28:28,310 --> 00:28:31,239 Speaker 2: when the interest rate was very low. 461 00:28:32,739 --> 00:28:37,760 Speaker 2: I'm not sure timer that from 2022 onwards, 462 00:28:38,510 --> 00:28:43,199 Speaker 2: The Fed Fund rate will return back to 0.25. So 463 00:28:43,209 --> 00:28:48,599 Speaker 2: perhaps the normal rate will be around, I don't know, 3, 3.5%. 464 00:28:48,729 --> 00:28:52,229 Speaker 2: Under this kind of situation, the cost of fund will 465 00:28:52,239 --> 00:28:57,719 Speaker 2: become much more expensive than before. So the PC, they 466 00:28:57,729 --> 00:29:01,280 Speaker 2: cannot afford to continue with their strategy only focusing on 467 00:29:01,290 --> 00:29:07,359 Speaker 2: growth like GM fee, GT, fee loan to disbursement, et cetera. 468 00:29:07,839 --> 00:29:11,439 Speaker 2: Unless the startup companies including in Indonesia, 469 00:29:12,689 --> 00:29:16,660 Speaker 2: you know, change their business model into path to profitability. 470 00:29:16,670 --> 00:29:20,229 Speaker 2: Otherwise they will be in a difficult situation. And this 471 00:29:20,239 --> 00:29:21,900 Speaker 2: is not unique for Indonesia 472 00:29:22,630 --> 00:29:26,760 Speaker 2: Also for other digital company. That's the first one, the 473 00:29:26,770 --> 00:29:29,900 Speaker 2: second one about the digital issue. I'm not too worried 474 00:29:29,910 --> 00:29:34,130 Speaker 2: so much about the so called the industrial 4.0. I 475 00:29:34,140 --> 00:29:37,479 Speaker 2: am concerned about government 4.0. 476 00:29:38,290 --> 00:29:42,040 Speaker 2: The reason behind it is the product cycle because the 477 00:29:42,050 --> 00:29:45,869 Speaker 2: disruption is getting shorter and shorter. If you are, if 478 00:29:45,880 --> 00:29:49,280 Speaker 2: you were in the position of the policy makers, can 479 00:29:49,290 --> 00:29:52,060 Speaker 2: you imagine you make a regulation will only last for 480 00:29:52,069 --> 00:29:54,180 Speaker 2: six months and after that, there will be a new 481 00:29:54,189 --> 00:29:54,839 Speaker 2: disruption 482 00:29:56,290 --> 00:29:59,199 Speaker 2: will be very difficult for the government anywhere in the world. 483 00:29:59,359 --> 00:30:03,189 Speaker 2: So under this kind of situation, the ideally what we 484 00:30:03,199 --> 00:30:09,469 Speaker 2: need is an agile bureaucracy, but agile bureaucracy is an oxymoron, 485 00:30:09,819 --> 00:30:12,599 Speaker 2: there is no way bureaucracy can be agile 486 00:30:13,160 --> 00:30:16,800 Speaker 2: under this kind of situation. What we need is to 487 00:30:16,810 --> 00:30:21,910 Speaker 2: change the mindset, especially from the regulator perspective, from agree 488 00:30:21,920 --> 00:30:26,709 Speaker 2: on rules to agree on principle. Without that some innovations 489 00:30:26,719 --> 00:30:31,010 Speaker 2: in many countries including Indonesia, you know, will be difficult 490 00:30:31,020 --> 00:30:31,770 Speaker 2: to develop. 491 00:30:32,609 --> 00:30:37,530 Speaker 1: These are exceptionally astute insights. I hope we're absorbing it 492 00:30:37,540 --> 00:30:39,869 Speaker 1: and we should consider ourselves lucky that uh Park Bater 493 00:30:39,880 --> 00:30:40,619 Speaker 1: is weighing in. 494 00:30:41,729 --> 00:30:44,260 Speaker 1: I'm going to postpone the interest rate discussion for another 495 00:30:44,270 --> 00:30:46,270 Speaker 1: couple of minutes. I want to talk about election for 496 00:30:46,280 --> 00:30:51,500 Speaker 1: a second. Uh You have watched over two decades of 497 00:30:51,510 --> 00:30:53,500 Speaker 1: presidential election in Indonesia, 498 00:30:54,150 --> 00:30:58,199 Speaker 1: give us a sense of the political business cycle. Does 499 00:30:58,209 --> 00:31:02,599 Speaker 1: the economy's direction change regardless of the outcome of the election? 