Indonesia's Prospects and Challenges: A Cause For Hope On The Resurrection of An Asian Economic Tiger

Indonesia's Prospects and Challenges:
A Cause for Hope on the Resurrection

of Asian Economic Tiger
By : Arifin Panigoro
Abstract
Indonesia has transformed itself into a more stable and

promising economy. Indonesia is now a member of the
G20, an acknowledgment for its contribution to the
world's economy. Yet, Indonesia is facing the common
challenges of most developing economies: maintaining
economic growth in the midst of the growing demand
for a better environment.
This paper examines the fact that Indonesia and its

neighboring countries need to re-address some
strategic issues to build a stronger alliance in tackling
the challenges ahead. Economy and ecology need to
work hand in hand. Such efforts will bring forward more
opportunities that create mutual benefit toward a better
region in the future for Indonesia and its partners.
Indonesia's Prospects and Challenges: A Cause for Hope on the Resurrection of Asian Economic Tiger
By : Arifin Panigoro 1
“For the first time ever, we are witnessing genuinely

global growth. This is creating an international system
in which countries in all parts of the world are no
longer objects or observers but players in their own
right. It is the birth of a truly global order.”
- Fareed Zakaria
I NTRODUCTION
The world has seen two major financial crises; one in 1998 and another in 2008.
The earlier financial crisis emerged from Asian economic turbulence, whereas the
latter arose from fallout from the collapse of the US property-banking industry.
One might say these two calamities have brought different responses in terms of
their effect on the world's economy at large: government bail-out packages or
economic stimuli.
The 2008
financial
The 2008 financial crisis struck at the heart of global capitalism: the US economy. crisis struck
To sum up its impact for the US market and the global economy, we refer to an
observation made by Fareed Zakaria in his recent book: at the heart
of global
“The crash of 2008 was the world's worst financial collapse since 1929 and capitalism:
has ushered in the worst economic slowdown since the Great Depression.
Every event in the last year has been unprecedented: the destruction of the US
approximately $40 trillion in equity value in the global economy; the economy.
nationalization of America's largest mortgage lenders; the largest
bankruptcy in history (Lehman Brothers); and the disappearance of the
investment bank; as well as bailouts and stimulus packages adding up to
trillions of dollars around the world. We are living through times that will be
recounted and studied for generations.”
Fareed's opinion is not the only skeptical view on the recovery of the US economy.
A recent issue of Time magazine even gave that country the provocative title of
“Unemployment Nation” as nearly 10% of all Americans have been idled and the
country faces the prospect of long-term, double digit unemployment
A story of Economic Resilience

Unlike Uncle Sam's struggle to recover from the ongoing economic ordeal,
fortunately, Indonesia is surviving the 2008 financial disaster on a much better
scale. The Economist, in its September 2009 edition, had a special report on
Indonesia that described the country as “having a golden chance”. I took this as
fair and sincere appreciation toward Indonesia's economic stability.
“But given
So, how does Indonesia survive? What are some of the political and economic Indonesia's
changes that have secured its economic growth? These are common questions
starting-
that I see as natural responses, especially from those who had rather negative
perceptions about Indonesia at the end of the 1990s. In fact, there was a lot of point a
discouraging news on Indonesia in the international media in the aftermath of decade ago,
Soeharto's rule and the 1998 financial crisis: authoritarian rule, political that is still
instability, unfriendly investment climate, and so forth. impressive.”
Why is it different now? Frankly speaking, Indonesia was on the brink of
catastrophe a decade ago. Now, the Indonesian economy has clearly survived
the previous crisis. In the early 1990s our debt reached 80% of the GDP, but
today it is only 30% of the GDP. An economist at the World Bank office in Jakarta,
Wolfgang Fengler, goes so far as to take an optimistic view of Indonesia's
economic resilience. He put it succinctly that “Indonesia has recovered strongly,”
and he believes that the country has been underrated globally. In the past
decade, we have not only survived, we have recovered.
A similar voice has been raised by The Path to

