Vice President of Indonesia reveals plans for economic growth at lunch held at Asia House

H.E. Jusuf Kalla, Vice President of the Republic of Indonesia, reassured more than 80 business leaders of Indonesia’s potential and growing investment opportunities at a business lunch held at Asia House.

The Rt Hon Francis Maude, the newly-appointed Minister of State for Trade and Investment, made his first public engagement at the lunch, welcoming the Vice President to the UK. Mr Maude said the UK was developing its relationship with Indonesia and that the relationship was getting closer.

H.E. Jusuf Kalla, Vice President of the Republic of Indonesia chatting to the Rt Hon Francis Maude, the UK’s newly-appointed Minister of State for Trade and Investment at a business lunch held at Asia House. Copyright Miles Willis Photography

Mr Kalla, who took office as the 12th Vice President of Indonesia six months ago, made a speech in which he discussed Indonesia’s economic outlook, plans to develop infrastructure and attract foreign investment.

Mr Kalla said that Indonesia was very proud of working together with the UK and with British companies and wanted to further build on that relationship.

He explained that one of the purposes of his trip was to build a relationship with the new Government of Britain, following the May 2015 general election in which the Conservative party won a majority.

He was sworn in as Vice President in October 2014 after he and Joko Widodo, better known as Jokowi, won the 2014 presidential election with a comfortable lead.

It is not the first time Mr Kalla has served as Vice President. He also served in that role during the first term of President Susilo Bambang Yudhoyono (2004-2009.)

“One of the main objectives of this Government is to increase growth, make the economy better and have more stability,” Mr Kalla said.  “What has changed most between this Government and the last one is the way to govern,” he added.

He pointed out that the previous Government under President Yudhoyono spent about 20 per cent of the state budget on fuel subsidies. In November Mr Widodo abolished US $20bn of fuel subsidies in Indonesia diverting the funds to infrastructure, education and health. The cuts which took hold on January 1 this year were aimed at boosting investor sentiment and demonstrating the Government was serious about reform.

“Just one month in, our Government cut mostly all the fuel subsidies,” Mr Kalla, a veteran politician told the packed hall.

However it was not a popular decision. A survey by the Indonesian Survey Circle (LSI) in January this year found that Jokowi’s popularity had fallen to 42 per cent from 72 per cent last August – a month after winning the election.

The majority surveyed cited the fuel subsidy cuts as the main reason, stating they did not believe the money would be used for economic development.  The cuts also raised the price in petrol by more than 30 per cent.

CEO of Asia House Michael Lawrence, left, Vice President of Indonesia Jusuf Kalla, centre, and the UK Minister of State for Trade and Investment the Minister of State for Trade and Investment the Rt Hon Francis Maude, right. Copyright Miles Willis Photography

“The Government popularity is reducing because of that,” Mr Kalla said in his speech. “But hard decisions have to be made in the first year of Government. There is no point in making them in the last year. That’s why we did that – to shift that subsidised money to infrastructure so that we can sustain the economy and create jobs. We need more electricity plants and more harbours. Manufacturing will create more jobs and bring equality but we need more infrastructure for it,” he added.

The 73-year-old said the Government’s goal was for the economy to grow at 5.7 per cent this year . He said it only grew at 4.7 per cent in the first quarter. He put that down to the global drop in oil and commodity prices as well as the slowdown in China, Europe and the USA.

“I think these things go in circles. China imported so much in raw material previously and now they have had a slowdown but things will pick up in five years’ time and I think they will start importing a lot more in five years’ time again,” he added.

Indonesia exports minerals such as tin and rubber, as well as commodities such as petroleum gas and coal.

He said setbacks to economic growth include the drop in the price of minerals and other commodities. “We have stopped exporting certain raw minerals and unprocessed mineral ore. We need to process goods and export them to make more jobs and add value to our exports rather than export them raw,” he explained. “This is important for investment as we need to maximise investment in infrastructure. The Government of Indonesia cannot fund everything themselves. It is not easy to get the capital from banks.”

CEO of Asia House Michael Lawrence gives H.E. Jusuf Kalla a gift of English Crystal at the lunch. Copyright Miles Willis Photography

He pointed out the middle class in Indonesia was huge. “If 20 per cent of Indonesia is middle class, that is double the entire population of Malaysia and Singapore combined. We want to increase trade and business and we need your technology and skills in London as you are the financial capital of the world. Now that Garuda flies directly between London and Jakarta it is very easy to travel between the two conveniently. We want to work together with Britain more,” he added.

“The UK is the fifth largest investor in Indonesia and I hope that you will bring more business investment here. Your current investment is very varied – as you invest in energy, oil and gas, agriculture and manufacturing. Our target is to reach a growth rate of seven per cent in two to three years’ time.”

Mr Kalla was in the UK to meet the First Secretary of State and Chancellor George Osborne, Prince Andrew, representatives of Olam, Jardines, and Standard Chartered Bank, as well as to attend a conference of the Federation of Cocoa Commerce (FCC).

As for his view regarding the likelihood of ASEAN achieving its goal of establishing the ASEAN Economic Community by the end of this year, he said: “We would like to see more efficiency in ASEAN cooperation. A lot of us sell palm oil and rubber so it’s better for us to cooperate and sell our products around Asia without tariffs,” he said. “We need better rail connections between ASEAN nations and we need fast railways within Indonesia. China is offering to help with that. Connectivity is very important. The Transportation Minister Ignasius Jonan came to Asia House and spoke about that.” The ASEAN Economic Community is one of the three pillars of the ASEAN Community, which leaders of the 10 member-nations, hope to establish by the end of 2015. It refers to economic integration meaning a single market and production base, making ASEAN a highly competitive economic region, a region of equitable economic development, and a region fully integrated into the global economy.

Mr Maude is expected to receive a peerage and be elevated to the House of Lords. His new role is shared between the Foreign & Commonwealth Office and the Department for Business, Innovation and Skills. During the last Coalition Government he was Minister for the Cabinet Office and Paymaster General. He stood down as an MP for Horsham at the 2015 general election.

More than 80 business leaders attended the lunch. Copyright Miles Willis Photography

Among the attendees were Richard Graham MP, Sir Henry Keswick, Chairman of Matheson & Co and Jardine Matheson Holdings Ltd, and HE Hamzah Thayeb, Ambassador for Indonesia. Senior representatives from Prudential, Standard Chartered, Airbus, Maybank, Mitsui, Garuda Indonesia and BNP Paribas were also present.

naomi.canton@asiahouse.co.uk

To read an exclusive Asia House interview with H.E. Jusuf Kalla click here.

To read about a private briefing that Mr Kalla gave to Asia House corporate members click here.