500 00:31:03,469 --> 00:31:08,420 Speaker 2: Very good question. Let me talk about the, the downside 501 00:31:08,430 --> 00:31:10,969 Speaker 2: and the upside race. The first one is, let me 502 00:31:10,979 --> 00:31:13,939 Speaker 2: talk with the positive, the uh the, the, the, the 503 00:31:13,949 --> 00:31:17,599 Speaker 2: downside race. The first one is, 504 00:31:18,310 --> 00:31:21,920 Speaker 2: I think the political party in Indonesia political parties in 505 00:31:21,930 --> 00:31:23,369 Speaker 2: Indonesia will, 506 00:31:24,439 --> 00:31:28,810 Speaker 2: you know, nominate their candidates in September. 507 00:31:29,599 --> 00:31:36,589 Speaker 2: Yeah. So you can imagine from September until February 2024 508 00:31:36,599 --> 00:31:40,689 Speaker 2: because the election will be held on 14 February during 509 00:31:40,699 --> 00:31:41,930 Speaker 2: the Valentines Day. 510 00:31:42,630 --> 00:31:46,719 Speaker 2: Um Then you would expect that everyone will focus on 511 00:31:46,729 --> 00:31:47,319 Speaker 2: the election 512 00:31:48,119 --> 00:31:49,109 Speaker 2: after that. 513 00:31:50,000 --> 00:31:53,079 Speaker 2: Then people will wait. I don't know whether it is 514 00:31:53,300 --> 00:31:58,420 Speaker 2: only one round or two rounds after that. People have 515 00:31:58,430 --> 00:32:03,250 Speaker 2: to wait who will be ministers on the cabinet. So 516 00:32:03,260 --> 00:32:05,739 Speaker 2: I don't think there will be a major decision will 517 00:32:05,750 --> 00:32:06,339 Speaker 2: be made 518 00:32:07,630 --> 00:32:11,400 Speaker 2: After that, the Echelon one on its line ministries will 519 00:32:11,410 --> 00:32:14,910 Speaker 2: wait after their minister is being appointed, whether they will 520 00:32:14,920 --> 00:32:16,400 Speaker 2: stay in their position or not. 521 00:32:17,119 --> 00:32:23,770 Speaker 2: So the downside is the major decision perhaps from September 522 00:32:23,780 --> 00:32:32,969 Speaker 2: 2024 until December, sorry, the September 2023 until December 2024. Probably, 523 00:32:33,030 --> 00:32:36,469 Speaker 2: you know, we won't see the major or significant reform. 524 00:32:37,030 --> 00:32:42,089 Speaker 2: Yeah, and that's not only unique for this year. Also 525 00:32:42,099 --> 00:32:48,260 Speaker 2: happened back in 2014. Similar things also happened in 2000 2004. 526 00:32:48,439 --> 00:32:50,979 Speaker 2: So for the investors, 527 00:32:51,660 --> 00:32:53,520 Speaker 2: you know, probably they have to wait. So that is 528 00:32:53,530 --> 00:32:56,430 Speaker 2: why many investors take the position of wait and see 529 00:32:56,439 --> 00:32:59,780 Speaker 2: because this kind of situation. But let me talk now 530 00:32:59,790 --> 00:33:01,910 Speaker 2: about the upside. 531 00:33:03,000 --> 00:33:06,250 Speaker 2: If you look at the data six months before the 532 00:33:06,260 --> 00:33:13,449 Speaker 2: election consumption in Indonesia jumped significantly. Why is that? Because 533 00:33:13,459 --> 00:33:18,209 Speaker 2: all the politicians spend money for election? 534 00:33:19,020 --> 00:33:22,359 Speaker 2: Yeah, let me give an example. This is just some illustration. 535 00:33:22,619 --> 00:33:26,739 Speaker 2: I don't know whether this figure is still valid or not. 536 00:33:27,000 --> 00:33:34,890 Speaker 2: Back on 2014, there were about 750,000 ballots for each 537 00:33:34,900 --> 00:33:40,550 Speaker 2: political party. They need to nominate someone as a witness, 538 00:33:40,800 --> 00:33:43,989 Speaker 2: you know, to stay in the ballot from the morning 539 00:33:44,000 --> 00:33:46,189 Speaker 2: until evening, right? So they got 540 00:33:46,849 --> 00:33:49,939 Speaker 2: of of course you need to fit them with meal. 541 00:33:49,949 --> 00:33:54,219 Speaker 2: So let's start with the Nasi Padang 30,000 yeah per meal. 542 00:33:54,449 --> 00:33:59,020 Speaker 2: So three times you are talking about 200,000 multiply by 543 00:33:59,030 --> 00:34:04,709 Speaker 2: 750,000 ballots. You are talking about 75 billion rupiah money 544 00:34:04,719 --> 00:34:06,920 Speaker 2: per day per one witness. 545 00:34:07,959 --> 00:34:11,029 Speaker 2: At least political party should come with the three people. 