Indonesia was one of the few nations in the world to emerge intact, and indeed prosper, following the 2008 global economic crisis, but the nation must work harder and smarter to maintain that momentum if it is to develop as a global economic power, warns leading economist Chatib Basri.

Chatib, the chairman of the Investment Coordinating Board (BKPM), believes that despite the bullish feelings at the present time, Indonesia must remain prudent in its economic policy.

Speaking at an AmCham luncheon in November about his vision and strategy for drawing more – and higher quality foreign investment into Indonesia, Chatib reminded the audience that Indonesia has not grown simply because of sound policy, but also as a result of plain good luck due to a combination of external and internal “push” and “pull” factors.

“Push” factors that allow Indonesia to grow have to do with the shaky status of the rest of the global economy, leaving Indonesia one of the few remaining countries in the world that is attractive for investment, he said. The factors: a high yen that makes it expensive to produce in Japan; labor unrest in China and rising wages; the “relative” attractiveness of Indonesia compared to the slowing economies of India, China and Vietnam; the slow timing of the recovery in the United States and Europe; and a liquidity flush in the United States that is pushing capital elsewhere.

Among the “pull” factors are Indonesia’s young population, strong consumption and growing market size.

“My concern is that this [growth] is not going to be sustainable because once the rest of the world recovers, they are going to wonder [about Indonesia],” he said.

“[The growth] needs to be supported by reform. In five years, not in my term [as BKPM Head], people will look at Indonesia and ask if it is still an appropriate destination to invest.”

Chatib warned that “good times make for bad policy,” reminding the audience that the role of technocrats is important during times of crisis, but they are unfortunately often ignored during boom times like now. He cited a laundry list of problems that Indonesia still must deal with in order to compete such as infrastructure, corruption and an uncertain business environment.

“The only thing that I can promise to investors is that you will see problems,” Chatib said, echoing a familiar theme for the plain-talking former professor.

He emphasized that BKPM exists to help investors, and that they do have a partner during the often difficult start-up phase of operations in Indonesia this was the main message of his talk.

Chatib underscored his larger strategy for reform as one that is focused on providing evidence to back his case through early success stories. By helping some very large foreign companies, he hoped to show within the two years that he has left in office that reform is possible.

He believes that people will continue to see that doing business in Indonesia is feasible. However, he admitted he could not be all things to all investors.

“I have to focus on a few investments that are iconic. I can only deploy my resources to a few investors. I only have 55 people in my office.”

Chatib so far is a man of his word. One of the first things he did on the job was to shorten the queue time for investors who visited the office. He also requires that all his staff reply to emails within 48 hours.

One of the highlights of the luncheon was the launch of the new BKPM tracking system, an online application tracker called SPIPISE, whose goal is to lend transparency to the BKPM application process for investors.

Doug Rammage, Chair of AmCham’s Trade and Investment Committee, asked Chatib what impact he thought the 2014 Presidential Election would have on the investment climate.

Chatib replied that there is not much room for change currently because of politics. The fuel price increase is one such example, he said. However, Chatib said he believes that much of the noise is a matter of political gimmicks. The current tone of ultra nationalism, for example, is used as a way to get into office, but once there, leaders will make reforms, he said.

He reiterated his belief that only an open economy could allow Indonesia to achieve a 7% GDP growth rate, and that means creating an investment-friendly environment.

“Whoever the president is in 2014, he has to be open to foreign investment to reach growth goals,” Chatib said.

AmCham - 2012

Indonesia Snapshot

Capital: Jakarta
Population: 259 million (2016)
Currency: Indonesian Rupiah
Nominal GDP: $936 billion USD (IMF, 2016)
GDP Per Capita: $3,620 USD at Current Prices (IMF, 2016)
GDP Growth: 5.0% (2016)
External Debt: 36.80% of GDP (BI, Q2 2016)
Ease of Doing Business: 91/190 (WB, 2017)
Corruption Index: 90/176 (TI, 2016)

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