1 00:00:05,960 --> 00:00:08,779 Speaker 1: Welcome to COI Time, a podcast series on markets and 2 00:00:08,779 --> 00:00:12,670 Speaker 1: economies from DBS Group Research. I'm Tabei, chief economist. Welcome 3 00:00:12,670 --> 00:00:17,430 Speaker 1: you to our 154th episode. This episode was recorded in 4 00:00:17,430 --> 00:00:22,790 Speaker 1: Jakarta at the DBS Asia Insights Conference 2025 on the 5 00:00:22,790 --> 00:00:26,229 Speaker 1: 21st of May. I had the privilege of discussing Indonesia's 6 00:00:26,229 --> 00:00:28,389 Speaker 1: near and medium term outlook with Kati Basri. 7 00:00:28,780 --> 00:00:33,540 Speaker 1: Indonesia's former finance minister. In this conversation, Mr. Basri talks 8 00:00:33,540 --> 00:00:37,619 Speaker 1: about Indonesia's strategy during a time of geoeconomic fragmentation, the 9 00:00:37,619 --> 00:00:40,700 Speaker 1: ability of the economy to absorb shocks, what it would 10 00:00:40,700 --> 00:00:44,580 Speaker 1: take to reach 8% growth, the challenges to education, health, 11 00:00:44,590 --> 00:00:48,880 Speaker 1: and infrastructure, sectoral development strategies in place, and the future 12 00:00:48,880 --> 00:00:51,020 Speaker 1: of jobs amid tech disruption. 13 00:00:51,490 --> 00:00:55,750 Speaker 1: And erudite speaker, Mr. Bastri's insights are invaluable to those 14 00:00:55,750 --> 00:01:01,950 Speaker 1: following Southeast Asia's most populous economy. Let's now hear from Mr. Bastri. Basri, 15 00:01:02,310 --> 00:01:04,029 Speaker 1: welcome to our program. 16 00:01:04,709 --> 00:01:06,470 Speaker 2: Hi, Dayer, thanks for having me. 17 00:01:06,669 --> 00:01:09,110 Speaker 1: I remember 2 years ago, we did something like this, 18 00:01:09,230 --> 00:01:10,260 Speaker 1: so this is round 2 19 00:01:11,709 --> 00:01:12,750 Speaker 2: in a different situation, 20 00:01:13,059 --> 00:01:13,470 Speaker 1: slightly 21 00:01:13,470 --> 00:01:16,989 Speaker 1: different situation. I went back to our conversation from 2 22 00:01:16,989 --> 00:01:17,550 Speaker 1: years ago. 23 00:01:18,080 --> 00:01:23,540 Speaker 1: And I remember you began that conversation by describing Indonesia 24 00:01:23,540 --> 00:01:29,080 Speaker 1: as a disappointing country. It disappoints the ones who think 25 00:01:29,300 --> 00:01:32,300 Speaker 1: growth is about to collapse. It disappoints the one who 26 00:01:32,300 --> 00:01:35,059 Speaker 1: think that it is just about to take off. Very 27 00:01:35,059 --> 00:01:39,179 Speaker 1: different circumstances now. We just heard from Park Haim. We 28 00:01:39,180 --> 00:01:41,730 Speaker 1: have been hearing from the government about a very ambitious 29 00:01:41,730 --> 00:01:42,459 Speaker 1: growth agenda. 30 00:01:43,139 --> 00:01:45,500 Speaker 1: I want to talk about that later. I want to 31 00:01:45,500 --> 00:01:48,300 Speaker 1: first talk about the global environment. 32 00:01:49,129 --> 00:01:54,160 Speaker 1: Reciprocal tariff, country by country bilateral discussions with Donald Trump 33 00:01:54,160 --> 00:01:57,089 Speaker 1: and his team about how to get some relief. We're 34 00:01:57,089 --> 00:01:59,559 Speaker 1: in a bit of a pause, but I'm not too 35 00:01:59,559 --> 00:02:02,629 Speaker 1: sure how long the pause will last. What's your assessment 36 00:02:02,629 --> 00:02:04,569 Speaker 1: of this whole trade war situation? 37 00:02:05,489 --> 00:02:11,130 Speaker 2: Well, let me, perhaps let me start by putting the layout, 38 00:02:11,210 --> 00:02:14,610 Speaker 2: the global context first. I think if you look at 39 00:02:14,610 --> 00:02:17,929 Speaker 2: about the issue of the trade balance, you are an economist, timer. 40 00:02:18,788 --> 00:02:23,119 Speaker 2: The trade balance is a reflection of the saving investment gap. Yeah, 41 00:02:23,279 --> 00:02:24,899 Speaker 2: so the way I look at it. 42 00:02:25,809 --> 00:02:29,589 Speaker 2: If this Trump administration would like to introduce the so-called 43 00:02:29,589 --> 00:02:33,910 Speaker 2: uh the tax cut, this will widen the, the trade deficit. 44 00:02:34,500 --> 00:02:38,410 Speaker 2: And if the way they address the trade deficit by 45 00:02:38,699 --> 00:02:42,100 Speaker 2: increasing tariff, I don't think that this 46 00:02:42,850 --> 00:02:46,788 Speaker 2: This, this policy will entirely address this issue of district balance. 47 00:02:47,130 --> 00:02:50,490 Speaker 2: What is happening in the US that you would expect 48 00:02:50,490 --> 00:02:52,649 Speaker 2: that's probably there is a risk of the inflationary. 49 00:02:53,559 --> 00:02:57,508 Speaker 2: Um, the slowdown of the economic growth. So under this 50 00:02:57,508 --> 00:02:59,710 Speaker 2: kind of situation, it's not easy for the Fed to 51 00:02:59,710 --> 00:03:03,299 Speaker 2: make a decision because the probability of recession will probably 52 00:03:03,300 --> 00:03:05,589 Speaker 2: will increase. At the same time there is a risk 53 00:03:05,589 --> 00:03:08,490 Speaker 2: of the inflationary whether they have to cut the rate 54 00:03:08,750 --> 00:03:10,770 Speaker 2: or they have to increase the rate, they are really 55 00:03:10,770 --> 00:03:11,978 Speaker 2: at a crossroads now. 56 00:03:13,050 --> 00:03:16,580 Speaker 2: Of course, this will have an implication to the global trade. Yeah, 57 00:03:16,649 --> 00:03:19,929 Speaker 2: I can imagine that export in many. 58 00:03:20,839 --> 00:03:24,440 Speaker 2: You know, emerging developing economies will be affected. But now 59 00:03:24,440 --> 00:03:27,198 Speaker 2: let me talk about what will be the implication for Indonesia. 60 00:03:28,050 --> 00:03:29,899 Speaker 2: Um, the way I look at it. 61 00:03:32,240 --> 00:03:37,259 Speaker 2: The share of export Indonesia to GDP is only 25%, right? 62 00:03:37,570 --> 00:03:41,080 Speaker 2: And if you look at the share of export, Indonesia 63 00:03:41,080 --> 00:03:44,320 Speaker 2: export to US is only 10%. So if you look 64 00:03:44,320 --> 00:03:49,339 Speaker 2: at the direct impact, perhaps the direct impact to Indonesian GDP, 65 00:03:49,869 --> 00:03:54,080 Speaker 2: it's probably about 2.5%. So the impact will be relatively limited. 66 00:03:54,669 --> 00:03:59,789 Speaker 2: So I'm, I'm quite confident that this year, the economic 67 00:03:59,789 --> 00:04:03,139 Speaker 2: growth in Isia will be faster than Singapore. Why is that? 68 00:04:03,789 --> 00:04:06,789 Speaker 2: Because in the case of Singapore, your export to GDP 69 00:04:06,789 --> 00:04:08,190 Speaker 2: is about 120%. 70 00:04:09,169 --> 00:04:12,110 Speaker 2: 180 actually, and if you look at even Vietnam is 71 00:04:12,110 --> 00:04:17,250 Speaker 2: about almost 90%. So under this kind of situation, Indonesia 72 00:04:17,619 --> 00:04:21,820 Speaker 2: will still maintain the relatively high growth in Southeast Asia. 73 00:04:22,260 --> 00:04:24,579 Speaker 2: Of course, the Indonesian economy will be affected by. 74 00:04:25,730 --> 00:04:29,329 Speaker 2: My estimate is probably about 0.5%, so if the baseline 75 00:04:29,329 --> 00:04:32,890 Speaker 2: is about 5%, so probably we are, you know, we 76 00:04:32,890 --> 00:04:37,678 Speaker 2: are experiencing the situation about 4.5% of the economic growth, uh, 77 00:04:37,730 --> 00:04:41,488 Speaker 2: this year. It's not easy, but the good news is. 78 00:04:43,290 --> 00:04:46,558 Speaker 2: I would call Indonesia is the least, one of the 79 00:04:46,559 --> 00:04:49,919 Speaker 2: least unattractive countries in the world, not because we are 80 00:04:49,920 --> 00:04:51,969 Speaker 2: doing great, but because the other part of the world 81 00:04:51,970 --> 00:04:54,989 Speaker 2: are in trouble. So if you are an investor, you're 82 00:04:54,988 --> 00:04:58,678 Speaker 2: talking about you're not looking for perfection, you are looking 83 00:04:58,678 --> 00:05:04,238 Speaker 2: for a relative return, and Indonesia is still an interesting 84 00:05:04,238 --> 00:05:08,920 Speaker 2: country to invest. Yeah. And then in addition to that, 85 00:05:09,529 --> 00:05:12,109 Speaker 2: With the risk of the trade war between US and China, 86 00:05:12,410 --> 00:05:14,450 Speaker 2: I won't be surprised if there is a sort of 87 00:05:14,450 --> 00:05:18,390 Speaker 2: like relocation of the production base from China to Southeast 88 00:05:18,390 --> 00:05:19,200 Speaker 2: Asian countries. 89 00:05:20,220 --> 00:05:23,100 Speaker 2: Maybe to Vietnam, maybe to Indonesia, but the way I 90 00:05:23,100 --> 00:05:25,459 Speaker 2: look at it, if you look at the trade surplus 91 00:05:25,459 --> 00:05:29,570 Speaker 2: between Vietnam and the US, it's about $120 billion US dollars, 92 00:05:30,339 --> 00:05:33,660 Speaker 2: whereas for Indonesia it's about $19 billion US dollars. So 93 00:05:33,660 --> 00:05:36,220 Speaker 2: for us it's relatively easy to settle this issue with 94 00:05:36,220 --> 00:05:39,459 Speaker 2: the US, whereas in the case of Vietnam, if they 95 00:05:39,459 --> 00:05:41,940 Speaker 2: want to settle this issue of the trade surplus, they 96 00:05:41,940 --> 00:05:46,130 Speaker 2: probably have to increase their import about 11 to 12 times. 97 00:05:46,339 --> 00:05:49,700 Speaker 2: It's not easy. Yeah, so that is why I can see. 98 00:05:50,660 --> 00:05:55,488 Speaker 2: The possibilities of relocation from China into Indonesia provided the 99 00:05:55,488 --> 00:06:00,010 Speaker 2: government would implement the economic deregulation. The good news is 100 00:06:00,010 --> 00:06:05,559 Speaker 2: President Prabowo already announced last April that government is committed 101 00:06:05,839 --> 00:06:08,890 Speaker 2: to economic deregulation. I hope I respond to your question. 