Speech by M. Jusuf Kalla The Vice President of the Republic of Indonesia At the 21st International Conference on The Future of Asia

Tokyo, 21 May 2015

EXCELENCIES, DISTINGUISH GUESTS, LADIES & GENTLEMEN,

It is a great honour for me, on behalf of the Republic of Indonesia, to share my view at this very prestigious forum. I would like to congratulate Nikkei and Japan Center for Economic Research for the excellent and timely conference on the future of Asia.
In the 21st century, a substantial transformation is taking place. We witness the shift of global economic and geopolitics centre of gravity from the West to the East. Asia plays a more strategic role in the global arena.

The future of Asia and its global role depend on our ability to manage the regional transformation.
Asia is a complex region. Before discussing the future of Asia, lets me share with you some interesting fact about the continent we live in.
• Asia has more than a half of world population;
• It has Brunei with less than 400,000 population as well as China and India with 1.4 and 1.3 billion population;
• It has three world’s largest archipelagic countries: Indonesia, the Philippines and Japan;
• It has city countries like Singapore and large continental countries such as China and India;
• It has rich countries with GDP per capita above USD 50,000 and developing countries with GDP per capita less than USD 1,000;
• It has all religious. In fact all major religions coexist peacefully in Asia, including Christian, Islam, Hinduism and Buddhism;
• It has countries with various political systems ranging from democracy to autocracy.

I can make the list much longer since Asia is a very diverse region. As a person who came from a very diverse country, I understand that diversity is a great opportunity as long as we could create common goal and develop culture of cooperation.

DISTINGUISH GUESTS, LADIES AND GENTLEMEN,

Nations have similar ultimate goals: to live a prosperous life in peaceful and stable world. Prosperity, peace and stability are the key words.

Despite the existence of common goal, friction among nations often arises due to the conflicting strategy in achieving goal. This makes the effort to deliver prosperity tougher. Only a group of countries that are able to develop the culture of collaboration could create a peaceful environment, an essential precondition for prosperity.

East Asia is not a conflict free region. Geopolitical tension exists here and there. However, its culture of collaboration has enabled us to contain the friction from creating instability.

As a result, we have enjoyed a peaceful and stable East Asia for the last five decades. We witness East Asia’s emergence as the most dynamic region in the global political economy despite the series of economic crises since the nineties. Currently East Asia is at its best development phase. Compared to some other regions, East Asia has been able to cultivate a better cooperation environment.

The crucial question is, under the current dynamic global setting, can East Asia sustain this achievement in the long run?

The world transforms itself at a quick pace. A recipe for success in the past has become obsolete today. What is considered a breakthrough nowadays will soon become irrelevant. Being forward looking and innovative are the key success factor, not only to maintain geopolitical stability but also to ensure economic progress.

DISTINGUISH GUESTS, LADIES AND GENTLEMEN,

Over the last five decades, Indonesia and its regional peers, Malaysia and Singapore, has been able to maintain security at Malacca Strait. It turns out that the commitment to maintain the security of the 50 km wide and 800 km long strait is one of the best decisions we have ever made.

Nowadays, the strait become one of the busiest strait in the world in which around 100,000 ships pass through it each year, carrying around one-fourth of world’s traded goods. It is the artery of the regional economy.

It is essential for Southeast Asia economies and it is of the surrounding countries such as China, India, Japan, and South Korea.
At geopolitical arena, South China Sea dispute is one of East Asia major homework. I am sure that experts at various occasions, including at this forum, have discussed this issue. However, please allow me to emphasize the importance of stability and security in South China Sea. It represents around a half of global marine transportation. Peaceful solution is crucial.

I hope that decades from now leaders of the countries involve in the dispute, could feel grateful for the decision they made to maintain peace in the region. Just like what we feel when we remember the Malacca Strait story.

At the geo-economic front, East Asia faces three main challenges: global economic slowdown, income inequality, and economic volatility. Most of them could not be solved individually; collaboration is the route to take.

Concerning the economic slowdown, East Asia could not rely on export to EU and the US to stimulates growth. The two global economic engines are not in good shape. Asia’s self-reliance in finding solution is being tested.

Instead of protecting domestic economy by introducing overly protectionist policies, East Asia should promote more efficient and well-govern trade. Dubious practices in form of dumping, smuggling, money laundering and the like, should be avoided to promote trust and stimulate more trade.

In regard to income inequality, East Asia needs to introduce a more inclusive development approach that balance growth and equity. Growth without equity is meaningless, since it doesn’t reach the ultimate goal of development, prosperity for all. Empowering the poor is extremely crucial.

Over the last decades, in parallel with the high GDP growth, GINI indexes in Asia have increased significantly. This situation could trigger social and political unrest that may escalate into regional instability. Arab Spring is a clear example for us.
To address economic volatility East Asia needs to promote a more reliable long-term source of capital to finance its investment and to avoid mismatch between capital supply and demand. In this regard, institutions like the World Bank and ADB has played important role, but they are far from being adequate.

