Interview: Suryo Sulisto

What sectors look to benefit most as Indonesia transitions from being a resource driven economy to one driven by industry and consumer demand?

SURYO SULISTO: I would say that the infrastructure and the agriculture sectors will benefit the most. Infrastructure is something we lack across the board in terms of roads, ports and airports. This must be improved to end logistical inefficiency and increase Indonesia’s ability to compete among ASEAN members. We are still a net importer of food, but we have huge capacity to increase domestic productivity, particularly staples such as corn, rice and sugar. This area needs focus and provision of the right incentives and stimulus for farmers.

I also believe that it is extremely important to build domestic industrial capacity. As the affluent population grows, demand will follow. If you cannot satisfy demand with locally produced goods, dependence will continue to be on imports and the country will be subjected to a bigger trade deficit and an increased amount of money spent on the foreign exchange. Therefore, we must look to empower our local industries which are producing value added goods and commodities.

Given the vocal labour unions, which are petitioning for higher pay, how can the government balance worker welfare and competitive compensation?

SULISTO: In terms of the management of labour union activities, the government must be more firm. While demonstrating in an orderly fashion is acceptable, the opposite is happening in Indonesia and we must learn from countries like Japan where sensible conduct is effectively enforced. As far as wage increases, we have communicated to the government the inability of companies using labour-intensive processes, such as the textile and food industries, to absorb increased labour costs due to small margins. The responsibility for finding a balance has to be taken on by provincial authorities, who must liaise with unions, local government and representatives of the private sector. In the regions surrounding Jakarta, such as Bogor and Tangerang, wage increases have been particularly steep, even in the face of considerable objection by firms using labourintensive processes. However, in the other regions there is a more established consensus and wage increases have actually been very small. So, now we have a situation where there is competition, in terms of finding this balance, between regions. I think this is a positive development, as people are now seeking stability in their work and not just the highest wage they can find. However, authorities in regions affected by labour union disruption are starting to worry because there is going to be a rechanneling of investment away from these areas if they cannot get the situation under control.

In terms of infrastructure development, how are issues like land acquisition and financing being addressed and what is the private sector’s role?

SULISTO: While the slow realisation of infrastructure projects was previously due to extensive land acquisition issues, I believe that the situation is now being resolved via the new Land Acquisition Act, which gives the government power to allocate land to any project as long as they pay a sufficient sum to the elected vendor. These elected vendors of the land required for projects are quickly realising the benefits of complying with the government, largely due to satisfactory remuneration. Adequate financing for infrastructure projects has also long been an issue, largely due to the limited availability of low-interest, long-term funding. KADIN has suggested the resurrection of a dedicated development bank to solve this problem, and we believe this could be achieved quite easily via utilisation of a state bank, however we are yet to hear any positive response regarding this suggestion. Another prevailing issue is slow government bureaucracy. Everything takes far too long, especially when compared to the private sector, which can move at twice the speed when it needs to. As such, we propose that the private sector should be utilised for all vital, time sensitive projects. The private sector’s involvement is vital to complete these projects.