102 00:06:10,309 --> 00:06:15,190 Speaker 1: I stay with the global agenda a little longer, um. 103 00:06:16,059 --> 00:06:19,750 Speaker 1: To your point that if the US has an inflation problem, 104 00:06:20,178 --> 00:06:22,500 Speaker 1: while the rest of the world does not, if the 105 00:06:22,500 --> 00:06:26,130 Speaker 1: US has a savings investment gap problem which might be 106 00:06:26,130 --> 00:06:29,049 Speaker 1: exacerbated if there is a tax cut, which looks likely, 107 00:06:29,299 --> 00:06:31,739 Speaker 1: while the rest of the world really does not in 108 00:06:31,738 --> 00:06:34,980 Speaker 1: a situation like that, where do you see the dollar 109 00:06:34,980 --> 00:06:37,619 Speaker 1: go and then therefore what does it mean for RIA? 110 00:06:37,940 --> 00:06:40,299 Speaker 1: Where do you see US interest go and what does 111 00:06:40,299 --> 00:06:42,529 Speaker 1: it mean for Indonesia's interest rates? 112 00:06:42,700 --> 00:06:43,089 Speaker 2: Very good 113 00:06:43,089 --> 00:06:44,019 Speaker 2: question because. 114 00:06:45,100 --> 00:06:48,670 Speaker 2: When you know before the reciprocal tariff. 115 00:06:49,709 --> 00:06:54,039 Speaker 2: I was expecting with the universal tariffs about 10% when 116 00:06:54,170 --> 00:06:59,920 Speaker 2: President Trump came to power. I was expecting that dollar 117 00:06:59,920 --> 00:07:01,940 Speaker 2: will continue to be the safe haven asset. 118 00:07:02,829 --> 00:07:06,700 Speaker 2: Yeah, but it seems to me that after the reciprocal tariff, 119 00:07:07,350 --> 00:07:10,670 Speaker 2: there are some concerns from the financial market about the 120 00:07:10,670 --> 00:07:13,100 Speaker 2: role of dollar to be the. 121 00:07:14,220 --> 00:07:18,670 Speaker 2: The only one safe haven asset. So if you look at, I'm, 122 00:07:18,750 --> 00:07:21,910 Speaker 2: I'm not saying that this, you know, will happen in 123 00:07:21,910 --> 00:07:25,290 Speaker 2: the extreme case radically, but there is a tendency of 124 00:07:25,290 --> 00:07:29,940 Speaker 2: the so-called the de-dollarization at this moment. And for that reason, 125 00:07:30,190 --> 00:07:33,149 Speaker 2: we can see the depreciation of the US dollar against 126 00:07:33,149 --> 00:07:37,429 Speaker 2: major currency, including the rupiah. Yeah, even though nowadays that 127 00:07:37,429 --> 00:07:41,709 Speaker 2: the rupiah is still about $16,400. So the way I 128 00:07:41,709 --> 00:07:42,260 Speaker 2: look at it. 129 00:07:43,170 --> 00:07:45,000 Speaker 2: Timer under this kind of situation. 130 00:07:45,690 --> 00:07:49,160 Speaker 2: I wouldn't be surprised if in the medium term we 131 00:07:49,160 --> 00:07:52,470 Speaker 2: will see the depreciation of the US dollar against major currency, 132 00:07:52,799 --> 00:07:54,720 Speaker 2: so there is room for a bank in Indonesia to 133 00:07:54,720 --> 00:07:55,160 Speaker 2: cut the rate. 134 00:07:56,130 --> 00:07:58,269 Speaker 2: Yeah, and then I think this. 135 00:07:59,320 --> 00:08:03,040 Speaker 2: Just right now today, right, the, the Bank in Indonesia 136 00:08:03,040 --> 00:08:05,600 Speaker 2: cut the 25 basis points. I can see more room 137 00:08:05,600 --> 00:08:08,600 Speaker 2: because if you look at our inflation, it's about less 138 00:08:08,600 --> 00:08:12,119 Speaker 2: than 3% now, 2.5%. If the tendency of the US 139 00:08:12,119 --> 00:08:16,549 Speaker 2: dollar is depreciate against major currency, so I don't think, I, 140 00:08:16,640 --> 00:08:19,160 Speaker 2: I think there is room for bank Indonesia to cut 141 00:08:19,160 --> 00:08:23,480 Speaker 2: the rate and if you look at the real uh return, yeah, 142 00:08:23,799 --> 00:08:27,839 Speaker 2: the spread between, let's say the Indonesian government bond. 143 00:08:28,239 --> 00:08:32,598 Speaker 2: And the inflation and also the, the, the, the, um, 144 00:08:32,690 --> 00:08:37,250 Speaker 2: you know, the, the SRBI for example, I think for, 145 00:08:37,489 --> 00:08:41,409 Speaker 2: for many investors, you know, investing in the rupia is 146 00:08:41,409 --> 00:08:43,450 Speaker 2: quite attractive. So I think there is a room for 147 00:08:43,450 --> 00:08:46,729 Speaker 2: a bank in Indonesia to get the rate unless the 148 00:08:46,729 --> 00:08:50,280 Speaker 2: Fed with this is not an easy situation at this moment, 149 00:08:50,570 --> 00:08:54,049 Speaker 2: raise the interest rate. Yeah, but with the probability of recession. 150 00:08:54,539 --> 00:08:58,299 Speaker 2: Probably around 40% for the US It is not easy 151 00:08:58,299 --> 00:09:01,460 Speaker 2: for the Fed to raise the rate at least probably 152 00:09:01,460 --> 00:09:03,380 Speaker 2: they what what they will do if they don't want 153 00:09:03,380 --> 00:09:06,739 Speaker 2: to cut the rate, probably they will maintain the, the, the, 154 00:09:06,780 --> 00:09:08,530 Speaker 2: the Fed fund rate at this level. 155 00:09:09,140 --> 00:09:11,409 Speaker 1: I think we're exactly on the same page on this. 156 00:09:11,659 --> 00:09:16,130 Speaker 1: If you were to advise Bank of Indonesia since you 157 00:09:16,299 --> 00:09:18,419 Speaker 1: and I both believe that the dollar might have more 158 00:09:18,419 --> 00:09:21,939 Speaker 1: downset ahead, would you advise Bank of Indonesia to reallocate 159 00:09:21,940 --> 00:09:24,059 Speaker 1: some of their dollar reserve to different currency? 160 00:09:24,809 --> 00:09:27,979 Speaker 2: Yes, I think it is very important. Now if you 161 00:09:27,979 --> 00:09:30,460 Speaker 2: look at this is very interesting, this is the new 162 00:09:30,460 --> 00:09:34,580 Speaker 2: development now. Well, probably not, not new development because it's 163 00:09:34,580 --> 00:09:39,179 Speaker 2: also happened during the Trump 1.0. If you look at 164 00:09:39,179 --> 00:09:42,750 Speaker 2: what happened during the Trump 1.0, the gold price also 165 00:09:43,450 --> 00:09:46,890 Speaker 2: soaring at the time, right? Similar to this kind of situation. 166 00:09:47,179 --> 00:09:49,858 Speaker 2: Correct me if I'm wrong, the BIS has just proof 167 00:09:49,859 --> 00:09:52,539 Speaker 2: that gold to be part of the high quality asset 168 00:09:52,539 --> 00:09:53,500 Speaker 2: at this moment, right? 169 00:09:53,960 --> 00:09:56,880 Speaker 2: So looking at this, maybe it is very important to 170 00:09:56,880 --> 00:10:00,599 Speaker 2: sort of like do the diversification of the basket currency, yeah, 171 00:10:00,719 --> 00:10:02,909 Speaker 2: for any central bank all over the world. 172 00:10:03,750 --> 00:10:07,280 Speaker 1: And for the client universe that's sitting here right now, 173 00:10:07,489 --> 00:10:09,729 Speaker 1: would you also advise them to reduce their exposure to 174 00:10:09,729 --> 00:10:10,559 Speaker 1: the US dollar? 175 00:10:10,969 --> 00:10:13,968 Speaker 2: Well, I have to say that if you expect that 176 00:10:13,969 --> 00:10:16,669 Speaker 2: the renminbi will replace the US dollar, this will take 177 00:10:16,669 --> 00:10:18,929 Speaker 2: probably about 10 to 15 years because if you look 178 00:10:18,929 --> 00:10:21,929 Speaker 2: at the share of the renminbi in the sovereign wealth 179 00:10:21,929 --> 00:10:26,130 Speaker 2: fund in the global transaction, it's still pretty small. Euros 180 00:10:26,130 --> 00:10:29,169 Speaker 2: still a very important role. It's about 40% and also 181 00:10:29,169 --> 00:10:29,780 Speaker 2: US dollar. 182 00:10:30,190 --> 00:10:33,520 Speaker 2: But under this kind of situation, I would say that 183 00:10:33,520 --> 00:10:37,000 Speaker 2: the trend of the so-called the deloadization will happen even 184 00:10:37,000 --> 00:10:40,679 Speaker 2: though will not replace the role of the US as the, 185 00:10:40,919 --> 00:10:43,280 Speaker 2: you know, the risks of currency, at least for another 186 00:10:43,280 --> 00:10:43,988 Speaker 2: 5 years. 187 00:10:45,190 --> 00:10:49,710 Speaker 1: It's really an extraordinary time, especially with all three major 188 00:10:49,710 --> 00:10:53,830 Speaker 1: ratings agencies having downgraded the US debt outlook. We sometimes 189 00:10:53,830 --> 00:10:56,960 Speaker 1: wonder whether it is better to hold US high grade 190 00:10:56,960 --> 00:11:00,439 Speaker 1: corporate bonds than US government bonds than maybe the debt 191 00:11:00,440 --> 00:11:04,549 Speaker 1: issued by Apple is safer than some of the risk 192 00:11:04,549 --> 00:11:08,809 Speaker 1: associated with US Treasury issuance. Uh, Park Masri, what about 193 00:11:09,020 --> 00:11:10,728 Speaker 1: You just touched a little bit on gold, so let's 194 00:11:10,729 --> 00:11:13,609 Speaker 1: talk about a little bit that whenever there is geopolitical 195 00:11:13,609 --> 00:11:17,409 Speaker 1: uncertainty we have seen in the past, uh, gold related 196 00:11:17,409 --> 00:11:21,570 Speaker 1: demand go up, um, would you see that continuing and 197 00:11:21,570 --> 00:11:24,729 Speaker 1: in addition to gold, gold, we also have this digital 198 00:11:24,729 --> 00:11:26,358 Speaker 1: gold cryptos. 199 00:11:27,400 --> 00:11:29,700 Speaker 2: Well, first of all, I think it is very difficult 200 00:11:29,700 --> 00:11:32,179 Speaker 2: to make a prediction about the geopolitical. 201 00:11:33,150 --> 00:11:36,710 Speaker 2: Uh situation now. The way I look at it, we 202 00:11:36,710 --> 00:11:41,000 Speaker 2: probably cannot entirely explain this current situation through the so-called 203 00:11:42,229 --> 00:11:47,679 Speaker 2: Economic conventional, you know, the, the economic conventional theory, but 204 00:11:47,679 --> 00:11:50,189 Speaker 2: we probably have to look at this issue more on the, 205 00:11:50,479 --> 00:11:51,599 Speaker 2: the Bayesian games. 