Economist. In its recent report published on recovery is
Indonesia, GDP growth is expected to not an easy
decline to only 4% this year from 6.3% in process.
2007 and 6.1% in 2008. Indonesia is After the
among the three countries still growing
steadily during the crisis, with China at 8% 1997
and India at 6%. “But given Indonesia's financial
starting-point a decade ago, that is still crisis that
impressive.” plummeted
For me, it is not merely about our GDP and all banking
other statistics, nor about any comparison system and
to the other Asian economic tigers, such as
India and China. The more important market,
INDONESIA’S GDP question to be discussed is what sort of Indonesia
% CHANGE recovery processes allowed Indonesia to launched
stand out firmly against the backdrop of the bold
global economic downturn last year. economic
Retaining solid footing on the path to recovery is not an easy process. After the and financial
1997 financial crisis that saw all of its banking and market systems plummet, measures.
Indonesia launched bold economic and financial measures.
We provided a government guarantee over all bank liabilities and established a

national agency to restructure bad assets, while at the same time introducing A Story of
stronger measures toward prudent banking management and setting up an Economic
independent central bank, which has powerful regulatory and enforcement roles
in relation to the entire banking system throughout the country. Resilience
All of these efforts have served as a solid “defensive” system against the 2008
crisis. Moreover the government recently has been promoting bureaucratic
reforms through improvement in legislative processes, simplifying regulations
and, more importantly, encouraging more government expenditures for
infrastructure and education. Besides resulting somewhat from these
improvements in its systems, Indonesia's economic resilience also owes much to
high levels of domestic (household) consumption.
These achievements have led to the strong argument that Indonesia should be
regarded as ranking among the countries with the three highest economic
growths in Asia after China and India. I am not surprised at all about this
assessment. Indeed, the recent admission of Indonesia into the G-20 is an
acknowledgement of its economic resilience. As we all know, the G-20 countries
account for 80 percent of the global GDP and 90 percent of world trade. This
forum also provides the opportunity for developed and developing countries to
work together with regard to the world's economic challenges.
A story of of Political Stability

