Keynote Address at The 31st Annual IPA Convention and Exhibition

Keynote Address
by
His Excellency Dr. Susilo Bambang Yudoyono
President of The Republic of Indonesia
at The 31st Annual IPA Convention and E-xhibition
Jakarta, Indonesia, May 14, 2007



Bismillahirrahmanirahiim
Assalamualaikum Wr. Wb.

Minister Purnomo Yusgiantoro, Excellencies Minister Ambassador, Member of the parliament, Governor of Jakarta
President of IPA, Mr.Chris Parttini.
Distinguished Busisness Leaders and Participants,
Ladies and Gentlemen,

I am pleased and honored to join you here this morning, and to open the 31st Annual Indonesian Petroleum Association (IPA) Convention and Exhibition. I extend a very warm welcome to all of you, especially our friends who have come from overseas.

This is my first address to an international conference since the cabinet reshuffle a few days ago. As you see, Minister Purnomo is much more relaxed now, and he is smiling again !

But make no mistake. I have told Minister Purnomo and all my Ministers that we are racing with time: we have less than 2 and a half years left to do our job and to deliver on the hopes and expectations of the Indonesian people who have elected me to this job.

This is actually the second time I have had the honor to meet with distinguished members of IPA as President of the Republic of Indonesia.

The first opportunity was in August 2005, when the world was grappling with the sharp rise of oil price, including us here in Indonesia.

That was a particularly difficult year for Indonesia. In addition to dealing with the horrible tsunami tragedy, I had to make the politically difficult but economically necessary decision to significantly reduce the oil subsidies --not once, but twice!-- on a scale that no previous Government ever dared to do.

Alhamdulillah, that difficult decision paid off. Since then, we have been able to divert billions of dollars from the oil subsidy for the poor who need it most: for village infrastructure, free education, health care, basic needs such as rice and cooking oil, and so on.

Indeed, I am pleased to say that, half-way through my term in office, Indonesia is in better shape than when I last stood before this Conference in 2005.

In Aceh, the post-tsunami reconstruction is going strong. The 30-year conflict that bled Aceh has also ended, with a peace deal that has been faithfully implemented by all sides.

In Papua, the political situation has considerably improved, and we are launching an ambitious “New Deal” development program to address to socio-economic problems in that area.

In Poso and Maluku, the horizontal conflicts have been under control.

Throughout Indonesia, post-2004 local elections have proceeded smoothly.

Political stability has been maintained -- I e-xpect that to be the case until 2009.

And we continue to press on with anti-corruption drive of my Government, which is said to be the most aggressive in our nation’s history.

The Indonesian economy TOO is more promising today. Our macro-economic performance is showing record figures since the financial crisis of 1998.

Our economy grew at 5,6 % in 2005, and about the same in 2006, which the highest growth rate in 2 consecutive years since the crisis. This year, Insya Allah, we aim to reach 6.3 % of GDP growth.

Our Debt to GDP Ratio is below 41 %, considerably the lowest since the crisis.

Our e-xports for the first time in history exceeded US$ 100 billion.

Our international reserves in April this year exceeded US$ 49 billion, the highest ever recorded in our history.

Our e-xchange rate has been stable between Rp 8,800 to 9,200 to the US Dollar.

Our inflation rate has declined significantly to 6.6 % in 2006, from 17.1% in 2005, and this year we e-xpect to keep it below 7 %.

Our GDP per capita in 2006 was US$ 1,592, which is almost twice the rate during the crisis, and was also the highest per capita income in our history.

We have maintained fiscal sustainability: last year, our budget deficit was at 1,1 %, which is well below the OECD standard of 3 %.

We also managed to pay all of our debt to the International Monetary Fund (IMF) four years ahead of our schedule.

And starting this year, due to our macro-economic performance, we will no longer continue with the CGI mechanism, although we will continue to work on bilateral basis with the World Bank, ADB and a few creditors.

