Taking Advantage of Opportunities Amid Change in the Global Economy

KOMPAS/WAWAN H PRABOWO

President Joko Widodo, accompanied by Kompas Gramedia CEO Lilik Oetama, State-Owned Enterprises Minister Rini Soemarno and State Secretary Minister Pratikno, opens the Kompas100 CEO Forum 2018 at the Jakarta Convention Center in Senayan, Jakarta on Tuesday, Nov. 27. The Kompas100 CEO Forum was aimed at promoting optimism ahead of the general election in 2019 and in the face of global economic instability.

JAKARTA, KOMPAS — There are always opportunities amid change in the global economy. However, opportunities to increase exports and to strengthen industries can only be realized if the competitiveness of human resources is improved and the licensing system is no longer complicated.

Therefore, business leaders should not be afraid to be optimistic, because in the middle of difficulty lies opportunity. "The world economy may further face uncertainties. However, we must be optimistic as there are always opportunities. It’s up to us whether we can seize the opportunity or not," President Joko “Jokowi” Widodo said in his address in front of a number of business leaders and CEOs at the Kompas100 CEO Forum held at the Jakarta Convention Center on Tuesday.

The discussion, themed "Increasing Indonesian Industrial Competitiveness", was held by the Kompas daily in cooperation with PT Perusahaan Listrik Negara (PLN). Industry Minister Airlangga Hartarto, Manpower Minister Hanif Dhakiri, Deputy Finance Minister Mardiasmo and co-founder and managing partner of Northstar Group Glenn Sugita were among the speakers at the discussion forum.

President Jokowi stressed that Indonesia could take advantage of the high import tariffs resulting from the United States and Chinese trade war. Investment opportunities could also increase as there is a possibility that investors relocate their factories to countries in Southeast Asia in order to avoid high import tariffs.

However, the various opportunities can only be realized if Indonesia\'s human resources are ready to face the industrial revolution. Readiness is not only in terms of individual competitiveness, but also in the system of work and openness.

The industrial revolution has led the world to transition to a new normal situation. Thus, businesspeople must react quickly to face unexpected situations. In addition, the government should be also prepared to face the fourth industrial revolution, which is known as Industry 4.0.

The President made an instruction to issue more deregulation measures to facilitate employers and attract direct investment. With fewer regulations, the country could better make adjustments amid global uncertainties.

"Countries that can move quickly will defeat countries that move slowly," said the President. In fact, as stated by Hanif Dhakiri, the workforce in Indonesia is still dominated by elementary and junior high school graduates.

In 2018, around 58.76 percent of the workforce in Indonesia comprise elementary and junior high school graduates.

Industrialization

In his speech at the event, the President also said, Indonesia\'s biggest challenge was to overcome the trade balance and current account deficits. Therefore, downstream industrial development or industrialization must be encouraged, especially in the mining sector. With the use of technology, Indonesia’s commodity exports will comprise semi-finished products instead of raw materials like at present.

In the third quarter of 2018, the current account deficit reached a total of US$8.846 billion or 3.37 percent of the gross domestic product (GDP), higher than $7.977 billion or 3.02 percent of the GDP in the second quarter.

Airlangga Hartarto  said the government was preparing tax incentives, industry readiness indexes, training programs for managers and experts, cooperative facilities for small and medium industries, a selection of companies to be used as models in each priority sector and building infrastructure for research and development centers to face Industry 4.0.

"Industrial preparation will be carried under a medium to long-term program in the range of 3 to 5 years. It cannot be carried out in a short-term," Airlangga said.

Meanwhile, Mardiasmo said that the implementation of an inclusive economy in the industrial revolution was also important to ensure that the benefits of development could be felt by the wider community. An inclusive economy will support financial system stability, deepen financial markets and create new markets.

The banking industry plays an important role in realizing an inclusive economy in order to create economic sustainability at the central and regional levels.

Meanwhile, Hanif also emphasized the importance of promoting the competitiveness of workers in gearing toward Industry 4.0. So far, labor issues in Indonesia exist in terms of quality, quantity and distribution.

These three issues often cause investors to have difficulty finding workers with certification and special skills.

Based on data from the Statistics Indonesia, there are 7 million unemployed people in Indonesia as of August 2018. The quality of the labor force still needs to be improved. "Indonesia\'s employment structure is still worrying. Efforts to improve the quality of the workforce must be supported by the regional government, it cannot only depend on the central government," he said.

Glenn Sugita said that the quality of labor was a point of consideration for investors in entering Indonesia. Some investors cancel investments due to a lack of skilled workers.

During the event, Kompas Gramedia CEO Lilik Oetama emphasized the need to build up optimism amid uncertainty in the global economy. The holding of the Kompas100 CEO Forum, which was attended by a number of CEOs, economists and policy makers, was one of the efforts to build optimism.

The chief economist and head of research at PT Bank UOB Indonesia, Enrico Tanuwidjaja, said that, with the strengthening of the rupiah, Indonesia had the opportunity to promote the export of goods with a high competitive edge in the global market.

"The export of manufactured goods with high content of local raw materials, such as timber and furniture, needs to be encouraged. This will help reduce the current account deficit," he said. On Tuesday, the rupiah exchange rate, based on the Jakarta Interbank Spot Dollar Rate, strengthened to Rp 14,504 per US dollar.

Regarding the government\'s efforts to stabilize the economy, Enrico estimated that the impact of the 16 economic policy packages issued by the government recently would be felt in mid-2019.

"From June to July 2019 there will be a positive turning point in the flow of foreign direct investment and portfolio investment. However, it would be better if this period can be supported by the promotion of the export of goods with high content of local raw materials," he said.

Economist at PT Bank Permata Tbk Josua Pardede estimated that external challenges would continue in 2019, especially due to the US-China trade war. Meanwhile, internal challenges could arise from the 2019 presidential and legislative elections.

Josua said that with all these challenges, industrial competitiveness must continue to be strengthened. Strengthening the industry, such as through the provision of incentives, is needed to reduce the current account deficit, which came large in part as a result of the dependence on imports.

(KRN/DIM/JUD/LSA/INA/NTA)