Indonesia is also presenting a different story than perhaps expected in the area of
social and political changes. In the past ten years, the country has transformed
itself from one of the most authoritarian and centralistic regimes in the world into a
decentralized democracy; one of the most massive political transitions ever seen
in any developing country. Indonesia has indeed become a democracy. In fact, it
is the third largest democracy in the world – after India and the United States. On
top of this, Indonesia is also known as the country with the largest Muslim
population in the world.
I should acknowledge, however, that prior to the recent peaceful social and
political transition, Indonesia was seen as – using Tom Friedman's words – “a
messy state”. Ten years ago, if you may recall, major international media
portrayed the country as a place of political instability, economic uncertainty,
ethnic clashes, contentious religious sentiments, riots, and so forth. The world
viewed Indonesia with severe pessimism. Now, the country's image is much more
positive worldwide.
The people of Indonesia have taken a radically different direction than could have
been expected from the nation's negative image of the 1990s. In 2004, for
example, Indonesia conducted truly democratic general elections to vote for its
government. The country introduced a direct presidential election, as well as
direct elections for local leaders, such as governors, regents and mayors.
These general elections are regarded as a huge achievement in regard to the
latest social and political recovery of Indonesia after Soeharto's authoritarian
regime. Indonesia's election processes are, by far, among the most advanced A Story of
and complex election processes worldwide. The Election Commission has to
manage around 174 million voters across hundreds of islands for the direct Political
election of the President and the House of Representatives. stability
The most recent general election (April 2009)
also sent a clear signal to all constituencies in
Indonesia and abroad: political stability. As we
can see from the table that I have referenced
from The Economist's special report on
Indonesia, the legislative election result
showed that only the party of the incumbent
(Mr. Susilo Bambang Yudhoyono, or more
popularly known by the nickname SBY) had Indonesia has
the privilege to nominate him without the emerged with
further burden of forging a grand coalition a strong
with other political parties. outcome as a
According to Indonesia's electoral law, to run for president, a candidate needs consolidating
nomination by parties commanding at least 20% of the House of Representatives democracy.
(DPR) or 25% of the popular vote. In fact, even though SBY's party secured the Indeed,
majority of seats in the legislature, he formed a broader alliance and eventually
Indonesia is
won presidential re-election in a landslide victory. His contenders, Megawati
Soekarnoputri and Jusuf Kalla secured only 27% and 12 % respectively. Then, an now regarded
even stronger signal of political stability emerged as Megawati's husband, Taufik as an
Kiemas, who is also the head of the PDI-P party, was recently supported by SBY's exemplary
party to become Chairman of the People's Consultative Assembly (MPR). country in
As well, the new cabinet line-up, announced right after the inauguration of SBY on which
October 20, 2009, reflects what political observers in the country perceive as a democratic
continuation of the previous mix of ministers from political parties and values, Islam,
professional backgrounds. This is seen as part of SBY's effort to ensure and multi-
continued political stability during his second term in the presidency.
ethnic
What are the lessons to be learned from the most recent election? By far, the elements can
Indonesian people have shown their maturity in carrying out peaceful elections. exist in
Unlike the widely held perception that new democracies tend to experience harmony
messy elections, Indonesia has emerged with a strong outcome as a
consolidating democracy. Indeed, Indonesia is now regarded as an exemplary
country in which democratic values, Islam, and multi-ethnic elements can exist in
harmony. Despite the current terrorism, the country and its people continue to
show their resistance and denounce the attacks.
Another trend that is worth mentioning is the general feeling among Indonesians
that it is time to take on a more global role. In the past ten years there had been
little appetite for playing a proactive role in the global arena as Indonesia's
domestic challenges had mounted up and were consuming much of the nation's
attention. However, now, the public in general, as well as government officials, are
now keen to contribute attention not only to domestic issues, but also to regional
and even global challenges.
For several reasons, I might also say that there is a rising general awareness
about Indonesia's role in the global context. It is a new trend in contrast to what we
saw ten years ago. Just to name a few instances of this changing attitude:
Indonesia has proactively taken a lead in mitigating global climate change
through the Bali conference, as well as involving itself in the global interfaith
dialogue, and taking on a greater role among the ASEAN countries.
A Rough Road Ahead: Challenges

and Opportunities
What with the increasing interest in these latest trends, I have taken the
opportunity to outline some prospects for Indonesia's economic and political
outlook, and in today's public lecture, I am adding a few more balancing views
concerning the enormous challenges that could hamper the resurrection of
Indonesia to its previous position as an Asian economic tiger.
From a businessman's point of view, perhaps, it is easiest to start with the realities
that we are dealing with in the current investment situation, with additional
reference to the World Bank survey on 'Doing Business' in Indonesia.
Investors
In general, both local businessmen and foreign investors have found the have found
environment unfriendly, with its legal uncertainty, overlapping rules and the
regulations, over-regulated local government, tax problems, labor issues, and environment
inadequate economic infrastructure throughout the country. unfriendly,
In Indonesia's export sector, which is hampered by inadequate seaport facilities, with its legal
shipping costs run between 50% to 80% higher than in other regions. In addition, uncertainty,
even with the Indonesian government's remarkable achievement of reducing the overlapping
number of people living below the poverty line to 15% of the total population, rules and
unemployment remains high and can be expected to rise upon impact of the regulations,
ongoing global financial crisis. On top of this, Indonesia is under international over-
pressure as a large carbon emitter, and continues to be perceived globally as one
of the most corrupt nations in the world. These conditions are bound to create regulated
disincentive for any further investments in the country. local
government,
Having learned of these challenges, some people might wonder where we are tax problems,
actually heading. They might well ask the following: Why hasn't business taken off labor issues,
at warp speed? What is the competitive advantage for further investment in and
Indonesia? Is the country really ready to lure back its investors? Will it be possible
to work hand-in-hand with central and local government to secure business inadequate
certainty? economic
infrastructure
You might even want to suggest more questions or even point out more skeptical throughout
views in regard to these challenging situations, but as the old proverb says, “In the country.
every cloud there is a silver lining”. In other words, in each challenge lies further
opportunity, which, in this case, for sure, requires the art of doing business. For
this reason, I am attending this gathering today to share some balanced optimism
about a better Indonesia. Although the investment road ahead may be rough, it is
certainly is no dead-end, and there is absolutely no reason to put off taking the
journey!
O pportunity awaits in Food,