206 00:11:52,369 --> 00:11:56,719 Speaker 2: Yeah, there are two players, the US and then, and China, 207 00:11:57,010 --> 00:12:00,209 Speaker 2: and then the only one, only one player have the 208 00:12:00,210 --> 00:12:03,978 Speaker 2: perfect information with this US. So the option for this, 209 00:12:04,130 --> 00:12:07,650 Speaker 2: you know, the geopolitical tension, it really depends on the 210 00:12:07,650 --> 00:12:12,000 Speaker 2: move made by the United States. If President Trump bling 211 00:12:12,000 --> 00:12:14,689 Speaker 2: with President Xi, he gave a sort of like a 212 00:12:14,690 --> 00:12:17,718 Speaker 2: signal that he would like to visit China to negotiate, 213 00:12:17,969 --> 00:12:20,520 Speaker 2: then you can see immediately the stock market. 214 00:12:21,140 --> 00:12:25,349 Speaker 2: You know, a rebound, the bond market rebound, so give 215 00:12:25,349 --> 00:12:27,789 Speaker 2: us sort of like a positive impact. But on the 216 00:12:27,789 --> 00:12:30,229 Speaker 2: other hand, one thing that I'm concerned about, I hope 217 00:12:30,229 --> 00:12:31,439 Speaker 2: this is not going to happen. 218 00:12:32,270 --> 00:12:36,710 Speaker 2: One thing that President Xi is perceived by many, that 219 00:12:36,710 --> 00:12:39,309 Speaker 2: one thing that he would like to have for his 220 00:12:39,309 --> 00:12:41,939 Speaker 2: legacy is to have one China. 221 00:12:42,799 --> 00:12:46,099 Speaker 2: And that could be a very dangerous situation because the 222 00:12:46,099 --> 00:12:48,419 Speaker 2: way I look at it, if this happened, 223 00:12:49,369 --> 00:12:52,608 Speaker 2: Then there is a risk of the fragmentation of the 224 00:12:52,609 --> 00:12:56,770 Speaker 2: global financial architecture because probably I don't know whether the 225 00:12:56,770 --> 00:12:59,809 Speaker 2: US will retaliate or give a sanction similar like in 226 00:12:59,809 --> 00:13:04,329 Speaker 2: the case of Russia, then probably in many countries emerging 227 00:13:04,330 --> 00:13:07,369 Speaker 2: developing economies, we have to trade in both renminbi and 228 00:13:07,369 --> 00:13:11,119 Speaker 2: the US dollar and the transaction cost will be very expensive. 229 00:13:11,530 --> 00:13:14,489 Speaker 2: Now back to your question about this, you know, the 230 00:13:14,489 --> 00:13:15,650 Speaker 2: digital currency. 231 00:13:16,429 --> 00:13:19,819 Speaker 2: Honestly speaking, I'm, I'm, I'm not a big fan of this, 232 00:13:20,030 --> 00:13:22,510 Speaker 2: you know, in the sense that the way I look 233 00:13:22,510 --> 00:13:25,218 Speaker 2: at it, I can see there is a role, but 234 00:13:26,030 --> 00:13:31,460 Speaker 2: maybe I always call this, this, this crypto as a, 235 00:13:31,989 --> 00:13:34,830 Speaker 2: you know, as a greenback, you know, in the US dollar, 236 00:13:34,869 --> 00:13:37,270 Speaker 2: there is a word, there is a sentence that In 237 00:13:37,270 --> 00:13:40,710 Speaker 2: God We Trust, similar with the crypto, In God We 238 00:13:40,710 --> 00:13:42,229 Speaker 2: Trust because there is no underlying. 239 00:13:42,760 --> 00:13:46,199 Speaker 2: Right? So it really depends on the, on the supply 240 00:13:46,200 --> 00:13:49,520 Speaker 2: and demand, and I can, uh, it's for me, it's 241 00:13:49,520 --> 00:13:52,559 Speaker 2: hard to imagine this kind of sort of like, you know, 242 00:13:52,919 --> 00:13:56,689 Speaker 2: medium of exchange of sort of value will be the 243 00:13:56,690 --> 00:13:57,979 Speaker 2: replacement for the US dollar. 244 00:13:59,320 --> 00:14:02,020 Speaker 1: Uh, talk to you a little bit about commodities, uh, 245 00:14:02,239 --> 00:14:06,400 Speaker 1: both energy and non-energy commodities. On the energy side, Donald 246 00:14:06,400 --> 00:14:12,469 Speaker 1: Trump is very keen on driving down the price of energy, um, which, uh, 247 00:14:12,520 --> 00:14:17,400 Speaker 1: is probably negative for green transition, but for the near term, 248 00:14:17,640 --> 00:14:21,960 Speaker 1: especially with Indonesia in mind, uh, weak energy price environment 249 00:14:21,960 --> 00:14:26,380 Speaker 1: is bad for commodity exporters. So, do you think it is. 250 00:14:26,859 --> 00:14:29,979 Speaker 1: Sustainable this this 50 to $60 oil that we have 251 00:14:29,979 --> 00:14:32,659 Speaker 1: right now and what does it mean for a country 252 00:14:32,659 --> 00:14:33,450 Speaker 1: like Indonesia? 253 00:14:33,630 --> 00:14:36,099 Speaker 2: Yeah, this is a very good question because at this 254 00:14:36,099 --> 00:14:39,650 Speaker 2: moment you see that there are two competing forces here. 255 00:14:40,580 --> 00:14:43,859 Speaker 2: The first one is we will see the risk of 256 00:14:43,859 --> 00:14:46,099 Speaker 2: the slowdown of the global trade. 257 00:14:46,849 --> 00:14:49,369 Speaker 2: With this will have an implication of the slowdown of 258 00:14:49,369 --> 00:14:53,369 Speaker 2: the global economy, the export, then you would expect the 259 00:14:53,369 --> 00:14:57,130 Speaker 2: negative impact on the oil price in the sense that 260 00:14:57,330 --> 00:15:01,820 Speaker 2: you would expect probably the, the, the oil price will decline, 261 00:15:02,330 --> 00:15:05,770 Speaker 2: but at the same time with the some uh sort 262 00:15:05,770 --> 00:15:09,690 Speaker 2: of like initiative made by the US to. 263 00:15:10,900 --> 00:15:14,289 Speaker 2: Not to say I, I, I would say that probably 264 00:15:15,099 --> 00:15:18,859 Speaker 2: entirely focused on the renewable energy but also exploring the 265 00:15:18,859 --> 00:15:22,260 Speaker 2: possibility of the fossil fuel. There is sort of like, 266 00:15:22,270 --> 00:15:24,539 Speaker 2: you know, a possibility of the. 267 00:15:25,109 --> 00:15:28,409 Speaker 2: A rising oil price. So my answer to this is, 268 00:15:28,500 --> 00:15:32,409 Speaker 2: it really depends on what will be the net effect 269 00:15:32,409 --> 00:15:36,179 Speaker 2: between these two competing forces. In the case of Indonesia, 270 00:15:36,340 --> 00:15:37,690 Speaker 2: this is a very interesting timer. 271 00:15:38,719 --> 00:15:40,760 Speaker 2: Because we are not important at this moment. 272 00:15:41,630 --> 00:15:45,500 Speaker 2: The declining of oil prices somehow will help our fiscal. 273 00:15:46,280 --> 00:15:49,270 Speaker 2: Yeah, so I won't be surprised if by the end 274 00:15:49,270 --> 00:15:51,929 Speaker 2: of the year if the oil price continues between $50 275 00:15:51,929 --> 00:15:54,869 Speaker 2: to $60 US dollars, then you will see maybe the 276 00:15:54,869 --> 00:15:59,309 Speaker 2: budget deficit will stay around 2.4%. So the concern about 277 00:15:59,309 --> 00:16:02,950 Speaker 2: this budget deficit go beyond 3%. I don't think that's 278 00:16:03,349 --> 00:16:06,900 Speaker 2: sort of like something that maybe the investors should worry about, 279 00:16:07,150 --> 00:16:08,739 Speaker 2: especially under this kind of situation. 280 00:16:10,190 --> 00:16:14,190 Speaker 1: Uh, beyond oil, uh, particularly on the natural gas base 281 00:16:14,190 --> 00:16:16,549 Speaker 1: of which Indonesia is a consequential exporter. 282 00:16:17,609 --> 00:16:21,409 Speaker 1: If the US demands that China as part of a 283 00:16:21,409 --> 00:16:23,570 Speaker 1: trade deal would have to buy more LNG from the 284 00:16:23,570 --> 00:16:28,049 Speaker 1: US or in the case of things breaking down, China 285 00:16:28,049 --> 00:16:31,369 Speaker 1: refuses to buy any LNG for the US under those 286 00:16:31,369 --> 00:16:35,500 Speaker 1: two sort of extreme circumstances, one where China-US relationship. 287 00:16:36,010 --> 00:16:39,690 Speaker 1: Gets tighter at the expense of other natural gas exporters 288 00:16:39,690 --> 00:16:43,289 Speaker 1: or it breaks down at the benefit of other natural 289 00:16:43,289 --> 00:16:46,840 Speaker 1: gas exporters. What's your probability assessment of these two? 290 00:16:47,049 --> 00:16:49,890 Speaker 2: Well, let me put it this way, I think Indonesia should. 291 00:16:50,549 --> 00:16:54,219 Speaker 2: Sort of like, you know, should take this opportunity. Let 292 00:16:54,219 --> 00:16:54,859 Speaker 2: me put it this way. 293 00:16:56,099 --> 00:16:58,719 Speaker 2: If you look at our trade balance, trade surplus with 294 00:16:58,719 --> 00:17:03,479 Speaker 2: the US, it's about $19 billion US dollars at this moment, 295 00:17:03,489 --> 00:17:05,040 Speaker 2: 18 to $19 billion US dollars. 296 00:17:05,780 --> 00:17:08,270 Speaker 2: And we import oil. 297 00:17:09,550 --> 00:17:13,349 Speaker 2: From Middle East and also Nigeria is about $40 billion 298 00:17:13,349 --> 00:17:16,979 Speaker 2: US dollars. So if Indonesia wants to address this issue. 299 00:17:17,760 --> 00:17:19,719 Speaker 2: One thing that they can do, what, what we will 300 00:17:19,719 --> 00:17:23,560 Speaker 2: do is to import oil, for example, somehow to relocate 301 00:17:23,560 --> 00:17:26,319 Speaker 2: to US. This is part of the negotiation. 302 00:17:27,020 --> 00:17:31,180 Speaker 2: And in addition to that, also related to LNG. 303 00:17:31,959 --> 00:17:35,909 Speaker 2: Yeah, because this is also very important and maybe the 304 00:17:35,910 --> 00:17:40,149 Speaker 2: possibility of Indonesia could be hard for Southeast Asia under 305 00:17:40,150 --> 00:17:43,619 Speaker 2: this kind of situation. So, so we probably have to, 306 00:17:43,829 --> 00:17:48,709 Speaker 2: to observe, you know, about all the possibilities that what 307 00:17:48,709 --> 00:17:53,140 Speaker 2: is happening now and also I, I think that the 308 00:17:53,150 --> 00:17:55,319 Speaker 2: the the name of the game is how to be 309 00:17:55,319 --> 00:17:58,829 Speaker 2: part of this, the US supply chain at this moment, yeah. 310 00:17:59,900 --> 00:18:03,180 Speaker 2: Where we are also observing about the possibility of the 311 00:18:03,180 --> 00:18:04,689 Speaker 2: trade war between the US and China. 312 00:18:05,849 --> 00:18:09,790 Speaker 1: What is your sense of the kind of dialogue the 313 00:18:09,790 --> 00:18:12,339 Speaker 1: Indonesian authorities have so far managed to have with the 314 00:18:12,339 --> 00:18:13,579 Speaker 1: US on this issue? 