Indonesia Can Achieve `Sustainable' Economic Growth of 8%, Ambassador Says

Bloomberg, by Greg Ahlstrand and Femi Adi - Dec 30, 2010

Indonesia can achieve economic growth of 8 percent that is driven by domestic as well as international investment, if regulatory clarity and infrastructure in the country are improved, U.S. Ambassador Scot Marciel said.

Scot Marciel, U.S. ambassador to Indonesia.
Photographer: Dimas Ardian/Bloomberg

“Indonesia’s growing around 6 percent this year,” Marciel said in an interview in his office at the U.S. Embassy in Jakarta. “I think that could reach 8 percent sustainably, without tremendous difficulty, by addressing some of the infrastructure issues and opening up a little bit more.”

President Susilo Bambang Yudhoyono seeks to expand Southeast Asia’s biggest economy by as much as 7.7 percent and create 10.7 million jobs by the end of his second term in 2014, he said in his annual state-of-the-nation address Aug. 16. Indonesia also aims to cut the poverty rate by about a third to between 8 percent and 10 percent over the next four years.

“It’s not so much about making it attractive to foreign investors,” said Marciel, who was named ambassador in August. “To the extent Indonesia can work on infrastructure, and improve transparency and the regulatory environment and battle corruption, it creates a good environment for Indonesian businesses. Then foreign business will also find it attractive.”

Indonesia’s ranking in Transparency International’s 2009 corruption perception index improved to 111 from 126 in 2008, according to the watchdog’s website. It gained one place to 110 this year, 24 slots above the Philippines. The index measures the perceived level of public-sector corruption in 178 countries and territories around the world, the website says.

Roads, Ports, Rails

Inadequate roads, ports and railways mean orange juice from the Indonesian side of Borneo costs more than that from China, four times as far away, the Indonesia Logistics Association said in January. Logistics costs are the equivalent of 25 percent of gross domestic product in Indonesia, versus 19 percent in Thailand and 10 percent in the U.S., it said.

During U.S. President Barack Obama’s visit to Indonesia in November, he and Yudhoyono announced the Comprehensive Partnership, under which the countries will cooperate on education, environmental and climate change issues, defense and security, science and technology, investment and trade.

“We’ve made education a high priority; specifically trying to increase the number of students from Indonesia studying in the United States, and from the United States studying in Indonesia,” Marciel said. “Also to try to build partnerships between universities.”

Scholarship Drive

The U.S. will commit about $165 million over five years to promote cooperation on education, including scholarships such as the Fulbright program, funding for Indonesian students to study at U.S. community colleges and English-language training, Marciel said. Indonesia will provide 100 scholarships for American students to study in Indonesia, he said.

“We need to do a better job of making U.S. education accessible to Indonesians,” he said. “Over the past 10 to 12 years, the number of Indonesian students studying in the U.S. has actually fallen.”

The decrease is partly due to concern over costs, and partly to a “misperception” that a student visa is difficult to get, Marciel said. That misperception stems from revisions to visa procedures implemented after Sept. 11, 2001, he said.

“A lot of the problems or obstacles that came out of that have been dealt with, but the perception remains that it is extremely difficult to get a visa,” Marciel said. “We need to continue to explain to people that it’s very possible.”

Military Cooperation

In July, Defense Secretary Robert Gates said the U.S. will begin a “measured and gradual” relationship with the elite Indonesian military unit known as Kopassus after a 12-year gap. The decision to restore links was possible due to Indonesia’s progress in professionalizing the military since the fall of the dictator Suharto, Gates said at the time.

The move was criticized by New York-based Human Rights Watch, which said it “weakens U.S. standards for military cooperation globally.” U.S. Senate Foreign Relations Committee member Russ Feingold, a Wisconsin Democrat, also said he was “disappointed” by Gates’s announcement.

“Secretary Gates announced in July that we would begin taking limited steps toward re-engagement with Kopassus,” Marciel said. “That had not been possible in the past because of lack of accountability for past human-rights violations.”

Move to Democracy

Marciel said Gates stressed that the decision was based on Indonesia’s move to democracy, improved human rights record, and changes to the military, and that it would start with staff- level talks, which to date has been the extent of the engagement.

Regarding videos that surfaced in October showing men in military clothing torturing Papuan civilians, Marciel said: “The Indonesian leadership has made it clear the human-rights violations depicted in those videos is unacceptable. There’s nothing that I’ve seen that suggests that was Kopassus.”

Indonesian police had assured the U.S. that they were committed to investigating the videos and bringing the perpetrators to justice, he said.

“We are watching this very carefully,” Marciel said.

A challenge the U.S. faces in developing its relationship with Indonesia is convincing Indonesians it doesn’t have a hidden agenda, Marciel said.

“Indonesia is a democracy, and the people and the government have to decide what’s most important to them,” he said.

To contact the reporters on this story: Greg Ahlstrand in Jakarta at gahlstrand@bloomberg.net; Femi Adi in Jakarta at fadi1@bloomberg.net

To contact the editor responsible for this story: Greg Ahlstrand at gahlstrand@bloomberg.net

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