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.