315 00:18:14,479 --> 00:18:15,689 Speaker 2: I am quite 316 00:18:16,359 --> 00:18:20,089 Speaker 2: Um, optimistic in the sense that because as I said 317 00:18:20,089 --> 00:18:24,000 Speaker 2: to you, our trade surplus is relatively small, it's only 318 00:18:24,000 --> 00:18:28,300 Speaker 2: $19 billion US dollars, and then the, the, the government 319 00:18:28,920 --> 00:18:33,359 Speaker 2: already established the so-called the task force. 320 00:18:34,260 --> 00:18:38,579 Speaker 2: Uh, on this negotiation and to, to the best of 321 00:18:38,579 --> 00:18:42,459 Speaker 2: my knowledge they are working very hard on this to 322 00:18:42,459 --> 00:18:45,459 Speaker 2: come up with some proposals. Yeah, I've got a chance 323 00:18:45,459 --> 00:18:49,140 Speaker 2: to see some people in in Washington about a couple 324 00:18:49,140 --> 00:18:52,939 Speaker 2: of weeks ago and then based on my impression. 325 00:18:53,599 --> 00:18:56,959 Speaker 2: The Indonesian proposal is pretty good, yeah, in the sense 326 00:18:56,959 --> 00:19:00,920 Speaker 2: again because this, this trade surplus is pretty small. The 327 00:19:00,920 --> 00:19:04,208 Speaker 2: only thing that we need to anticipate is. 328 00:19:05,030 --> 00:19:07,379 Speaker 2: I think the main goal for the US is not 329 00:19:07,380 --> 00:19:11,770 Speaker 2: for all the Southeast Asian countries. Their main objective is 330 00:19:11,770 --> 00:19:12,750 Speaker 2: to deal with China. 331 00:19:13,800 --> 00:19:17,619 Speaker 2: Yeah. So one thing that we have to anticipate is 332 00:19:18,160 --> 00:19:21,829 Speaker 2: about once the US-China deal happened, what will be the 333 00:19:21,829 --> 00:19:25,839 Speaker 2: implication for the others, right? This is something that we 334 00:19:25,839 --> 00:19:26,790 Speaker 2: need to anticipate. 335 00:19:27,040 --> 00:19:29,280 Speaker 1: Well, you just wrote my next question. That's exactly where 336 00:19:29,280 --> 00:19:30,089 Speaker 1: I was coming to. 337 00:19:30,930 --> 00:19:34,000 Speaker 1: Um, I was in Washington DC during the spring meetings, uh, 338 00:19:34,099 --> 00:19:37,459 Speaker 1: of World Bank and IMF, and some of the feedback 339 00:19:37,459 --> 00:19:40,579 Speaker 1: that I got from the US side, as well as 340 00:19:40,939 --> 00:19:43,619 Speaker 1: those from Mexico and Canada who have been privy to 341 00:19:43,619 --> 00:19:46,979 Speaker 1: the first round of conversations with US Treasury and US 342 00:19:46,979 --> 00:19:50,930 Speaker 1: Trade Representative's office, was that it is not about creating 343 00:19:50,930 --> 00:19:54,180 Speaker 1: a tariff mode around the US, it is about creating 344 00:19:54,180 --> 00:19:55,770 Speaker 1: a tariff mode around China. 345 00:19:56,489 --> 00:19:59,989 Speaker 1: That many countries will be asked to replicate US tariffs 346 00:19:59,989 --> 00:20:04,409 Speaker 1: and restrictions on China. How can any country in Southeast 347 00:20:04,410 --> 00:20:05,188 Speaker 1: Asia do that? 348 00:20:05,550 --> 00:20:07,520 Speaker 2: This is the thing that we probably have to look 349 00:20:07,520 --> 00:20:09,669 Speaker 2: at carefully for especially. 350 00:20:11,199 --> 00:20:16,239 Speaker 2: For many ASEAN countries, yeah, because one thing that probably 351 00:20:16,239 --> 00:20:20,719 Speaker 2: US will ask is through the so-called the rule of origin. 352 00:20:21,859 --> 00:20:25,369 Speaker 2: So they limit the rule of origin in which that 353 00:20:26,000 --> 00:20:29,958 Speaker 2: China can participate in, you know, any particular product, there 354 00:20:29,959 --> 00:20:33,919 Speaker 2: is a limit of it. So indirectly this will exclude 355 00:20:33,920 --> 00:20:37,599 Speaker 2: China from any countries in Southeast Asia, but of course 356 00:20:37,599 --> 00:20:40,989 Speaker 2: it will come as a cost for Southeast Asian countries, 357 00:20:41,160 --> 00:20:42,839 Speaker 2: and I think this is really the gist of the 358 00:20:42,839 --> 00:20:47,000 Speaker 2: negotiation for any Southeast Asian countries because like it or not. 359 00:20:48,520 --> 00:20:49,800 Speaker 2: China is one of 360 00:20:50,550 --> 00:20:54,379 Speaker 2: Uh, the largest trading partner in Southeast Asia and it's 361 00:20:54,380 --> 00:20:58,819 Speaker 2: not easy for Southeast Asian countries to exclude China. Yeah, 362 00:20:58,939 --> 00:21:01,459 Speaker 2: in fact, the message that we have to convey. 363 00:21:02,130 --> 00:21:05,199 Speaker 2: is with this kind of policy, there is a tendency 364 00:21:05,199 --> 00:21:09,949 Speaker 2: of the Southeast Asian countries will work more closely with China, yeah, 365 00:21:10,199 --> 00:21:13,079 Speaker 2: and then I think it is also very dangerous for 366 00:21:13,079 --> 00:21:16,430 Speaker 2: the Southeast Asian countries to rely too much on China. 367 00:21:16,719 --> 00:21:20,589 Speaker 2: That is why cooperation with the US, investment from the US, 368 00:21:20,719 --> 00:21:24,250 Speaker 2: trade with the US is also very important to maintain 369 00:21:24,430 --> 00:21:25,709 Speaker 2: this geopolitical balance. 370 00:21:27,359 --> 00:21:32,880 Speaker 1: You have spoken about the relatively small impact on Indonesia 371 00:21:32,880 --> 00:21:35,760 Speaker 1: given its limited trade sur visa with the US and 372 00:21:35,760 --> 00:21:39,800 Speaker 1: the largely domestic demand driven nature of Indonesia's economy. But 373 00:21:39,800 --> 00:21:42,760 Speaker 1: then there's second round impacts. If China slows around the 374 00:21:42,760 --> 00:21:45,919 Speaker 1: trade war, if Vietnam slows, if Singapore slows, there's a 375 00:21:45,920 --> 00:21:47,699 Speaker 1: 2nd round impact on Indonesia. 376 00:21:48,170 --> 00:21:51,010 Speaker 1: Um, so when you talk about 50 basis points downside 377 00:21:51,010 --> 00:21:54,689 Speaker 1: to your view of 2025 growth, you're taking the second 378 00:21:54,689 --> 00:21:55,969 Speaker 1: round impact into 379 00:21:55,969 --> 00:21:56,319 Speaker 1: account? 380 00:21:56,489 --> 00:21:59,639 Speaker 2: No, this is just a, a direct impact. My estimate 381 00:21:59,640 --> 00:22:03,380 Speaker 2: is 1% decline of economic growth in China. It's probably 382 00:22:03,380 --> 00:22:06,709 Speaker 2: the impact the Tunisian economy is about 0.3%. So if 383 00:22:06,709 --> 00:22:11,599 Speaker 2: you're talking about, you know, after all, the China effect 384 00:22:11,599 --> 00:22:12,129 Speaker 2: as well. 385 00:22:12,579 --> 00:22:15,270 Speaker 2: The economic growth in the worst case scenario will grow 386 00:22:15,270 --> 00:22:20,719 Speaker 2: between 4 to 4.45%. Yeah, but hopefully this has not 387 00:22:20,719 --> 00:22:23,250 Speaker 2: happened because with the possibility of the 388 00:22:23,979 --> 00:22:27,949 Speaker 2: You know, the, the agreement between US and China, I 389 00:22:27,949 --> 00:22:30,030 Speaker 2: hope that this will not happen, but even in the 390 00:22:30,030 --> 00:22:33,459 Speaker 2: worst case scenario, I still believe that the Indonesian economy 391 00:22:33,459 --> 00:22:37,790 Speaker 2: can still grow by about 44.2%, even the direct impact 392 00:22:37,790 --> 00:22:41,910 Speaker 2: to China. As I said, timer, that our export share 393 00:22:41,910 --> 00:22:46,630 Speaker 2: to GDP is relatively small. Don't forget, yeah, during the 394 00:22:46,630 --> 00:22:50,869 Speaker 2: global financial crisis when the global economy plummeted at the time. 395 00:22:51,619 --> 00:22:55,819 Speaker 2: Negative growth in the US in the global economy. Indonesian 396 00:22:55,819 --> 00:23:00,060 Speaker 2: economy still maintained growth 4.6% at that time. So this 397 00:23:00,060 --> 00:23:04,448 Speaker 2: number is probably, you know, won't change so much, yeah, 398 00:23:04,660 --> 00:23:06,949 Speaker 2: a lot compared to what we had back on the 399 00:23:06,949 --> 00:23:08,060 Speaker 2: global financial crisis. 400 00:23:10,000 --> 00:23:17,489 Speaker 1: Can Indonesia have successful green transition, successful introduction of the 401 00:23:17,489 --> 00:23:22,359 Speaker 1: next generation of technology without absorbing China's new technology? 402 00:23:23,770 --> 00:23:26,329 Speaker 2: This is a very good question because the way I 403 00:23:26,329 --> 00:23:28,929 Speaker 2: look at it in the, we are facing in the, 404 00:23:28,969 --> 00:23:31,650 Speaker 2: we are in the era of what we call the 405 00:23:31,650 --> 00:23:35,560 Speaker 2: techno nationalism at this moment, right? There is a competition 406 00:23:35,560 --> 00:23:38,689 Speaker 2: between US and China in terms of this technology, the 407 00:23:38,689 --> 00:23:44,209 Speaker 2: AR energy transition, etc. But despite, regardless of all of 408 00:23:44,209 --> 00:23:49,040 Speaker 2: this issue, I think if you're talking about this green technology, 409 00:23:49,290 --> 00:23:52,920 Speaker 2: energy transition, one thing that the government should focus on. 410 00:23:53,459 --> 00:23:56,609 Speaker 2: Is to getting the price right. 411 00:23:57,560 --> 00:24:00,780 Speaker 2: Yeah, because the way I look at it, timer will 412 00:24:00,780 --> 00:24:02,688 Speaker 2: be very difficult for Indonesia. 413 00:24:03,670 --> 00:24:07,698 Speaker 2: To into the transition of this energy or the green 414 00:24:07,699 --> 00:24:12,069 Speaker 2: economy without phasing out the real subsidy. Let me give 415 00:24:12,069 --> 00:24:14,060 Speaker 2: an example about EV, for example. 