WEBVTT - Kopi Time E097 - Chatib Basri on Indonesia 0:00:05.900 --> 0:00:09.140 Welcome to Cope Time, a podcast series on Markets and 0:00:09.148 --> 0:00:12.510 Economies from D BS Group Research. I'm Tambe, chief economist. 0:00:12.569 --> 0:00:17.430 Welcoming you to our 97th episode. Today's episode is not 0:00:17.440 --> 0:00:21.020 your typical coby time on March 15th. I was in 0:00:21.030 --> 0:00:24.119 Jakarta where I sat down with former Finance Minister of 0:00:24.129 --> 0:00:28.200 Indonesia Kati Basri at the D BS Indonesia Asian Insights 0:00:28.209 --> 0:00:33.009 Forum 2023. What is about to follow is a recording 0:00:33.020 --> 0:00:34.090 of our conversation 0:00:34.409 --> 0:00:38.619 in it first. Mr Basri provides a brief presentation about 0:00:38.630 --> 0:00:43.340 the outlook for Indonesia in the context of global macroeconomic developments. 0:00:43.348 --> 0:00:47.970 He explains the Indonesian economy's middle path which is neither 0:00:47.979 --> 0:00:51.610 high nor low single digit growth. And he does that 0:00:51.619 --> 0:00:55.750 by taking into account resilient domestic demand and still positive 0:00:55.759 --> 0:00:58.450 commodity sectors exports outlook. 0:00:58.939 --> 0:01:03.509 Consequently, when there are global headwinds, Indonesia tends to outperform 0:01:03.520 --> 0:01:06.389 due to its low beta nature. The flip side is 0:01:06.400 --> 0:01:10.230 during a global upswing, Indonesia tends to underperform 0:01:10.860 --> 0:01:15.569 on climate change and green financing. Mr Basri underscores the 0:01:15.580 --> 0:01:20.000 daunting challenges ahead along with the massive domestic external, as 0:01:20.010 --> 0:01:24.870 well as private public multilateral financing mix needed, removing fossil 0:01:24.879 --> 0:01:30.290 fuel subsidy is key despite the obviously uh political impediments 0:01:30.300 --> 0:01:34.459 in place. He then expands on the possible opportunities for 0:01:34.470 --> 0:01:38.050 regional trade and manufacturing in the context of China us 0:01:38.059 --> 0:01:38.610 tension 0:01:39.099 --> 0:01:41.839 ASEAN has got to be united in setting rules for 0:01:41.849 --> 0:01:45.410 trade and commerce. While dealing with this dynamic. According to 0:01:45.419 --> 0:01:45.849 Mr Basri, 0:01:46.870 --> 0:01:49.940 We then have a very nice back and forth uh 0:01:49.949 --> 0:01:54.419 on the investment environment need for a balance between industrial 0:01:54.430 --> 0:01:58.470 policy and private sector incentives. The importance of the services sector, 0:01:58.480 --> 0:02:03.459 e-commerce techno nationalism. 2024 elections and the economic impact of 0:02:03.470 --> 0:02:06.819 camp and finance strength of Indonesia's financial system in light 0:02:06.830 --> 0:02:10.229 of global market sell off and the role of regulatory 0:02:10.240 --> 0:02:13.600 policy to deal with that. Well, here you go with 0:02:13.610 --> 0:02:14.419 the conversation. 0:02:14.910 --> 0:02:19.160 Good afternoon, everybody. Uh lots to talk about. But first, 0:02:19.380 --> 0:02:23.770 Pabu three will spend about 10 minutes talking about the 0:02:23.899 --> 0:02:27.228 ASEAN outlook. And from that, we will take cues on 0:02:27.240 --> 0:02:29.538 some of the current issues that are near and dear 0:02:29.550 --> 0:02:32.758 to our hearts. Please sending, keep sending your questions. I 0:02:32.770 --> 0:02:35.320 have a lot of questions for him too. But first, 0:02:35.330 --> 0:02:38.820 let's hear from him about 10 minutes on the ASEAN outlook. 0:02:38.830 --> 0:02:39.490 Pabu three. 