Remarks of President of the Republic of Indonesia at the 2021 Kompas100 CEO Forum, 18 November 2021, at the State Palace, Jakarta
Assalamu’alaikum warahmatullahi wabarakatuh,
May peace be upon us all,
Greetings of virtue.
Distinguished Ministers of the Indonesia Onward Cabinet,
Distinguished CEO of Kompas Gramedia, Lilik Oetama along with the CEOs, Chairperson of Kadin (the Indonesian Chamber of Commerce and Industry), Heads of Associations;
Distinguished Ladies and Gentlemen,
The world is full of uncertainties, doubts, and complex problems, and further issues continue to arise that we have to deal with it whether we like it or not. It includes issues related to climate change that might lead to food crisis. All countries are facing similar fears of inflation; inflation rate is high. People also fear of tapering off. Many countries also depend on global supply chain; we depend on one, two, or three countries. Almost all countries also lack of containers. Those are the disruptions which are getting more and more complex. Therefore, we all have to anticipate it, prepare ourselves, remain vigilant, but we should not be too overwhelmed.
Most importantly, I would say, the key to economy growth in 2022 is on how we control the COVID-19. That’s the key. If we can’t control it, the economy will go down and fall again. Many countries have experienced the first, second, third, and fourth waves. We must remain careful in dealing with the pandemic. I always convey to Ministers, regional leaders that the opening [community activities] must be gradual and in stages. No need to rush to open them all. We must consider the positivity rate, the bed occupancy rate (BOR) in hospitals, recheck testing and tracing rate in each area, everything. We have to be careful.
We have to be grateful for the latest development of COVID-19 in the country. Let’s go back to mid-July when our daily cases hit 56,000. It is such a high figure. In just 2-3 weeks, we experienced the peak of COVID-19 when the number reached 56,000 of cases. Hospitals were overwhelmingly striving to secure medical oxygen, to obtain medicines. The key is cooperation, to join hands, and solidarity among all elements of the nation. The key is there and we have proved it in July, August, September that we can do that. Currently, the number of daily cases has declined to 500, 400, 300 cases within the past week. We should be grateful. However, be mindful of the development of COVID-19 cases in other countries. Let’s take a look at the current situation in the United States, the United Kingdom, India, and compare it with Indonesia. We must be grateful. I reiterate that vaccination is the key. The speed, speed up our vaccination drive. Provinces, regencies/municipalities are vying to lower PPKM [public activity restrictions] level, ‘I am at Level 1’, ‘I am at Level 2’. It is a sound competition. The same goes to vaccination rate. ‘My region has reached 60 percent’, ‘Mine 70 percent’, ‘Mine 80 percent’. It is also a good move. Compete in goodness.
To date, we have administered 219 million doses of vaccines, it is such a large figure. It is no an easy task to do. Geographically, our country is not in favor given we have 17,000 islands. We must transport vaccines by motorcycle or on boat to cross a river. Don’t compare our country with other countries. We have the most complicated managements, including its logistics management and transportation management. It is not easy at all. Thus, 219 million doses have been administered and hopefully the figure can reach 280-290 million doses by the end of this year. For the first dose, the vaccination rate is 63 percent.
Furthermore, if we can make it under control, handle the COVID-19, the economy will rebound as seen in several indicators. Let’s see the indicators. For consumption, the Consumer Confidence Index (IKK) increased to 113.4 to that of pre COVID position. I believe the index will rise if the situation improves.
Our Retail and Sales Index (RSI) also strengthened along with increased mobility of 5.2 percent. In term of production, we can also see that Manufacturing Purchasing Managers’ Index has exceeded the figure before pandemic. Before the pandemic, the index was 51, now it is 57.2. What does it mean? Our manufacturing industry has rebounded. Why it started the production? Because of the consumer’s demand. It is impossible to reach 57.2 without the demand. The demand is not only from domestic market but also to be exported. Thus, our export rate increased by 53 percent this month. Import rate also increased by 51 percent, indicating raw materials, supporting materials. We must continue to keep this positive momentum. How do we do that? By keeping COVID-19 under control.
I learned that five provinces experienced an increase in [COVID-19] cases. We must remain vigilant despite a slight increase. We must lower the number, deploy team to that region. We are really concern of the increase despite a slight increase. If we do nothing to the provinces, the number will continue to increase just like the situation back in July in which the number of positive cases surged to 56,000 within 2-3 weeks only.
In addition, infrastructure projects as our foundation have completed one by one. Toll road projects spanning 1,640 km, and non-toll road projects spanning 4,600 km have completed in the past six years. We also have built 15 new airports, expanded 38 sections, and rehabilitated old airports. We have built 124 new seaports. There are to date 22 dams built to support our food security. By 2024, we expect to have finished constructing 65 dams. This is a foundation for medium and long terms which is crucial for the advancement of the nation.
I had ordered provincial, regency, and municipal governments to connect the new roads, including toll roads with agricultural areas, tourism areas, plantation areas, industrial areas. That is the task of provincial, regency, and municipal governments. Secondly, we will continue policy on developing downstream industry. We have stopped [exporting raw materials] nickel. If we are brought to WTO (World Trade Organization) by the EU, there is no problem. This is our nickel, from our country.
During the G20 Summit, many countries told me regarding the issue of nickel. I told them that we want to provide more employments in Indonesia. If we send raw materials from Indonesia to Europe, to other countries, they will be the ones who create job opportunities, while we get nothing. However, we are open for cooperation. We can cooperate to produce semi-finished goods in Indonesia and send it to your country and produce it into finished goods. We are open for cooperation but the production must be made in Indonesia; they have to invest in Indonesia. We will welcome you with open arms but we refuse to send raw materials to your countries. No means no. Don’t think Indonesia will send raw materials ever again.