416 00:24:14,810 --> 00:24:20,270 Speaker 2: The price of EV electric vehicles, um uh car is 417 00:24:20,270 --> 00:24:25,149 Speaker 2: still relatively expensive compared to the, the combustion engine. At 418 00:24:25,150 --> 00:24:28,390 Speaker 2: the same time, the fossil fuel, the gasoline is subsidized 419 00:24:28,390 --> 00:24:32,869 Speaker 2: by the government about 40 to 60%, right? So what's 420 00:24:32,869 --> 00:24:36,069 Speaker 2: the point to buy EV at this moment unless you 421 00:24:36,069 --> 00:24:38,589 Speaker 2: just follow the trend or you have this. 422 00:24:39,439 --> 00:24:44,109 Speaker 2: You know, conscious about the issue of this environment, but 423 00:24:44,109 --> 00:24:47,699 Speaker 2: besides that, from the economic perspective, you don't see much, 424 00:24:47,869 --> 00:24:52,890 Speaker 2: you know, much, um, benefit from shifting into this, you know, the, 425 00:24:52,910 --> 00:24:56,760 Speaker 2: the combustion engine into the, the EP. So I think 426 00:24:57,349 --> 00:25:00,619 Speaker 2: to address your question, the first step the government should do. 427 00:25:01,770 --> 00:25:05,349 Speaker 2: In order to push the transition to energy, is to 428 00:25:05,560 --> 00:25:09,119 Speaker 2: phasing out the fuel subsidy. Without that, I think this 429 00:25:09,119 --> 00:25:10,479 Speaker 2: process is not going to be easy. 430 00:25:12,540 --> 00:25:13,829 Speaker 1: I 431 00:25:14,859 --> 00:25:18,180 Speaker 1: Whenever I go to China, um, I feel that I 432 00:25:18,180 --> 00:25:21,500 Speaker 1: see the benefits of EVs. 433 00:25:22,349 --> 00:25:24,510 Speaker 1: More powerfully than any statistic can tell me. 434 00:25:25,280 --> 00:25:27,698 Speaker 1: When we look at studies, we can tell that in 435 00:25:27,699 --> 00:25:30,369 Speaker 1: the large cities in China, particularly the emission has gone 436 00:25:30,369 --> 00:25:33,959 Speaker 1: down because of the evification of the auto fleet. But 437 00:25:33,959 --> 00:25:37,000 Speaker 1: unless you have gone for an early morning run in 438 00:25:37,000 --> 00:25:40,760 Speaker 1: Shanghai or Beijing or Shenzhen like I do, you will 439 00:25:40,760 --> 00:25:43,599 Speaker 1: miss out on the biggest benefit of green transition. It 440 00:25:43,599 --> 00:25:46,709 Speaker 1: is the decline in the sound level. These cities are 441 00:25:46,709 --> 00:25:49,449 Speaker 1: quieter than ever before. In the morning when I run 442 00:25:49,880 --> 00:25:53,290 Speaker 1: in Beijing, roads are full of cars, but they don't 443 00:25:53,290 --> 00:25:53,948 Speaker 1: make any sound. 444 00:25:54,260 --> 00:25:56,369 Speaker 1: So I can listen to my podcast. I can listen 445 00:25:56,369 --> 00:25:59,010 Speaker 1: to music. So the decline in sound pollution in, in 446 00:25:59,010 --> 00:26:02,000 Speaker 1: addition to particular emission, I think it's a very powerful 447 00:26:02,000 --> 00:26:04,689 Speaker 1: motivation for those who actually go and see that. They'll 448 00:26:04,689 --> 00:26:07,650 Speaker 1: want that to happen in their own countries. Pugwari, let's 449 00:26:07,650 --> 00:26:11,319 Speaker 1: talk about the big story, the 8% growth going back 450 00:26:11,319 --> 00:26:15,619 Speaker 1: to the Indonesia, disappoints the bulls and the bears, and 451 00:26:15,619 --> 00:26:17,290 Speaker 1: somewhere in the middle used to be the story two 452 00:26:17,290 --> 00:26:19,250 Speaker 1: years ago. Where do you stand now? 453 00:26:19,449 --> 00:26:21,129 Speaker 2: Well, let me put this way. 454 00:26:23,250 --> 00:26:25,899 Speaker 2: Bear with me if I'm talking with number, OK? This 455 00:26:25,900 --> 00:26:28,760 Speaker 2: is the old number that we discussed about 2 years ago. 456 00:26:29,750 --> 00:26:35,698 Speaker 2: Our incremental capital output ratio timer is about 6.66.8 now, 457 00:26:35,989 --> 00:26:43,030 Speaker 2: so 1% economic growth will require investment over GDP about 6.8%. 458 00:26:43,030 --> 00:26:45,989 Speaker 2: So if you're talking about investment over uh you're talking 459 00:26:45,989 --> 00:26:52,670 Speaker 2: about 8% economic growth, this will require investment over GDP 6.8% 460 00:26:52,670 --> 00:26:56,750 Speaker 2: multiply by 8%. You're talking probably about 54% investment over GDP. 461 00:26:57,439 --> 00:27:01,589 Speaker 2: So at this moment, our investment ratio to GDP is about. 462 00:27:02,500 --> 00:27:07,949 Speaker 2: 37 out of GDP 23,000. So you're talking probably about 463 00:27:08,369 --> 00:27:09,770 Speaker 2: almost 9000 trillion. 464 00:27:10,420 --> 00:27:12,170 Speaker 2: Rupia at this moment. 465 00:27:12,859 --> 00:27:15,119 Speaker 2: Yeah, it's about $500 billion US dollars. 466 00:27:17,199 --> 00:27:21,500 Speaker 2: If you want to grow by 8%, you have to 467 00:27:21,500 --> 00:27:25,839 Speaker 2: increase the investment from 9000 to around 12,000 trillion. 468 00:27:27,280 --> 00:27:30,680 Speaker 2: Or even more. So you probably need to increase the 469 00:27:30,680 --> 00:27:33,630 Speaker 2: investment at least by 30%. 470 00:27:34,680 --> 00:27:35,189 Speaker 2: Now 471 00:27:36,630 --> 00:27:40,459 Speaker 2: The question is, how should we do this? 472 00:27:41,560 --> 00:27:45,959 Speaker 2: The first answer is we have to improve productivity in 473 00:27:45,959 --> 00:27:47,479 Speaker 2: order to lower the ICO. 474 00:27:49,089 --> 00:27:53,050 Speaker 2: Yeah, then if we, let's say, improve the productivity, we 475 00:27:53,050 --> 00:27:56,849 Speaker 2: probably need less capital to produce. 476 00:27:57,689 --> 00:27:59,660 Speaker 2: The similar output, the same output. 477 00:28:00,619 --> 00:28:02,500 Speaker 2: So improving productivity is the key. 478 00:28:03,260 --> 00:28:06,599 Speaker 2: And if you're talking about improving productivity, then it means 479 00:28:06,599 --> 00:28:11,709 Speaker 2: that we have to improve the quality of human capital, infrastructure, 480 00:28:11,959 --> 00:28:12,880 Speaker 2: and governance. 481 00:28:14,939 --> 00:28:17,010 Speaker 2: How should we do this? 482 00:28:17,839 --> 00:28:20,359 Speaker 2: You know, during my time when I was at the MOF, 483 00:28:20,479 --> 00:28:26,530 Speaker 2: we introduced the so-called the endowment fund for the scholarship 484 00:28:26,880 --> 00:28:29,880 Speaker 2: is under the name of the LPDP. Now many Indonesian 485 00:28:29,880 --> 00:28:33,469 Speaker 2: students get accepted in the top 200 universities in the world, 486 00:28:33,959 --> 00:28:37,718 Speaker 2: but this will take one generation. So the best way 487 00:28:37,719 --> 00:28:41,359 Speaker 2: to do it is to have this management or technologies 488 00:28:41,359 --> 00:28:43,119 Speaker 2: spill over from foreign direct investment. 489 00:28:43,599 --> 00:28:46,439 Speaker 2: If you recall in the 80s, most of the Indonesian 490 00:28:46,439 --> 00:28:51,239 Speaker 2: bankers were Citibank alumni because they have the best executive 491 00:28:51,239 --> 00:28:54,170 Speaker 2: development program, right? So why don't we ask the private 492 00:28:54,170 --> 00:28:56,439 Speaker 2: sector to do it and give the double deduction for 493 00:28:56,439 --> 00:28:58,979 Speaker 2: tax if they do training. If you're talking about AI, 494 00:28:59,160 --> 00:29:02,760 Speaker 2: if you're, why don't you ask NPDA, for example, to 495 00:29:02,760 --> 00:29:06,439 Speaker 2: do a training rather than you build the government training center. 496 00:29:07,209 --> 00:29:10,660 Speaker 2: That's one thing in improving the quality of human capital, 497 00:29:10,829 --> 00:29:14,160 Speaker 2: so the government should work with the private sector definitely. 498 00:29:14,829 --> 00:29:17,030 Speaker 2: I'm not a big fan of industrial policy, but I 499 00:29:17,030 --> 00:29:21,869 Speaker 2: can see the justification of industrial policy if you improve 500 00:29:21,869 --> 00:29:25,500 Speaker 2: the quality of the human capital. The second aspect is 501 00:29:25,900 --> 00:29:30,030 Speaker 2: continue to build an infrastructure because with the aggressive development 502 00:29:30,030 --> 00:29:33,310 Speaker 2: under Djokovic's administration, we're still deficient. 503 00:29:34,030 --> 00:29:38,579 Speaker 2: Yeah, uh, in terms of the the infrastructure is still inadequate. 504 00:29:39,469 --> 00:29:42,540 Speaker 2: And then governance. This is very important because let me 505 00:29:42,540 --> 00:29:45,699 Speaker 2: be open and frank with you, time or even when 506 00:29:45,699 --> 00:29:47,819 Speaker 2: I was in the cabinet, I said that one of 507 00:29:47,819 --> 00:29:50,699 Speaker 2: the reasons why many Indonesians become religious is because they 508 00:29:50,699 --> 00:29:51,739 Speaker 2: have to deal with the government. 509 00:29:52,939 --> 00:29:56,910 Speaker 2: You know, so if you, let's say if you apply 510 00:29:56,910 --> 00:29:57,550 Speaker 2: on something. 511 00:29:58,239 --> 00:30:00,680 Speaker 2: There is nothing you can do except pray to God 512 00:30:01,089 --> 00:30:04,530 Speaker 2: because a lot of uncertainties. That is why this economic 513 00:30:04,530 --> 00:30:09,170 Speaker 2: deregulation is very important, so I'm very, I'm very happy. 514 00:30:09,250 --> 00:30:09,969 Speaker 2: I'm glad. 515 00:30:10,660 --> 00:30:13,890 Speaker 2: You know, when the president made a decision that he 516 00:30:13,890 --> 00:30:14,939 Speaker 2: announced that 517 00:30:15,689 --> 00:30:19,469 Speaker 2: Economic deregulation will be the top priority of his administration, 518 00:30:19,719 --> 00:30:22,719 Speaker 2: and he announced it openly in public. He will remove 519 00:30:22,719 --> 00:30:27,920 Speaker 2: the import quota. He will, you know, change the local 520 00:30:27,920 --> 00:30:31,609 Speaker 2: content requirement to become an incentive. He will remove the 521 00:30:31,609 --> 00:30:35,750 Speaker 2: so-called the, the technical regulation. I think this is one way, 522 00:30:35,959 --> 00:30:40,689 Speaker 2: you know, to improve the productivity. So provided the government can. 523 00:30:41,229 --> 00:30:44,939 Speaker 2: You know, fulfill all this requirement that 8% would be 524 00:30:44,939 --> 00:30:46,660 Speaker 2: possible without that. 525 00:30:47,579 --> 00:30:48,810 Speaker 2: Then it will be difficult for us. 526 00:30:51,180 --> 00:30:55,000 Speaker 1: So one of the things that I picking up from 527 00:30:55,000 --> 00:30:57,640 Speaker 1: President Prabowo's administration is that they would like to see 528 00:30:58,079 --> 00:31:01,239 Speaker 1: more competition both from foreign capital coming into Indonesia as 529 00:31:01,239 --> 00:31:04,359 Speaker 1: well as um increasing domestic competition. 