546 00:34:11,459 --> 00:34:14,510 Speaker 2: If you multiply by 10 people, you are talking about 547 00:34:14,520 --> 00:34:17,939 Speaker 2: two point something trillion already. So as a lot of 548 00:34:17,949 --> 00:34:21,620 Speaker 2: money will be spent on t shirt on banner traveling. 549 00:34:22,830 --> 00:34:25,259 Speaker 2: One thing that I cannot answer is where does the 550 00:34:25,270 --> 00:34:26,209 Speaker 2: money come from? 551 00:34:27,969 --> 00:34:28,489 Speaker 2: Yeah, 552 00:34:29,340 --> 00:34:32,570 Speaker 2: it will be very sensitive to her response to that question. 553 00:34:33,030 --> 00:34:35,020 Speaker 2: The other thing is so that is why if you 554 00:34:35,030 --> 00:34:38,459 Speaker 2: look at the data consumption boom. So six months from now, 555 00:34:38,469 --> 00:34:41,260 Speaker 2: you will see there's a lot of demand, strong demand 556 00:34:41,290 --> 00:34:45,820 Speaker 2: come from the you know the society. So that is 557 00:34:45,830 --> 00:34:48,040 Speaker 2: why I'm not too worried so much about the economic 558 00:34:48,050 --> 00:34:50,850 Speaker 2: growth for this year. The other thing is 559 00:34:51,658 --> 00:34:52,789 Speaker 2: let me put this way, 560 00:34:55,229 --> 00:34:59,260 Speaker 2: usually two years after the election, every president will become 561 00:34:59,270 --> 00:35:00,520 Speaker 2: a normal president. 562 00:35:02,360 --> 00:35:05,899 Speaker 2: What I mean by normal presidents is during campaign, you 563 00:35:05,909 --> 00:35:10,569 Speaker 2: can promise everything but once you are in power, then 564 00:35:10,580 --> 00:35:14,129 Speaker 2: you will see your budget is limited. Your tax ratio 565 00:35:14,139 --> 00:35:18,638 Speaker 2: is limited, then you become realistic. Most of the presidential 566 00:35:18,649 --> 00:35:23,429 Speaker 2: candidates before they become a president, they criticize the decision 567 00:35:23,439 --> 00:35:26,850 Speaker 2: to adjust the fuel price. But all of them once 568 00:35:26,860 --> 00:35:29,719 Speaker 2: they are in power, the first policy that they did 569 00:35:29,729 --> 00:35:31,110 Speaker 2: adjust to the fuel price. 570 00:35:32,129 --> 00:35:36,939 Speaker 2: So my point is whoever becomes a president by 2024, 571 00:35:36,949 --> 00:35:38,718 Speaker 2: they will be very realistic 572 00:35:40,100 --> 00:35:44,859 Speaker 2: Because the fiscal space is limited, the budget is limited. 573 00:35:45,250 --> 00:35:47,909 Speaker 2: 2nd point because there are many, 574 00:35:48,550 --> 00:35:52,129 Speaker 2: you know, the the uh uh customers of the D 575 00:35:52,139 --> 00:35:55,520 Speaker 2: Bs and D BS Bank is, is a foreign banks. 576 00:35:56,030 --> 00:35:58,120 Speaker 2: Let me talk with the number. Bear with me a 577 00:35:58,129 --> 00:35:58,698 Speaker 2: little bit 578 00:35:59,310 --> 00:36:03,639 Speaker 2: A timer. The Indonesian incremental capital output ratio is about 579 00:36:03,649 --> 00:36:09,090 Speaker 2: 6.5 now. So 1% economic growth will require investment over 580 00:36:09,100 --> 00:36:14,790 Speaker 2: GDP 6.5. So if Indonesia like said, want to achieve 581 00:36:14,800 --> 00:36:19,270 Speaker 2: the income per capita about 10,000 by 2030, we need 582 00:36:19,280 --> 00:36:21,679 Speaker 2: to grow by 6% per annum. 583 00:36:22,209 --> 00:36:24,639 Speaker 2: So if you want to grow by 6%. It means 584 00:36:24,649 --> 00:36:28,620 Speaker 2: that you need investment over GDP six multiply by 6.5. 585 00:36:28,709 --> 00:36:32,219 Speaker 2: You are talking about 39% investment over GDP. 586 00:36:33,050 --> 00:36:38,239 Speaker 2: Our domestic savings now is 35%. So there is a 587 00:36:38,250 --> 00:36:41,570 Speaker 2: saving investment gap which is reflected in the current-account deficit. 