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ndonesia’s economy has grown quickly in recent years with last year expanding by 6.5 percent, one of the highest rates in the Asian region, in stark contrast with financially-troubled advanced economies.

Questions, however, still linger over how the Southeast Asia’s largest economy can perform better, partly by seizing the opportunities available at present. The Jakarta Post’s Linda Yulisman recently discussed the issue with Suryo Bambang Sulisto, the chairman of the Indonesian Chamber of Commerce and Industry (Kadin), which has long played an important role in the country’s economy. Below are excerpts from the interview.  

Question: How do you see the government’s economic policies under the leadership of President Susilo Bambang Yudhoyono in the past two years?

 Answer: In general, I acknowledge that Indonesia’s economy is at present one of the best performing economies in the world. Macro-economic stability, foreign exchange, inflation rates, and flows of investment have provided us with many opportunities and benefits. In addition to that, we’ve just recently achieved investment grade. The government also just passed a land acquisition law necessary to overcome the key bottleneck in executing infrastructure projects.

All of these conditions offer us the opportunity to maintain and even enhance the already good performance amidst uncertainties in the global economy.

The problem is that we should make the best use of this golden opportunity to avert losing such precious momentum. To make it, we have to issue policies that boost our attractiveness to investors, giving the right incentives, which are supportive to strengthen our economic fundamentals, our industrial edge and our businesspeople. We should not introduce policies which, in my terms, would be “shooting ourselves in the foot”.

 What kind of policies do you mean?

 One of them is the recently-launched Energy and Mineral Resources Minister regulation requiring mining companies to process their raw products in local smelting companies.

 Isn’t it in line with the government’s plan to ban export of raw materials starting from 2014?

Yes, but it is set to run faster than planned. This is confusing, particularly for investors who already put their investment at present.

Another example is the regulation on the appointment of regulated agents for cargo inspection at airports which is finally hard to implement.

 So, do you agree that the solid economic fundamentals are the result of President Yudhoyono’s leadership? Or can the conditions be achieved without significant efforts from the government?

 The stable economy must be attributed partly to the leadership of President Yudhoyono. Indonesia has abundant natural resources, but without supportive policies, the stellar economic performance cannot be achieved.

The other thing is that the global economic crisis amplifies Indonesia’s performance, making it very interesting for global investors. In the regional context, Indonesia emerges as the most-stable performing economy in ASEAN.  

 How do you see the investment climate in Indonesia so far?

The overall investment climate is relatively good in spite of major bottlenecks, such as corruption and legal uncertainty, poor infrastructure, and labor. Despite all of these problems, Indonesia is still attractive. What does it mean? We will be much better if we can eliminate these obstacles.

So you’re saying that we need policies to reduce the major bottlenecks?

Yes. And what is not of least importance are policies that stimulate business sectors to grow — incentives.

The government has recently provided fiscal incentives, including tax holidays and incentives. Have they sufficiently helped reach that goal?

Giving a tax holiday is like giving something that we don’t have. It’s like I am asking you, if you win a lottery, will you give me 25 percent of the gain, and you and I agree with that. Why? It’s because the investors have yet to enter Indonesia as they have other countries as choices. So by offering tax holidays, we lose nothing. The problem will be quite different if we offer a tax holiday for investors that have already been here.  

How do you see current trade policies? Do you expect the new Trade Minister to offer policy changes?

I think our trade policies should help strengthen our local production capability to reduce imports and this takes integrated efforts from the Trade Ministry, Industry Ministry and Finance Ministry.      

For example, we need fiscal incentives from the Finance Ministry to empower our horticulture farmers. Give them duty-free imports for machinery that they need.

In the health sector, for example, the government needs to remove the luxury goods tax on machinery needed in hospitals, as it will help prevent people from seeking medication overseas. This will avert flows of our foreign exchange reserves overseas.  

How do you see the policy related to the supply of energy?

The energy supply is related to the problem that really burdens the state, which is the government’s subsidy. The subsidy must be targeted and time-limited instead of open-ended.

Which subsidy should be lifted first, fuel or electricity?

Fuel, but at the end, both should be lifted because we can better use the subsidy for other purposes: building infrastructure, developing mass transportation and supporting small and medium enterprises.

The amount of the fuel subsidy (in the state budget) is higher than the electricity subsidy. Besides, the electricity subsidy affects the greater population.

What can the government do to enhance a better business climate for business people?

We need more public-private partnerships to handle key projects, as up to present, the government is slow to tackle them. Look at the traffic jams in Jakarta, for example. There’s been no significant progress on solving the problem. And this applies to development of other crucial infrastructure.

The private sector tends to execute projects faster, cheaper and quicker, and at the same time, will most likely maintain the quality.

How do you see Kadin’s role as the government’s partner at present?

As the government’s partner, we can basically work together with the government to improve the business climate to become more conducive for investors by offering suggestions. On the other hand, we also must provide optimal services by the business community, encourage investment, help accelerate the development of infrastructure and contribute to job creation.

Does the President respond to Kadin’s suggestions?

Yes, he does. The President was very responsive to Kadin’s advice about the urgency of low interest rates. He encouraged the Bank of Indonesia and the banking sector to lower interest rates. We also advised him to set up an infrastructure bank, which has been responded to positively. The government has considered the idea and there have been efforts to realize that.