530 00:31:05,089 --> 00:31:08,189 Speaker 1: But the last 30, 40 years of this nation, if 531 00:31:08,189 --> 00:31:10,069 Speaker 1: we look at it, the track record is one where 532 00:31:10,069 --> 00:31:13,270 Speaker 1: the vested interests thrive on the lack of competition. 533 00:31:14,109 --> 00:31:17,619 Speaker 1: Is it really going to be possible to break that 534 00:31:17,619 --> 00:31:18,579 Speaker 1: uh stronghold? 535 00:31:19,260 --> 00:31:21,449 Speaker 2: Well, let me put it this way, I always believe 536 00:31:21,449 --> 00:31:23,050 Speaker 2: that bad times makes good policy. 537 00:31:23,930 --> 00:31:27,449 Speaker 2: Yeah. Only during the bad times, politicians will listen to 538 00:31:27,449 --> 00:31:28,170 Speaker 2: the hanocrat. 539 00:31:28,930 --> 00:31:31,750 Speaker 2: You cannot expect that the politician will listen to the 540 00:31:31,750 --> 00:31:35,489 Speaker 2: technocrat during the good times because what's the point to 541 00:31:35,489 --> 00:31:38,719 Speaker 2: spend the political capital if the economic situation is already good, 542 00:31:39,060 --> 00:31:42,130 Speaker 2: you know, I was able to convince SBA to adjust 543 00:31:42,130 --> 00:31:45,689 Speaker 2: the fuel price by 45% because they put tantrum and 544 00:31:45,689 --> 00:31:50,290 Speaker 2: now the reciprocal tariff, the global situation, this will push 545 00:31:50,859 --> 00:31:54,810 Speaker 2: the government to do the good things, and I think 546 00:31:54,810 --> 00:31:58,369 Speaker 2: that's the reasons why the president announced the economic deregulation. 547 00:31:58,760 --> 00:32:01,689 Speaker 2: So this is the sadly. Bad times makes good policy. 548 00:32:01,989 --> 00:32:03,180 Speaker 2: Good times makes bad policy. 549 00:32:04,180 --> 00:32:08,310 Speaker 1: Well, finger crossed on that one. green transition. 550 00:32:09,349 --> 00:32:12,839 Speaker 1: When I visited Indonesia in recent years, I heard a 551 00:32:12,839 --> 00:32:17,469 Speaker 1: lot about Indonesia's sort of goal toward wind energy, solar energy, 552 00:32:17,739 --> 00:32:20,650 Speaker 1: tapping into its, uh, natural gas potential and so on. 553 00:32:21,099 --> 00:32:23,910 Speaker 1: The US is sort of turning away from that. Is 554 00:32:23,910 --> 00:32:26,560 Speaker 1: that going to have a negative impact on green transition 555 00:32:26,560 --> 00:32:27,630 Speaker 1: in developing countries? 556 00:32:27,959 --> 00:32:30,400 Speaker 2: Definitely, I, I, I hate to say this, but I think. 557 00:32:31,229 --> 00:32:35,770 Speaker 2: You know, with the, the US withdraw from the from 558 00:32:35,770 --> 00:32:40,119 Speaker 2: the Paris Agreement, for example, this will have this negative 559 00:32:40,119 --> 00:32:43,449 Speaker 2: impact to the commitment towards that because you can see, 560 00:32:43,969 --> 00:32:48,089 Speaker 2: you know, my, my concern is under this kind of 561 00:32:48,089 --> 00:32:50,969 Speaker 2: situation if US is no longer the leader of this 562 00:32:50,969 --> 00:32:55,609 Speaker 2: Grand region like in the under Biden administration, this is 563 00:32:55,609 --> 00:33:00,130 Speaker 2: not easy for the emerging developing economies because European countries 564 00:33:00,130 --> 00:33:01,130 Speaker 2: will take the leadership. 565 00:33:01,930 --> 00:33:04,510 Speaker 2: And if you're talking about leadership of the European countries, 566 00:33:04,630 --> 00:33:08,349 Speaker 2: it is very ideological rather than, you know, based on 567 00:33:08,349 --> 00:33:13,030 Speaker 2: the economic rationale. So this somehow will 568 00:33:13,849 --> 00:33:17,400 Speaker 2: Create a sort of like additional transaction costs for the 569 00:33:18,170 --> 00:33:22,410 Speaker 2: uh emerging developing countries, you know, to pursue the idea 570 00:33:22,410 --> 00:33:25,609 Speaker 2: of this energy transition because they said that probably the 571 00:33:25,609 --> 00:33:29,250 Speaker 2: requirement will be very difficult and honestly speaking time, this 572 00:33:29,250 --> 00:33:32,010 Speaker 2: is the problem with the many emerging developing economies. 573 00:33:33,369 --> 00:33:35,989 Speaker 2: The issue of the energy transition or climate. 574 00:33:36,780 --> 00:33:38,859 Speaker 2: I always considered as a luxury goods. 575 00:33:39,939 --> 00:33:42,040 Speaker 2: Yeah, because we are too busy with the day to 576 00:33:42,040 --> 00:33:45,920 Speaker 2: day problem, with the issue of poverty, the poor quality 577 00:33:45,920 --> 00:33:50,780 Speaker 2: of infrastructure. So in order to put this energy transition 578 00:33:50,780 --> 00:33:51,829 Speaker 2: or environment. 579 00:33:52,449 --> 00:33:55,800 Speaker 2: In the government agenda is to link it with the 580 00:33:55,800 --> 00:33:58,800 Speaker 2: issue of development. Without that, I don't think the government 581 00:33:58,800 --> 00:34:02,390 Speaker 2: will put the priority on the energy transition and their policy. 582 00:34:02,640 --> 00:34:04,680 Speaker 1: I, I want to connect this with your earlier point 583 00:34:04,680 --> 00:34:08,719 Speaker 1: that bad times make for good policy. If I travel 584 00:34:08,719 --> 00:34:13,149 Speaker 1: to India, for example, I see issues related to water shortage, 585 00:34:13,520 --> 00:34:17,560 Speaker 1: to steady rise in summer temperature really creating havoc, and 586 00:34:17,560 --> 00:34:19,679 Speaker 1: as a result, you don't really have to convince people 587 00:34:19,679 --> 00:34:21,639 Speaker 1: on the need to reduce particulate emission. 588 00:34:22,209 --> 00:34:24,969 Speaker 1: Are we so fortunate in Indonesia that climate change is 589 00:34:24,969 --> 00:34:26,879 Speaker 1: not visible in our face? 590 00:34:27,620 --> 00:34:31,550 Speaker 2: It is, but you know, this is, this is what 591 00:34:31,810 --> 00:34:35,229 Speaker 2: the behavioral economists call the present bias, right? 592 00:34:36,550 --> 00:34:41,189 Speaker 2: Because the priority for people, they will think, well, this 593 00:34:41,189 --> 00:34:46,379 Speaker 2: issue of this climate probably will happen in the 2050, 2060, 594 00:34:46,669 --> 00:34:49,500 Speaker 2: and for a politician, why should I spend my political 595 00:34:49,500 --> 00:34:53,139 Speaker 2: capital if my my successor will take the benefit of it, right? 596 00:34:53,310 --> 00:34:56,669 Speaker 2: It is better for, for us, for example, you know, 597 00:34:56,709 --> 00:34:59,029 Speaker 2: to focus on something that's tangible. 598 00:35:00,010 --> 00:35:02,799 Speaker 2: Yeah, if you do something on climate, you cannot cut 599 00:35:02,800 --> 00:35:06,080 Speaker 2: the ribbon for the improving of the climate, right? This 600 00:35:06,080 --> 00:35:09,040 Speaker 2: is really one generation, but you can cut the ribbon 601 00:35:09,040 --> 00:35:10,199 Speaker 2: for the building bridges. 602 00:35:11,030 --> 00:35:15,439 Speaker 2: And politicians don't forget about the political cycle. It's 5 years. 603 00:35:15,729 --> 00:35:18,889 Speaker 2: They need to build something that's really tangible. That is 604 00:35:18,889 --> 00:35:23,129 Speaker 2: why the incentive is how to link this issue, the 605 00:35:23,129 --> 00:35:28,729 Speaker 2: climate issue, with the issue of development that could be 606 00:35:28,729 --> 00:35:31,729 Speaker 2: sort of like something that tangible for politicians. So if 607 00:35:31,729 --> 00:35:33,679 Speaker 2: I may give an example. 608 00:35:34,629 --> 00:35:38,659 Speaker 2: The issue of the job creation is important, OK. 609 00:35:39,790 --> 00:35:44,679 Speaker 2: Why don't the government create the so-called the cash for work, 610 00:35:45,010 --> 00:35:48,560 Speaker 2: but the project is mangrove. So you use the green 611 00:35:48,560 --> 00:35:50,209 Speaker 2: project to create the jobs. 612 00:35:51,979 --> 00:35:55,520 Speaker 1: OK, one more time, you have basically prepared the ground 613 00:35:55,520 --> 00:35:57,120 Speaker 1: for my next question because I was gonna ask you 614 00:35:57,120 --> 00:36:03,919 Speaker 1: about jobs. Um, artificial intelligence, large language models, and the 615 00:36:03,919 --> 00:36:08,469 Speaker 1: serious threat it poses to white collar jobs. All this time, 616 00:36:08,560 --> 00:36:12,120 Speaker 1: the Trump narrative, the Indonesian narrative that blue collar jobs 617 00:36:12,120 --> 00:36:14,750 Speaker 1: are being taken away by China's overcapacity and that sort 618 00:36:14,750 --> 00:36:17,280 Speaker 1: of stuff, very soon we'll be talking about white collar 619 00:36:17,280 --> 00:36:19,280 Speaker 1: jobs being taken away by Chad GPT. 620 00:36:19,760 --> 00:36:22,529 Speaker 1: How does a country like Indonesia needs to generate millions 621 00:36:22,530 --> 00:36:25,549 Speaker 1: and millions of jobs? It's a prerequisite to the 8% 622 00:36:25,550 --> 00:36:27,719 Speaker 1: plus growth target. How does it ensure that? 623 00:36:28,949 --> 00:36:32,030 Speaker 2: Of course this is a problem for every country all 624 00:36:32,030 --> 00:36:34,510 Speaker 2: over the world now, but the way I look at it, I'm, 625 00:36:34,629 --> 00:36:38,709 Speaker 2: I'm trying to be optimistic timer. This is not the 626 00:36:38,709 --> 00:36:44,189 Speaker 2: first time the world is facing the impact of the 627 00:36:44,189 --> 00:36:48,109 Speaker 2: technology to the humankind. Look at what happened during the 628 00:36:48,110 --> 00:36:49,189 Speaker 2: industrial revolution. 