588 00:36:41,580 --> 00:36:42,580 Speaker 2: About four 589 00:36:43,870 --> 00:36:48,439 Speaker 2: market will not accept this unless you finance this current 590 00:36:48,449 --> 00:36:52,719 Speaker 2: account deficit by the F D I or you mobilize 591 00:36:52,729 --> 00:36:57,300 Speaker 2: saving by boosting economic growth or you do economic deregulation 592 00:36:57,310 --> 00:36:58,320 Speaker 2: to lower 593 00:36:59,110 --> 00:37:03,669 Speaker 2: The incremental capital output ratio. So my point is whoever 594 00:37:03,679 --> 00:37:07,639 Speaker 2: becomes a president by 2024, he or she needs to 595 00:37:07,649 --> 00:37:11,530 Speaker 2: provide the job needs to provide jobs, then he or 596 00:37:11,540 --> 00:37:15,189 Speaker 2: she will be open to the foreign investor will be 597 00:37:15,199 --> 00:37:20,179 Speaker 2: open to the streamlining regulation, economic deregulation, etc 598 00:37:20,620 --> 00:37:25,350 Speaker 2: to improve productivity and need to boost economic growth. So 599 00:37:25,770 --> 00:37:28,699 Speaker 2: I'm not too worried so much about, you know, the 600 00:37:28,709 --> 00:37:32,020 Speaker 2: result of the election. The difference is me but the 601 00:37:32,030 --> 00:37:36,409 Speaker 2: leadership style and gimmick because if you're talking about I 602 00:37:36,750 --> 00:37:41,629 Speaker 2: megawati administration by S B Y administration, by Jokowi administration, 603 00:37:41,639 --> 00:37:44,699 Speaker 2: if you're talking about, you know, the big idea, more 604 00:37:44,709 --> 00:37:50,129 Speaker 2: or less the same talking about job creation, poverty, infrastructure. 605 00:37:50,489 --> 00:37:54,040 Speaker 2: The difference is about the leadership and deliverable but but 606 00:37:54,050 --> 00:37:56,409 Speaker 2: I don't think there will be a radical change in 607 00:37:56,419 --> 00:37:57,959 Speaker 2: terms of this economic policy, 608 00:37:59,199 --> 00:38:05,699 Speaker 1: Right? No, no secret sauce improve productivity, become more business friendly. Absolute. OK. 609 00:38:05,709 --> 00:38:08,610 Speaker 1: So we have less than 10 minutes left. And given 610 00:38:08,620 --> 00:38:11,649 Speaker 1: what has happened in the world over the last one week, 611 00:38:11,659 --> 00:38:13,888 Speaker 1: I think we need to go a little deeper on 612 00:38:13,899 --> 00:38:17,429 Speaker 1: the issue of bank stress in the us and its 613 00:38:17,439 --> 00:38:23,229 Speaker 1: implication for finance and by extension, regional economic outlook. 614 00:38:23,800 --> 00:38:27,939 Speaker 1: So as you pointed out, you don't think inflation or 615 00:38:27,949 --> 00:38:30,489 Speaker 1: interest rates are going to be as low in the 616 00:38:30,500 --> 00:38:32,860 Speaker 1: coming decade than it has been in the past decade, 617 00:38:33,040 --> 00:38:38,669 Speaker 1: which also means that investors will be more discriminatory. Borrowers 618 00:38:38,679 --> 00:38:40,330 Speaker 1: will have a little harder time 619 00:38:41,770 --> 00:38:44,810 Speaker 1: in the very near term. Do you think the actions 620 00:38:44,820 --> 00:38:47,770 Speaker 1: taken by the FED and the FDIC are sufficient to 621 00:38:47,780 --> 00:38:50,639 Speaker 1: stop a systemic risk from spreading worldwide? 622 00:38:51,979 --> 00:38:54,229 Speaker 2: This is a very tough question because 623 00:38:55,030 --> 00:38:59,489 Speaker 2: we don't really know the real situation. Yeah, about 624 00:39:00,879 --> 00:39:04,129 Speaker 2: the complexity and also the size. But I think 625 00:39:05,290 --> 00:39:06,830 Speaker 2: the action that 626 00:39:08,030 --> 00:39:12,199 Speaker 2: you know, took by the FDIC and also the FED 627 00:39:12,209 --> 00:39:18,129 Speaker 2: at least by guaranteeing that the depositors will get the 628 00:39:18,139 --> 00:39:21,540 Speaker 2: money back somehow will calm the market. 629 00:39:22,439 --> 00:39:26,340 Speaker 2: Yeah, so I think, but, but but the issue is 630 00:39:26,929 --> 00:39:30,370 Speaker 2: we probably need to look at about the possibility of 631 00:39:30,379 --> 00:39:31,009 Speaker 2: the 632 00:39:32,850 --> 00:39:36,540 Speaker 2: risk of some other banks as well. There is um 633 00:39:36,550 --> 00:39:41,589 Speaker 2: if I'm not mistaken, there is uh research done by 634 00:39:41,909 --> 00:39:45,779 Speaker 2: JP Morgan if I'm not mistaken. Yeah, it shows about 635 00:39:45,790 --> 00:39:50,549 Speaker 2: the loan to deposit ratio and the characteristic the diversification. 