Meanwhile, our credit rating is at its best since the crisis, just ask Moody’s, Standard and Poor, and Fitch.

Our stock market is also reaching its peak performance. When we closed 2006, our stock market hit the third fastest growth in the World after Russia and China. The Jakarta Composite Inde-x continued to soar and passed the 2,000 mark, breaking their trading records almost every day.

I am also pleased that our competitiveness has improved and The World Economic Forum ranks us at 50th place in their 2006 global competitiveness inde-x ranking, moving up from 68th position the previous year.

With those current indicators, we are confident about Indonesia’s economic prospects in the coming years.

Excellencies Ladies and Gentlemen
While these figures are heartening, I am still not satisfied because what we want to achieve is NOT just high growth, but also a better QUALITY of growth. The kind of economic growth that spreads and benefits all Indonesians, which provides more jobs, reduces poverty, and delivers better quality of life for the individual and the community. This is what I call “growth with equity”, and this is where the challenge lies.

To achieve this, we are spending the highest portion of the development budget for education and health, and for anti-poverty programs.

Indeed, this year, we are allocating over 50 trillion Rupiah almost 6 billion USD for the Poverty Reduction Program including National Program for People’s Empowerment --the PNPM Mandiri program-- which targets tens of thousands of villages across Indonesia.

In this grand scheme of our national development, the energy sector is very critical, both in fueling the economy and as sources of national revenue.

When I assumed office in 2004, I immediately realized that we have to review and reform our energy policy. The right energy policy can be a big boost to our economy, while the wrong energy policy can burden and rob our economic gains.

Therefore, my Government has formulated a comprehensive energy policy for Indonesia.

First, we must continue to increase our domestic oil production and the capacity of our refineries.

Our present production capacity of around 1 million barrel per day is not sufficient to meet rising energy needs. Without new e-xplorations, our oil production will continue to decline as has been said by Minister Purnomo, and that would create serious problem to the national economy.

We therefore need to find more new oil fields, and intensify our e-xplorations over existing known fields. Of the 60 oil basins in Indonesia, less than half have been e-xplored e-xtensively. I hope that the current high oil price would stimulate more e-xplorations, especially in the untouched Indonesian oil basins.

We are working hard to improve the output of our refinery capacity. We want to build new refineries as well as storages while enhancing the capacity of e-xisting ones.

Secondly, the Government is determined to diversify our energy sources.

We encourage the greater use of gas, and especially renewable energy sources such as solar, wind, geo-thermal, biofuel and others. By so doing, not only are we anticipating the scarcity of fossil-based fuel, but we are also protecting our environment.

I urge you, the energy industry, with your knowledge, technology and resources, to be our partner in finding and developing renewable energy resources.

Thirdly, we will intensify the efforts to conserve our energy in an efficient manner. I have launched a national campaign to build culture habit of using energi efficiently. We know that it takes time how to change the life style of our people in using and consuming energy.

Fourthly, we will continue to enhance our capacity and capability to enforce the law, especially against oil and fuel smugglers. The trend is moving positively.

And fifth, we are also working hard to formulate and implement correct policy on oil subsidy and pricing. My Government remains consistent in ensuring that subsidy goes to the right target—the poor.

In all this, there is plenty of opportunity for us to grow and prosper together.

We will continue to do our best to create a better and friendlier investment climate for investors, both domestic and foreign.

I am pleased that we have accomplished the transformation of our oil industry from a monopolistic to a more competitive one.

We have also recently passed a new investment law to provide greater certainty and more conducive environment for both domestic and foreign investors.

We are also working on a new Mining Law, which is now being deliberated by the Parliament to replace Law no 11 of 1967. It is critical for us to ensure that the provisions in this draft Mining Law will actually stimulate e-xploration and production in Indonesia.

The high oil price also means it is a good time to invest and to increase your production. High oil price enables several marginal fields, previously found to be uneconomic, to go on stream now.

