Remarks at A Business Luncheon Organized by The Korea Chamber af Commerce

TRANCRIPT
REMARKS BY
H.E. DR. SUSILO BAMBANG YUDHOYONO
PRESIDENT OF THE REPUBLIC OF INDONESIA
AT A BUSINESS LUNCHEON
ORGANIZED BY
THE KOREA CHAMBER OF COMMERCE
(SIMULATENOUS INTERPRETATION)
SHILLA HOTEL, SEOUL-SOUTH KOREAN
25 JULY 2007


Bismillahirrahmanirrahim,
Your Excellency Prime Minister Han Duck-soo,
Mr. Chairman,
Ministers,
Excellencies,
Distinguished Business Leaders,
Ladies and Gentlemen,

Annyong ha-se-yo.

Let me begin by thanking the Korean Chamber of Commerce, the Federation of Korean Industries, the Korea International Trade Association, and the Korea Federation of Small and Medium Business and also Indonesian Chamber of Commerce and Industry for arranging this business luncheon today. I am honored for this opportunity to meet Korean business leaders.

I arrived in your beautiful country two nights ago for my first bilateral State Visit to Korea as Indonesia’s President, and I have been very impressed by what I have seen and very encouraged by the remarkable progress of our bilateral relations.
President Roh Moo-hyun and I agreed that our Strategic Partnership, which we declared in December last year, is well on track. And yesterday, we reaffirmed our determination to substantiate that Partnership comprehensively across all sectors.

Someone had asked me earlier: how would I describe Indonesia-Korea relations? Well, I would describe it as a special relationship for several reasons:

First, we don’t have any historical, cultural, political, or diplomatic baggage holding down our relationship. Our history has always been about friendship, and the geographical distance that once separated us is no longer a hurdle today. President Roh Moo-hyun was entirely right when he said to me yesterday that ours was an easy, problem-free relationship.

Secondly, there is a high degree of complementarities between our economies. With 220 million people, Indonesia is the fourth most populous nation in the world, and the largest country in Southeast Asia in terms of size and population. Indonesia also has an abundant natural resources, including energy resources, which we also e-xport to Korea, and Indonesia is strategically located in the most active trading crossroad.

Korea is one of the Asia`s most dynamic nation, with great outlook on technology innovation, industrial strength, and a very vibrant and outward-looking private sector, and of course a great football team in “the Reds”. This is in addition to being the 11th largest economy, and one of the most wired and digitized country in Asia. The Strategic Partnership is meant precisely to harness and unleash the enormous potentials and complementarities between our great nations.

And the third, reason why ours is a special relationship is because both Indonesia and the Republic of Korea have e-xperienced a major transformation in recent years. This means that today Indonesia and Korea are becoming and have become a different nation.

We all know how Korea has dramatically transformed herself, so let me elaborate on how Indonesia has evolved in recent years.

Indonesia has now become the world’s third largest democracy, after India and the United States. Moreover, we are living proof that Islam, democracy and modernity can live and thrive together.

We have restored civil and human rights, reformed the military, overhauled our political institutions and amended our Constitution so that our people now have a voice in political decision-making.

We have finally resolved conflict in Aceh after three decades of bloodshed. In other places where unrest once took place, we are addressing grievances through legal action, dialogue and reconciliation.

We are waging a vigorous campaign for good governance and a relentless battle against corruption.

We have achieved a great deal of decentralization. Local authorities in Indonesia now have all the powers and resources, and they are also directly accountable to their constituents, who now elect them to office.

There is also an ongoing e-xercise to eliminate local level regulations which are inconsistent with central government policies and standards. For instance, there is now a positive list of what local governments are allowed to tax, everything else is not allowed.

On the economic front, we have revamped our financial institutions and pursued prudent fiscal policies. And we have succeeded in maintaining macro-economic stability, as well as ensuring that we have the elements for sustained growth.

Growth has been increasing steadily to 5.6 percent in 2005 and 2006, the highest since the crisis. We e-xpect to achieve 6.3 percent growth or higher this year. In the last three quarters our growth is 6%.

This growth is driven mainly by the recovery of private consumption and investment as well as continued e-xport growth. The revival in consumption is evident in the sales growth of a number of goods such as motorcycle, automotive, electronics, other consumer products, and construction materials.

This means sales of various Korean brands in Indonesia will be doing well this year—be they Samsung mobile phones, LG refrigerators or Hyundai cars. With the size of the population and increasing GDP per capita, reaching $1640 last year, Indonesia’s potential as a consumer market is very high.

The investment picture is getting brighter. In the first six months of 2007, approved domestic investments increased from US$ 7 to US$12 billion and approved foreign direct investment tripled from US$ 6 to US$ 24 billion, compared to the first six months of 2006.

Our e-xports are also doing well. We crossed the US$ 100 billion threshold last year.

With strong e-xport growth and capital inflows both for direct investment and for portfolio investments, our international reserves e-xceeded US$ 50 billion—another first in our history.