629 00:36:49,949 --> 00:36:53,219 Speaker 2: The premise at a time that every job will be 630 00:36:53,219 --> 00:36:58,209 Speaker 2: replaced by machine, yeah, but look at what happened after this. 631 00:36:58,500 --> 00:37:01,169 Speaker 2: So the way I look at it, what is happening is, 632 00:37:01,219 --> 00:37:05,300 Speaker 2: is not a sort of about of like the destruction 633 00:37:05,300 --> 00:37:09,339 Speaker 2: of job, but the redefinition of job. The same job 634 00:37:09,340 --> 00:37:12,870 Speaker 2: will be available but will require a different skill of set. 635 00:37:14,060 --> 00:37:15,590 Speaker 2: Yeah, so for example, 636 00:37:16,350 --> 00:37:17,330 Speaker 2: We still need 637 00:37:18,010 --> 00:37:18,770 Speaker 2: Medical doctor. 638 00:37:19,610 --> 00:37:21,129 Speaker 2: We still need nurse. 639 00:37:22,129 --> 00:37:25,629 Speaker 2: But both nurse and doctor will require a different skill 640 00:37:25,629 --> 00:37:30,320 Speaker 2: set because they have to know how to operate. 641 00:37:30,959 --> 00:37:35,570 Speaker 2: The artificial intelligence, for example, the technology, for example. So 642 00:37:35,570 --> 00:37:41,209 Speaker 2: the solution is about the reskilling, about the training. That's 643 00:37:41,209 --> 00:37:44,129 Speaker 2: really the important. That's one thing that we probably need 644 00:37:44,129 --> 00:37:46,760 Speaker 2: to anticipate. That is why, as I said to you, 645 00:37:46,959 --> 00:37:50,629 Speaker 2: the role of the private sector in providing in helping 646 00:37:50,629 --> 00:37:52,209 Speaker 2: the training is a very important one. 647 00:37:53,199 --> 00:37:54,860 Speaker 2: But I have a concern here. 648 00:37:56,020 --> 00:37:59,919 Speaker 2: I am more worried about the government 4.0 rather than 649 00:37:59,919 --> 00:38:01,199 Speaker 2: industrial 4.0. 650 00:38:02,030 --> 00:38:05,100 Speaker 2: Why? can you imagine with this? 651 00:38:05,899 --> 00:38:10,060 Speaker 2: the disruption of the technology. The product cycle is getting 652 00:38:10,060 --> 00:38:11,939 Speaker 2: shorter and shorter, right? 653 00:38:12,830 --> 00:38:15,419 Speaker 2: How do you position the government? 654 00:38:16,290 --> 00:38:16,850 Speaker 2: In 655 00:38:17,689 --> 00:38:23,600 Speaker 2: Introducing the policy if the product is only lasts for 656 00:38:23,600 --> 00:38:26,080 Speaker 2: about 6 months because after that, 657 00:38:27,100 --> 00:38:29,408 Speaker 2: The product is no longer exists. It's obsolete. 658 00:38:30,909 --> 00:38:33,689 Speaker 2: As a regulator, it will be very difficult for you 659 00:38:34,060 --> 00:38:37,060 Speaker 2: if you keep if you keep a man your regulation 660 00:38:37,060 --> 00:38:40,649 Speaker 2: every 6 months, right? So I think this will require 661 00:38:41,139 --> 00:38:45,169 Speaker 2: the change of mindset. The ideal solution is will be 662 00:38:45,169 --> 00:38:50,139 Speaker 2: an agile bureaucracy, but agile bureaucracy is an oxymoron. There 663 00:38:50,139 --> 00:38:54,290 Speaker 2: is no way bureaucracy can be agile, so the bureaucracy 664 00:38:54,500 --> 00:38:57,459 Speaker 2: should change the mindset from agree on rules to agree 665 00:38:57,459 --> 00:39:00,500 Speaker 2: on principle, and this is not an easy thing. 666 00:39:01,340 --> 00:39:02,979 Speaker 1: Not easy at all. And again, as you say, it 667 00:39:02,979 --> 00:39:05,780 Speaker 1: is not an Indonesia specific, it's a whole, you know, 668 00:39:05,899 --> 00:39:09,820 Speaker 1: humanity is a big challenge going forward. Are you in 669 00:39:09,820 --> 00:39:11,830 Speaker 1: the camp that we're on the cusp of a big 670 00:39:11,830 --> 00:39:13,600 Speaker 1: productivity revolution thanks to AI? 671 00:39:13,610 --> 00:39:14,179 Speaker 2: I 672 00:39:14,179 --> 00:39:17,699 Speaker 2: think so. I think so. Let me give just give 673 00:39:17,699 --> 00:39:20,729 Speaker 2: an example. We have to change all the, you know, 674 00:39:21,100 --> 00:39:26,009 Speaker 2: all the conventional thinking method, etc. Let me give an example. 675 00:39:26,300 --> 00:39:29,339 Speaker 2: I'm teaching at the Department of Economics at the University 676 00:39:29,340 --> 00:39:30,139 Speaker 2: of Indonesia. 677 00:39:32,429 --> 00:39:36,270 Speaker 2: We always expect the student to be able to answer 678 00:39:36,270 --> 00:39:38,110 Speaker 2: the question during the exams, right? 679 00:39:39,060 --> 00:39:42,479 Speaker 2: But in the future, from now on, I don't think 680 00:39:42,479 --> 00:39:45,969 Speaker 2: anybody will be smarter than the GPT in providing the answer. 681 00:39:46,040 --> 00:39:48,639 Speaker 2: So what's the point to ask the student to provide 682 00:39:48,639 --> 00:39:49,229 Speaker 2: an answer? 683 00:39:50,060 --> 00:39:53,218 Speaker 2: So what we teach them at the university is not 684 00:39:53,219 --> 00:39:56,860 Speaker 2: by to provide an answer, but to ask the question 685 00:39:57,179 --> 00:40:01,620 Speaker 2: that GPT cannot provide an answer. So this is something that, 686 00:40:01,699 --> 00:40:05,459 Speaker 2: you know, a new different, a new different method. Yeah, 687 00:40:05,560 --> 00:40:07,979 Speaker 2: that is why I'm putting in my exams. The first 688 00:40:07,979 --> 00:40:11,138 Speaker 2: question is not to answer the question, but to ask 689 00:40:11,139 --> 00:40:14,850 Speaker 2: the question. And if this question never crossed to my mind, 690 00:40:14,979 --> 00:40:17,100 Speaker 2: that will be the very good research question. 691 00:40:17,629 --> 00:40:20,330 Speaker 1: And what's your sense? the students are adapting to this 692 00:40:20,330 --> 00:40:20,489 Speaker 1: new 693 00:40:20,489 --> 00:40:25,679 Speaker 2: world? Um, the student, they do, but not the lecturer. 694 00:40:27,750 --> 00:40:30,229 Speaker 1: Uh, Pai, we have some questions from the audience. Uh, 695 00:40:30,389 --> 00:40:32,469 Speaker 1: so in the limited time that we have, let's put 696 00:40:32,469 --> 00:40:35,729 Speaker 1: them up. So start with an FX question, uh, related 697 00:40:35,729 --> 00:40:38,080 Speaker 1: to DXY weakening and um. 698 00:40:39,229 --> 00:40:45,429 Speaker 1: Uh, uh, and then what's the like outlook for the rupia. So, uh, 699 00:40:45,520 --> 00:40:49,239 Speaker 1: the fact that most currencies in the world have appreciated 700 00:40:49,239 --> 00:40:51,489 Speaker 1: against the US dollar, while the rupia has been rather 701 00:40:51,489 --> 00:40:54,840 Speaker 1: muted in his appreciation, do you read something into that. 702 00:40:55,540 --> 00:40:56,299 Speaker 2: Yes, I think 703 00:40:57,229 --> 00:40:59,189 Speaker 2: Let me put it this way, because if you're talking 704 00:40:59,189 --> 00:41:05,709 Speaker 2: about the uh the currency rupiah, yeah, two factors play 705 00:41:05,709 --> 00:41:08,310 Speaker 2: a role here. The first one is of course the 706 00:41:08,310 --> 00:41:13,270 Speaker 2: global situation, the reciprocal tariff, etc. the weakening of the 707 00:41:13,270 --> 00:41:18,350 Speaker 2: DXY index, but at the same time, also the country risks. 708 00:41:19,179 --> 00:41:22,300 Speaker 2: You know, some concern, let me be frank and honest 709 00:41:22,300 --> 00:41:26,860 Speaker 2: with you, when Danan Tara was announced, yeah, there's a 710 00:41:26,860 --> 00:41:31,350 Speaker 2: lot of questions came from the investors about the governance, 711 00:41:32,219 --> 00:41:33,860 Speaker 2: about the management. 712 00:41:34,929 --> 00:41:35,639 Speaker 2: Until 713 00:41:36,510 --> 00:41:40,600 Speaker 2: They came up with a good management system, then you see. 714 00:41:41,459 --> 00:41:46,009 Speaker 2: You know, markets started to rebound when they mentioned about 715 00:41:46,010 --> 00:41:49,919 Speaker 2: the importance of governance, they put people like Ray Dalio, 716 00:41:50,409 --> 00:41:55,800 Speaker 2: you know, Jeff Sachs as an advisor or, or, um, 717 00:41:55,810 --> 00:41:59,570 Speaker 2: Chapman Taylor, for example. Markets start to believe that, you know, 718 00:41:59,649 --> 00:42:03,100 Speaker 2: the government is serious in this, at least in the government, 719 00:42:03,330 --> 00:42:06,049 Speaker 2: at least on the governance issue. So this is really 720 00:42:06,050 --> 00:42:07,290 Speaker 2: a combination of. 721 00:42:07,760 --> 00:42:11,449 Speaker 2: You know, external and also internal. So the rupia has 722 00:42:11,449 --> 00:42:14,080 Speaker 2: been appreciated a little bit compared to 723 00:42:14,739 --> 00:42:16,540 Speaker 2: What's about, you know, it's about. 724 00:42:17,419 --> 00:42:21,699 Speaker 2: A month ago, yeah, it was almost about 17,000. Now 725 00:42:21,699 --> 00:42:25,290 Speaker 2: it's about 16,400, but the way I look at it, 726 00:42:25,419 --> 00:42:29,060 Speaker 2: if we do sort of like give more confidence, yeah, 727 00:42:29,110 --> 00:42:31,979 Speaker 2: that the best side, you would expect that more sort 728 00:42:31,979 --> 00:42:35,020 Speaker 2: of like appreciation of the rupee, yeah, yeah, the other 729 00:42:35,020 --> 00:42:37,500 Speaker 2: concern from the market is about the budget deficit. 