Since establishing official ties in 1976, the UAE has become much more than a friend to Indonesia.
The UAE is the leading Gulf investor in South-East Asia, accounting for 74 per cent of Gulf states’ investments in the Association of South-East Asian Nations bloc between 2016 and 2021. Between January and July this year alone, total trade between our two countries reached $2.8 billion, an increase of almost 30 per cent compared to the corresponding period in 2021. To add to the optimism, the newly signed Indonesia-UAE Comprehensive Economic Partnership Agreement is set to eliminate about 94 per cent of existing tariffs. These facts and figures signal the rapidly growing business ties between the two countries.
However, our relationship is also one of respect and brotherhood, reflected in the naming of Indonesia’s longest elevated toll road after President Sheikh Mohamed, as well as the existence of a President Joko Widodo Street in Abu Dhabi’s diplomatic enclave. A similar exchange could be observed in plans to build mosques in the name of Mr Widodo in Abu Dhabi and Sheikh Mohamed in the Indonesian president’s hometown of Surakarta.
While some might view these symbolic acts as mere gestures, I am convinced that in the UAE, we have a friend who cares. Proudly, I can say that we reciprocate this feeling with utmost respect. When Sheikh Khalifa passed away, Mr Widodo had just returned from a visit to the UAE. This did not deter him from making a trip back to pay his respects. Such is the nature of our relationship.
This is why I want to share with Emiratis and Arabs the opportunities emerging in Indonesia as the country embraces great changes. Internationally we are gaining prominence as chair of the G20 Summit this year and the Asean Summit in 2023. Domestically we will start making Indonesia Vision 2045 a reality. By our 100th year of independence, we want to be one of the world’s five largest economies. I have faith we will get there – but we will need foreign investment to overcome three key challenges.
The first challenge is infrastructure. We are a country of more than 270 million people, the fourth largest in the world by population, across 17,508 islands. Our geography means logistics costs make up almost a quarter of our gross domestic product. To overcome this challenge and accelerate our journey towards economic prosperity, we must undertake significant infrastructure improvements in collaboration with foreign partners.
As chairman of Indonesia’s National Capital City Project Steering Committee and a key backer of the Indonesian Investment Authority, Sheikh Mohamed and the UAE are no strangers to the commercial viability of infrastructure projects in Indonesia. Since 2014, I am proud to state that at least 6,140 kilometres of roads, 15 airports, 124 ports and 65 dams have been built. Yet, Indonesia needs more, and companies such as DP World, Abu Dhabi Investment Authority and Mubadala Investment Company will play a key role in making things happen.
Second, we need to play a larger role in the global supply chain. In 2021, Indonesia's trade-to-GDP ratio stood at 40.2 per cent. Developed economies typically having a trade-to-GDP ratio of 50 to 55 per cent. Indonesia must reach similar levels by offering products that are critical for the global supply chain.
Our final economic challenge is that the manufacturing industry contributes a mere 17.5 per cent to the national GDP. Without high-value manufacturing, Indonesia risks falling into the middle-income trap and becoming isolated from the global supply chain. Attracting high-value manufacturing from developed economies is a necessity to unleash Indonesia’s true economic potential.
Despite these challenges there are three reasons that I believe Indonesia will thrive.
First, Indonesian companies and the public are rushing to involve themselves in the industries of the future. Currently about a quarter of our population are Gen Z and a quarter are millennials, and this youthful energy can be felt everywhere.
In the digital sphere, Indonesia is a leading force in Asean. Only Singapore has more unicorns. The beneficiaries are not just a few big companies. Many of our MSMEs, which make up 61 per cent of our GDP, are online selling goods across the country or abroad at the click of a button. As chairman of Kadin, the only national business organisation mandated by the constitution, I will be speaking on their behalf and working to support them with advice and technical support.
In green energy as well, Indonesians are seizing the day. While the government has committed that Indonesia will have net-zero carbon emissions by 2060, many businesses have earlier deadlines. For example, Indika Energy has committed itself to a 2050 deadline. We started as a coal company. Now we are budgeting more than $500 million over five years, beginning 2021, to transition into climate-friendly business sectors including renewable energy, sustainable forestry and electric vehicles. A quick Google search will tell you that several other Indonesian conglomerates are doing the same.
The only limit is funding. I once told a high-level US official considering investing in Indonesia's transition: “Invest in us and I will personally round up every coal miner and put them to work installing solar panels.”
I know this funding will come, and this is my second reason for confidence – the world is waking up to Indonesia’s potential. In the past, trying to sell Indonesia was sometimes frustrating. People often knew only of Bali and were barely aware of the rest of the country. Sometimes we Indonesians were also too modest for our own good. At trade fairs, for instance, one could find Indians and Chinese at the front, with Indonesians sitting humbly in a corner. Now, this is changing.
As chairman of the advisory board at B20, the official G20 dialogue with the global business community, I have travelled the world telling the story of Indonesia Incorporated. From Japan and South Korea to the US and Australia, the people I spoke to quickly grew interested. Whatever people wanted – commodities, green energy, digital markets, supply chain diversification – Indonesia could offer it to them. In the second financial quarter of 2022, our FDI jumped 40 per cent year on year. Top global companies such as Hyundai, LG, Foxconn, Tesla and Volkswagen are all knocking on our door.
At Kadin, we stand ready to assist all businesses, whether foreign or national. All we ask is that they register in Indonesia, pay their taxes, and have a positive community impact via initiatives involving local talent.
The final reason is simply my faith in ordinary Indonesians’ spirit. Many of us have experienced and overcome hardship. We have faced crises, but we have never been defeated. It is always those who have faced difficulties but who can see success on the horizon who are most hardworking, most determined, and most enterprising. Indonesians are all those things. That is why I am determined to make the world take notice of our country and the rapid change that is looming with Indonesia Inc.