Jakarta. Indonesian President Joko Widodo has assured the world’s business community that Indonesia is an “incredible” place to invest, and is ready to change to accommodate global development and adapt to the challenges it faces.

“I invite you to join our incredible people on an incredible journey and make incredible profits,” Joko told some 700 business leaders from 40 countries attending the World Economic Forum on East Asia at the Shangri-La Hotel in Jakarta on Monday, before officially opening the forum.

Indonesia ranked 114th out of 189 countries in the World Bank’s latest ease-of-doing-business survey, and its growth rate slowed to 5 percent last year, the slowest pace in five years.

Still, economists are projecting growth of 5.1 percent this year and 5.4 percent next year, while Joko is aiming for an ambitious 7 percent target by 2019.

“Please come and invest in Indonesia. If you have any problem, please call me,” he said, drawing applause from the forum participants.

Joko said Indonesia needed to change from a consumption-driven economy to a production-based one, while investing heavily in infrastructure and especially human capital. “Everywhere I go my people tell me, please Mr. Jokowi, change our country,” he said.

He said Indonesia would change for the better, stressing that the country needed to reinvent its economy and society to better adapt to current challenges.

“Indonesia has to change. I am extremely optimistic. I have 100 percent confidence that Indonesia will prevail,” he said.

In an earlier discussion at the forum, Sofyan Djalil, the chief economics minister, said Indonesia, with a population of 250 million people, of whom 60 percent are under the age of 30 years, was ripe for investment.

“There’s a lot of potential in this market,” he said, noting that the service sector was expanding rapidly and the manufacturing sector was growing again. He said the biggest challenge facing Indonesia was the lack of infrastructure.

Kishore Mahbubani, the dean of the Lee Kuan Yew School of Public Policy at the National University of Singapore, said Indonesia had an “inner resilience” that allowed it to weather the Asian financial crisis of 1997-98, the 2008 global recession, and other smaller economic mishaps. But he stressed that it would need to be more open to the world.

“The inner resilience will carry Indonesia forward, but the danger is it could become complacent,” he said. “Democracy is not enough; open up the economy and engage the world.”

Budi Gunadi Sadikin, president of state-owned Bank Mandiri, also struck a hopeful tone.

“I’m very positive and optimistic. In the next 15 years, 50 million Indonesians will join the middle class,” he said.

Regional context

Meanwhile, leaders from business and government called for structural reforms across Southeast Asia to inject confidence into the region’s financial markets and prepare for an anticipated interest rate hike by the US Federal Reserve, that many fear will lead to capital outflows from the region.

John Riady, executive director of the Lippo Group and co-chair of the WEF on East Asia, said institutions need to begin reflecting the reality on the ground to instill more confidence in the region’s markets.

“If we begin to change our institutions to better reflect the realities in Asia, investors will have more confidence in Asia,” he said.

Mari Kiviniemi, the deputy secretary general of the Organization of Economic Cooperation and Development, said harmonizing regulations would also make Southeast Asia more business-friendly.

“Developing capital markets is one of those issues which is at the forefront,” she said. “Governments should be as open as possible, as reliable as possible, and as inclusive as possible.”

With a Fed rate hike expected later this year, Asian economies are already bracing for potential capital outflows.

“Having said that, Asian economies have been preparing for a long time,” said Jose Isidro Camacho, vice chairman for Asia Pacific and country chief executive officer of Credit Suisse in Singapore, adding that Asian economies had performed well during the financial crisis.

“Domestic financial markets have grown to an extent that they’re beginning to finance the needs of those economies. That speaks to the resilience of the financial markets in many parts of Asia,” he said.

John said Asian economies had changed drastically since the Asian crisis of the 1990s, putting them in a better position to withstand a US rate hike.

“We have over 4.5 times the reserves we had in 1996,” he said. “Asia is in a much better position to manage the impact of monetary policy in the US.”

The panelists agreed that Asian governments needed to do a better job of communicating their stories to potential investors to build trust and confidence in the region’s markets.

Restoring trust

Business leaders also said that businesses in East Asia must work to regain the public trust and put greater participation in national development amid growing global uncertainty.

“I commend the World Economic Forum on choosing the topic of trust,” John said. “The biggest challenge that businesses face in today’s world is that people have lost confidence in how business and markets are fairly benefiting markets and communities.”

He also said businesses should be “required to rethink” their role and contribution to the wider community.

Atul Singh, group president of the Coca-Cola Company for the Asia-Pacific region, said there was a link between gaining the public’s trust and financial growth, dismissing the misconception that trust was not beneficial to a company’s growth.

“If you give back to society, you will be around in society. It doesn’t matter if you’re a multinational or family-owned or publicly listed, it all depends on the values,” Singh said during the “Trust or Bust?” session on Monday.

Growing nationalism

But amid the optimism on display, several panelists warned that a rising tide of nationalism across Asia could shut down access to economic progress.

“Growing nationalism in many part of Asia could also be a hindrance not only for integration but also economic growth,” Camacho said. “This growing nationalism for the most part is economic but it is also leading to the heightened territorial disputes that we are seeing in the region.”

Similar nationalist tendencies are also being seen in Southeast Asia, including in Indonesia, as the region prepares for the Asean Economic Community to take full effect at the end of this year, allowing for freer movement of goods, capital and labor across the 10 Asean member states.

William Lacy Swing, the director general of the International Organization for Migration, said protectionist policies ran counter to the spirit of opening up borders.

“If we do have freer movement of people, that tends to create equality of access and opportunity. That’s a key,” he said.

Teresita Sy-Coson, vice chairwoman of the Philippine conglomerate SM Investments Corp., said the AEC would lead to “inclusive growth” for all.

“What we’re talking about is not free flow of capital from big corporations. We’re talking about free access and harmonization of standards. People will be moving. This means inclusive growth,” she said.

Indonesia education challenges

Observers warn that Indonesia will suffer as a result of the AEC, given how uncompetitive its workforce is compared to those of its neighbors. Calls have mounted for the country to overhaul its education system to improve its workforce, and these were echoed at the forum on Monday.

Sonita Lontoh, head of global corporate marketing at Trilliant, a Silicon Valley-based smart grid company, said it was regrettable that Indonesia’s best universities, such as the University of Indonesia and the Bandung Technology Institute, ranked outside the top 300 in the world.

Sonita, an Indonesian-American, said Indonesia’s education system must add critical thinking, leadership and technology skills in its curriculum.

“I think the government needs to change the curriculum,” she said. “I don’t have the exact idea of how the change should [happen]. But please, put these three things [into] the curriculum.”

Education Minister Anies Baswedan made an identical call separately at the same forum. “We want to add more than critical thinking. We want analytical thinking and entrepreneurship,” he said.

“But it’s not just the curriculum that must be changed; the teachers as well. They have to be facilitators, not merely instructors. So we need to educate them,” he said. “That is challenging.”

The Jakarta Globe is a media partner of the 2015 World Economic Forum in East Asia.

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Source: The Jakarta Globe