Current oil price also creates opportunity for the development of Coal Bed Methane (CBM) gas, which is abundant in Indonesia. The potential resource of CBM in Indonesia is about 300 – 450 Trillion cubic feet --twice the size of our potential gas resources.

I am pleased that the Ministry of Energy and Mines will start offering acreage for the Coal Bed Methane development this year. I do hope through partnership and mutual cooperation in developing the Coal Bed Methane in Indonesia, we could repeat our success in developing our natural gas industry as we did in 1970’s.

My Government fully realizes that there are concerns and e-xpectations from the industry regarding the investment conditions.Investment climate.

I understand that investors e-xpect to see the elimination of any possible conflicting regulations.

I know you need consistency and clarity in government policies across all government institutions and also between central and local governments.

I am well aware that investors e-xpect to see the formulation of detailed long-term implementation plans and strategies for the development of the oil and gas industry.

And I followed whas been pointed out by Chris, list of concern, e-xpectation from the private sector oil and gas industry.

So let me assure you that my Government is working hard and strongly committed to ensure that appropriate regulations are well in place. We are here to uphold a fair market playing field, for every investor and project. And we need to hear more from you on how we can partner better and do better.

The Indonesian Government and investors in the oil and gas industry have been together in this venture for decades, and I have every confidence that we continue to prosper together as partners.

As we pursue this partnership, however, we must not forget the critical importance of the local community. I appreciate the efforts done by the energy industry for the benefit of the local community. This is very healthy and admirable, and I hope you will continue to relentlessly advance your corporate social responsibility programs.

In my view, ladies and gentlemen, the entire multinational corporation movement that occur in many countries, due to among others, a perception, a feeling to the local people unneglected. To The local people are left behind. That’s why I really encourage to continue your community development program to have the people. So they can feel that they are also progressing in part of the progress of oil and gas industry that is located in certain areas.

Our partnership is not only vital at the national level, but it is also crucial at the global level. All of us are now facing an issue that is fast becoming an urgent concern: global warming.

We are aware of the series of Reports produced by the United Nations Inter-Governmental Panel on Climate Change.

We know that global average temperature has risen by 0.76 degree Celsius since the last century, and that the concentration of carbon-dioxide in the atmosphere has grown significantly, perhaps even doubling in the coming decades.

Sir Nicholas Stern has issued a Report which, among others, predicts serious and far-reaching economic, social and demographic consequences if global temperature rises by 2 degrees Celsius, by 3 degrees Celsius, or fatally, if it rises by 5 degrees Celsius.

If anything is clear, it is that we are all in this together and that we can only avert a catastrophe if each of us do our part.

In this, the energy industry has a strategic role to play, because the three-quarter of the global greenhouse gas emissions are believed to have originated from man-made industries.

We therefore expect the energy industry to devote more resources to research and development on how your operations and production can be done with much less greenhouse gas emissions.

You can use your innovative technology to produce clean energy. Those in the coal industry, in particular, must do more to develop clean coal technology.

You can prove that you can cut greenhouse emissions without cutting on growth or jobs.

In December this year, Indonesia will host the UN Conference on Climate Change, where we will e-xpect thousands of participants from around the world deliberating on how to produce a global consensus and an action plan to control greenhouse gas emissions. I do hope that the energy industry will not only contribute positively to this debate but will also be at the forefront of this global action plan.

Excellencies Ladies and Gentlemen
This morning, I am proud to stand before prominent business leaders and bright minds in this room. I trust with all your e-xperience, wisdom, and knowledge, you will generate many good ideas and suggestions for us to act upon.

I know many of you have been staying with us all these years, throughout good and bad days, surviving many ups and downs. I appreciate and highly value our partnership. I trust you will stay with us in doing the business, in promoting our oil industry, and in working together so that we can prosper together partners. After all, that is the theme you have chosen for today’s event, “Promoting Investment through Partnership”.

With that note, and by saying ”Bismillahirrahmanirrahiim”, I declare the 31th Annual IPA Convention and E-xhibition open.

Thank you.