Speech by H.E. Sudjadnan Parnohadiningrat,
Ambassador of the Republic of Indonesia,
On the occasion of AIBC New South Wales Branch function
Sydney,19 February 2002
Mr. Eric de Haas,
Ladies and Gentlemen,At the outset, I would like to express my appreciation to the AIBC New South Wales Branch for the opportunity given to me to speak to this very distinguished gathering.
I consider it a great opportunity to be able to speak before all of you tonight as AIBC is dedicated to foster the economic development of Australia and Indonesia. This evening I have chosen to discuss not only Indonesia's current situation, but also the ever-expanding relations between our two countries. It is, therefore indeed, a great pleasure to be here but considering the time constraint and further enriching discussion that I anticipate will follow my short address, I shall be as brief as possible.
Ladies and Gentlemen,
It is Indonesia's foreign policy objective to help attain the aims of national development in all its aspects and simultaneously ensure mutually beneficial cooperation and stable peace and security in the country's regional and global environment. We are now encountering enormous challenges in the political, economic, social fields as well as in the fields of security and public order. We inherited most of these challenges from the past, while others have emerged as a result of the rigor of the transitional period we are going through. To respond to such complex challenges is not an easy task, nor can it be quickly accomplished. Despite all this, the government of the Republic of Indonesia determined to carry on and to resolve the pressing problems that we are facing in all aspects of our national life.
I am sure that most of the Australians have been closely following developments on these issues. As a friend, Australia has been supportive of our efforts to overcome these problems. But often, various circles even in friendly countries have raised their doubt about our capability to surmount these problems. The events of transfer of presidency in Indonesia last July 2001, however, serve to demonstrate not only that we can solve a political crisis but also that we can do it in a peaceful and constitutional manner.
Ladies and Gentlemen,
It is our intention to reviewing and reassessing many aspects of our national life. In this transitional period, we will do our best to put back on track the processes of reform and democratization. That is what we are doing now and we will remain focused on it. Thus we will give new momentum to the process of democratization that was launched in our country in 1998.
As you have experienced in your national history, this is not an easy task. In the political field for instance, we are confronting separatist movements in Aceh and Irian Jaya. It is understandable that the business sectors of Australia are concerned at the possible political and economic impact of these movements on their interests and business prospects.
I should therefore like to seize this opportunity to reiterate the Indonesian Government determination to take peaceful measures through a conscientious political process, without sacrificing the unity of the state and the nation. We indeed give the people of these two provinces special autonomy. Last August 2001, the Indonesian Government signed into law a measure that would give special autonomy status to Aceh as it is also happen to Irian Jaya. These special autonomy status will give the people and the authorities of these two provinces not only greater opportunity to govern themselves but also to do it according to their local culture and custom.
Similarly, the Indonesian Government has achieved a significant progress in reducing the tension as well as addressing the horizontal conflicts among the Indonesian communities especially in Poso and Maluku/Ambon through the recent conclusion of peace agreements in Malino I and Malino II. The communities of the conflicted areas have determined to end the conflicts and returned to their normal life. The Government is working hand in hand with non-government organizations, social volunteers as well as private sector to support the communities in the rehabilitation and recovery programs.
Ladies and Gentlemen,
At the economic scene, the greatest challenge that we are facing as a result of the financial crisis and the damage it has wreaked on our infrastructure is the sharp rise in our unemployment rate as well as the increasing number of population living in poverty. It is therefore imperative that the economy recovers to provide new jobs for our people and eventually will reduce the poverty. If we cannot solve the problem, it will bring about social and political turmoil and security risks and jeopardize the efforts of our Government at economic recovery. The success of our endeavors at reform and democratization will also be in jeopardy.
Keeping in mind with the failure of previous experience in defining the economic development strategy which neglected the sense equitable development, the government under the leadership of President Megawati Soekarnoputri currently has defined its development strategy under two big headings namely: National Economic Recovery and Equitable Economic Development. Under the national economic recovery efforts, the Indonesian Government has taken all necessary steps to boost the overall Indonesian economic performance while increasing the non-oil export revenue including tourism and to regain its credibility in the international market as one of the most promising investment destination. The equitable economic development strategy is employed by the Indonesian Government to ensure that the economic development efforts taken by the government will not bring any disadvantages to any part of Indonesian society. The effort in implementing the equitable economic development strategy will consist of any measures in resolving poverty, developing the small and medium enterprises, and implementing fiscal devolution.