0:02:40.089 --> 0:02:44.460 Thank you very much. Uh timer a very good afternoon 0:02:44.470 --> 0:02:48.169 to all of you. It is a great pleasure to 0:02:48.179 --> 0:02:52.679 be here. I won't use my Power Point presentation because 0:02:53.130 --> 0:02:57.799 when I saw already give all the numbers then perhaps 0:02:57.809 --> 0:03:00.289 let me try to speak in the human language in 0:03:00.300 --> 0:03:02.429 the next 10 minutes. Uh 0:03:03.169 --> 0:03:06.198 I'll give a sort of like a background about the 0:03:06.210 --> 0:03:10.979 ASEAN economic situation in general. But uh I'll be focusing 0:03:10.990 --> 0:03:17.360 on Indonesia after that. Yeah. So let me start by 0:03:17.788 --> 0:03:24.100 putting Indonesian's position when I saw the result of this 0:03:24.110 --> 0:03:29.489 survey was very interesting. I believe that more than 70% 0:03:29.500 --> 0:03:31.039 of people are optimistic. 0:03:31.729 --> 0:03:36.009 So if you ask me, how do I describe Indonesia? 0:03:36.830 --> 0:03:38.199 Let me 0:03:39.600 --> 0:03:46.080 uh share my view. I called Indonesia is a disappointing country. 0:03:47.369 --> 0:03:49.899 It disappoint the optimists 0:03:50.589 --> 0:03:55.240 Who expect that Indonesia will grow by 10% economic growth 0:03:55.419 --> 0:03:58.690 but will also disappoint the pessimists who keep talking that 0:03:58.699 --> 0:04:00.559 this country will collapse every day. 0:04:01.550 --> 0:04:03.940 So the reality is 0:04:04.750 --> 0:04:06.470 we are not doing 0:04:07.610 --> 0:04:09.460 uh you know, 0:04:10.279 --> 0:04:15.490 Extremely well in the sense that the economy grew by 9-10% 0:04:15.500 --> 0:04:19.690 or double-digit growth like some East Asian countries in Asia. 0:04:19.700 --> 0:04:22.769 I will explain to you later on the reasons behind it. 0:04:23.070 --> 0:04:23.649 But 0:04:24.738 --> 0:04:31.079 despite the global situation, Indonesia will do relatively well. Yeah. 0:04:31.309 --> 0:04:35.118 So that is why I call this disappointing country, disappoint 0:04:35.130 --> 0:04:40.779 optimist and also disappoint the pessimists. Now, let, let me 0:04:40.790 --> 0:04:43.928 explain to you about our position in ASEAN. 0:04:44.839 --> 0:04:48.209 If you look at the experience for many ASEAN countries 0:04:48.220 --> 0:04:49.410 compared to 0:04:50.290 --> 0:04:53.410 uh the other part of the world. Uh If you 0:04:53.420 --> 0:04:54.539 look at the 0:04:55.649 --> 0:05:02.579 projection of the global growth for 2023 timer, uh IMF 0:05:02.589 --> 0:05:08.170 projected that the global growth will be around 2.9% whereas 0:05:08.178 --> 0:05:12.450 the advanced economy may grow around maybe 1.3 So the 0:05:12.459 --> 0:05:16.479 source of growth may come from the emerging developing countries 0:05:16.690 --> 0:05:18.320 and ASEAN countries 0:05:18.950 --> 0:05:21.459 Will continue to grow by more than 4%. 0:05:22.230 --> 0:05:25.859 Yeah, it is quite strong. And if you look at Indonesia, 0:05:25.869 --> 0:05:32.690 the projection made by the IMF Indonesia will grow around 4.8%. 0:05:32.940 --> 0:05:36.279 Much better than many countries in the region. 0:05:37.488 --> 0:05:41.329 Yeah. And if you ask me, why is that? I 0:05:41.339 --> 0:05:44.409 said that for two reasons. The first one is good 0:05:44.420 --> 0:05:49.570 policy response as explained by the second one. Good luck. 0:05:49.709 --> 0:05:50.719 Why is that? 0:05:52.100 --> 0:05:56.988 Because the share of Indonesian export to GDP is only 25%. 0:05:57.600 --> 0:06:00.690 So when there is a negative global spill over 0:06:01.790 --> 0:06:06.609 And hit many ASEAN countries, I can imagine timer that 0:06:06.619 --> 0:06:11.760 Singapore because the share export to GDP is about 180%. 0:06:11.809 --> 0:06:15.399 Singapore will be hit severely compared to Indonesia. 0:06:16.089 --> 0:06:19.000 In our case, the export to GDP is only 25%. 