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H.E. Mr Gita Wirjawan's Keynote Address in the 6th Asia Think Tank Summit

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Former Trade Minister of Indonesia H.E. Mr Gita Wirjawan delivered his Keynote Address on the second day of the 6th Asia Think Tank Summit organised by the Economic Research Institute for ASEAN and East Asia (ERIA) and the Think Tank and Civil Societies Program (TTCSP) of the University of Pennsylvania in Bali, Indonesia on 22 November 2018.

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H.E. Mr Gita Wirjawan's Keynote Address in the 6th Asia Think Tank Summit

  1. 1. 2018 ASIA Think Tank Summit November 22, 2018 Nusa Dua Beach Hotel & Spa, Bali Gita Wirjawan
  2. 2. 1 An Ever Changing World
  3. 3. 2 An ever changing world • Climate shift o Population growth o God forgives, people often forgive, nature never forgives o 3,000 Gigatons of Detectable Carbon on Planet Earth
  4. 4. 3 An ever changing world • Economic shift o Decline of the price of money (demographics and quantitative easing) S&P500 Pharaoh Tutankhamun 1332-1323 BC
  5. 5. 4 An ever changing world • Economic shift o Rising gap between inflation of financial vs real assets o Reduction of meaning of globalization o Catalyst of populist narratives Source: Goldman Sachs The great disconnect Real economy prices
  6. 6. 5 An ever changing world • Economic shift o Gap between Moore’s law vs humanity o Infusion of Info-tech and Biotech o Control of Data
  7. 7. 6 An ever changing world The last major trade wars in 1930 Smoot-Hawley Tariff results in increased 900 import tariffs by an average of 40 to 48 percent. • Economic shift
  8. 8. 7 An ever changing world • Ideological Shift o From Defined Benefit to Defined Contribution o Decline of Centrality with ever-growing populist narratives Communism Fascism Liberal Democracy ? Socialism with Chinese characteristics Liberal Democracy Pancasila
  9. 9. 8 An ever changing world • Peace and stability o No continuation of global economic growth without peace and stability o 2,000 years of peace and stability in ASEAN
  10. 10. 9 Where is Indonesia?
  11. 11. 10 Where is Indonesia? Sources: OECD, CIA World Factbook, World Bank Indo- nesia Malay- sia Viet- nam Singa- pore Thai- land Laos Myan- mar Brunei Cambo- dia Philip- pines China Roads (km) 496,000 144,000 206,000 3,400 180,000 40,000 34,000 3,000 44,700 216,000 4,106,300 Electricity consumption (kWh per capita) 730 4,345 1,272 8,689 2,465 300 153 7,603 234 606 4,039 Lending rates (%) 12.6% 4.6% 9.5% 5.4% 6.8% N/A 13.0% 5.5% 11.7% 5.8% 4.4% Deposit rates (%) 7.0% 3.0% 5.8% 1.0% 2.0% N/A 8.0% N/A N/A N/A 1.75% Interest rate differential (Lending vs deposit rates) 5.6% 1.6% 3.7% 4.4% 4.8% N/A 5.0% N/A N/A N/A N/A Banking penetration (% of 15yo+ with accounts) 36% 81% 31% 96% 78% 27% 23% N/A 22% 31% 79% Connectivity and financial inclusion
  12. 12. 11 Where is Indonesia? Connectivity and financial inclusion Indo- nesia Malay- sia Viet- nam Singa- pore Thai- land Laos Myan- mar Brunei Cambo- dia Philip- pines China Population (thousand) 264,510 31,164 95,415 5,740 68,298 6,858 53,550 429 16,005 103,797 1,388,233 Internet penetration (%) 50.4% 78.8% 67.1% 81.2% 83.5% 21.9% 25.1% 75.0% 25.6% 55.5% 53.2% Smartphone penetration (%) 20.7% 64.1% 26.4% 85% 40.5% N/A 80% N/A N/A 23.3% 51.7% Smartphone users (thousand) 54,494 19,967 25,162 4,890 27,628 5,829 42,840 538 12,483 24,173 717,310 Number of universites* (unit) 693 103 4193 60 167 92 163 12 56 1,9233 2,845 Number of student** (thousand) 689 1,236 1,4063 424 2,000 76 8901 12 2163 3,3183 23,9102 Remarks: * Number of university and college ** Number of tertiary student 1 Data in 2004 2 Data in 2012 3 Data in 2014
  13. 13. 12 Where is Indonesia? Notes: Labor Force: World Bank; Productivity: GDP at Constant Prices per Worker using 2013 PPP – Asia Productivity Organization (APO) Databook 2018 Productivity Growth: CAGR 2005-2013 – Asia Productivity Organization (APO) Databook 2018 GDP (PPP) per Capita as of 2017 (IMF); Bachelors: Bachelors Degree Holders as % of Population Aged 25+ (UNESCO Statistics) Productivity GDP (PPP) (US$/capita) R&D Spending (US$/capita) Bachelors (% of Population Aged 25+) Labor Force (millions) PPP adjusted (US$/person) Growth (%) Singapore 3.4 131,900 1.3% 89,100 1,608.9 28% Brunei 0.2 161,900 1.3% 75,300 N/A N/A Malaysia 15.4 56,400 2.0% 27,300 256.9 16% Thailand 39.1 28,300 3.5% 17,400 52.7 11% Indonesia 127.1 24,900 3.6% 11,900 8.1 7% Philippines 44.6 18,700 3.8% 7,860 5.4 17% Vietnam 57.5 10,200 4.5% 6,510 9.9 7% Laos 3.6 11,500 5.3% 6,580 N/A N/A Myanmar 25.4 10,600 2.6% 4,750 N/A N/A Cambodia 9.3 6,200 4.9% 3,940 N/A 2% Total ASEAN 325.6 23,400 3.0% 11,700 N/A N/A vs China 786.7 24,000 7.1% 15,500 298.6 3% Marginal Productivity
