Continuing Engagement, Ongoing Advocacy
AmCham Indonesia’s Year in Review, 2017
By A Lin Neumann, Managing Director
Monday, December 18, 2017
2017 was the year the Indonesian government began to seem like the Old Kid on the Block, politically stable, functionally democratic and reasonably predictable after more than three years of the Joko Widodo administration. Given political uncertainty in Washington following the election of President Donald Trump in 2016 and the almost constant saber rattling emanating from the tensions over North Korea, Indonesia maintained a blessedly low profile on the global stage. Even tensions over the divisive Jakarta gubernatorial elections had calmed down, at least for the time being, by year’s end. For business and investment this steady environment has meant incremental progress on a few issues, and some cautious regulatory wins despite continuing worries over numerous issues. The chief uncertainty as we end the year is how the business environment will be impacted as Indonesia sails into politically fraught waters for 2018-2019, years of important regional elections and the presidential polls.
While President Widodo’s message that the government is open for business and is intent on major reforms remains consistent, the reality from the standpoint of our companies remains mixed. There has been undoubted progress on the overall business environment in terms of ease of permitting and licensing, which is reflected in Indonesia’s move up in the World Bank’s Ease of Doing Business Index 2018, to 72 from 91, but overall new foreign investment remains sluggish. From continuing work permit hurdles to restrictions on marketing child nutrition products, a new mandatory National Payment Gateway regulation that negatively impacts multinational electronic payments companies and long delays in getting approvals for new pharmaceuticals, the list of obstacles and issues can be time consuming and costly.
Less publicly discussed are deep concerns about legal uncertainty in the form of the potential criminalization of business activity. These cases, while seldom highly publicized, remain a major blemish on Indonesia’s risk profile. The tax system, where major reforms are promised, also remains a significant challenge. The implementation of the 2014 Halal Law remains in limbo with its sweeping provisions a serious concern for many sectors.
All that said, AmCham and its companies have welcomed progress and flexibility on the calculation of local content (TKDN) guidelines for smartphone devices, pointing the way toward understanding the real nature of the emerging digital economy. We have also welcomed the openness of the government to our participation in the debate over implementation of the 2016 Patent Law, which has major problems from a global best practices point of view. We are also actively involved in discussions over ecommerce regulations, data onshoring and the shape of the overall digital economy. We also have been encouraged by government willingness to listen to major energy companies over the best way to structure the new gross split revenue mechanism.
Washington came to town
In 2017, we were pleased when US Vice President Mike Pence chose Jakarta for one of his first overseas visits in April. AmCham participated in the private sector side of the visit, which featured a handful of deal signings and was well received locally. The tone eased some concerns about the new administration in Washington and pointed the way toward warm relations between the two countries under President Donald Trump despite some underlying issues over Indonesia’s trade surplus with the United States.
AmCham made its annual doorknock visit to Washington in October, with a delegation consisting of President Brian Arnold, Vice President Doug Ramage, Second Vice president Adam Schwarz and myself meeting with administration officials and congressional offices. As usual, we received great assistance from our partners at the US Chamber of Commerce and Kit Bond Strategies and we were warmly received by the Indonesian embassy. We also had a chance to interact with an Indonesian Chamber of Commerce delegation that was in DC the same week and the visit was capped by a moving speech Minister of Finance Sri Mulyani gave on work-life balance at a conference of women CEOs held under the auspices of the US-based American-Indonesian Chamber of Commerce.
In January, we co-hosted, with the US-Indonesia Society, a gala reception for incoming US Ambassador Joseph Donovan. The event kicked off what became a year of growing involvement with Ambassador Donovan’s team as the US embassy continued its deep partnership with AmCham.
Big picture 2017
In order to take stock of things this past year, AmCham, in cooperation with the US Chamber of Commerce, conducted a series of in-depth video interviews with senior economic thinkers to gauge where the administration thinks it stands. Our talks with BKPM chairman Thomas Lembong, industry minister Airlangga Hartarto, information technology minister Rudiantara, Bappenas chief Bambang Brodjonegoro and former minister Mari Pangestu paint a collective picture of high aspirations for faster growth to propel the country out of the “middle income trap” but uncertainty about how Indonesia can attract the foreign investment needed to reach the needed 6.5 to 7 percent growth from the current roughly 5 percent. The video interviews are available here along with our 2017 investment report, The Big Picture: Indonesia's Partnership with US Investors. “I think we have to be clear: Are we open for business or not?” asked Mari Pangestu in our interview. “And if we’re open for business, what does that mean? Whether it’s about foreign ownership, whether it’s about foreign workers.”