730 00:42:38,360 --> 00:42:42,429 Speaker 2: Because so many government programs, whether the government will hit 731 00:42:42,429 --> 00:42:45,959 Speaker 2: the budget deficit, go beyond 3%, I would say no, 732 00:42:46,000 --> 00:42:49,279 Speaker 2: I don't think so, and my bet is, you know, 733 00:42:49,360 --> 00:42:52,520 Speaker 2: we'll see what really happens, you know, by the end 734 00:42:53,120 --> 00:42:56,209 Speaker 2: of this year. I believe that the budget deficit will 735 00:42:56,209 --> 00:43:00,830 Speaker 2: stay around 2.4%, especially because the oil price remains about 736 00:43:00,830 --> 00:43:03,649 Speaker 2: $50 to $60 US dollars. So I don't think that 737 00:43:03,649 --> 00:43:05,080 Speaker 2: investors should worry about it. 738 00:43:05,489 --> 00:43:07,909 Speaker 2: Yeah, so I can see sort of like, you know, 739 00:43:08,159 --> 00:43:10,550 Speaker 2: more confidence to the rupia related to this. 740 00:43:11,320 --> 00:43:14,949 Speaker 1: Pug Bastri. I've been covering Indonesia for perhaps 15 years now, 741 00:43:15,320 --> 00:43:18,239 Speaker 1: and so many times we have had similar conversations that 742 00:43:18,239 --> 00:43:21,069 Speaker 1: the deficit is going to be destabilizing for the market. 743 00:43:21,429 --> 00:43:23,600 Speaker 1: By and large, every single time Indonesia is always surprised 744 00:43:23,600 --> 00:43:26,199 Speaker 1: on the downside. So yeah, I'm also not particularly fussed 745 00:43:26,199 --> 00:43:26,600 Speaker 1: about it. 746 00:43:26,794 --> 00:43:30,044 Speaker 1: Um, clearly a lot of questions on that 8% growth 747 00:43:30,044 --> 00:43:32,524 Speaker 1: target and the trade war issues. So there is one 748 00:43:32,524 --> 00:43:35,064 Speaker 1: question that sort of combines both. It might require you 749 00:43:35,064 --> 00:43:36,364 Speaker 1: to sort of repeat some of the things you said, 750 00:43:36,445 --> 00:43:38,235 Speaker 1: but might as well just read the question to you. 751 00:43:38,445 --> 00:43:41,245 Speaker 1: As US China compete in many aspects of technology and 752 00:43:41,245 --> 00:43:43,964 Speaker 1: tariffs are kicking in, what would it take for Indonesia 753 00:43:43,965 --> 00:43:47,125 Speaker 1: to stay on track with this ambitious target, uh, and, uh, 754 00:43:47,405 --> 00:43:49,524 Speaker 1: is there anything we can learn from past episodes of 755 00:43:49,524 --> 00:43:53,655 Speaker 1: geopolitical rivalry to cast Indonesia's target into context? Uh let, 756 00:43:54,245 --> 00:43:55,395 Speaker 2: let me share with you. 757 00:43:56,489 --> 00:44:01,129 Speaker 2: One episode back when I was chairman of the investment board, 758 00:44:01,209 --> 00:44:06,330 Speaker 2: the minister of Investment like Paros and is um have 759 00:44:06,330 --> 00:44:10,449 Speaker 2: this job now. It was back in 2011, if I'm 760 00:44:10,449 --> 00:44:13,800 Speaker 2: not mistaken, time or there was a big flood in Thailand. 761 00:44:14,489 --> 00:44:16,359 Speaker 2: Yeah, as a result. 762 00:44:17,120 --> 00:44:17,909 Speaker 2: To Utah 763 00:44:18,969 --> 00:44:22,888 Speaker 2: Could not produce their production in Southeast Asia because this 764 00:44:22,889 --> 00:44:27,090 Speaker 2: big flood in Bangkok, yeah, if you recall, I was 765 00:44:27,090 --> 00:44:29,689 Speaker 2: the chairman of the investment board, so I went to 766 00:44:29,689 --> 00:44:34,290 Speaker 2: Tokyo to meet Akio Toyoda. At the time he was 767 00:44:34,290 --> 00:44:37,699 Speaker 2: the CEO of Toyota, and I spoke to Toyota Sun. 768 00:44:37,889 --> 00:44:41,040 Speaker 2: I said that this is about the time for you 769 00:44:41,040 --> 00:44:42,719 Speaker 2: to invest in Indonesia. 770 00:44:43,149 --> 00:44:46,540 Speaker 2: And then he asked me why and I said, not 771 00:44:46,540 --> 00:44:50,580 Speaker 2: because Indonesia is better than Thailand, but you need to 772 00:44:50,580 --> 00:44:55,339 Speaker 2: diversify your risks because if something natural disaster happened like 773 00:44:55,340 --> 00:44:58,649 Speaker 2: what is happening, what was happening at the time in Bangkok, 774 00:44:58,899 --> 00:45:02,500 Speaker 2: you cannot produce your supply chain stop. You know there 775 00:45:02,500 --> 00:45:04,850 Speaker 2: is a supply chain disruption. It is better for you 776 00:45:05,060 --> 00:45:09,209 Speaker 2: to have, you know, some production based in Southeast Asia 777 00:45:09,449 --> 00:45:11,339 Speaker 2: and Indonesia is one of the options. 778 00:45:12,229 --> 00:45:15,770 Speaker 2: So I was able to convince him. Toyota decided to 779 00:45:15,770 --> 00:45:19,770 Speaker 2: put the production base $3.7 billion US dollars, not because 780 00:45:19,770 --> 00:45:23,330 Speaker 2: Indonesia is better than Thailand, because there is a need 781 00:45:23,330 --> 00:45:26,959 Speaker 2: for Toyota to diversify the race, and I can see 782 00:45:26,959 --> 00:45:28,649 Speaker 2: the similar analogy now. 783 00:45:29,870 --> 00:45:33,549 Speaker 2: Many production base in China should be relocated, not to 784 00:45:33,550 --> 00:45:37,100 Speaker 2: other Southeast Asian countries, not because we are better than China, 785 00:45:37,469 --> 00:45:40,310 Speaker 2: but they need to diversify the risk now because the 786 00:45:40,310 --> 00:45:46,889 Speaker 2: geopolitical tension. And if you're talking about Vietnam is probably. 787 00:45:47,600 --> 00:45:52,679 Speaker 2: Overcapacity at this moment, right? So Indonesia is very important. 788 00:45:52,860 --> 00:45:56,250 Speaker 2: So if Indonesia would like to maintain this 8% economic growth, 789 00:45:56,479 --> 00:46:00,320 Speaker 2: we can take this opportunity, provided that we do the 790 00:46:00,320 --> 00:46:01,280 Speaker 2: economic deregulation. 791 00:46:02,239 --> 00:46:04,689 Speaker 1: Very critical point related to that issue. OK, you are 792 00:46:04,689 --> 00:46:08,330 Speaker 1: convincing a foreign investor that from a risk diversification perspective 793 00:46:08,330 --> 00:46:11,448 Speaker 1: it makes sense to invest in Indonesia. What about the 794 00:46:11,449 --> 00:46:14,600 Speaker 1: fact related to your earlier point that even during GFC 795 00:46:14,600 --> 00:46:17,810 Speaker 1: this country did not lose growth momentum the way most 796 00:46:17,810 --> 00:46:20,489 Speaker 1: open economies in the world did? Do you consider that 797 00:46:20,489 --> 00:46:22,770 Speaker 1: also as an important resilient factor? 798 00:46:23,729 --> 00:46:26,040 Speaker 2: I couldn't agree more with you. I think we have 799 00:46:26,040 --> 00:46:27,679 Speaker 2: to change our strategy timer. 800 00:46:28,659 --> 00:46:32,260 Speaker 2: Many people believe, including the, you know, I believe that 801 00:46:32,260 --> 00:46:38,570 Speaker 2: many investors here always talking about one of the attraction for, 802 00:46:38,620 --> 00:46:42,459 Speaker 2: you know, investors to invest in Asia because huge domestic market. 803 00:46:44,340 --> 00:46:48,620 Speaker 2: If people talk about India, huge domestic market, but let 804 00:46:48,620 --> 00:46:49,379 Speaker 2: me put it this way. 805 00:46:50,060 --> 00:46:54,729 Speaker 2: Indonesia, India, and China have this huge domestic market since 806 00:46:54,729 --> 00:46:55,639 Speaker 2: a century ago. 807 00:46:56,600 --> 00:47:00,100 Speaker 2: But they only grew China only in the late, in the, 808 00:47:00,110 --> 00:47:04,080 Speaker 2: in the 80s, India only in the 90s, Indonesia only 809 00:47:04,080 --> 00:47:05,509 Speaker 2: in the mid 80s. Why? 810 00:47:06,389 --> 00:47:11,120 Speaker 2: And when, when they started to connect the domestic economy 811 00:47:11,120 --> 00:47:14,610 Speaker 2: into the global economy, India did the reform under Mamohan 812 00:47:14,610 --> 00:47:19,120 Speaker 2: Singh in the early 90s. China sent to WTO. Indonesia 813 00:47:19,120 --> 00:47:21,850 Speaker 2: introduced the economic deregulation in the mid 80s. So the 814 00:47:21,850 --> 00:47:24,229 Speaker 2: way I look at it, if we want to promote 815 00:47:24,229 --> 00:47:28,330 Speaker 2: the economic growth, it should be export oriented sector. You 816 00:47:28,330 --> 00:47:32,330 Speaker 2: put Indonesia as a production base to serve the global 817 00:47:32,330 --> 00:47:34,810 Speaker 2: economy because the issue with Indonesia, even though we have 818 00:47:34,810 --> 00:47:36,000 Speaker 2: this huge domestic market. 819 00:47:36,290 --> 00:47:40,070 Speaker 2: The purchasing power is relatively low. You won't be surprised. 820 00:47:40,739 --> 00:47:43,100 Speaker 2: I don't know whether you'll be surprised, the number of 821 00:47:43,100 --> 00:47:45,250 Speaker 2: subscribers of Netflix in Indonesia. 822 00:47:46,060 --> 00:47:50,340 Speaker 2: is smaller than the number of subscribers of Netflix in 823 00:47:50,340 --> 00:47:54,149 Speaker 2: Singapore because the issue of purchasing power, right? So I 824 00:47:54,149 --> 00:47:56,659 Speaker 2: think if we want to pursue the economic growth, we 825 00:47:56,659 --> 00:48:00,939 Speaker 2: should follow the Vietnam style, you know, export-oriented, financed by 826 00:48:00,939 --> 00:48:02,020 Speaker 2: the foreign direct investment. 827 00:48:03,290 --> 00:48:06,310 Speaker 1: Pug Basri, you've been very generous with your time and 828 00:48:06,310 --> 00:48:09,669 Speaker 1: fantastic insights. Really appreciate it, everybody. A big hand for Pogbastri. 829 00:48:10,719 --> 00:48:12,590 Speaker 2: Thanks, Daya. Thanks for having me. 830 00:48:13,399 --> 00:48:16,279 Speaker 1: Thanks to our listeners as well. Copy Time was produced 831 00:48:16,280 --> 00:48:19,279 Speaker 1: by Ken Delbridge at Spy Studios. Daisy Sharma and Viet 832 00:48:19,280 --> 00:48:22,759 Speaker 1: Lee provided additional assistance. It is for information only and 833 00:48:22,760 --> 00:48:27,600 Speaker 1: does not constitute any investment advice. All 154 episodes of 834 00:48:27,600 --> 00:48:30,520 Speaker 1: COIT Time are available on YouTube and on all major 835 00:48:30,520 --> 00:48:35,609 Speaker 1: podcast platforms, including Apple and Spotify. As for our research material, 836 00:48:35,800 --> 00:48:38,509 Speaker 1: you can find them all by Googling DBS Research Library. 837 00:48:38,800 --> 00:48:39,679 Speaker 1: Have a great day.