636 00:39:50,840 --> 00:39:54,139 Speaker 2: So we probably need to look at, you know, some 637 00:39:54,149 --> 00:39:56,739 Speaker 2: of other banks as well about the quality. But so 638 00:39:56,750 --> 00:39:58,560 Speaker 2: far timer, I would say that 639 00:39:58,939 --> 00:40:04,310 Speaker 2: I think the fed and also the FDIC I read 640 00:40:04,320 --> 00:40:08,049 Speaker 2: Secretary Yellen's statement in financial Times a couple of days 641 00:40:08,060 --> 00:40:12,050 Speaker 2: ago that she would not guarantee, put the blanket guarantee, 642 00:40:13,169 --> 00:40:16,649 Speaker 2: at least at this moment can help to sort of 643 00:40:16,659 --> 00:40:18,790 Speaker 2: like to calm the market. Of course, there will be 644 00:40:18,800 --> 00:40:23,089 Speaker 2: a sort of like a turbulence but hopefully not. But again, 645 00:40:23,100 --> 00:40:25,770 Speaker 2: I have to say that it's too early to judge 646 00:40:25,780 --> 00:40:26,569 Speaker 2: at this moment 647 00:40:27,290 --> 00:40:31,830 Speaker 1: beyond banks. What about the risk on the balance sheet 648 00:40:31,840 --> 00:40:36,770 Speaker 1: of non-bank finance companies, corporations and countries 649 00:40:37,620 --> 00:40:43,330 Speaker 2: you're talking about in, in Southeast Asian countries? Yeah, 650 00:40:44,969 --> 00:40:47,199 Speaker 2: I think the exposure for 651 00:40:48,179 --> 00:40:53,370 Speaker 2: ASEAN countries, especially South East Asia related to the, 652 00:40:54,679 --> 00:40:58,370 Speaker 2: you know, to the US is relatively small. I don't 653 00:40:58,379 --> 00:41:03,638 Speaker 2: know about Singapore because because Singapore is quite advance but 654 00:41:03,699 --> 00:41:06,409 Speaker 2: looking about what happened a couple of years ago, unless 655 00:41:06,419 --> 00:41:10,069 Speaker 2: the supply market gets, the impact was also relatively less 656 00:41:10,080 --> 00:41:12,729 Speaker 2: uh the impact to the most 657 00:41:13,600 --> 00:41:18,529 Speaker 2: uh Southeast Asian economies came into three channel rather than 658 00:41:18,540 --> 00:41:22,600 Speaker 2: financial channel. Yeah. So looking at this, of course, the 659 00:41:22,610 --> 00:41:26,090 Speaker 2: risk is there. But I would say that let me 660 00:41:26,100 --> 00:41:31,209 Speaker 2: talk about because my knowledge is mostly Indonesia. I think 661 00:41:31,219 --> 00:41:35,580 Speaker 2: the exposure of the Indonesian banks or the insurance, the 662 00:41:35,590 --> 00:41:37,149 Speaker 2: non bank financial institution 663 00:41:37,389 --> 00:41:40,669 Speaker 2: related to what happened in the US is relatively small. 664 00:41:40,679 --> 00:41:42,550 Speaker 2: So I'm not too worried so much about it, but 665 00:41:42,560 --> 00:41:46,199 Speaker 1: At the sovereign level, if rates were to remain high 666 00:41:46,209 --> 00:41:49,590 Speaker 1: and the dollar liquidity were to tighten. Would the government 667 00:41:49,600 --> 00:41:52,600 Speaker 1: of Indonesia be able to fund itself the external part 668 00:41:52,610 --> 00:41:54,709 Speaker 1: at sub 6% or would we be prepared to pay 669 00:41:54,719 --> 00:41:58,800 Speaker 1: much higher than that to the government of Indonesia debt? 670 00:41:58,840 --> 00:42:01,229 Speaker 1: Would it stay at sub 6% the next issuance or 671 00:42:01,239 --> 00:42:02,600 Speaker 1: would it be much higher than 6%? 672 00:42:02,949 --> 00:42:05,320 Speaker 2: This is a very good question because the way I 673 00:42:05,330 --> 00:42:10,718 Speaker 2: look at this situation, timer, the first one is 674 00:42:12,340 --> 00:42:15,010 Speaker 2: I won't be surprised if the fed fund rate may 675 00:42:15,020 --> 00:42:15,870 Speaker 2: go to 676 00:42:17,260 --> 00:42:22,429 Speaker 2: 5.75 or even 6%. So under this kind of situation, 677 00:42:22,439 --> 00:42:23,908 Speaker 2: if you look at the 678 00:42:24,909 --> 00:42:28,250 Speaker 2: Uh 10 years standards of the government bond, 679 00:42:29,100 --> 00:42:34,370 Speaker 2: It probably may go to run between 7.5-8% the implication. 