The report and videos were released at the fifth annual US-Indonesia Investment Summit on October 1-2 at the Mandarin Oriental Hotel in Jakarta. This year’s summit, under the broad theme of “Innovation for Growth,” featured public and private discussion with six cabinet ministers – Coordinating Minister for Maritime Affairs Luhut Pandjaitan, energy chief Ignasius Jonan, BKPM’s Lembong, industry minister Airlangga, Bappenas chief Bambang and information technology minister Rudiantara. Attended by dozens of top US companies, Ambassador Donovan, other senior government officials and private sector partners Kadin and Apindo, the Summit helps deepen relations between the government and the US private sector, flagging numerous areas of concern for further advocacy and follow-up. The annual event is held under the auspices of the US-Indonesia Investment Initiative, a joint project of AmCham and the US Chamber of Commerce.
Through our committees, meetings with the government, private dinners and lunches and formal missions under the auspices of the Investment Initiative, AmCham engaged throughout the year in advocacy with the government on behalf of our companies on various issues.
We hosted three separate missions in 2017 under the Initiative, bringing together companies based in Jakarta and the US for private discussions on investment issues. In February, the Innovation Mission focused largely on patent and IPR issues and also featured the Indonesian launch of the US Chamber’s 2017 Global Intellectual Property Index. It was the creative economy’s turn in June as Hollywood came to Jakarta to discuss the finer points of increasing investment in film and television production and distribution.
In September, we had perhaps the best-attended mission we have ever hosted when we brought together companies in the finance, insurance and financial technology sectors. Amid several highlights of the mission, the group met with finance minister Sri Mulyani and the new leadership of the Financial Services Authority (OJK) under Chairman Wimboh Santoso. We also took the opportunity to engage with Bank Indonesia over the controversial new National Payment Gateway regulation, hopefully opening some ground for further discussion on a thorny issue in US-Indonesia economic relations.
During the year, AmCham’s tax committee held sessions to discuss the continuing complexities of Indonesia’s tax system. A newly revived IPR committee went forward on several fronts, as did our pharma committee. The services committee, under veteran chairman Peter Meyer, continued to provide a vital forum for information and updates across many sectors. On some issues, the Halal Law implementation is one, AmCham added our voice quietly to concerns being raised largely by the Indonesian private sector. We have also recently started a government relations forum under the AmCham board as a way to bring together the network of corporate professionals within AmCham who work with the government on business issues.
Throughout the year, AmCham briefed foreign and local reporters on issues of pressing concern. While we are not anxious to see our names in print, we do respond to queries for positions on important issues on a regular basis. We are grateful to those reporters who were careful with our information and accurate in the ways we were quoted. Working with the media is a vital way for AmCham to get its members’ concerns into the broader public discussion. The AmCham leadership is frequently quoted in leading publications like The Wall Street Journal, Reuters, Bloomberg and The New York Times. Our 2017 Investment Summit garnered more than 60 mentions, mostly in the local media; the AmCham online biweekly newsletter remains a popular source of thought-provoking information and something of a tip-sheet for journalists looking to understand business issues in greater detail.
Thanks to all
I want to take a moment here, as always, to thank the many tremendous people involved in the AmCham community. Our members and hard-working Board led by Brian Arnold do yeoman service, the amazing office staff led by Executive Director Sarah Howe are wonderful to work with. Our advocacy team led by Mary Silaban is tireless and longtime AmCham mainstay Arian Ardie, who coordinates our Investment Initiative work on behalf of the US Chamber, is a passionate agent for change and creativity.
Finally, a special note of appreciation goes to our Platinum Benefactors – BCA, Cargill, Caterpillar, Chevrolet, Chevron, Coca-Cola, ExxonMobil, EY, Freeport, Mead Johnson, PwC and HM Sampoerna – who make much of our work possible. In addition, the many companies who joined the Investment Initiative – more than 20 altogether – turned the Summit and Initiative into a productive reality.
If I have missed anyone, the omission is unintentional. Thanks again and let’s all have a great 2018!