In the afternoon of October 28, 2016, former Coordinating Minister for Economic Affairs of the Indonesian cabinet, Founder and Chairman of CT Corp of Indonesia, and founder of CT Foundation to promote education of smart children who come from disadvantaged families, Chairul Tanjung visited the Yenching Academy of Peking University to cultivate business relations between Indonesia and China, and discuss trends in economic development with a focus on Asia. His visit also marked the official launch of the Chinese translation of his biography ‘Chairul Tanjung: Si Anak Singkong,’ a best seller in Indonesia also available in English. The event was hosted by Associate Dean of Yenching Academy John Holden. Mr. Tanjung was accompanied by Indonesian Ambassador to People’s Republic of China in Beijing His Excellency Soegeng Rahardjo.
In the first part of his presentation, Mr. Tanjung contextualized the rise of Asian economies within the global economic situation. He said that ‘Asia is going to come back again,’ showing projections that predict by 2050 fifty percent of global GDP will come from Asia. He noted that China and Indonesia both have great potential because of their large populations. Mr. Tanjung said Chinese and Indonesian economies have a lot of opportunities for collaboration into the future as a result of their different but complementary strengths. The Chinese economy with its strong supply driven economy, and the Indonesian economy with its strong demand driven economy can partner together for Chinese investors to take advantage of.
Mr. Tanjung also discussed the immediate challenges faced by global economic development. He expressed his concerns regarding the negative effects of global and geopolitical uncertainties on global stability and economic recovery. In particular, he reminded his audience of the rising popularity of controversial political figures such as Donald Trump in the US, Brexit, terrorism, and migrant crisis in Europe, the coup attempt in Turkey, the IMDB scandal in Malaysia, and the impeachment of former president Dilma Rousseff in Brazil. In what he called the ‘global growth engine problems,’ Mr. Tanjung noted that the US economy just recovered from the financial crisis, China is still consolidating its economy to a slower annual growth rate, and European and Japanese economies are still stagnant and have negative interest rates. Furthermore, he pointed out that the emerging markets and BRICS which should be the major drivers of global economic growth are still suffering from low commodity and petroleum prices. He also stressed that many governments are pursuing policies that reduce market confidence.
Mr. Tanjung noted that the world is going under a fourth industrial revolution that began in 2000, called the ‘internet of things.’ The internet of things is a concept that denotes the increasing interconnectivity of everyday devices and the revolutionary effect of the internet on traditional services as a driver of innovation. He designated progress in artificial intelligence, autonomous robots, big data, cloud services, 3D printing and additive manufacturing and augmented reality as technological progresses that are going to change services in the manner Airbnb changed the hotels market, Amazon changed the retail market and Uber and Didi changed the taxi market.
Mr. Tanjung said the previous industrial revolutions competed to increase productivity and efficiency. Different from previous revolutions, in the fourth industrial revolution the winners are those that combine productivity and efficiency with innovation, creativity and entrepreneurship. He said that in the new business environment, the winner will take the entire market. He reminded the takeover of Uber’s China branch by Didi in China as an example. He stressed that to catch up with the fourth industrial revolution, Asian countries need to invest in high-skilled human capital to build innovation, creativity and entrepreneurship driven economies. On the downside however, he predicted that the natural tendency of this kind of competition will be an increase in economic inequality and a decrease in employment creation as more industries are taken over by automation.
As for Indonesia in particular, Mr. Tanjul argued that the Indonesian market is ripe for investment by Chinese firms. He pointed out that Indonesia has a young population with median age of 29. He explained that the Indonesian consumer class is expected to triple from 45 million to at least 135 million assuming a conservative annual GDP growth rate of 5% per year as experienced since 2005. He also stressed that the Indonesian government is committed and constitutionally bound to support quality education in Indonesia by at least committing 20% of ‘government revenue’ on education. According to latest World Bank data available, the percentage share of education out of total government expenditure in Indonesia is indeed very close 20%. In 2013, 17.5% of total government expenditure was used to fund education.
In his concluding remarks, Mr. Tanjul identified 5 ‘key investment opportunities in Indonesia’ for Chinese investors. First, he presented projections that expect the consumer sector of Indonesia to reach one trillion dollars by 2030. According to Mr. Tanjul the Indonesian consumer market is ripe for investments in all sectors including financial services, food and beverage, leisure, apparel, and education in the foremost. Second, he encourages Chinese private and state owned companies to invest in the abundant renewable and unrenewable energy sources and mining sector of Indonesia. Third, he hopes Indonesia will cement its position as one of Asia’s most sought after tourist destinations. He expressed his hopes to cooperate with Chinese businessmen to establish mutual touristic ties, and for Chinese businessmen to directly invest to possibly build ‘China Towns’ in Indonesia to help Chinese tourists feel more comfortable. Fourth, he expressed that there were ‘massive’ infrastructure development opportunities in Indonesia. Fifth, he said that Indonesia’s internet and information market is ready for progress similar to internet services offered in China.
Written by: Deniz Ozensoy