The plan to establish multilateral development bank, namely Asia Infrastructure Investment Bank (AIIB), is a breakthrough that should be supported. In parallel, we need to promote bilateral financial cooperation between nations.

DISTINGUISH GUESTS, LADIES AND GENTLEMEN,

The Association of Southeast Asian Nations (ASEAN) has played a significant role in shaping regional security. After the end of the Cold War, ASEAN is actively involved in the development of regional security architecture. It puts itself at the centre of security arrangements that link Southeast Asia and Northeast Asia.

This year is the historic year of the launching of ASEAN Economic Community and the tenth anniversary of the East Asia Summit. Indonesia continues to support regional cooperation and ASEAN centrality.

Engaging countries with interest in Southeast Asia is one of ASEAN’s strategies to remain influential. Japan, for example, has been a partner in promoting peace and creating regional economic cooperation. Indonesia highly values the contribution of Japan.
Indonesia and Japan are members of the East Asia Summit, a vital forum for cooperation in establishing peace and welfare in the 21st century. The summit has important role in advancing regional integration and cooperation, in various areas including finance, energy, environment, education, health, and connectivity.

DISTINGUISH GUESTS, LADIES AND GENTLEMEN,

Indonesia represents 40% of ASEAN in term of population, land area and economic size; naturally it has strong influence in shaping regional economic and geopolitical landscape. For Indonesia, development has two goals: to deliver prosperity for all Indonesians as well as to spread positive spill over to the region.

Recognising its geopolitical position, its strength as a maritime country, and its responsibility as a regional actor, Indonesia asserts itself as a force between the two oceans: the Indian Ocean and the Pacific Ocean. This is the essence of what President Joko Widodo reiterates as “transforming Indonesia as a global maritime fulcrum.”

The maritime doctrine has five underlying pillars. First, a revival of Indonesia’s maritime culture, recognizing the link between the country’s archipelagic geography, identity, and livelihood. Second, improved management of Indonesia’s oceans and fisheries through the development of the country’s fishing industry and building maritime “food sovereignty” and security.

Third, boosting Indonesia’s maritime economy by improving the country’s port infrastructure, shipping industry, and maritime tourism. Fourth, maritime diplomacy that encourages Indonesia’s partners to work together to eliminate conflict arising over illegal fishing, breaches of sovereignty, territorial disputes, piracy, and environmental concerns like marine pollution. And fifth, bolstering Indonesia’s maritime defences, both to support the country’s maritime sovereignty and wealth, and to fulfil its role in maintaining safety of navigation and maritime security.

DISTINGUISH GUESTS, LADIES AND GENTLEMEN,

Indonesia realizes that it will reach middle-income level soon. Indonesia needs to modify its development strategy in order for the nation to maintain economic progress. We will never be a high-income nation by planting more palm oil, digging more coal or pumping more natural gas. There is a limit the mother nature could support.

Transforming our economy from natural resources based into more value added economy is the answer. We plan to gradually shift ourselves from being raw material exporter into processed or final product producers, by empowering down-stream industries. Instead of process the raw mineral abroad, we require mining companies to do the processing in the country to gain more value added. To realize this target, smelters for various minerals have been and will be built.

We improve our infrastructure to promote economic efficiency. Currently, Indonesia’s logistical system is far from being competitive. Logistic cost represents 24% of GDP. This is among the highest in the region. In response, we plan to build high-speed train, modern MRT, seaport, airport, and highway in Indonesia’s major islands.

We also plan to increase our electricity supply by massively building electricity power plant, with emphasise on renewable energy. It is very encouraging to see strong interest from investors to participate. A large proportion of them are Japanese investors.

Indonesia promotes high quality FDI, characterized by high value added, high quality employment, pro environment and extensive transfer of technology. We simplify investment procedure, promote regulatory certainty as well as provide comprehensive facilitation for potential investors.

The recent development is quite promising. In the automotive industry, for example, Indonesia exported around 200,000 cars in 2014. They are mainly Japanese brands with up to 80% local content. In the future, Indonesia would like to position itself as production hub for various products, including automotive, electronics and consumer goods.

At the political front, Indonesia is a vibrant and stable democracy. It is true that if ones stay in Jakarta for at least a week, it is very likely that ones will see demonstrations on the street.

The freedom of expression is a sign of democracy at work. It is enable small crisis to happen regularly to avoid big crisis from arising. Politically, it is conducive for the Government to create policies and to execute them.

How about regional geo-politic? Indonesia would like to contribute more to help the region on various aspects, including in humanitarian area. Post Vietnam War, Indonesia help the Vietnamese refuges to settle in Galang Island. We proud of the solidarity that had been shown by our leaders in the past, and we would like to maintain the same attitude.

Concerning Rohingya refuges, for instance, we would like to lend our hand to provide temporary settlement, if there is support from international community especially from our neighbouring friends.

DISTINGUISH GUESTS, LADIES AND GENTLEMEN,

This is the era of collaboration. Asia faces various challenges that cannot be solved alone, it also provide various opportunities that need the help of others to realize. Indonesia understands this situation well, and would like to collaborate with other nations to realize a prosperous, peaceful and stable Asia.

Thank you.