0:06:19.579 --> 0:06:22.420 We are less integrated to the global economy. If you 0:06:22.428 --> 0:06:25.440 ask me whether this is something by design, my answer 0:06:25.450 --> 0:06:28.329 is no, we would like to be as competitive as 0:06:28.339 --> 0:06:31.040 Singapore because there are many mistakes that we made. We 0:06:31.049 --> 0:06:34.969 are not as competitive as Singapore but blessing a discuss 0:06:34.980 --> 0:06:37.750 because we are less integrated than the impact of the 0:06:37.760 --> 0:06:41.950 negative global spill over will be relatively limited for us. 0:06:42.220 --> 0:06:44.868 So I can imagine a country like Singapore. Now 0:06:45.290 --> 0:06:50.029 You may grow around zero point something to 1% for 2023, 0:06:50.040 --> 0:06:52.380 Indonesia will grow much higher than that. 0:06:53.470 --> 0:06:59.019 Thailand will be affected. Vietnam will be affected by this 0:06:59.160 --> 0:07:03.589 tightening monetary policy. The decline of the volume of trade, 0:07:03.600 --> 0:07:07.130 et cetera, the impact to Indonesia will be relatively less 0:07:07.140 --> 0:07:11.000 compared to many countries in ASEAN. For that reason, from 0:07:11.010 --> 0:07:16.170 the investor perspective, I would call Indonesia is one of 0:07:16.179 --> 0:07:18.899 the least unattractive countries in the world, 0:07:19.359 --> 0:07:21.880 not because we are doing great but because the other 0:07:21.890 --> 0:07:23.609 part of the world are in trouble. 0:07:24.579 --> 0:07:26.790 So if you are an investor, you are talking about 0:07:26.799 --> 0:07:30.529 relative from the relative perspective, you will continue to invest 0:07:30.540 --> 0:07:35.049 Indonesia because we have growth, we have economic growth. Palu 0:07:35.209 --> 0:07:41.829 mentioned about this huge potential related to the rising middle class. 0:07:42.179 --> 0:07:45.660 We have the market size, we have the resources. So 0:07:45.670 --> 0:07:48.390 from that perspective, I won't be surprised that if the 0:07:48.399 --> 0:07:49.329 economy 0:07:49.839 --> 0:07:55.329 for 2023 for this year, Indonesia will perform better than 0:07:55.339 --> 0:07:58.769 much country in ASEAN. Yeah. And then, 0:07:59.619 --> 0:08:02.660 but the other side of the coin, when the global 0:08:02.670 --> 0:08:05.880 economy starts to recover, then 0:08:06.640 --> 0:08:11.730 Singapore will probably will recover faster than us because they 0:08:11.739 --> 0:08:18.239 are more integrated compared to Indonesian economy. Now many people 0:08:18.760 --> 0:08:23.040 started to worry about the SI PB the Silicon Valley 0:08:23.170 --> 0:08:24.010 uh Bank. 0:08:24.309 --> 0:08:26.250 The question is whether there will be a sort of 0:08:26.260 --> 0:08:30.339 a systemic global risk. Again when I look at the data, 0:08:30.480 --> 0:08:33.750 the exposure to the Indonesian economy in terms of this 0:08:33.760 --> 0:08:37.080 banking is also relatively less. So that is why if 0:08:37.090 --> 0:08:40.289 you look at on the financial sector until today. The 0:08:40.299 --> 0:08:46.229 impact is relatively limited compared to many countries like in Europe. 0:08:46.969 --> 0:08:48.500 So talking from this, 0:08:49.130 --> 0:08:54.619 you know, comparison of Indonesia to many ASEAN countries, I 0:08:54.630 --> 0:09:00.030 would say that Indonesia will perform better than many ASEAN countries. 0:09:00.210 --> 0:09:03.219 If you're talking about the 2023 0:09:04.820 --> 0:09:08.049 The only thing that we need to worry about, we 0:09:08.059 --> 0:09:11.909 can have a discussion about a timer. The last time 0:09:11.919 --> 0:09:15.340 I was in Davos at the World Economic Forum. Larry 0:09:15.349 --> 0:09:18.299 Summers mentioned about the possibility of the Fed Fund rate 0:09:18.309 --> 0:09:22.190 may go to 6% if the us economy remains strong. 