Tom Lembong discussing economy of Indonesia and the bilateral relationship with Australia
As the Australia Indonesia Business Council (AIBC) Conference 2018 was held in Gold Coast earlier this month, AIYA had a chance to interview the head of the Indonesian Investment Coordinating Board, Thomas Lembong. Being one of the key speakers at the conference, the former Trade Minister shared his view regarding Indonesia’s prosperity in the midst of economic changes and global trends.
As one of the most active Indonesian government figures who speak in international forums, Tom admitted that Indonesia is a big country that doesn’t get as recognised as it should. Even though Indonesia is part of the 16 largest economies with the gross domestic product (GDP) of USD 1 billion every year, Tom regrets the lack of awareness about Indonesia in global eyes. “We have to actively go around and trade [Indonesia to the world]. Indonesia lacks from so many sides compared to other countries. For example, our exports only account for 20% of the total economy, while Vietnam’s reached 140%.” Tom also explained that Indonesia’s position in the world is positive and on track to further growth. Tom asserted that Indonesia could catch up with what it has missed with hard work and to bring Indonesia to the global eyes, and also bring the world’s focus on Indonesia.
“Prosperity can only come from trade with others, not just from ourselves (domestically).”
Tom Lembong, 2018
As the Indonesian delegate to share investment updates to Australia, Tom wants to push Indonesia’s potential in the digital economy (e-commerce) and sustainable tourism infrastructure. When asked the reason why these two sectors are chosen as the country’s economic backbone, Tom emphasised the priorities that drive the economic growth. Looking at the current data, it is no doubt that the biggest opportunity to date lies in the digital economy, lifestyle and tourism sectors. Currently, Indonesia’s economic growth increases at around 5%, tourism at 15% and the digital economy grew at around 20-25%. Despite championing these sectors, Tom ensure that the government does not leave other sectors behind, ie. manufacturing and industry.
Tom also attended to speak at the Indonesia Australia Business Summit (2018) on October showing the Indonesian government’s great effort to bring overseas investments to the country given the fact interests of Australian businesses in Indonesia are still minimal. Indonesian bureaucracy may not be the friendliest in comparison to other Asian countries, and this was the biggest reason why Australian investors are hesitant to invest in Indonesia despite the significant market size.
The lack of trust in Indonesia is also one of the critical points that the head of the Indonesian Investment Coordinating Board thinks as a challenge that the government is actively trying to solve. “That’s why the government today is so focused on regulation, reform, and bureaucracy, and simplifying the permit and requirements to invest. I have to admit that permit, requirements and regulations in Indonesia are still complicated.” Tom emphasised and regretted that some practices are related to extortion that may cause international capital to not wanting to come into the country. Tom hopes that all the efforts to solve this problem can regain foreign trust so that there is no more start-ups or local businesses having to register their businesses in neighbouring countries to attract overseas investors.
Speaking to Australian audience, Tom assured that the improving Indonesia-Australia bilateral relationship is no longer a theory. IA-CEPA is not only a pivotal moment on paper but also bridges the economic facilitation between the two countries. Regarding how far does IA-CEPA signing affect the citizens, Tom briefly answered that it affects in two ways: primary (direct) and secondary (indirect).
The primary influence is that the trade agreement between Indonesia and Australia directly brings the import tariffs to 0% and this applies two ways. Moreover, Tom explained that Indonesia exporter to Australia and vice versa will soon enjoy 10-15% discount. This deal can lower the products involved in the agreement such as beef and lamb, crops and produce, milk products and other export products. With the increase of exports between the two countries and the significantly lowered price on the products, the consumers will directly see this taking into effect and enjoy the benefits.
In terms of secondary influence, the trade agreement also eliminates previous barriers and challenges, such as barriers for Australian universities to enter Indonesia. In the next 3 to 5 years, there will be many Australian universities opened in Indonesia. “That way, our people will be able to obtain international diploma with world-class education without having to go overseas. Paying school fees will also be in Rupiah, no need to use dollars, as we live in Indonesia with Rupiah, not in Dollars like when overseas. Although this takes a bit of time.” Said Tom with hopes that in the future, more Indonesians will get access to world-class education system.
As we enter 2019, there are three trends that Tom predicts to be the highlight with analysing the prospects and needs of Indonesians. According to him, the rise of urbanisation in itself will come with its challenges and needs. It is estimated that in 20-30 years, 70% of Indonesia’s population will live in urban areas. In addition to that, there will be a rise in lifestyle services and help spur the growth of job opportunities. Environmental issues will also be in the spotlight and become the consumers’ interests. Speaking of the video of Citarum river pollution by Garry and Sam Bencheghib that went viral, Tom showed the communities’ high awareness of the environment. “Because plastic trash in the seas or on the land, microplastics, in particular, are those little plastic particles that have entered the food chain, and that means they have entered our bodies.” To add on the prediction, Tom also added digitalisation would continue to be the trend of future.
In the opening speech of the AIBC conference, Tom also encouraged to adopt millennial generation mentality that’s agile and fear of missing out. He also proposed the idea of finding the balance between being the powerhouse and doing it with such fun. He also observed the fast growth of Indonesian middle class can be complemented with creativity from lifestyle and entertainment support. Tom also shared German Minister of Economy and Energy recently to Merdeka Palace early last month that praised Indonesian creativity in doing businesses. “No other country is funkier than Indonesia,” replied him with laughter.