Economic View

On Indonesia’s burgeoning economy

What is your overall assessment of Indonesia’s economic progress and performance in 2018?

MOELDOKO: Considering the current external conditions, Indonesia’s economic stability and fundamentals are quite sound. Countries like Indonesia that have pursued trade liberalisation are, by virtue of their close links to global markets, impacted by changes in other countries, even at the local level. As such, current international challenges, such as the US-China trade relationship, the depreciation of the Turkish lira or Argentina’s IMF deal, can affect Indonesia’s economic performance. However, the government and various authorities are working together to face global challenges. 

The government’s development agenda, which ensures quality economic growth and momentum, is also being pushed forward. With Indonesia’s poverty, unemployment and inflation rates declining, the government is also looking to improve the country’s investment climate. 

At the heart of a knowledge-based economy lie information and skills, so in Indonesia we cannot only rely on improving the business climate and regulatory framework. A comprehensive and long-term government-oriented strategy has therefore been put in place to build and develop Indonesia’s hard and soft infrastructure. 

In this context, physical infrastructure is being developed to support the knowledge economy, namely ICT development. As for soft infrastructure, the government is looking to keep improving the business and investment climate through the introduction of the online single submission system in order to reduce regulatory uncertainty. At the same time, we aim to advance the quality of human resources through vocational education and training, and to double our efforts to reduce stunting in Indonesia. By allowing foreign higher education institutions to operate in Indonesia, the government also works hard to attract foreign direct investment to support technology transfer and knowledge diffusion.  

How would you describe the government’s strategy to maintain political and social stability? 

MOELDOKO: In Indonesia we have a national state philosophy called Pancasila, which is at the root of the country’s political and social stability. Since the country first declared independence in 1945, the Pancasila movement has persevered in the face of competing ideologies. The administration of President Joko Widodo has placed a special emphasis on Pancasila education, and the key focus will be on removing any breeding grounds for political or religious extremism in Indonesia. 

In addition to Pancasila education, the government has strengthened its security apparatus to ensure political and social stability. During my tenure as commander of the Indonesian National Armed Forces, I learned that security guarantees – military, regulatory or otherwise – correlate with a significant increase in investments. Working with the Coordinating Ministry of Political, Legal and Security Affairs, President Widodo’s staff now has instantaneous access to security instruments to maintain stability. I can give full guarantees to foreign investors that their investments in Indonesia are safe.

To what extent is military and security cooperation being strengthened between Indonesia and its ASEAN partners and where would you like to see closer engagement between members to counter regional threats?

MOELDOKO: Formal and informal communications systems among military commanders in the ASEAN region are already very sophisticated. For example, when the Philippines was struck by a heavy storm, Indonesia immediately sent aerial shipments to contribute to disaster relief. 

With regard to current regional developments in ASEAN, we are attempting to find common ground on the South China Sea, especially as China’s military strength and economy continue to grow. Nevertheless, ASEAN military commanders do not wish for China’s expanding military force to create new instabilities in the region. At the same time, we have observed the US pivot from the Middle East towards the Asia-Pacific region. 

Overall, we do not seek an emergence of new forces in this region or wish for any country to become overly dominant; instead, we hope a dynamic equilibrium is reached. We also cannot ignore that Indonesia is increasing its presence on both the regional and global stage. Most recently, Indonesia was elected as a non-permanent member of the UN Security Council 2019-20. The country has been involved in peacekeeping operations, including in Lebanon and the Democratic Republic of the Congo, and is supporting an independent Palestine. Aside from increased security cooperation with other ASEAN states, Indonesia will be particularly vocal on these issues at the UN.