0:09:23.210 --> 0:09:26.619 So the implication is I do believe that the central bank, 0:09:26.630 --> 0:09:30.099 the bank Indonesia need to maintain the parity with the fed. 0:09:31.299 --> 0:09:35.108 Yeah, if that's the case, then the implication, we will 0:09:35.119 --> 0:09:36.789 see that there will be a sort of like a 0:09:36.799 --> 0:09:42.140 tightening cycle also in Indonesia. But because the share of 0:09:42.150 --> 0:09:47.270 investment to GDP is relatively small compared to the consumption, 0:09:47.280 --> 0:09:50.270 because our share consumption to GDP is about 55%,, 0:09:51.059 --> 0:09:54.989 Then the economy will remain to grow by about 4.8%. 0:09:55.000 --> 0:09:55.750 For that reason, 0:09:56.489 --> 0:09:59.359 The share export to GDP is on 25%. 0:10:00.010 --> 0:10:03.219 A couple of things that we need to anticipate is 0:10:03.229 --> 0:10:08.978 the declining in energy commodity prices. This definitely will hit 0:10:09.320 --> 0:10:12.700 the Indonesian export. And if you look at the data 0:10:13.400 --> 0:10:17.718 on the fourth quarter, we have seen the export is 0:10:17.729 --> 0:10:18.609 slowing down. 0:10:19.400 --> 0:10:21.929 And if you look at the import, the reasons why 0:10:21.940 --> 0:10:25.010 we are running a current account surplus because the import 0:10:25.020 --> 0:10:27.510 dropped more significantly than our export. 0:10:28.169 --> 0:10:31.840 Yeah, 90% of our import is made up of capital 0:10:31.849 --> 0:10:33.340 goods and raw materials. 0:10:34.159 --> 0:10:36.609 So if the imports start to slow down, 0:10:37.260 --> 0:10:41.650 then we will see six months from now, the investment 0:10:41.659 --> 0:10:42.900 will also slow down. 0:10:43.690 --> 0:10:47.650 Yeah, under this kind of situation, it is inevitable, the 0:10:47.659 --> 0:10:51.500 economy will slow down. But I do believe that the 0:10:51.510 --> 0:10:55.750 impact will be relatively limited again because that's, you know, 0:10:55.760 --> 0:11:01.140 the huge percentage of the consumption. Now let me talk 0:11:01.150 --> 0:11:06.589 to the other issue that mentioned about the climate and 0:11:06.630 --> 0:11:09.479 mostly you know, the the the climate change 0:11:10.130 --> 0:11:14.939 issue related to the ASEAN countries. I think the biggest 0:11:14.950 --> 0:11:17.619 challenge for a country like Indonesia and many countries in 0:11:17.630 --> 0:11:20.699 ASEAN as well is about climate finance. 0:11:21.739 --> 0:11:23.349 Yeah, it's about climate finance 0:11:24.890 --> 0:11:29.809 mentioned about jet P $20 billion money available. 0:11:31.210 --> 0:11:32.200 I'm sure that 0:11:33.190 --> 0:11:38.419 any ASEAN countries will commit to achieve this net zero emissions. 0:11:39.289 --> 0:11:43.880 In our case, we already sort of like put our 0:11:43.890 --> 0:11:48.590 target more ambitious than before. I was involved in the 0:11:48.599 --> 0:11:52.729 independent level expert group for the COP 27. But one 0:11:52.739 --> 0:11:56.549 thing that I have to say that climate financing for 0:11:56.559 --> 0:11:59.479 the energy transition, this is not an easy thing 0:12:00.090 --> 0:12:02.909 because we need to mobilize fund probably about 0:12:04.039 --> 0:12:07.950 two or 3% of the global GDP. We are talking 0:12:07.960 --> 0:12:14.130 about $100 billion. The question is how do ASEAN countries 0:12:14.140 --> 0:12:15.729 including Indonesia, 0:12:16.530 --> 0:12:20.319 you know, can mobilize fund related to this? My response, 0:12:20.330 --> 0:12:23.559 my answers to it is there will be a combination 0:12:23.570 --> 0:12:26.559 between domestic resource management, 0:12:27.250 --> 0:12:33.090 external and the fiscal framework to attract the philanthropy and 0:12:33.099 --> 0:12:36.640 the private sector because there is no way that this 0:12:36.650 --> 0:12:40.960 financing for climate could be entirely financed simply by the 0:12:40.969 --> 0:12:44.260 government spending. So like in the case of Indonesia, if 0:12:44.270 --> 0:12:49.590 you look at the composition, Indonesia probably need about $28 0:12:49.789 --> 0:12:50.280 billion 0:12:50.859 --> 0:12:53.109 for the issue of the climate finance. If you look 0:12:53.119 --> 0:12:54.750 at the allocation of budget 0:12:55.479 --> 0:12:59.858 In our total government budget, in terms of this climate 0:12:59.880 --> 0:13:04.359 is still relatively limited, it's only about 1%. Yeah, so 0:13:04.369 --> 0:13:06.989 it's still relatively limited. But there are a couple of 0:13:07.000 --> 0:13:10.530 things that the government can do. The first one is 0:13:10.539 --> 0:13:11.718 the budget allocation. 