680 00:42:34,629 --> 00:42:37,280 Speaker 2: So it is very important for the government to do 681 00:42:37,290 --> 00:42:41,570 Speaker 2: a sort of like a front loading before this happened. Otherwise, 682 00:42:41,580 --> 00:42:46,409 Speaker 2: the cost of fund will become very expensive. And from 683 00:42:46,419 --> 00:42:47,750 Speaker 2: the Bang Indonesia side, 684 00:42:48,850 --> 00:42:52,939 Speaker 2: the inflation in Indonesia after September 685 00:42:53,750 --> 00:42:56,810 Speaker 2: may come down to less than 4% because the base 686 00:42:56,820 --> 00:43:00,159 Speaker 2: effect of the last year fuel price high, 687 00:43:00,919 --> 00:43:05,840 Speaker 2: but maybe bank Indonesia don't have doesn't have much room 688 00:43:05,850 --> 00:43:07,520 Speaker 2: to lower the interest rate now. 689 00:43:08,310 --> 00:43:11,439 Speaker 2: Yeah. So under this kind of situation, the cost of 690 00:43:11,449 --> 00:43:15,520 Speaker 2: fund will be relatively high and this may have an implication. 691 00:43:15,629 --> 00:43:18,270 Speaker 2: I think the big banks, big banks in Indonesia are 692 00:43:18,280 --> 00:43:21,649 Speaker 2: relatively ok. I'm not too worried so much. My concern 693 00:43:21,659 --> 00:43:24,469 Speaker 2: is related to the small banks because there will be 694 00:43:24,479 --> 00:43:29,219 Speaker 2: a flight to quality. Then this will trigger a sort 695 00:43:29,229 --> 00:43:32,020 Speaker 2: of like a price war from the small banks which 696 00:43:32,030 --> 00:43:35,570 Speaker 2: is raising the interest rate. But back to your question again, 697 00:43:35,580 --> 00:43:36,780 Speaker 2: I think related to that, 698 00:43:37,590 --> 00:43:40,270 Speaker 2: The, the, the, the government, it's better to do a 699 00:43:40,280 --> 00:43:42,709 Speaker 2: sort of like a front loading. The good news is 700 00:43:43,080 --> 00:43:49,370 Speaker 2: the fiscal deficit for 2023 is projected maximum 2.8%. So 701 00:43:49,379 --> 00:43:54,419 Speaker 2: the need for the sort of like a financing perhaps 702 00:43:54,429 --> 00:43:55,679 Speaker 2: will be relatively limited 703 00:43:57,340 --> 00:44:01,649 Speaker 1: if f funds go to five and 75%. Where does 704 00:44:01,659 --> 00:44:02,459 Speaker 1: the Rupiah go? 705 00:44:04,800 --> 00:44:06,069 Speaker 2: Very good question. 706 00:44:07,000 --> 00:44:07,850 Speaker 2: Um 707 00:44:09,840 --> 00:44:14,029 Speaker 2: I don't think anyone can make a, you know, prediction about, about, 708 00:44:14,040 --> 00:44:16,969 Speaker 2: about Ruia. If I knew the answer, I was sitting 709 00:44:16,979 --> 00:44:19,729 Speaker 2: in the dealing room to, you know, rather than talking 710 00:44:20,010 --> 00:44:22,379 Speaker 2: to all of you. But let me, let me put 711 00:44:22,389 --> 00:44:23,009 Speaker 2: this way, 712 00:44:24,120 --> 00:44:26,209 Speaker 2: there are a couple of reasons that 713 00:44:27,070 --> 00:44:29,479 Speaker 2: I don't see the Rupiah will overshoot. 714 00:44:30,399 --> 00:44:31,949 Speaker 2: The first one is 715 00:44:33,530 --> 00:44:35,340 Speaker 2: because the pandemic 716 00:44:35,979 --> 00:44:41,639 Speaker 2: Private saving increase. So that's explain why the current account 717 00:44:41,649 --> 00:44:45,350 Speaker 2: we are running a current-account surplus. The second one is 718 00:44:45,360 --> 00:44:50,149 Speaker 2: even though the energy and commodity price decline but still 719 00:44:50,159 --> 00:44:53,939 Speaker 2: remains high compared to 2021. If you're talking to people 720 00:44:54,389 --> 00:44:57,709 Speaker 2: who are in the coal business, 721 00:44:58,530 --> 00:45:04,080 Speaker 2: you know, their, their profit increased by quadruple because the 722 00:45:04,090 --> 00:45:08,050 Speaker 2: price of coal increased four times maybe. So in terms 723 00:45:08,060 --> 00:45:11,009 Speaker 2: of the terms of the Air Indonesia will be benefited 724 00:45:11,020 --> 00:45:15,939 Speaker 2: from that. And then the downstream industry like Palo explained 725 00:45:15,949 --> 00:45:17,000 Speaker 2: in his presentation. 