Vice-President Muhammad Jusuf Kalla: Interview

Interview: Vice-President Muhammad Jusuf Kalla

Investment procedures will be streamlined under this administration. How can better coordination among new ministers be achieved to this end?

VICE-PRESIDENT MUHAMMAD JUSUF KALLA: Our government includes members from a range of different backgrounds, including the public sector, academia and business. The diversity of our team will help bring a balanced view to the government’s fundamental tasks of budget allocation and public policy. This year we expect a lower deficit, as we have already reduced fuel subsidies, and more capital can be allocated to infrastructure projects, for example. The government’s ultimate goal is a more productive budget.

With regards to public policy, we need to be open to both local and foreign investment. As such, we are reestablishing the one-stop shop concept, which was first implemented during the Suharto era. We are bringing the concept back, adapting it to the current context, and spreading it across the country. There must therefore be a greater degree of coordination between institutions and agencies such as Bank Indonesia, the Indonesia Investment Coordinating Board and the Ministry of National Development Planning.

What can the administration do to maintain current levels of investment over the coming years?

KALLA: Investors are attracted to Indonesia for three major reasons: the size of its market, its prodigious natural resources and democratic political stability. Indonesia is unique in the region for offering investors all three factors at the same time. This represents a significant advantage for Indonesia and we need to make sure we have the right policies in place to attract and maintain investment in the country.

Regulatory changes are a side-effect of progress. As we move forward in becoming a developed nation, we must adapt our policies to ensure that the local population benefits from the wealth being generated, while minimising the impact on investor confidence and investment flows over the long term. For example, the ban on exports of mineral ore has forced mining companies to process minerals locally, creating challenges in the short term, but this will have a positive impact in the long term, as it will create jobs, add value and develop local industries to a higher level. We have been exporting unprocessed minerals for too long and this change will surely benefit the country for years to come.

Which sectors will be prioritised in terms of government spending for 2015?

KALLA: As compared to 2014, we will double our budget expenditure for infrastructure development. Another area that will receive great attention is agriculture and food security, as we aim to become self-sufficient in rice in the next three years. This will require large investments in irrigation systems and training of human capital, for example.

Additionally, Indonesia needs to create more jobs, and this will only be possible with a more developed manufacturing sector that can expand the country’s industrial capacity. Last but not least, significant investments will also go towards power generation. The government plans to build 35,000 MW of new generation by 2019. We will spend more in this area, and also invite the private sector to participate more actively. Indeed, we also aim to simplify the tender and execution process by fixing tariffs and removing bureaucratic obstacles.

To what extent should regional autonomy be reassessed in Indonesia, particularly in relation to the overlapping of permits and regulations?

KALLA: Regional autonomy gives each province the ability to be creative on their own terms, opening the door to innovation and entrepreneurship, while encouraging healthy competition that can promote growth across the country. That said, different regions have different resources, and it is central government’s responsibility to build infrastructure according to each region’s needs. Moreover, we should facilitate regional growth through better taxation and incentives schemes that are adapted to the economic situation of each province.