Although the global economic slowdown seems not to be showing any signs of solid improvement, hundreds of CEOs from around the globe will visit Jakarta to discuss possible solutions during the 16th Forbes Global CEO Conference this November. Forbes Media chairman and chief editor Malcolm Stevenson “Steve” Forbes, Jr. recently spoke with The Jakarta Post’s Vincent Lingga and Fedina S. Sundaryani about Indonesia’s economic reforms and the potential sectors in emerging markets. The following are edited excerpts of the interview.
Question: This is your second global CEO conference in Indonesia, with 300 CEOs and 42 speakers from around the world confirmed to attend. So what do you think the main attraction of the forum is — is it the Forbes brand or Indonesia’s position as a rising power in the global economy? And on the theme, “rising to the challenge”, can you elaborate on that?
Answer: I think it’s a synergy. Indonesia, even though it’s facing some economic challenges with the collapse of commodity prices, Indonesia is still achieving higher growth rates than many of its neighbors. It is an enormously populated country, fourth largest in the world. You have a president [Joko “Jokowi” Widodo] who is determined to make major economic reforms to unleash the potential of the Indonesian economy. So it seems a natural place for 400 plus CEOs, opinion leaders, thought leaders to come together, brainstorm, discuss opportunities and challenges.
On the business side you still have a sluggish global economy. The US is still stuck in second gear. Europe remains in trouble. Japan has no growth, [a] virtual recession. China: We know about China’s problems. Latin America: Brazil is still experiencing negative economic growth. So you look around the world and business leaders, whether with established companies or start-ups, face very real headwinds. So in addition to [having] a great product or service, you also have to navigate these uncertain waters [in the] short term.
Taking “rising to the challenge” [as a] theme for global leaders [comes from] the fact that most of them have not made the structural changes needed for their companies to grow. The central banks have not pursued sound monetary policies, which makes your President a very pleasant contrast to these other global leaders in the sense that he wants to make substantial changes in taxes, remove a lot of redundant rules and regulations, move ahead with infrastructure projects. So he, to an outsider, seems to be doing more to make pro-growth changes, pro-economic growth changes here than you see with leaders of other countries.
In addition to coming up with good products and services you have the challenge of rules and regulations. That’s why Indonesia needs to make a lot of reforms there, which the President has vowed to do, and they face what you might call artificial obstacles of too high taxation, unnecessary burdens, and that’s why the discussion of reducing your income, your corporate taxes down to eventually 17 percent to make it competitive to Singapore is very important. Ultimately, I hope that the discussion of having a flat tax in Indonesia comes to pass as you know Hong Kong has a variation of it and that would make Indonesia not only a capital creator internally, but also a magnet for capital overseas, particularly as you make these other structural changes.
What are investors’ views of the emerging markets?
Well, investors globally are always interested in market opportunities and this is Indonesia’s opportunity in the next couple of years to follow through on these substantial reforms because when an economy is growing and other economies are not, that always gets people’s attention. The fact that you’re making substantial reforms in the face of commodity problems shows that you are developing an economy that is not just economy-based, but is much more broadly based and that’s very important.
So, in terms of growth, wherever you create opportunity for growth, growth will take place. That means removing obstacles, regulatory obstacles, tax obstacles, starting to make reforms and enhancing educational opportunities. All of these are important. People [are] saying that infrastructure projects are taking place. Oftentimes you get talk, but it takes a 100 years before anything happens. So, Indonesia is starting to make these steps and the more consistently Indonesia does it, the more word will get around. If you have the right policies, even if you don’t have so-called natural resources, you can do very well.
What are the specific potential sectors for investment?
Well, that’s everywhere. Whether it’s retailing, finance, if you’re still underbanked in this country, health care is going to be very big around the world in the next few years. I think enormous technological changes are coming, not only in medical instruments, but in curing diseases. Building infrastructure products, as you have more and more of a middle class, what we call white goods, that is things like refrigerators, washing machines, stoves and the like: a huge market there. So, everywhere you look, whether it is digital technology or just household products for a growing middle class, it’s everywhere and it feeds on itself as we’ve seen in other countries.
As you are a business leader, editorial writer and a politician, what is your opinion on President Jokowi’s next three years, as many say his first two years were politically turbulent?
He seems to have a [legislative] coalition that seems much stronger than it was two years ago, so that gives him some flexibility and opportunity and he seems to be willing to move, to take advantage of that change and the broadening of the coalition. So the key thing is just pushing things through. He’s indicated that it’s not enough to just tell a bureaucracy to do something, you have to tell them about 48,000 times and push it before something happens so you have to have that energy for the small and the large, but if you put in the changes in your tax codes and put in a Hong Kong-like tax system, you will see a lot of activity rise up.