Energy and Water (FEW) Scarcity
Because food, energy and water (FEW) are the three most strategic commodities
for human beings, it is probably best to start by taking a look at the threat of
scarcity. I will outline briefly my point of view on the significance of FEW in a global
context, and then focus in on Indonesia to explore business opportunities that Food,
could provide mutual benefit for all stakeholders. energy and
water (FEW)
The year 2008 not only brought the financial crisis to our attention, but also the
food and energy crises. Most international observers and world organizations
are the three
have begun expressing concern over rapid population growth and the ensuing most
potential for food scarcity. The World Research Institute (WRI) has even strategic
predicted that the world population is poised to expand 50% by 2050, which will commodities
bring an extraordinary growth in consumption. for human
beings
In one analysis, BV Krishnamurty quotes a report from the Food and Agricultural
Organization (FAO) which shows the cereal intake in India in 2007-2008 was
197.8 million tons compared to 193.1 million tons for the previous year,
representing an increase of just 2.17%. On the contrary the US accounted for
310.4 million tons of consumption in 2007-2008 against 227.6 million tons the
previous year, representing an increase of 11.8%. The world average itself
increased by a modest 2.06%. Perhaps, more importantly, while there was a
slight increase in consumption in Asia and Africa, there was a corresponding
increase in production as well. In the US, however, while consumption increased
by 11.8%, production, in fact, declined.
In addition, a recent survey from WRI reveals higher demand for food and
household items across the globe over the past 20 years. This only further
underscores what we have already known for some time: A steady growth of the
world population pumps further consumption. What may not be as readily
apparent is that within this phenomenon lies a greater demand for more massive
industrialization as the main vehicle to produce the items feeding this increased
household consumption, all of which results in a surging demand for energy
Unfortunately, with world energy production rising 42% between 1980 and 2000
alone, most of the energy producers worldwide have been relying heavily on Opportunity
fossil fuels (oil, coal and gas). In this context, it is worthy to note that one WRI awaits in
study reveals that biomass also contributes approximately 15% of the world
energy supply. What is the further implication of all this? A warmer climate, of Food,
course, as more and more carbon emissions are released into the atmosphere as Energy and
a consequence of the massive level of fossil fuel burning around the world.
Water (FEW)
As can be seen from the WRI research graphics below, the 1990s constituted the Scarcity
warmest decade thus far. Scientists have confirmed that global warming is
occurring and affecting the earth, as well as the sustainability of the environment,
animals and the human population.
In his book, former US Vice President, Al Gore, even went so far as to express the
concern:
“The best-known and by far most serious of the strategic environmental
threats is the climate crisis. For me, this issue is in a special category
because of what I believe is at stake. I am particularly concerned because
the vast majority of the most respected environmental scientists from all
over the world have sounded a clear and urgent alarm.”
Scientists
have
confirmed
that global
warming is
occurring
and affecting
As if this wasn't concerning enough, we will find a similarly frightening outlook in our the earth, as
search for renewable water resources. With the world currently facing tremendous
deforestation, most countries will face serious water supply threats by 2025. In fact, WRI
well as the
estimates that 40% of the world's population will be living in water scarce regions by that sustainability
year. of the
environment,
animals and
the human
population.
WRI reports also reveal that the