In the globalization era, Indonesia has to face tougher competition from other countries. Globalization has also intensified competition and we have to restructure many of our industries to make them more competitive. We have learned a valuable lesson from our having adopted a policy of excessive regulation that brought about inefficiency and increased costs. Many countries have enhanced their competitiveness through deregulation that, among others, reduced and streamlined the role of government. We are undergoing the same process by applying a series of deregulation packages to liberalize trade and investment regime in a market-oriented approach.
In the efforts to overcome the severe climbing of unemployment rate, Indonesia needs to accelerate its economic growth at least to the level before economic crunch hit Indonesia about 4 years ago. In the year 2001 economic growth recorded at 3.32% which most of it generated by consumption activities. This figure is lower than what had been achieved in the year 2000 that was 4.8% and slightly below the 2001 State Budget of which was set at 3.5%. The GDP growth in 2002 is predicted about the same as in 2001. This is less than half of the annual growth rates Indonesia enjoy for three decades before the financial meltdown in 1998. This slow down was mainly caused by the sluggish world economic growth particularly after the incident of 11 September in the USA.
The slow down of the world economic growth has also brought in the decline of Indonesia's foreign trade value in the year of 2001 at the rate of 9.8% compared to that in the year of 2000. This unfortunate world economic outlook has left the Indonesian Government no choices other than to close the rank with the Indonesian business sectors in overcoming the economic turbulence. We believe that the Indonesian economy and its business sector could withstand of this problem, particularly the small and medium enterprises which had learned to survive since the outbreak of the economic crises.
With regards to the bilateral terms of trade between Indonesia and Australia, the trade volume has increased by 27.3% in the year 2001 to the total value of A$ 7.1 billions compared to that in the year of 2000. For Australia the figure is representing 2,45% of its total world trade, while at the Indonesian side it represents 3% of its total world trade. Despite the increasing value in bilateral terms of trade, the figures still far from reflecting what our countries could possibly achieve together. I am confident that the trade relations between the two countries can be promoted further since there are still ample of room to maximize it.
Ladies and Gentlemen,
The abovementioned factual conditions have enforced us to speed up our strenuous efforts to resolve the serious problems in the banking sector, in the government and the private banks, and in our levels of debt. I am pleased to say in this respect that progress has been made in all-important areas of corporate restructuring. All of these present positive atmosphere for Australian business to operate or to increase operation in Indonesia. The new government will not be inheriting an economy in deep crisis, but an economy that has been stabilized, partly rebuilt and on the road to recovery. We are fully aware however, that the crisis is not over yet and the present government clearly cannot afford to underestimate the challenges that still lie ahead as the international community will continue to closely observe us.
We are therefore seeking wide participation in our economic endeavors and initiatives. Taking into account our limited capacity to mobilize financing for development, not to mention financing for investment activities, we are hoping that the business community, of which you are the eminent representatives, could invest in Indonesia. It is encouraging to note that the Australian companies' investment in Indonesia since 1967 until 31 August 2001recorded at US$ 10.358 billions with total 501 projects mostly operating in oil, gas and mining sectors. It ranks Australia among the ten biggest countries investing in Indonesia.To encourage such investments, the Indonesian Government is shaping a new investment policy. I realize that for some time now investors have been losing confidence in the economic situation in Indonesia due to uncertainties. We are going to rectify it by earning your confidence. It is not only a question of establishing rules but also and more important, it is a question of how to provide institutional and administrative mechanisms in a comprehensive manner.
In relation to our limited capacity for financing, we are also in need of foreign loans to cover the financial requirements of our development. This is a need compounded by our obligation to pay our foreign debts. This has brought about a situation where we are so heavily burdened. Nevertheless, the Indonesian Government's policy remains firm that we will fulfill all our obligations. Thus, there is no intention of reneging on our commitments. Our commitments and our agreements will all be faithfully met.
Complementing the measures taken in the political and economic fields is our efforts to uphold the rule of law. We believe that this is an important undertaking as it provides one of the pillars of our business environment. The greatest challenge in achieving this goal is the fact that, merely by establishing regulations and providing infrastructure the supremacy of law cannot be realized. This ideal can be achieved only with the support of a strong culture of law and the determination of the community to sustain it. We will do it step by step for there is no shortcut to its achievement. In the effort to eradicate corruption, collusion and nepotism, we call on the support of the business community, which can greatly help by vigorously adhering to business ethics.
Ladies and Gentlemen,
To conclude, it is my fervent hope that the Australian business community will observe the positive signs in the improvement of the political, economic, and social conditions in Indonesia of which might give conducive environment for business activities. May I reiterate my assurance that the Indonesian Government has committed to make a strenuous efforts in creating a better atmosphere for foreign investment.
Thank you.
Embassy of the Republic of Indonesia, Canberra - Australia