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Indonesia will overcome its protectionist urges, says foreign investment chief

Sydney Morning Herald - August 8, 2019

James Massola, Jakarta – The Indonesian president will pursue bold economic reforms to open the country to much needed foreign direct investment, and pursue economic reform as a key priority in his second term, his foreign investment chief has insisted.

Thomas Trikasih Lembong, the influential chairman of the country's Investment Coordinating Board, BKPM, says opening up the university sector to overseas players will be a key part of the foreign investment push.

Australian universities have a head start on much of the rest of the world, as the recently signed Indonesia-Australia free trade deal allows Australian universities to open campuses in Indonesia while, crucially, being able to maintain majority ownership.

In an exclusive interview with The Sydney Morning Herald and The Age, Mr Lembong also nominated the reform of inefficient state owned enterprises, such as national flag carrier Garuda Indonesia, as another item on the president's reform agenda.

Mr Lembong, who is near-universally known as Tom, said Mr Joko "absolutely" had the courage to take on the advocates for economic nationalism and protectionism who still have a prominent and influential voice in Indonesia's politics and economy.

"Of course he can't – and he shouldn't – take on all the vested interests all at the same time. He will also be tactical and strategic about which interests to take on first, and which later," he said.

It's a matter of having the stomach for 12 months or 18 months of controversy and then it all goes away when the benefits begins to be showcased.

"But he [the President] has a proven track record of pushing through structural reforms – as proven by the signing of our IA-CEPA [the free trade deal] with Australia, which forces us to reform many sectors and open up many sectors to more access by Australian investors and Australian exporters."

Asked how the president would win the public debate over protectionism, Mr Lembong said: "there is an old saying that 'nothing succeeds like success'."

"You just need political courage for reform. It's just a matter of having the stomach for 12 months or 18 months of controversy and then it all goes away when the benefits begins to be showcased," he said, pointing out that Mr Joko would not have to face voters again because of Indonesia's two term limit on presidents.

As Mr Joko's Trade Minister in 2015 and 2016, Mr Lembong was able to open up the movie industry in Indonesia to competition and foreign investment, despite opposition from entrenched domestic players. Now he said the university sector was ripe for greater competition.

"The entrenched interests that were fighting this opening are coming around, they've been persuaded and that includes, for example, university deans and university professors. They started changing their minds when I started telling them that, when these international universities come in, the first thing they're gonna do is to poach all of you at five times their salary," he said.

"The idea to open the university sector to international investment came out of President Jokowi and Prime Minister Malcolm Turnbull at APEC in Da Nang, Vietnam in 2017. It was initially a feature specific to IA-CEPA. What has since happened is we've discovered it's easier to open it up to everyone."

The ministerial decree that will allow this to happen is, however, still being worked through, meaning Australian universities – such as Melbourne's Monash University and Perth's University of Western Australian, which have both flagged expansion plans – potentially have a head start.

BKPM has ministerial-level status and reports directly to the president, and as its head, Mr Lembong is effectively the tip of the spear in the President's efforts to attract more foreign investment.

Foreign direct investment in Indonesia has hovered between $US28.5 billion ($42 billion) and $US32.1 billion in the past five years, according to government officials.

Mr Lembong has been tipped by some political commentators to return to Mr Joko's cabinet in October, when the president is expected to announce his reshuffled cabinet, in a senior economic role.

Asked whether a future cabinet post in the offing, Mr Lembong ducks the questions. "Well, one thing I can tell you with 100 per cent certainty is that I will continue to serve the president, whether inside or outside [the government]."

Source: https://www.smh.com.au/world/asia/indonesia-will-overcome-its-protectionist-urges-says-foreign-investment-chief-20190808-p52f1y.html