726 00:45:17,260 --> 00:45:20,948 Speaker 2: So I won't see, I'm not too worried so much 727 00:45:20,959 --> 00:45:24,439 Speaker 2: with this current account deficit, especially when the economy will 728 00:45:24,449 --> 00:45:28,509 Speaker 2: slow down under this kind of situation, the pressure to 729 00:45:28,520 --> 00:45:32,570 Speaker 2: Ruia will be relatively limited. I cannot make a prediction, 730 00:45:32,689 --> 00:45:35,560 Speaker 2: but I don't think it will go to around 17,000. 731 00:45:35,570 --> 00:45:40,320 Speaker 2: I don't think so. Maybe the will be between 5000, 732 00:45:40,330 --> 00:45:43,350 Speaker 2: 500 to about 6000. If you look at the non 733 00:45:43,360 --> 00:45:45,790 Speaker 2: delivery forward 12 months from now 734 00:45:46,129 --> 00:45:49,280 Speaker 2: around this level, you know, maybe the situation will not 735 00:45:49,290 --> 00:45:53,750 Speaker 2: be as bad as during the taper tantrum when when 736 00:45:53,760 --> 00:45:55,179 Speaker 2: I was at the M O F at the time. 737 00:45:56,120 --> 00:45:59,679 Speaker 1: OK, final question. I want to bring it back to geopolitics. 738 00:45:59,879 --> 00:46:05,339 Speaker 1: How will Indonesia strategize around this China us conflict? 739 00:46:06,590 --> 00:46:09,000 Speaker 2: This is a very tough question. I don't think any 740 00:46:09,010 --> 00:46:13,540 Speaker 2: ASEAN countries can you know, can respond to this question. 741 00:46:13,550 --> 00:46:17,520 Speaker 2: But my response to it is there is no single 742 00:46:17,820 --> 00:46:19,158 Speaker 2: ASEAN countries 743 00:46:19,919 --> 00:46:24,530 Speaker 2: have the luxury to choose between us. And China. Definitely 744 00:46:25,600 --> 00:46:28,419 Speaker 2: I was mentioning about the two internet of things. If 745 00:46:28,429 --> 00:46:32,000 Speaker 2: this happen ASEAN countries will be very pragmatic because most 746 00:46:32,010 --> 00:46:34,699 Speaker 2: of the products that are being here may be Huawei. 747 00:46:34,709 --> 00:46:37,529 Speaker 2: I don't know because their present has been here for 748 00:46:37,540 --> 00:46:39,719 Speaker 2: many years, but at the same time, we need us 749 00:46:39,729 --> 00:46:40,290 Speaker 2: as well. 750 00:46:41,300 --> 00:46:46,709 Speaker 2: We we definitely need to sort of like to, to 751 00:46:47,070 --> 00:46:50,489 Speaker 2: uh support from the US to balance the position in 752 00:46:50,500 --> 00:46:54,698 Speaker 2: Southeast Asia, especially related to the South China Sea. Yeah. 753 00:46:54,709 --> 00:46:58,370 Speaker 2: So on the geopolitical tension, still a lot of uncertainty. 754 00:46:58,570 --> 00:47:01,509 Speaker 2: But let me put some, 755 00:47:02,199 --> 00:47:05,500 Speaker 2: You know, the the bright spot that possible may come. 756 00:47:05,800 --> 00:47:09,469 Speaker 2: I recall back on 2012 timer when I was a 757 00:47:09,479 --> 00:47:14,409 Speaker 2: chairman of the investment board, there was a natural disaster, 758 00:47:14,419 --> 00:47:17,468 Speaker 2: a flood in Thailand if you recall at that time, 759 00:47:17,919 --> 00:47:22,050 Speaker 2: and Toyota, their production base in their production base for 760 00:47:22,060 --> 00:47:24,540 Speaker 2: Southeast Asia at that time was only in Thailand. 761 00:47:25,219 --> 00:47:28,830 Speaker 2: So I went to Japan to meet the CEO of Toyota. 762 00:47:29,610 --> 00:47:33,949 Speaker 2: I convince him to invest Indonesia, not because Indonesia is 763 00:47:33,959 --> 00:47:37,279 Speaker 2: doing great, but you need to diversify your risks. And 764 00:47:37,290 --> 00:47:42,879 Speaker 2: for that reason, Toyota expand $3.7 billion in Indonesia. Back 765 00:47:42,889 --> 00:47:44,100 Speaker 2: on 2012. 766 00:47:45,090 --> 00:47:49,379 Speaker 2: The similar analogy, I do believe that many investors now 767 00:47:49,429 --> 00:47:52,760 Speaker 2: they learn from the pandemic, they learn from the geopolitical tension. 