Wishnu Wardhana, Chair, APEC Business Advisory Council (ABAC) 2013, and President Director and Group CEO, Indika Energy: Interview

Interview: Wishnu Wardhana

How is ABAC prioritising the deepening of economic integration in the Asia-Pacific region?

WISHNU WARDHANA: First, I should highlight two important shifts which shape the way ABAC thinks today. In a global macro-economic context, we are now entering what economists call “the new normal”. Following the 2008-09 financial crisis our economic performance was based on two factors: commodity prices and cheap money stemming from the quantitative easing (QE) policy. Now commodity prices have fallen to new lows, and the tapering of QE is only a matter of time. Second, our current business model has evolved significantly from when APEC was established 25 years ago, at a time when a particular product would be designed, produced and marketed all in one country. Thus, in 2013 ABAC pushed to deepen economic integration through the promotion of a Foreign Trade Area of the Asia-Pacific, via both the Regional Comprehensive Economic Partnership and the Trans-Pacific Partnership.

How can access to finance for infrastructure projects be improved across Asia?

WISHNU: We have been discussing public-private partnerships for a long time, yet progress is still below our expectations. In my view, there are three elements that need to be addressed by the public sector to catalyse private investment in infrastructure. First, the regulatory environment for infrastructure must be eased, as private sector players want their investments to provide adequate returns. Second, project readiness must be pre-confirmed by governments, so that projects are not delayed and investors are not laden with unforeseen costs. Third, while sovereign funds and multilateral banks are at the forefront of infrastructure financing, long-term instruments like the Asian Infrastructure Fund can be utilised, in addition to specific infrastructure bonds, which can attract finance from commercial banks or pension funds. Indonesia has housed a long list of promising infrastructure opportunities, but the investment environment has tested such projects.

The poor utilisation of low interest money in the last four to five years can be viewed as a missed opportunity, but in truth, the central issue remains the traditional problem of legal and regulatory uncertainty, in addition to poor coordination between institutions and the central and local governments.

How can small and medium-sized enterprises (SMEs) gain better market access throughout the region as well as better access to finance?

WISHNU: ABAC believes that SMEs should be better integrated into the global value chain and production networks. SMEs are often limited to producing goods, while their potential to be part of the global production network is overlooked. We can learn in this regard from China, Taiwan and South Korea, which have nurtured SMEs and integrated them into value-added product lines in segments like automobile components and IT products. We have made similar policy recommendations to the APEC economic leaders. There are also ways to improve access to finance such as, for example, Bank Indonesia’s branchless banking programme or mobile banking as a way to reach SMEs.

How will the 2015 ASEAN integration change the landscape for foreign investment in the region?

WISHNU: ASEAN integration will change the landscape for foreign direct investment because, within ASEAN, we have both synergy and competition. In terms of competition, I tend to see it sector by sector. Singapore, for example, is obviously strong in services but not in natural resources. Hopefully, Indonesia will be able to collaborate with the service industries offered by Singapore, such as those in the logistics or financial sectors, to improve competitiveness. In agricultural, direct competition between Indonesia, Thailand and Vietnam is clear, but this should have a positive impact on motivation. Overall, with the largest population, natural resource capacity and human capital, Indonesia will remain the most attractive investment destination.