Susilo meets investors

Susilo meets investors

The main agenda of President Susilo Bambang Yudhoyono's
weekend visit to Santiago was to attend the APEC summit, but he
gained much more for Indonesia's national interests from a series
of bilateral meetings and informal talks held separately with
other government and business leaders on the sidelines of the
summit.

Susilo worked according to very tight schedules to promote his
economic agenda and woo foreign investors in individual meetings
held with the leaders of nine countries, including those of such
economic powerhouses as the United States, Japan and China, as
well as with business leaders from around the world who convened
for their own summit in Santiago on Saturday.

He aptly charted out, in a keynote address to the APEC CEO
Summit, the main problems facing the global economy, pointing out
the need for the right balance between security concerns and open
trade because a secure and efficient flow of goods, people and
services within and across borders is a prerequisite to a
conducive investment climate.

The President also rightly emphasized the strategic role of
infrastructure for economic growth and poverty reduction, calling
on foreign governments and business leaders to send delegations
to the Infrastructure Summit to be held in Jakarta in January.

The central theme of Susilo's address at the CEO summit should
deeply impress business leaders because a secure and efficient
flow of goods, services and people within and across borders is
indeed vital for the international economy that is now being
increasingly globalized.

Efficient supply-chain management was one of the key themes in
free trade, which is the primary goal of the 21-member Asia
Pacific Economic Cooperation forum.

The rationale is that foreign investors would be encouraged to
establish production networks in a country or region if the place
has become a reliable part of the global supply chain, as a
superior logistics capability will enable companies to tap local
comparative advantages and economies of scale.

The modern production system requires efficient supply-chain
management to allow for lower warehousing costs, lean
manufacturing and just-in-time delivery. Without such advances in
logistics and supply capability, regional market integration,
through subdivision and the dispersion of production processes,
will not be cost effective.

However, an efficient supply chain requires a minimum set of
conditions, notably efficient transport and expedient customs
services and production standards, to ensure the free flow of
goods, services (including labor) and investments. All these
activities require adequate infrastructure.

Hence, the Infrastructure Summit in Jakarta in January would
be an opportune moment to discuss a concrete action agenda to
improve basic infrastructure, identify barriers to private
investments in this sector and explore the most economically and
politically feasible methods of private participation in
infrastructure, including public utilities.

The government, already trapped under heavy domestic and
foreign debt service burdens, is certainly not able even to
adequately maintain and service existing basic infrastructure,
let alone build new infrastructure to meet the rising demands of
the expanding economy.

However, private investors are not yet willing to stake out
their money in this sector as the institutional and regulatory
framework in the country is simply not conducive.

An acute lack of maintenance and the virtual absence of new
investment in basic infrastructure over the past six years of the
economic crisis has left infrastructure -- such as roads,
seaports, airports and power stations -- crumbling in many areas.
Poor infrastructure is, in turn, undermining the country's growth
prospects.

The thought process concerning the rational linkage between
security and free trade, investment, job creation, economic
growth and poverty reduction that Susilo elaborated on to
business leaders in Santiago clearly demonstrated the President's
comprehension of Indonesian economic problems and their context
within the global economy.

However important this apt articulation is to assure investors
that President Susilo's economic agenda would be utterly
business-friendly, that campaign is by itself not enough to
maintain the momentum of market confidence in Indonesia's
economy. He needs to provide additional confidence-building
blocks in the form of concrete measures to reduce red tape, fight
corruption and resolve such high-profile disputes with foreign
investors as Mexico's Cemex, Karaha Bodas Company of the U.S. and
ExxonMobil oil contract for the Cepu field in C. Java.