768 00:47:52,899 --> 00:47:57,459 Speaker 2: They need to diversify their source of this supply chain 769 00:47:57,469 --> 00:48:01,260 Speaker 2: as well. This will push some of the companies to 770 00:48:01,270 --> 00:48:06,209 Speaker 2: reallocate the investment to many countries in Southeast Asia. And 771 00:48:06,219 --> 00:48:10,340 Speaker 2: I don't think Vietnam, you know, is big enough to 772 00:48:10,350 --> 00:48:11,520 Speaker 2: absorb all of them. 773 00:48:11,739 --> 00:48:15,510 Speaker 2: So some of the investment will go to Malaysia, will 774 00:48:15,520 --> 00:48:19,510 Speaker 2: go to Singapore to Indonesia. So I would see a 775 00:48:19,520 --> 00:48:23,159 Speaker 2: lot of potentials related to that. The second one with 776 00:48:23,169 --> 00:48:27,750 Speaker 2: the US China geopolitical tension, they need somehow the back 777 00:48:27,760 --> 00:48:31,049 Speaker 2: door to enter the US market. So I believe that 778 00:48:31,060 --> 00:48:36,520 Speaker 2: some Asian countries including Indonesia, you know, can be a potential, 779 00:48:36,530 --> 00:48:37,350 Speaker 2: can be 780 00:48:37,689 --> 00:48:41,929 Speaker 2: sort of like an opportunity for them, provide that we 781 00:48:41,939 --> 00:48:44,580 Speaker 2: improve the investment climate. And let me be honest and 782 00:48:44,590 --> 00:48:45,379 Speaker 2: frank with you. 783 00:48:46,689 --> 00:48:49,870 Speaker 2: When I was at the investment board, I told my 784 00:48:49,879 --> 00:48:52,699 Speaker 2: colleague in the cabinet, one of the reasons of why 785 00:48:52,709 --> 00:48:55,949 Speaker 2: many Indonesians become religious is because they have to deal 786 00:48:55,959 --> 00:48:56,739 Speaker 2: with the government. 787 00:48:57,540 --> 00:49:01,719 Speaker 2: You know, because if you apply something, then you never 788 00:49:01,729 --> 00:49:05,290 Speaker 2: know whether your permit will be approved by the government. 789 00:49:05,300 --> 00:49:07,219 Speaker 2: The only thing that you could do is only pray 790 00:49:07,229 --> 00:49:10,729 Speaker 2: to God, right? So that is why I do really 791 00:49:10,739 --> 00:49:15,090 Speaker 2: expect by this omnibus law, we can streamline the regulation, 792 00:49:15,100 --> 00:49:19,790 Speaker 2: et cetera. Last but not least I know as said, 793 00:49:20,260 --> 00:49:20,399 Speaker 2: you know, 794 00:49:21,439 --> 00:49:22,830 Speaker 2: Indonesia is not perfect, 795 00:49:23,479 --> 00:49:27,040 Speaker 2: so many problems. But as a former chairman of the 796 00:49:27,050 --> 00:49:30,239 Speaker 2: investment board, let me give a sort of like a disclaimer. 797 00:49:30,379 --> 00:49:34,370 Speaker 2: Investing in Indonesia is very dangerous because it is addictive. 798 00:49:37,090 --> 00:49:37,939 Speaker 1: Ok. 799 00:49:42,290 --> 00:49:48,250 Speaker 1: On that optimistic and spiritual note, Bari, thank you very 800 00:49:48,260 --> 00:49:52,860 Speaker 1: much for your insights. Thank you. So, investing in Indonesia 801 00:49:52,870 --> 00:49:57,399 Speaker 1: is very dangerous because it is very addictive. How great 802 00:49:57,409 --> 00:49:57,959 Speaker 1: was that? 803 00:49:58,330 --> 00:50:00,860 Speaker 1: Thanks to Kati Basri for his time and insights and 804 00:50:00,870 --> 00:50:03,959 Speaker 1: thank you dear listeners, Coy time was produced by Ken 805 00:50:03,969 --> 00:50:07,120 Speaker 1: Delbridge from spy studios, Viet Le and Daisy Sherman provided 806 00:50:07,129 --> 00:50:10,729 Speaker 1: additional assistance. It is for information only and does not 807 00:50:10,739 --> 00:50:13,320 Speaker 1: constitute any investment advice. 808 00:50:13,415 --> 00:50:16,763 Speaker 1: 97 episodes of Coy time are available on youtube and 809 00:50:16,774 --> 00:50:20,784 Speaker 1: on all major podcast platforms including Apple Google and Spotify. 810 00:50:20,844 --> 00:50:24,175 Speaker 1: As for our research publications and webinars, you can find 811 00:50:24,185 --> 00:50:27,685 Speaker 1: them all by Googling D BS Research Library. Have a 812 00:50:27,695 --> 00:50:28,425 Speaker 1: great day.