loss of forest coverage has
been affecting the global
climate and simultaneously
causing the depletion of
renewable water resources.
The institute studied the
general trends in worldwide
deforestation rates, believed to
be the major cause of the loss
of clean water, diminished
biodiversity and climate
changes, between 1990 and
2000. The resulting data is
cited in the following chart.
In the interim, a lot of initiatives have been drawn up by governments and
scientists in regard to the scarcity of FEW and its further impact on the world. At you could
the policy making level, we have the Kyoto Protocol, that encourages the probably also
reduction of CO2 emissions. Yet, I can say, all of this remains under a satisfactory cite a few
level because we are simply witnessing series of rounds or environmental talks more policy
that have barely drawn a conclusion on even the mandatory level for all breakthrough
governments in their commitment to carbon reduction.
s for world
Under a similar initiative for some countries, we can also see the effort to exercise initiatives in
the suggested Reduced Emissions from Deforestation and Degradation (REDD) combating
that provides incentives for any effort to save the forests. global
climate
As for industry, including the power generation sector, we have the Clean change.
Development Mechanism (CDM) that guarantees incentives for CDM compliant
industrial facilities as they produce fewer carbon emissions. And you could However that
probably also cite a few more policy breakthroughs for world initiatives in may be, the
combating global climate change. However that may be, the most pertinent most
question now seems to be: Why is it that the results of these attempts at regulation pertinent
have been so relatively poor? question now
seems to be:
The main problem in all of this is that the forest carbon credits remain a small,
voluntary market. REDD constitutes only part of the negotiations on a successor Why is it that
to the Kyoto Protocol – the term of that protocol itself will end during the the results of
Copenhagen talks this December. The Economist reports that Britain's Prime these
Minister, Gordon Brown, in commitment to the environment, has asked all of attempts at
Copenhagen's participants, mainly the developed countries, to reach a deal for regulation
the transferring of US$ 100 billion a year to developing countries, “which would have been so
include funds for preserving forests”. But there are still plenty of questions-marks:
the price of carbon, for one thing; how the money should best be used; and relatively
whether the funds would really be paid in perpetuity. poor?
F EW and Carbon Credit:

Unlocking Indonesia's Potentials
How should we perceive this global debate in the Indonesian context? How do the
FEW factors implicate business opportunities in the country? Does Indonesia
have more chances to get carbon credit?
Food, energy and water (FEW), by all definitions, represent a cross-border issue
that engulfs countries throughout the world, including Indonesia. For that reason,
in Indonesia in particular, entrepreneurs might perceive FEW as having the Food, energy
potential to present new business opportunities. In terms of the food sector,
Indonesia needs further development to enhance its capacity to feed in its 240 and water
million people. Recent data from our research shows most of its food materials (FEW), by all
are imported. definitions,
represent a
Indonesia's dependence on imported food seems ironic in light of the fact that it cross-border
has vast tracts of land available for agricultural development. In fact, the Forestry issue that
Department has published shocking data indicating that 70 million hectares of
land has been abandoned or is in critical condition across the country. engulfs
countries
Indonesia - Imported Food
Products Production Import % Import of throughout
[Thousand Ton] [Thousand Ton] Consumption the world,
Maize 11,600 2,900 20% including
Soybean 740 610 45% Indonesia.
Peanut 840 150 15%
Beef Meat 395 130 25%
Milk 616 1,437 70%
Raw Sugar 2,300 300 11.5%
Source: Agriculture Dept. (2006)
Regardless of the country's rice Escalating Grain Prices in East Asia US$/ton (1990 – 2000)
sufficiency achievements, in
2008 Indonesia's food security
was threatened by the soaring
grain prices that hit East Asia.
The referenced World Bank
chart exposes the drastic
increase of grain prices from
US$300/ton in January 2007
into US$1,000/ton in April 2008.
This was partly due to the rising
food demand in other countries,
such as India and China,
combined with the booming Source: World Bank (2008)
demand for food-stock
conversion into ethanol.
In this context, it is interesting to note that Indonesia not only has enormous land
potential, but its farmers, in conjunction with advanced research on rice
cultivation methods, have extensive untapped capabilities that could enable to FEW and
country develop into a powerful rice producer, not only for domestic consumption, Carbon
but also to feed global demand. Just to name one of several, Indonesia has the Credit :
organic System of Rice Intensification (SRI), which encourages farmers to use
non-chemical fertilizer and to enhance their skills to process manure and other Unlocking
organic materials from their surroundings to boost their rice productivity levels. Indonesia’s
This effort to promote organic SRI has been adopted by farmers from various Potential
provinces in Indonesia, and on average their productivity level has increased 20
to 35% per harvest period. In fact, it delights me to be able to share with you that
two months ago our farmers from Tasikmalaya, West Java, through their
cooperation with a local trader, exported 30,000 tons of organic rice to Japan and
European countries.
Unfortunately, constraints to the application of this advanced organic cultivation