Inflation has come down since the effects of the domestic fuel price increase last year, and up to June of this year, I should say inflation year on year is 5.77 percent, so that interest rates have been steadily coming down, which has also stimulated credit and investment growth. The rupiah also remains stable.

On the fiscal side, our budget deficit was 1.1 percent, well below the OECD standard of three percent and our Debt to GDP Ratio stands at 41 percent, the lowest since the crisis. We have also settled our debt with the IMF four years ahead of schedule.

Our credit rating, as assessed by Moody’s, Standard and Poor’s, and Fitch, is now at its highest since the crisis. The Jakarta Stock E-xchange showed the third fastest growth in the world at the end of 2006, after Russia and China. The Jakarta Composite Inde-x continues to soar, recently passing the 2,000 mark. Yesterday, I watched to CNN inde-x that the inde-x was 2401.

The World Economic Forum ranks Indonesia 50th in its 2006 global competitiveness inde-x ranking, a significant rise from 68th position the previous year.

One of the key priorities to achieve sustainable growth is of course infrastructure. Here, the Indonesian government has identified the key areas for infrastructure development including 1,600 kilometers of toll-roads, power plants and ports. The value of investments amount to US$146 billion, of which US$72 billion, we hope, will come from private investors—including our friends in Korea.

The government has created the framework and regulations to encourage public private partnerships in the building of our national infrastructure.

We are also sustaining a reform program to ensure a conducive climate for investment: a climate of legal certainty, policy consistency and reduction in the cost of doing business in Indonesia.

The new investment law we enacted last April will help create that climate. Under this law, there is equal treatment for domestic and foreign investors, greater legal certainty and transparency, streamlining of the investment process and a number of incentives in the fiscal, land and immigration areas.

There is also already a customs reform package in place, and the revised tax reforms are currently being discussed in parliament. We are also continuing to improve the implementation of the labor regulations and safeguarding a good process of industrial relations.

So, Ladies and Gentlemen, as you can see, there is much by way of bilateral cooperation that we can do for mutual benefit.

I am very pleased the Joint Task Force on Economic Cooperation has worked productively to advance the Strategic Partnership during their meeting in Jakarta in May this year.

The task force has succeeded in identifying the way forward to broadening and strengthening economic cooperation to increase trade and investment flows. Today, we will witness the signing of a number of agreements showing the concrete results coming out of this task force today.

President Roh Moo-hyun and I agreed yesterday, in our joint statement, to double our current investment and trade by 2012. It’s a great challenge, but entirely achievable.

Our bilateral trade has doubled from $5.7 billion in 2002 to $10.7 billion in 2006. But much of our e-xports to South Korea is accounted for by oil and gas. Therefore, it is my hope that the Task Force will focus on how to ensure greater diversification of products in our bilateral trade, including manufactured products and agriculture products.

The ASEAN-Korea Free Trade Agreement which was signed last year and implemented July this year, offers opportunities for greater market access for Indonesian products in the Korean market and vice versa. Seventy percent of Korea’s tariff lines will be zero for products from ASEAN, and 95 percent by 2009. Products with zero tariffs entering into Korean market which will benefit Indonesia include fishery, palm oil, chemical products, paper products, te-xtile and te-xtile products, footwear and leather, and wood products.

Furthermore, negotiations are continuing so that the ASEAN-Korea agreement will also cover investment and services. This enhances the opportunities for trade and investment, not just for the Korean and Indonesian markets, but for the regional market. Indonesia is the largest market in Southeast Asia and Korea can build on the e-xisting investments and e-xpand to use Indonesia as a production base.

Last year, Indonesia was the fourth largest destination of Korean investments, as has been said by Mr. Hidayat after China, the U.S. and Vietnam. Total Korean investment in Indonesia in the last ten years amounted to $4.8 billion, making Korea the 7th largest investor in Indonesia. Korea is also the largest investor in terms of the number of companies as has been said by Prime Minister—about 1200 companies—because there are many small and medium sized enterprises, and the largest population of e-xpatriates, I could find almost every weekend in the concords, amounting to some 25,000. That is why we have more Korean Restaurants and Grocery shops in Indonesia, compared to any other nationality. Korean companies have also contributed to generating about 500,000 jobs for Indonesian.

The Task Force has also been very focused on realizing opportunities in a number of sectors.

We will witness the results today with the signing of some 12 business-to-business memorandums of understanding, eight of which are in the energy and minerals sector. The amount of investments involved a total of around USD 8.6 billion.

Other than trade and investment, it is a challenge; we also hope to learn the successes of Korea in the fields of innovation, research and development and the creation of creative industries.

All of you and all of us—the private business sector, civil society, the NGOs, the mass media and academia—must get involved in this great undertaking to promote peace, economic prosperity and social progress.

E-xcellencies Ladies and Gentlemen,
In closing, I would like to thank all our Korean friends for their continued support of and confidence in Indonesia. We have a strong basis to build on. We now have a bilateral framework to ensure that the partnership will make us not only strategic partners, but also long-term friends.

I thank you.


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Bureau for Press and Media Affairs
Presidential Household