Exports and investment are the keys to push forward: Airlangga Hartarto, Coordinating Minister for Economic Affairs of Indonesia

The global economy is predicted to face quite high challenges next year. How are the government’s efforts and strategies in facing this tough global economic challenge?

We need to look at our regional economy, if we look at ASEAN its position is still relatively better compared to various regions including Europe. We can see that our main trading partners, both China and India, will still grow positively this year. Both have become relatively better environments compared to other regions. Second, ASEAN as an economy has a relatively increasing level. This is the case for Indonesia which depends on two things for its economy, namely exports and investment. Now exports and investment are the keys to pushing us forward and Indonesia is certainly implementing fiscal prudence. With the 2022 State Budget, we have succeeded in reducing the budget deficit below 3%, namely 2.4% which is actually targeted in 2023. 

In this way, the steps that the government has actually taken for Indonesia is on the right track and then our exports increased to around US$ 290 billion in 2022 and also in these 31 months we have continued to be positive in the Purchasing Managers Index, it is above 50 and we will continue to maintain this. We can see that it really feels like the downstream policy, especially the downstream supply chain, is actually an added value, so it’s been implemented and is on the right track. We actually already have something related to digital, this is the industry 4.0 roadmap which launched in 2018 and it turned out in 2018. In 2021, the expected numbers will happen. 

So if we look at some of the programs implemented in realizing the downstream digitization of Making Indonesia 4.0 accompanied by structural reforms through job creation law (RUU Cipta Kerja), we can say that it is timely.

There is also the possibility of a food recession, regarding this digital food, what has been planned by the government to overcome the economic crisis?

The food crisis is the most important supply and demand and stock, so the government is concentrating on this so the government has sufficient stock to feed the people. Adequate stocks can be produced from imports. Third, food is a factor causing inflation. So that the government is very serious in dealing with this so that inflation is not high because if inflation is high it will certainly  greatly affect economic growth. So last year we were able to maintain inflation at 5.5%, compared to America which was 8%, European countries which averaged at 9%.

Indeed, our challenge is intensification rather than food production with limited land. Our food is still 2.0, it is still mechanized. In the future we will encourage smart farming. We know that not many young people want to be back to agriculture but we encourage it with smart farming so that they want to go back, it can be in fisheries, horticulture, rice plants and so on.. 

In the future the government will also encourage what is called a food estate because of the limitations of human resources, especially for outside Java. Right now there is great potential if we import wheat flour in large quantities up to 4 million tons, so there will be alternatives to wheat flour, whether buckwheat-based or sago-based. We also see other potential, whether sweet potatoes or cassava especially for the needs of the food and energy industries. We will continue to diversify all of that so of course one of the contributions to society is to get a second income. Second, national economic resilience because security depends on food. If our energy is relative to the APBN buffer last year, we gave one of the highest, more than 500 trillion rupiah to maintain people’s purchasing power.

Regarding the digital economy, which is around 63 billion dollars in 2021 and expected to continue to increase to 360 billion dollars. What efforts or steps will the government take so that the digital economy continues to grow according to the target?

We could see our digital shopping in 2021 has reached USD 61 million, compared to other countries close to Indonesia, namely Thailand, 23 million, then the Philippines, 22 million, and Singapore only 9 million. While in 2022 it is estimated that around USD 77 million and USD 150 million targeted in 2025, it seems that with the existing track we can achieve this target because digitalization in Indonesia is quite deep and the government is committed to it.

Related to Satellite orbits, we also dare to be pioneers so that connectivity is good. The next infrastructure is a data center and the government has pushed for a special economic zone for digital in one of them, and it is committed for investment. It is equivalent to around 200 Megawatts, of course from that investment the data center industry will grow. Second, digital infrastructure. Third,  green energy sectors.

Because the data center requires double power or from two power that are uninterrupted, one of which is green energy. That’s why, the Riau archipelago is very high with interest in investing in renewable energy in the form of solar panels and the orientation is not only domestically but also exports to Singapore. So, this digitization effect  is very multiplier.