method remain, with research by local universities revealing delaying factors
other than land availability. The key problem is lack of access to funds or capital I believe
for the farmers. Should there be adequate funds, as well as land, I believe
Indonesia could become a giant organic (and also non-organic) rice producer that
Indonesia
could help fulfill regional and global rice demand. The business potential is clearly could be a
vast for any entrepreneur. giant
organic (and
The energy and water sectors in Indonesia also possess huge potential. In the also non-
energy context, I am proposing renewable energy instead of fossil-fuel based organic) rice
energy for unlocking the country's natural resources. The following table of
energy potential from the Ministry of Energy and Mineral Resources, for example,
producer
shows that Indonesia's renewable energy resources are mostly not developed, that will help
even though there is a serious electricity supply deficit around the archipelago. to fulfill
Recently, the Indonesian government launched a crash program to develop regional and
10,000 MW power plants to improve its electrification ratio in ten years. global rice
demand. The
business
potential is
clearly vast
for any
entrepreneur
.
The Economist has cited one of the serious factors hindering private investment
in power generation as being a lack of incentive. “PLN, the state power company,
has been trying to encourage private-sector investment, but subsidized electricity
acts as disincentive. Tariffs have not increased since 2003. During the oil-price
boom of 2008 they could not even cover the cost of the fuel burned in Indonesia's
power stations.”
Research also shows that in terms of renewable energy, Indonesia has gigantic
biomass resources. I believe that one of the best examples of this is the West
Papua forest, which has vast biomass power generation potential for the future.
The Southern part of West Papua, which is located across from Australia's
Northern Territory, has 12.5 million hectares of land predominantly covered by
monsoon forests consisting of acacia and eucalyptus trees. These are fast-
growing trees species that can be developed through forest management to
ensure forest sustainability.
Renewable energy production initiatives in the form of biomass or cellulose-

