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Jakarta Post

Indonesia needs value-added partnerships

Indonesia needs more investment to realize its economic and developmental ambitions

Myron Brilliant (The Jakarta Post)
Washington, DC
Thu, November 6, 2014

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Indonesia needs value-added partnerships

I

ndonesia needs more investment to realize its economic and developmental ambitions. But it also needs the right kind of investment partners.

Indonesia has vast potential. It is a country blessed with an abundance of resources from spices to rubber and copper to oil, but its human resources are even more impressive. Indonesia has a rising middle class with youthful working age demographics. In fact, in a recent report, the McKinsey Global Institute predicts that by 2030 Indonesia could be the world'€™s seventh-largest economy, overtaking both Germany and the United Kingdom. The prospects for Indonesia look bright.

This optimism is shared by the American business community. Last year, an AmCham study entitled Partners in Prosperity: US Investment in Indonesia, found that from 2004 to 2012, US foreign direct investment in Indonesia totaled US$65 billion. That total is much larger than official data indicate, making the United States the largest foreign investor in Indonesia over that period.

Furthermore, the study found that US companies plan approximately $61 billion in new investment in the country over the next 3-5 years if the investment climate is right.

The study shows that American businesses are committed to supporting Indonesia'€™s economic ascent, but there are a number of policy challenges that need to be worked through for this long-term value-added investment to be realized.

The recent election of Joko '€œJokowi'€ Widodo as the new President ushers in a new opportunity for Indonesia. Indonesia now embarks on a new journey with a new government, and a leader who has laid out ambitious goals for economic growth and development. Indonesia will need more investment if is to realize these goals and achieve its true potential. Such growth will not come from domestic consumption and Indonesia'€™s own productivity and exports alone.

Indonesia now needs investors who give back to the country'€™s communities and add value. Indonesia needs committed, responsible and long-term investment partners that can help the country achieve developmental goals.

Across sectors as diverse as energy, mining, ICT, consumer goods, agriculture and finance, all sectors that President Jokowi has discussed in his growth agenda, there is now a critical need for investment that can increase skills, bring in new technology, develop infrastructure, increase production, incorporate Indonesian partners into regional and global supply chains, and foster new spin-off enterprises.

Many countries may offer investment, but US companies lead the way in offering the kind of value added investment that Indonesia needs. During his inaugural address, President Jokowi emphasized the concept of gotong royong '€” the joint sharing of burdens. He also outlined repeatedly how Indonesia needs business and investors that can contribute to national development goals and provide benefits through mutual cooperation.

No country is as well placed to contribute to Indonesia'€™s development as America. US companies directly employ approximately 183,000 Indonesians at good wages, and provide top-notch employee benefits and welfare. US companies directly and indirectly support more than 1.7 million Indonesian jobs, supporting livelihoods and providing opportunities for millions of families.

American businesses are also helping to develop Indonesia'€™s human capital and the skilled workers it needs. From 2007 to 2012, US companies'€™ average employee-training budgets increased by 150 percent, providing a new generation of Indonesians with new skills and educational development.

Beyond business, US companies are also responsible corporate citizens, contributing $5.8 million in 2012 for Corporate Social Responsibility (CSR) programs, an increase of 95 percent since 2007. US companies have a strong track record of long-term partnerships and commitment to Indonesia, stretching back all the way to 1924 when geologists from Standard Oil of California (today'€™s Chevron) were trekking through the jungles of Sumatra. It is a story of investment and mutual cooperation that continues to this day.

In a few days, the US business community will come together with our Indonesian counterparts and government partners to discuss how American investment can continue to help Indonesia and its new government meet its economic and developmental ambitions at the '€œIndonesia Investment Summit.'€ It is an occasion where the US business community'€™s commitment to Indonesia will be reaffirmed.

Experts from Paramadina Public Policy Institute, as well as Indonesian Chamber of Commerce and Industry (Kadin), Indonesian Employers Association (Apindo) and Investment Coordinating Board (BKPM) in partnership with AmCham will put forward policy recommendations designed to foster value-added investment and thereby support the new government'€™s efforts to achieve its policy goals, with clear benefits to Indonesia'€™s economy, its people, and society at large.

American business is committed to working in partnership with the new government to support Indonesia on its journey, and help Indonesia realize its boundless potential.

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The writer is executive vice president and head of international affairs at the US Chamber of Commerce.

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