Indonesia Can Be an Economic Powerhouse: Steve Forbes

Media magnate talks about the US election and Indonesia’s future at AmCham Indonesia lunch

By Tellisa Ramadhani
Wednesday, September 7, 2016

With the US presidential election battle between Hillary Clinton and Donald Trump dominating the media in the build up to the November 8 poll, AmCham Indonesia was honored to welcome Steve Forbes, two-time Republican Party presidential candidate (1996 and 2000 primaries), to lunch to discuss his insights on the forthcoming election and his views on Indonesia’s economic growth.

The well-attended September 2 event at the Shangri-la Hotel in Jakarta featured a talk by Forbes, editor-in-chief of Forbes Media, who was candid in his views about the US presidential race. He also weighed in with some policy prescriptions for Indonesia and took questions from the floor.

The Forbes brand has a stake locally through its Forbes Indonesia edition and plans to hold a major international conference here later this year. Forbes in the US is the country’s leading business publication and its Website is highly influential.

Forbes said one main concern that always appears, in election after election, is the trade issue. He said he is worried about the current anti-trade talk in the US campaign getting out of hand, saying it easy to trigger a trade war, and the economic effects would be devastating, just like what happened in the Great Depression of the 1930s. He said whoever wins the election must deal with trade abuses and cybersecurity with mechanisms that already exist.

He noted that both Trump and Clinton have said they oppose the Trans Pacific Partnership trade deal, which is a cornerstone of US policy in the region.

Saying he supports the “Republican nominee” despite reservations, Forbes said he hoped Trump would be educated to be more pro-trade and less unpredictable. He said Clinton represented a “third term” for outgoing President Barack Obama.

“We were delighted to have Steve Forbes on an AmCham stage and I think on trade, he was speaking our language,” said AmCham Managing Director A. Lin Neumann. “Our members thrive in a free-trade environment and we think trade is good for Indonesia.”

One issue, Forbes said, that is critically important is to address the reasons why globally economies are stagnant, whether in China, Brazil, India or the United States. According to Forbes, when people talk as if its important for stability that the global economy must grow slowly, that stagnation is healthy, that is nonsense. He suggested that the global economy slows down because of major mistakes made by people in power, but that can be corrected in several ways.

First through tax policy. Governments have to understand that raising taxes will not raise just revenue, but also prices and economic burdens, said Forbes, who famously ran for president on a platform calling for a flat tax rate to simplify the system in the US, a la Hong Kong.

The proposition is very simple, he said, if we lower prices good things like productive work and taking risks to achieve success will happen more often — raise prices, and people play it safe. In the US in the 1960s, he said, when taxes were reduced there was a boom, but after seeing that boom the government increased taxes in the 1970s and there was stagnation. Hong Kong and Singapore, whose growth is considered stable, both have low tax rates and this encourages consumption.

Forbes sees the tax amnesty in Indonesia as a positive thing, even if the short-term benefits are questionable. But this should not deter Indonesia from eventually cutting the rate of corporate taxes down to the level of Singapore, if not lower, and impose a single rate flat tax. These reforms could give Indonesia the opportunity for rapid economic growth.

Secondly, making it easy for businesses to set up as a legal entity in the country will also boost the economy, he said. This is an issue in Indonesia and President Joko Widodo is well aware and wants to improve economic performance, he said. If there is reform on this issue, there is no reason why Indonesia should not grow, in real terms, 8 percent to 10 percent per year.

A stable monetary policy will also encourage businesses to invest in Indonesia. A weak monetary policy, he said, just like what is happening in the US at the moment, causes economic growth to stay stagnant. Indonesia now has the opportunity to learn from others’ mistakes and experiences. While other countries are still healing from stagnation over several years, Forbes said, Indonesia could come out as an economic powerhouse through regulatory reforms.

Forbes’ visit to Indonesia was to promote the 16th Forbes Global CEO Conference in Jakarta. The three-day conference will take place on November 29-December 1, 2016. This annual event serves as a platform for influential global business players, from CEOs to up-and-comers and thought leaders, to discuss and debate issues of global concern and build vital relationships.

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