Interview: Rosan Roeslani
What fiscal measures are needed to add higher value in the manufacturing sector?
ROSAN ROESLANI: For more than 10 years we have enjoyed the boom of commodities, and this made us lag behind in building our manufacturing industry. Now the government has realised that we need to have a strong, healthy and sustainable manufacturing industry, and is giving a lot of incentives and promoting special economic zones. The political will is there, and the government has issued 14 economic policy packages, however they take time to be implemented. They also need to be further publicised, not only to foreign investors, but also domestically. The three main burdens for Indonesia’s competitiveness are corruption, inefficiency and bureaucracy, along with a lack of infrastructure. These are being tackled by the government, which shows that there is a strong will to enhance competitiveness.
What kind of support is needed for small and medium-sized enterprises (SMEs) to respond to both domestic and export demand?
ROESLANI: There are around 60m SMEs in Indonesia, so giving the right support to these companies is essential for the future of the economy. There are several issues that need to be addressed regarding SMEs. One of these issues is for SMEs to maintain consistency in terms of quality and quantity, as there are ups and downs from month to month. Another issue is the access to formal financing. We also have to strengthen the access these companies have to the market, but this is a point that is already improving thanks to the boom of digital economy. It is very important that we support these companies in improving their knowledge and skills, trying to advise them to be more professional and ensuring they have a proper business approach and business practices. Lastly, the government needs to give them a lot of incentives, not only in terms of taxation, but also in reducing the bureaucracy and simplifying licensing processes. There are currently too many steps hampering SMEs, and opening a business in Indonesia is among the hardest in the Asian region.
How can the private sector contribute to development and reduce the skills gap?
ROESLANI: There is a huge gap between the need of the industry and the available labour force. The government has acknowledged this and made one of its primary targets to boost vocational training education. If you look at the structure of Indonesian labour, out of 122m people, slightly more than 50% have an elementary school education, 21% junior high school and about 19% have senior high school qualifications, so only 10-12% have a university background. Therefore, vocational training is very important to improve workforce skills and increase the country’s competitiveness. The government has requested KADIN to lead this vocational training orientation, and in December 2016 we launched a nationwide training programme.
How can Indonesia attract more investment in the industrial and manufacturing sectors?
ROESLANI: Our trade with most countries is slowing down, and we need to be more open and more competitive, because in the future trade is going to be the driving factor for us to achieve sustainable growth. Our growth is currently based mainly in domestic consumption, government spending, export minus import and investment. The one area that we can rely on is investment, and this is why the government is simplifying many rules and regulations. We need to look for new markets that are different to our traditional partners. A lot of things have been achieved in the past two years, but we need to understand that foreign investors have a choice to invest somewhere else other than Indonesia. Being an already attractive market because of the size of our population, we therefore need to capitalise on efforts that have been made to attract interest and increase existing levels of foreign direct investment.
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