IABC Forum Discussion With The Minister of Trade

Beverly Hills, May 16, 2011/Indonesia Media

Indonesian American Business Council (IABC) recently invited Indonesia’s Minister of Trade, Mari Elka Pangestu, to a discussion concerning Indonesia and American business at The Peninsula Beverly Hills Hotel. The event was sponsored by Mr. Zulfikar Mark Zulkifli, Director of Indonesian Trade and Promotion Center in Los Angeles, and Mr. Edi Suharto, Consul for Economic Affairs and Tourism of the Indonesian Consulate General in Los Angeles. PERMIAS LA, an Indonesian student club in the United States was also present.

The forum started with an opening statement from Mr. Hadi Martono, the Indonesian Consul General for Los Angeles, who promoted increased trade between America and Indonesia. Mr. Riff Wiguna, IABC’s President, followed the Consul General to introduce IABC’s members and explain the organization’s mission statement.

Minister of Trade Mari Elka Pangestu proceeded to give an update on Indonesia’s current economic situation. She explained that she had mostly lived abroad recently in places like Houston, Australia, and Shanghai, where she created Indonesian Business Association of Shanghai (IBAS). Like IBAS, she believes IABC can also forge business opportunities between two countries as Indonesians living abroad are still attached to Indonesia, and therefore are willing to help their current country of residence and Indonesia. The 52,000 Indonesians in Los Angeles alone have the potential to improve Indonesia’s image, which is often enveloped exclusively by negative events such as Bali bombings. Pangestu also sees Los Angeles as a gateway to business in Mexico. Indonesia has always wanted to do business with Mexico, but the country has been unsuccessful creating relationships. She believes IABC should reach out to Mexico with the help of United States representatives. Thus, if countries like China and Vietnam step in and create similar organizations, Indonesians abroad can really change Indonesia’s economy.

Lately, Indonesia has gotten more attention from investors and businesses after the 2008 financial crisis as it was one of the only countries to have positive growth during the 2008 economic crisis. In addition, unlike those in the Middle East, Indonesia’s government has become more stable and democratic. Pangestu also mentions that Indonesia’s economy can easily increase six to seven percent within the next five years, despite high inflation from the food crisis.

She also emphasized that Indonesia’s population, with an average of only 39 years old, can provide a demographic dividend as the productive group (40 to 65 years old) will continue to be larger than the dependent group until 2030 or 2035. China and Japan, on the other hand, must deal with an aging workforce in only three to five years. Indonesia’s population is not only young, but it is also “interconnected.” Indonesians only need twenty dollars to purchase a cell phone and 35 million Indonesians use Facebook, which is the highest amount for any country.

The Minister of Trade wishes to develop the creative industry in Indonesia, which includes film, music, performances, fashion, and publication. Film industries have already started outsourcing to Indonesia for animation, but she hopes film production will also take place in Indonesia, making it a prime film and tourist destination.

The entertainment industry is only one sector of business opportunities Indonesia has to offer. Indonesia is also a prime location for oil, agriculture, and manufacturing. The appreciation of the yuan has made manufacturing in China expensive. Therefore, sunset industries that are dependent on cheap labor can look to Indonesia. While the labor force in China and Vietnam has shown a high turnover, Indonesia’s workers seem to be working for their companies for longer periods of time. The Minister also stated that America has begun importing more branded high-end garments from Indonesia. Items manufactured in Indonesia should not only be for the low-end market, but should also branch out into high-end products and brands.

While Indonesia does offer a growing, creative workforce, it also must overcome problems. Indonesia must improve the infrastructure of its transportation and its energy supply. So far, the government has tried to increase efficiency in the logistics by providing energy in more places and building more toll roads. As the infrastructure improves, big businesses can succeed in more cities other than Jakarta especially because many provincial governments are eager to welcome investors.

The board then went on to offer potential ideas in promoting trade and industry in Indonesia.

Mr. Hadian, a member of IABC, expressed that the GSP (Generalized System of Preferences) Program, a program designed to promote economic growth in the developing world by providing duty-free entry for up to 4,800 products, cannot fully benefit Indonesia due to the low number of products allowed to take part in the program. In response, the Minister of Trade said that a bilateral free trade agreement is hard to establish between Indonesia and the U.S. due to political views.

John, a seafood importer and IABC member, offered a local connection in Mexico to teach Indonesian fisheries the techniques in breeding Blue fin Tuna. There have been many strict restrictions on the hunting of Blue fin Tuna, but farming avoids these restrictions.

Jeffrey Teja, a supplier for military aircraft technology, said that military aircraft technology could also be attained from Israel. However, the Minster said that Indonesia is not in a political position to work with Israel.

Another potential industry that Dr. Irawan brought up was geothermal energy. Indonesia holds 40% of the world’s resources for geothermal energy, but restrictions in geothermal energy haven’t been finalized due to environmental issues with provincial governments. The Minister said the regulations are almost done and are in the final stages.

Dr. Irawan also mentioned that while there is a large presence of Indonesians in Los Angeles, the number of Indonesian restaurants is low and is overshadowed by Thai restaurants. Pangestu explained that the Thai government had initiated a program for the country to promote its cuisine. Thailand emphasized that it was the “kitchen of the world.” By subsidizing restaurants abroad and creating an official standard of Thai dining, foreigners became interested in their food and eventually travel to Thailand itself, increasing its tourism. Their food promotion promoted both spice and food production too. Indonesia wishes to initiate a similar program, by revitalizing existing restaurants in other countries. One obstacle that remains is that it is difficult to establish an official standard as the country has a vast array of culinary flavors.

Pangestu concluded with an announcement of a trade expo in Indonesia on October 2011 and the increased utilization of CSV (Corporate Shared Values) programs by corporations in Indonesia. Investors can come to see all of Indonesia’s products and even their factories during the event. She has already arranged for the US Chamber of Commerce and several Chicago investors to attend the expo. Corporations have recently replaced Corporate Social Responsibility (CSR) programs with (CSV) programs. CSV programs look for win-win solutions for both the company and the community. For example, by helping local farmers reach high standards in agriculture, the farmers can supply the corporations. After the discussion, the forum continued to dinner.