We have stopped exporting nickel. Next year, we aim to stop exporting bauxite. Once our smelters are ready, we will stop exporting bauxite. Therefore, we can create jobs, develop downstream industry, industrialize our country. If we have stopped [exporting] bauxite, the following year we will stop copper. Once construction of smelter in Gresik is completed, we will stop exporting copper.
Why do we do this? Because we want to generate added value and employments as many as possible. Other countries started realizing it and they must invest in Indonesia or have partnership with our countries whether they like it or not. They only have that option. You can invest personally or through private company and State-owned Enterprises (SOEs). However, you should not report us to the WTO only because we stop exporting raw materials. We will oppose it.
Let me cite an example of nickel ore that the value can increase tenfold when it is produced into steel. Remember clearly that our significant increase in export is attributed to the value added. Until the end of the year, I estimate that we can gain US$20 billion because as of October, it has reached US$16.5 billion. By the end of the year, I estimate it will reach US$20 billion only by stopping nickel export. And I predict that if nickel is processed into other products, I estimate we can acquire US$35 billion only from one product. It also applies to bauxite and copper. Why don’t we do this in decades? It can improve our trade balance. Our current account balance will improve.
As for steel, it was the cause of deficit trade balance with China. Our trade balance in 2018 was at minus US$18.4 billion. The figure was at minus US$7.85 billion in 2020 and gradually declined. What is the reason? Because of steel and nickel that is processed into products. As of October 2021, the trade balance is at minus US$1.5 billion. I am upbeat our trade balance with China will see positive growth next year. I am sure about it.
If we apply it to bauxite, copper, lead, and other rare-earth minerals, you can imagine foreign exchange generated from it. We must have the same strategy. No one can tell me “Sir, we cannot export nickel.” We need to implement this strategy in the country’s big picture. We do not talk about company by company.
It is important to know how downstream industry development, industrialization is carried out, but more importantly, how we integrate it. Nickel is integrated with copper, integrated with lead, integrated with bauxite, everything. If it is integrated, the end product will be made with only Indonesian materials. For example, electric vehicle (EV) in which all components use local content. Semiconductor for rare-earth minerals must also process in the country so that investor will come to develop. People starts to noticing that we want to stop the export because we have the raw materials.
Another example is stainless steel which is processed into syringe. Globally, the demand for syringe is 10 billion. To date, we have been importing millions of syringes. In the near future, we will have the capacity to manufacture it by our own. We have stopped importing the syringes. Thus, there is no option than manufacturing syringes in the country and hopefully we can export it. I don’t know how many billion the production can generate.
That is what I mean by integration. Not to mention the expansion of lithium battery and the like. We must be optimistic that we can get more benefits and open many job opportunities by stopping exporting raw material.
Next, we will start developing green economy considering Indonesia’s great potential and will draw up the strategy. It is because in 2023, European countries and the United States will stop using goods made from fossil fuels. They will make regulations for it.
In G20 [Summit], everyone talked about that issue, that is, green economy, green economy. And, we realized that we have great potentials in green economy. Therefore, Indonesia will start constructing Green Industrial Park in North Kalimantan, of which the energy is generated from Kayan River. From only one river, Kayan river, it can generate 11-13,000 megawatts. Indonesia also has more than 4,400 medium and big rivers, 4,400 rivers. We just talked about one river, Kayan river. Mamberamo River can generate 24,000 megawatts. I only mentioned two rivers. Let’s imagine if 4,400 rivers can generate hydropower. The next green energy potential is geothermal. It can generate 29,000 megawatts. Not to mention wind power, and ocean tidal power that have huge potential which is not counted yet.
We should acknowledge such potentials and utilize it immediately for the next generation. We will prepare the potential. First, we will start constructing Green Industrial Park next month. When the project is underway, investors will enter the country because of the green energy. The projects require massive investment but we don’t have the skills. Thus, we are open for private sector investment.
The third point is related to digital economy. Indonesia also has the potential and huge market. Currently, there are more than 2,000 startup companies, 2,229 startup companies in Indonesia. Indonesia’s digital economy potential in 2025 is projected to reach US$124 billion. It is such a huge figure.
For that reason, we need to prepare it. I have set a target of two years. If it exceeds two years, other countries will outrun us. We must draw up the roadmap; how to prepare the digital infrastructure, how to prepare digital governance, digital economy, digital society, that will lead to digital economy ecosystem.
It indeed takes hard work. Digital infrastructure needs facilities such as optical fiber, microwave link, satellite, base transceiver station (BTS), and the like. It also needs downstream infrastructure and data center. We must move fast. Otherwise, we will lose to other countries. Yet, we often take long time to complete the regulations. Fintech moves really fast but we have not drawn up the regulations. We have to work, work with speed.
In addition, the most important thing is human resources. It is fundamental for the development of digital economy. It includes basic level human resources, mid-level human resources, IoT (Internet of Things), cloud computing, big data, and which will be prepared by digital leadership academy. I order to find partner to cooperate with. We have met and cooperated with Oxford, Harvard, NUS (the National University of Singapore), and Tsinghua. We cannot accelerate the process alone, it is impossible. Thus, digital ecosystem must be established as soon as possible so we can work on it.
That concludes my remarks.
I thank you.
Wassalamu’alaikum warahmatullahi wabarakatuh. (RAS/MUR)