0:13:12.460 --> 0:13:13.869 I think the government 0:13:14.750 --> 0:13:18.820 Did a good job last September when they adjusted the 0:13:18.830 --> 0:13:23.239 fuel price by about 30% at that time. Because without 0:13:23.250 --> 0:13:27.449 adjusting the fuel price, then the relative price between fossil 0:13:27.460 --> 0:13:32.239 fuel and renewable energy will not attract the investment into 0:13:32.250 --> 0:13:35.200 renewable energy. So the first things that the government needs 0:13:35.210 --> 0:13:39.780 to do is to adjust the fuel price, reduce the 0:13:39.789 --> 0:13:42.059 fossil fuel subsidy. 0:13:42.650 --> 0:13:45.880 But the thing is it's easier to be said than 0:13:45.890 --> 0:13:46.940 done because 0:13:47.820 --> 0:13:51.690 nine months from now, it's election, 12 months from now 0:13:51.700 --> 0:13:55.219 it is an election. So we probably have to wait. Yeah, 0:13:55.469 --> 0:13:58.659 the other possibility is to mobilize one through the 0:13:59.729 --> 0:14:02.659 carbon tax, the pean tax, 0:14:03.690 --> 0:14:07.710 this is from the domestic resources. The second one is 0:14:07.719 --> 0:14:11.500 probably this has been discussed in the in the World 0:14:11.510 --> 0:14:16.309 Bank and IMF as well about how to expand the 0:14:16.320 --> 0:14:18.679 concessional loan. Yeah, 0:14:20.010 --> 0:14:22.880 the S D R from the IMF has been sort 0:14:22.890 --> 0:14:27.239 of like, you know, extended to the Regional Development Bank 0:14:27.250 --> 0:14:30.669 to support the climate finance and this all this money 0:14:30.679 --> 0:14:34.380 can be used to the risking to invite the philanthropy 0:14:34.390 --> 0:14:40.049 and private sector to you know, to support the climate 0:14:40.059 --> 0:14:41.719 finance for the energy transition. 0:14:42.369 --> 0:14:46.950 Before I conclude timer, then we can have a discussion 0:14:46.960 --> 0:14:47.479 about it. 0:14:48.630 --> 0:14:52.969 The other important thing that I would like to touch 0:14:52.979 --> 0:14:56.700 related to the Indonesia and ASEAN issues is about 0:14:58.020 --> 0:15:01.789 us, China tension and R ce P 0:15:04.299 --> 0:15:07.630 I think this is my personal opinion, of course, 0:15:08.599 --> 0:15:11.250 since I'm no longer in the government, I can talk 0:15:11.260 --> 0:15:13.729 based on my own opinion. 0:15:14.349 --> 0:15:18.119 Seems to me that ASEAN countries, we don't have the 0:15:18.130 --> 0:15:20.479 luxury to choose between us and China, 0:15:22.210 --> 0:15:24.929 it is very difficult. But I can see in the 0:15:24.940 --> 0:15:28.479 case of the tension between us and China, this is 0:15:28.489 --> 0:15:32.359 the only issue that both Republican and Democrats are bipartisan. 0:15:33.270 --> 0:15:36.719 So looking at this, maybe this tension will continue for 0:15:36.729 --> 0:15:37.419 quite some time. 0:15:38.400 --> 0:15:41.859 Yeah, we have to stay this, this issue will stay 0:15:41.869 --> 0:15:42.479 with us. 0:15:43.239 --> 0:15:46.369 So the question is what can we do what the 0:15:46.380 --> 0:15:51.770 Indonesian and Asean countries can respond to it. Here is the, 0:15:51.780 --> 0:15:54.690 the idea of the R CE P is very important. 