Economic News

22 Jul 2010
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OBG talks to Kusmayanto Kadiman, State Minister for Research and Technology.

OBG: What efforts have been made to promote the integration of local industry into government procurement?

KADIMAN: I'm very happy that the use of more local content in the provision of technology has become an accepted practice by the government and the private sector. For example, in the defence and security-related technologies, the government has decided to purchase more technologies produced by local industries.

State-owned banks could not formerly provide financial support to industries with products related to defence. Now it is allowed if it is for the national purpose. Spending by the department of defence on local products has increased significantly. Local sourcing formerly constituted a one-digit percentage of total spending, and the ratio is now in the double digits. I am confident that in the new defence budget, the percentage will be 16%.

OBG: How is the government trying to stimulate private-sector investment in research and development?

KADIMAN: Two policies have been implemented. One allows state institutions, such as universities, to use money they have generated in cooperation with the private sector to reinvest into their operations and research. The second policy allows for tax deductibility of research investments by the private sector so they can enjoy incentives for investing in research.

OBG: What should be the focus of research policy in the coming years?

KADIMAN: Our priority is to have sufficient food supply, starting with the fundamentals, rice, soybeans, wheat and corn. We do not want to be reliant on one type of food, so we are striving to diversify and intensify production.

We must also increase access to medicine, including medical services, such as paramedics. Traditional medicines are being used more now than in the past 10 years. A decade ago, 90% of all medicine was imported. Today, there is a shift back toward natural medicines. Indonesia's biodiversity allows us to produce more of our own medicines, so we have seen tremendous market growth in the past 10 years.

The energy gap in Indonesia also needs to be addressed. Our oil, gas and coal resources are becoming scarce so we must look for alternative sources of energy. However, my colleagues who make decisions based on economic indicators still see renewable energies as being cost prohibitive. I am fighting to demonstrate the value of alternative energies that are not evident or accounted for in pure economic indicators. We also have to consider biodiesel and biofuels, but the challenge is that these fuels are based on oils that are also edible. It is always a difficult issue when you are talking about feeding people. Also, we cannot plant these crops on soil that could otherwise be used for producing food crops. So, first we must look for types of plants that are non-edible, and second, we must look for plants that can grow in marginal soils. We must also look to wind, solar, water, and nuclear power. I am very much looking forward to the policy of President George Bush on the Global Nuclear Energy Partnership (GNEP). So far, we are confident that we can meet the technological and economic requirements to start a nuclear power programme, but we have not yet achieved as much on the social front. We, too, have the problem of a "not in my back yard" mentality, that is nobody wants a nuclear power plant in their back yard.

We also need to increase the fluidity of transport. We would like to increase use of sea, air and railway transportation and perhaps use more bus transportation powered by a diesel-biodiesel mixture. Another possibility would be for goods to be transferred from airport to seaport by train.

OBG: How does information technology factor into these challenges?

Internet and computer penetration in Indonesia is very low, especially in comparison with our neighbours. The first challenge is educating people and the second is providing access to the technology. Piracy is also a major challenge. To combat it, we developed open-source software for word processing and other programmes people use for work. Even at the government level, about 85% of the software used is illegal. I have made a mandate within this ministry that all software must be legal, and this is now the case. Some of my colleagues in other ministries are taking a similar approach, as it is the role of the government to lead by example.

We have established 12 open-source centres at universities where people can receive software, training and help. Furthermore, universities that have an Information and Communication Technology (ICT) programme are very competitive, and the quality of education in IT in Indonesia is very high, but the number of people that can receive that training is not high enough.

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