By Tony Agus Ardie,

By Tony Agus Ardie, President of the U.S. Committee of the Indonesian Chamber of Commerce and Industry

The fundamentals of Indonesian-U.S. relations have remained largely unchanged over the years. Indonesia, the world's fourth most populous country with more than 210 million people, is geopolitically pivotal to peace and stability in Southeast Asia. It is also richly endowed with a vast variety of natural resources. The United States, as the world's largest economy, the biggest source of technology and the greatest influence on the global financial market, the International Monetary Fund (IMF) and the World Bank, plays an important role in supporting Indonesia's efforts to solve its economic woes. The problem is that Indonesia is now undergoing a painful process of transition from an authoritarian, centralized government into a more democratic and decentralized one. Its complications have engulfed Indonesia since early 1998, prompting many U.S. politicians and analysts to become overly fixated on the daily turmoil of events, such as raucous street demonstrations, rampant corruption and security problems in some areas. This often results in an overly pessimistic assessment of Indonesia's future, overlooking the medium and long-term perspectives following the painful learning process. Many Indonesians perceive the United States as an inward- looking superpower which tends to overlook the complex problems in a country like Indonesia. True, structural impediments such as the lack of trust in the judicial system, excesses in the initial process of transferring power to local administrations, virtually bankrupt big corporations and low investor confidence have been a turnoff to new investment. However, these problems are being tackled with great assistance from the World Bank, the IMF and the international creditor consortium, the Consultative Group on Indonesia (CGI), of which the United States has been a loyal donor member since 1967. Progress has been made, as can be noted from the strengthening macroeconomic and political stability, even though many contend the achievements would have been much greater if members of the political elite were united in setting their own ambitions aside to strive for the national interest. The most positive development is that Indonesian national resilience has passed the toughest test over the past five years exacted by political turbulence and the economic debacle.

Enormous changes have been achieved and continue, and a profound transformation will eventually reinforce the country's economic and political stability. As a longtime friend of Indonesia, the United States can play a role in alleviating this difficult, often painful process. It's needless to reiterate the importance of more vigorous dialogs between both countries' governments and peoples to build better mutual understanding and cooperation. This is what the U.S. Committee of the Indonesian Chamber of Commerce and Industry (KIKAS) has done through a series of missions to the United States to conduct regular discussions with senators, politicians, members of the government circle, academics and businesspeople. But the U.S. government, on top of its traditional assistance through the multilateral agencies and CGI, can greatly help fuel a stronger economic recovery in Indonesia by facilitating broader, better targeted business relations. In talking about U.S. business, there is tendency to focus on giant or multinational companies such as Exxon/Mobil Oil, General Electric, IBM and Freeport, overlooking the small and medium-size enterprises (SMEs) that have always played a very important role in the American economy. Notwithstanding the great contribution by American giants in developing oil and other mining resources, we should focus on a broader and bigger American role in empowering Indonesian SMEs to enter the international market, including the United States. After all, the American small business development scheme under the Small Business Act is one of the best-managed programs in promoting the nurturing of business through cooperation between the government, private sector and universities. The U.S. model has been tested by pioneering SME empowerment efforts in Yogyakarta, involving the community's three pillars - the local administration, committed private entrepreneurs and Gadjah Mada University -- and now attracting support of the Vienna-based United Nations Industrial Development Organization. This pilot project in integrated shrimp industry, jointly undertaken by PT Indokor Daya Mina, the Yogyakarta administration and Gadjah Mada University, could become a catalyst for SME development in other industries. With its long experience in community-based development projects in various provinces in Indonesia, the United States Agency for International Development should refocus its contribution to SME empowerment as well. More resource allocations are needed for the development of SMEs, which, besides being labor intensive, have proven their resilience and flexibility over the past five years of the economic crisis. The more SMEs can be made competitive on the global market, the stronger and broader will be the foundations of the Indonesian economy and the better will be the chance for expanding and diversifying exports. Empowerment of SMEs will, directly or indirectly, also support bigger businesses in mutually beneficial cooperation. Therefore, mutual cooperation among small, medium and big entrepreneurs can be expected to create huge employment opportunities, prosperity, security and stability in Indonesia and its fellow members of the Association of Southeast Asian Nations (ASEAN). Although more than 25 percent of Indonesian exports go to the U.S., their structure is weak because they consist mostly of energy, textiles, garments and primary commodities that are highly vulnerable to high price volatility. The collapse of large Indonesian corporations during the economic crisis that struck in 1997 and the mounting political demand for economic equity and justice have made SME development one of the most appropriate programs to generate a stronger recovery, which will be socially and politically sustainable. Such programs will serve as a stronger base for closer Indonesia- U.S. relationships because they benefit SMEs, the most important economic sector for the vast majority of people.

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