0:15:54.700 --> 0:15:59.239 I recall back in 2011, when Indonesia was the chair 0:15:59.250 --> 0:16:00.570 of the ASEAN. At the time, 0:16:02.109 --> 0:16:07.539 we realize that it's not possible for any individual ASEAN 0:16:07.700 --> 0:16:10.799 countries to deal bilaterally with China. 0:16:12.200 --> 0:16:14.669 It is very difficult. So one way to do it 0:16:14.679 --> 0:16:19.400 is we have to take ASEAN as a single entity. 0:16:19.650 --> 0:16:23.580 So ASEAN plus China ASEAN plus Japan, ASEAN plus Korea, 0:16:23.590 --> 0:16:27.280 et cetera. So that is why this R C become 0:16:27.289 --> 0:16:31.159 very important, not only from the economic perspective, but also 0:16:31.169 --> 0:16:35.260 from the geopolitical perspective. And somehow this will reflect the 0:16:35.400 --> 0:16:39.590 ASEAN position related to the US China tension. The good 0:16:39.599 --> 0:16:41.710 news is with the US China tension. 0:16:41.919 --> 0:16:45.539 We will see some reallocation from China into some Southeast 0:16:45.549 --> 0:16:48.969 Asian economy to enter the market, the US market, 0:16:49.799 --> 0:16:52.539 you know, from the back door. And I think countries 0:16:52.549 --> 0:16:56.630 like Vietnam already take the advantage. And if the government 0:16:56.640 --> 0:17:00.700 could pass the bill, the emergency state law regarding the 0:17:00.710 --> 0:17:04.599 omnibus law, then we do hope that the investment will 0:17:04.609 --> 0:17:07.859 also come to Indonesia. So I leave it up here, 0:17:07.869 --> 0:17:10.649 timer and certainly be happy for the conversation. Thank you 0:17:10.660 --> 0:17:11.409 very much. 0:17:11.660 --> 0:17:14.170 Thank you very much. Past three, I want to stay, 0:17:17.420 --> 0:17:20.239 I want to stay with ASAP. And you pointed out 0:17:20.250 --> 0:17:23.589 a very important issue that is close to our heart DB, 0:17:23.599 --> 0:17:27.930 sitting in Singapore with operations in China. And ASEAN is 0:17:27.939 --> 0:17:31.349 trying to understand that under R E P. And the 0:17:31.359 --> 0:17:36.270 context of the China U conflict would ASEAN economies be 0:17:36.280 --> 0:17:38.310 able to attract Chinese capital 0:17:38.630 --> 0:17:41.639 because under RCEP, you can have 40% value added in 0:17:41.650 --> 0:17:44.949 your home country and then produce the rest in a 0:17:44.959 --> 0:17:48.930 partner RCEP country and export it under that country's manufacturer name. 0:17:49.160 --> 0:17:52.060 So a Chinese company can come to Indonesia with 40% 0:17:52.069 --> 0:17:52.698 value added 0:17:53.430 --> 0:17:57.020 build here, assemble complete here and export. 0:17:57.689 --> 0:18:01.179 You were there during the G-20. Is your sense that 0:18:01.189 --> 0:18:04.449 Chinese capital will play a large role in Indonesia's development 0:18:04.459 --> 0:18:05.229 going forward? 0:18:05.689 --> 0:18:07.699 Um This is a very good question. 0:18:08.689 --> 0:18:12.760 Uh We will see some of it but not as 0:18:12.770 --> 0:18:16.770 much as to Vietnam because the the country that the 0:18:16.780 --> 0:18:19.329 one who really take the benefit of it. I think 0:18:19.339 --> 0:18:21.939 so far is Vietnam. Yeah 0:18:22.530 --> 0:18:26.170 and the other country that also take the benefit it 0:18:26.180 --> 0:18:30.569 is outside the ASEAN is Bangladesh because if you look 0:18:30.579 --> 0:18:33.849 at the R M G, the ready made garment, most 0:18:33.859 --> 0:18:37.510 of the companies in China actually move it to Bangladesh. 0:18:37.520 --> 0:18:39.469 But I do believe one of the reasons behind it 0:18:39.479 --> 0:18:43.189 is because the investors are waiting for the omnibus allow 0:18:43.530 --> 0:18:46.020 and hopefully you know this 0:18:46.640 --> 0:18:52.680 emergency state law about this, this p about this omnibus 0:18:52.880 --> 0:18:55.479 will be approved by the parliament soon. And after that, 0:18:55.489 --> 0:18:59.209 we will see that more capital come into Indonesia, 0:19:00.010 --> 0:19:05.140 you saw in Park Luo's presentation, the dynamics around the 0:19:05.150 --> 0:19:08.400 E V and the battery ecosystem. And again, just going 0:19:08.410 --> 0:19:10.199 back to China and Chinese investment. 