Regarding data centers, digital infrastructure, etc. so far what are the steps or breakthroughs facing these challenges?

One of the toughest challenges is the development of human resources. We need 600 thousand talents every year and we have to really take care of this human resource specifically. The government has pushed for several initiatives, including in special economic zones in Singasari, Malang, or economic zones where specialist education, such as that of Apple Academy, is about mobile application development. At this time we are talking about IBM, it will meet the needs in the data center, namely the development of a hybrid cloud academy which will also work with the Ministry of Education and Culture. 

We see several countries making changes in their curriculum structure, whether it’s England, India, or Singapore in the form of computer science or coding education which is introduced to early childhood. So it took 5-15 years in Singapore to introduce so-called computer science and in some countries India coding is even deeper, like Oracle.

Whatever knowledge, computer science is preferred. So computer science is like English lessons, so everyone must master computer science as one of the knowledge they have. We are pushing in that direction, we are now working with a variety of providers as well as with AWS and Microsoft. With Google as well, we are doing short courses, especially on upskilling and re-skilling. Therefore, we are pushing the Pre-Employment Card program there. One of the things that are in great demand is digital marketing, so this is all according to the needs of startups.

What are the government’s efforts or strategy to encourage digital equity to all regions, especially investment, which will also greatly affect economic growth in the province or regency/city?

We don’t have to see many kinds of digitization between tiers 1,2,3 so Indonesia’s economic development is cluster-based. Like for example outside Java, in Sulawesi, Maluku, we are pushing for downstream natural resources not digitalization. So it’s not one size fit for all. Not all 514 must be digital, but digital literacy is important. One of digital literacy is through the Pre-Employment Card program, which last year with 16 trillion rupiah of government funds with 5 million participants from 514 city/districts. This has shown that our infrastructure is relatively better and also that digital literacy has increased.

In fact, there is a third key, namely the basics for digitalization, which requires another literacy, namely English literacy. Indonesia is only 21% English compared to the Philippines, Thailand and Vietnam which is also relatively 60% so for global digital literacy it is easier for them. We are not only digital capable of software but English is important too. That’s why one of the most popular things on the Pre-Employment Card is also related to learning English. People are relatively aware of that direction. And indeed in America itself, Silicon Valley isn’t in all states, it’s only around Stanford, maybe to Seattle, then in several other places. So, we will push the cluster, whether it’s around Jakarta in the BSD area, whether it’s in Batam, or whether it’s in Malang, which is close to the university cluster.

What is the government’s strategy to build collaboration with the private sector and of course it will encourage the emergence of new startups in Indonesia?

The government creates a climate so that the private sector, especially young people, is open and has an environment for innovation. Several co-working spaces can be prepared, be it Telkom-based industries, both the government and private sector. We also encourage coworking spaces to be built at several universities, including working with Singapore, BLOCK71  already has coworking spaces in Indonesia. So the opportunity to build startups is wide open, their applications are very broad, including in the health sector.

A simple example is Halodoc, we use it to handle COVID. While other countries can not because by law they can not issue prescriptions if they don’t meet doctors. Now, with the PeduliLindungi application, we can track down anyone who is positive, by name, by address, so we can immediately send medicine. In other countries it is not possible because regulations are hampered by doctor’s consultation.

We have had an export surplus for 32 consecutive months, hopefully the government’s breakthrough will continue to provide benefits with an export surplus in the future. How is the connection or contribution of digitalization playing a role in driving exports?

From digitalization, it is more consumer to consumer, mainly of course producers for consumers, mainly through digital trade, e-commerce. We want to bring e-commerce that can protect ASEAN so that ASEAN does not become a market for Alibaba, Amazon, and others. We hope that Indonesia will have e-commerce that can enter the ASEAN level. 

One of the things we can do is for the payment system, we can already use QR so that the payment system will be easy. Next we will arrange the logistics of trade e-commerce trade, government to consumers because there are customs. We hope that this can really free flow within ASEAN. This is included in the ASEAN digital economy framework. So, we hope that the contribution of digitization to exports, especially from MSMEs can appear.

---

Download the EV-DCI 2023 here.