  14. 14. Where is Indonesia? • Democracy in a Muslim-majority nation • 12 Muslim Nobel Prize winners worldwide (1.4%) out of more than 900 Nobel Prizes (1901-2018) 13 Largest Muslim populations Muslims in millions Percent Muslim 1 Indonesia 203 88% 2 Pakistan 174 96% 3 India 161 13% 4 Bangladesh 145 90% 5 Egypt 79 95% 6 Nigeria 78 50% 7 Iran 74 99% 8 Turkey 74 98% 9 Algeria 34 98% 10 Morocco 32 99% 11 Iraq 30 99% 12 Sudan 30 71% 13 Afghanistan 28 99% 14 Ethiopia 28 34% 15 Saudi Arabia 25 97%
  15. 15. Where is Indonesia? Judicious spending on education and healthcare in 2019 14 487,9 444.1 419,8 419,8 390,1 20192018201720162015 122 65,9 92,3 104,9 111,1 20192018201720162015  Fund will be allocated to 49 gov’t hospitals in 160 cities  Indonesia healthy program will accommodate 96,8 million people and 10 million family by providing health insurances and coverage  Indonesia Smart Program will provide scholarships up to 20.1 million of students and 471.1 thousands through Bidik Misi program.  27 Thousands students will be given scholarships to pursue higher education in top universities globally.  The budget will also allocated for teachers’ training and compensation BUDGET ON EDUCATION (IDR Trillion) Sources: Presidenri.go.id
  16. 16. 15 How can Indonesia compete?
  17. 17. 16 How can Indonesia compete? Country Global rank*) R&D Spending Nominal (US$bn) R&D Spending US$/capita Singapore 2 8.7 1,609 Japan 6 170.8 1,344 Hong Kong 7 2.7 373 Taiwan, China 15 32.4 1,384 Malaysia 18 7.6 257 Australia 21 23.3 987 Korea, Rep. 21 91.6 1,518 China 28 409 299 Thailand 32 3.6 53 Indonesia 37 2.0 8 Philippines 47 0.5 5 Vietnam 56 0.9 10 Laos 83 N/A N/A Cambodia 90 N/A N/A Myanmar 131 N/A N/A Asia Pacific Most Competitive Economies Source: Global Competitiveness Report 2015-2016, *) out of 140 economies; Gross Domestic Spending on R&D as of 2010 (OECD) Indonesia (both the government and the private sector) must invest more in research and development
  18. 18. 17 How can Indonesia compete? Indonesia needs to modernize its educational system, with a particular focus on STEM as to embrace technological innovation
  19. 19. 18 How can Indonesia compete? • Resolutely sticking to the narrative of human capital development and connectivity development • Cumulative GDP (until 2045): US$150 Trillion • Cumulative spending (until 2045) for human capital development: US$ 5 Trillion • Cumulative spending (until 2045) for connectivity development: US$ 5 Trillion 755.1 893 917.9 912.5 893.3 860.9 923.3 1,016 1,069 1,125 1,186 6.2% 6.5% 6.0% 5.6% 5.0% 4.9% 5.0% 5.1% 5.2% 5.3% 5.4% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F 2020F Indonesia GDP nominal and growth 14,000 2045
  20. 20. 19 How can Indonesia compete? Ride-Hailing/ Fintech E-Commerce Indonesia is getting a taste of technological innovation/disruptions
  21. 21. 20 How can Indonesia compete? • Importance of sustaining democracy/Pancasila o Maintaining peace and stability o Ensuring sustainable development o Embracing technological innovation, while eschewing data dictatorship
  22. 22. 21 The Future • With self-efficacy (mentally un-colonized), perseverance, and luck, Indonesia/ASEAN is on a path to greatness MAFGA (Microsoft, Amazon, Facebook, Google, Apple) at US$4 Trillion would be the World’s 5th largest GDP 2018 2030 2045 Indonesia/ASEAN, 4 Top 10 GDP at PPP by 2030 & 2045
  23. 23. 22 The Future: Indonesia in 2045 • Economic Equity o Robust GDP US$14tn (nominal) 320 Million Population US$43,000 (per capita) 100% Trade/GDP ratio o Connectivity/human capital 25% Tax ratio development  50% Debt/GDP ratio  100% Market capitalization/GDP  100% Bank/GDP ratio 2 Million Km of roads 1 Million MW electrification 95% financial inclusion 150 Million tourist arrivals/year 4 Doctors per 1,000 people 4 Hospital beds per 1,000 people
  24. 24. 23 The Future: Indonesia in 2045 • Political / Geopolitical / Social Equity o A thriving democracy 3rd largest democracy 30% Gini Ratio Peace and stability Data protection o It’s all about soft power Top 5 nations in Olympics medal tally standing 10 Nobel prize winners Soccer World Cup Champion Dangdut-ization of the world
  25. 25. Thank You Gita Wirjawan Chairman, Ancora Group gita.wirjawan@group-ancora.com

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