0:19:10.540 --> 0:19:13.310 The Chinese are very keen on finding areas where they 0:19:13.319 --> 0:19:16.458 can get the backward linkage. Um And you may have 0:19:16.469 --> 0:19:19.920 even noticed in the pas presentation, the two companies he 0:19:19.930 --> 0:19:22.680 had one was a Korean company, one was a Chinese company. 0:19:22.770 --> 0:19:27.910 So on this area around backward linkage of metals mining 0:19:28.050 --> 0:19:30.979 E V. What's your sense of both M N C 0:19:30.989 --> 0:19:33.349 Western M N C as well as Chinese investment. Uh 0:19:33.359 --> 0:19:34.969 time I was 0:19:35.739 --> 0:19:38.708 I was at MFI was the one who 0:19:39.760 --> 0:19:42.770 implement the idea about this 0:19:43.670 --> 0:19:47.930 Uh this incentivized for the export at that time was 0:19:47.939 --> 0:19:52.910 back 2014. So we introduced a policy that we uh 0:19:52.920 --> 0:19:58.958 if companies export the raw materials, they need to pay 0:19:58.969 --> 0:20:03.510 a prohibitive tax. So that's the the the the uh 0:20:03.520 --> 0:20:07.169 the the the first move. So with this kind of 0:20:07.180 --> 0:20:10.959 policy would call it it downs streaming policy. You will 0:20:10.969 --> 0:20:11.899 see the impact 0:20:12.280 --> 0:20:16.510 on the you know the increase the value of export, 0:20:16.520 --> 0:20:21.688 et cetera. The investment coming in Indonesia, even the Economist magazine, 0:20:21.699 --> 0:20:23.409 praise us related to that. 0:20:24.089 --> 0:20:24.780 But 0:20:26.000 --> 0:20:30.290 I think we need also to be very careful as 0:20:30.300 --> 0:20:34.410 an economist if the relative price 0:20:35.020 --> 0:20:36.349 very high 0:20:37.069 --> 0:20:41.479 because this export ban, then the implication is there will 0:20:41.489 --> 0:20:45.010 be an innovation in another country to come up with 0:20:45.020 --> 0:20:48.599 a new product. So we can learn the experience from 0:20:48.609 --> 0:20:50.319 the rubber, 0:20:50.910 --> 0:20:55.060 Indonesia produced rubber and rubber price was very high. And 0:20:55.069 --> 0:20:58.139 as a result there was a synthetic rubber at the time. 0:20:58.300 --> 0:21:02.459 If you recall, when the Middle East began to embargo 0:21:02.469 --> 0:21:06.319 oil back in the seventies, then shale gas started to 0:21:06.329 --> 0:21:07.099 kick in, 0:21:07.339 --> 0:21:10.160 you know, renewable energies start to kick in. So my 0:21:10.170 --> 0:21:14.119 response to it, this is really the opportunity for us 0:21:14.130 --> 0:21:18.709 but needs to be combined with the competitive policy as well. 0:21:18.719 --> 0:21:23.339 Indonesia should be part of this global supply chain. So 0:21:23.349 --> 0:21:27.629 I don't know, I'm not, I'm not an expert about battery, 0:21:27.650 --> 0:21:30.770 but I won't be surprised if in the future, 0:21:31.270 --> 0:21:33.780 you know, one of the elements of battery is no 0:21:33.790 --> 0:21:38.089 longer only about lithium, but something else because once the 0:21:38.099 --> 0:21:41.379 relative price is too high, then there will be an 0:21:41.390 --> 0:21:46.239 incentive to do an innovation. That's basically how the market works. 0:21:46.250 --> 0:21:49.879 So for Indonesia, while people are still preparing for the 0:21:49.890 --> 0:21:53.369 new innovation, we need to do something to improve the 0:21:53.380 --> 0:21:55.659 quality and also the competitiveness. 0:21:57.020 --> 0:22:00.880 It's very fashionable these days for governments to talk about 0:22:00.890 --> 0:22:04.979 manufacturing and jobs around manufacturing. You see in the US 0:22:04.989 --> 0:22:08.219 the build back better bill, even the Inflation Reduction Act 0:22:08.229 --> 0:22:10.719 has a lot of buy American component. The idea is 0:22:10.729 --> 0:22:13.430 to bring jobs back to America. You see in India, 0:22:13.439 --> 0:22:16.670 the whole making India initiative that has been pursued over 0:22:16.680 --> 0:22:19.750 the last half a decade. It's again about manufacturing. And 0:22:19.760 --> 0:22:22.150 as we have heard from Palau and we have heard 0:22:22.160 --> 0:22:24.079 from others in the government of Indonesia, there is a 0:22:24.089 --> 0:22:25.169 desire to do that 0:22:25.810 --> 0:22:28.979 But what about the service sector? This country is increasingly 0:22:28.989 --> 0:22:34.219 service friendly. We see tremendous uh penetration of social media 0:22:34.229 --> 0:22:39.500 and outsourcing capabilities. So why are we always fixated on 0:22:39.510 --> 0:22:41.560 manufacturing jobs and not services 0:22:41.569 --> 0:22:42.159 jobs? 0:22:43.140 --> 0:22:45.849 This is a very good question. Let me respond to 0:22:45.859 --> 0:22:49.270 the manufacturing first as well. Yeah, I think 0:22:50.089 --> 0:22:54.290 we are talking about the returning of the industrial policy now. Yeah, 0:22:54.650 --> 0:22:58.550 somehow this is good, but we need to be very 0:22:58.560 --> 0:23:03.270 careful on this as well because in Indonesia, let me 0:23:03.280 --> 0:23:05.629 be frank and honest with you, we had an experience 0:23:05.640 --> 0:23:08.819 in the past that government is very bad in picking 0:23:08.829 --> 0:23:12.099 winner but losers are very good in picking government. So 0:23:12.109 --> 0:23:14.319 you start with the industrial policy, 0:23:14.569 --> 0:23:18.079 there will be an implication that probably some companies that 0:23:18.089 --> 0:23:21.709 politically very well connected with the government will take the 0:23:21.719 --> 0:23:22.640 advantage of it. 0:23:23.229 --> 0:23:27.930 Yeah, so this industrial policy can be justified as long 0:23:27.939 --> 0:23:32.139 as you ensure about the transparency about the governance, you know, 0:23:32.150 --> 0:23:36.800 et cetera. Now talking about the surfaces sector. One thing 0:23:36.810 --> 0:23:41.880 that perhaps if you're talking about surfaces basically in Indonesia, 0:23:41.890 --> 0:23:44.739 in terms of the surfaces we really lack behind because 0:23:44.750 --> 0:23:48.500 the limited quality of the human capital, I just came 0:23:48.510 --> 0:23:52.420 back from India last week for the G-20. 0:23:52.800 --> 0:23:54.129 And I can see 0:23:54.770 --> 0:23:58.780 like if you're talking about bangalore. Yeah, I would imagine 0:23:58.790 --> 0:24:01.810 correct me if I'm wrong, I'm not an expert about India, 0:24:02.040 --> 0:24:07.229 but Bangalore will not exist without Silicon Valley because so 0:24:07.239 --> 0:24:12.510 many Indus uh Indian diaspora in in Silicon Valley, they 0:24:12.520 --> 0:24:17.040 have the network, et cetera, Indonesia, we still not on 0:24:17.050 --> 0:24:21.020 that stage. So that is why in terms of this, 0:24:21.400 --> 0:24:24.040 you know, services sector, etcetera, I think 0:24:24.459 --> 0:24:28.359 the sort of like to be part of this the 0:24:28.369 --> 0:24:32.589 global supply chain of production network is rather different. Yeah, 0:24:32.969 --> 0:24:36.369 so this will take some time. But one thing that 0:24:36.380 --> 0:24:39.469 is also important but I know this is very, very 0:24:39.479 --> 0:24:44.819 sensitive and controversial is about e-commerce. This is something that 0:24:44.829 --> 0:24:48.889 we probably have to look at in the future. Because 0:24:48.900 --> 0:24:50.369 if every country, 0:24:50.650 --> 0:24:54.780 yeah in the world try to sort of like do 0:24:55.000 --> 0:24:59.540