based fuel development will also eventually help the country preserve its water
supply. Of course, the basis for any success would be prudent sustainable forest
management that requires stewardship and assessment by independent parties.
For our project in the southern part of West Papua, for example, prior to our initial
investment, we built an alliance with Conservation International, a reputable
international environmental NGO, which has been working for more than ten
years in Papua, to develop a suitability analysis that has provided us with more
details of social, environmental and economic considerations in developing a
biomass project in Papua.
Since I am talking about the southern part of West Papua, please allow me to
briefly share my views on a neighboring country, Papua New Guinea (PNG),
which has 25 million hectares of primary forest area. A recent report from an
environmental NGO shows three kinds of environmental threats for PNG,
namely: timber concessions, the mining industry and agricultural expansion.
The PNG government itself had raised concerns toward potential environmental
damage as early as the 1970s. A World Bank report shows that environmental
issues were added to the government's political, economic and social agenda in
the Fourth National Goal and Directive Principals of the 1975 Constitution, which
states “natural resources and environment (are) to be conserved and used for the
collective benefit of the future generations”.
Another similar report clearly states that PNG has suffered from some “serious Research
environmental problems since the start of its economic development. Some of the also shows
most pressing issues include unsustainable logging operations, dumping of
that in terms
tailings into rivers by mining companies, dynamite fishing and so on.” In another
instance, an environmental NGO reported that despite the fact that PNG's forests of renewable
have recovered slightly from illegal logging recently, “the rate of deforestation has energy,
held at about 1 percent per year”. Indonesia
has gigantic
In this context, it is to be hoped that PNG might adopt a similar approach to that of biomass
West Papua in unlocking its natural resource potentials without jeopardizing the
resources.
environment at large through the implementation of sustainable business
ventures in the food, energy and water sectors as I have outlined for the southern
part of West Papua and other parts of Indonesia.
I believe this idea of developing sustainable business both in southern Papua and
PNG will require relentless effort, but must be seen as the precondition toward
helping us all to secure a better world. For this purpose we will need better
innovation in terms of technology and management, as well as the improved
business networking that some of our friends in developed countries have
already acquired.
C oncluding Remark:
Suggesting a New Platform of Doing Business
Thus far I have outlined both prospects and challenges in Indonesia. Now, I would Hence, it has
like to set forth the expectation that Indonesia, once defined as an Asian Tiger, will become
once again achieve that status in the future. For us, the business community, the
increasingly
current situation offers future business opportunities, not only for profit, but also to
allow us to build a better world. apparent to
In this closing section I would like to elaborate on what I mean by doing business me that
in a better world. approaching
social issues
Even the notion of a better world implies tremendous effort. Concerted effort on and
the part of each element of the global society must be perceived as mandatory for
corporate
achieving a better world. We, the business people, are not exempted from this
noble objective. strategy as
Why? In the past 25 years we have been witnessing a global trend toward a big two distinct
demand for a better relationship between corporate strategy and societal issues, and separate
including the environment, poverty, health, and population. We all see that rising subjects is
energy consumption creates environmental risks, but at the same time provides misguided.
business opportunities for renewable energy producers. Hence, it has become
increasingly apparent to me that approaching social issues and corporate
strategy as two distinct and separate subjects is misguided.
Clearly, for some people, this is not the 'business as usual' approach
prescribed in the old handbook of doing business. Of course, it is not. We must
find a new way of doing business that will not jeopardize the sustainability of
our environment. I prefer the word 'sustainability' as it implies equal
importance for the benefit of the social environment and the corporation itself.
Some experts call this the Profit-People-Planet (3P) collaborative innovation,
or you might want to call it a “triple bottom line” perspective
So, within the context of those basic ideas that I have set out here, I suggest that
business people, in conjunction with the activities of academic researchers,
should embark on a new platform of doing business in the light of the current “ I prefer the
climate change issues. One such strategy would be to promote the Socially- word
Environmentally Responsible Investment (SERI) approach. This is an
approach that emphasizes social and environmental considerations over and 'sustainabilit
above investment plans. This approach also makes the local community the y' as it
subject and not the object of investment scenarios. implies
equal
Harvard Business Review recently published a profound article titled “Why importance
Sustainability is Now the Key Driver of Innovation”. The authors, Prahalad and for the
Rangaswami, examined five key stages toward sustainability for any company in
relation to competence and business opportunity. As a quick review, I would like to benefit of
share with you the fourth stage they suggested, which clearly portrays the the social
emergence of developing new business models. For example, the 2008 business environment
merger of Fedex and Kinko, a chain print shop. This merger was undertaken not and the
only to reduce the transportation costs of Fedex services, but also to expedite corporation
delivery, as the solicited customer could get a quick copy of the original document itself.“
through Kinko's print shop network.
Another example can be found in GE. In 2005, its CEO, Jeff Immelt, required his Concluding
business unit to develop products to adhere to environmental sustainability (e.g.
less polluting and clean machinery). Now, GE has taken the lead into this future
Remark :
Suggesting a
business, thus maintaining its position as one of the world's industry leaders. New Platform
of Doing
For a concluding thought, perhaps, the following lines from Fareed Zakaria are
worthy of consideration:
Business
“The world economy had become the equivalent of a race car –expensive,
with incredible range, and capable of performing at breathtaking speed. For
the last decade everyone rode it and experienced the adrenaline rush and
the highs. There was only one problem: it turned out that nobody really
knew how to drive a car like this one.”
In the light of developing sustainable business it is imperative for all stakeholders

to think of the skill of a racing car driver. Don't speed up too fast unless you know
how to drive perfectly!
By : Arifin Panigoro
R EFERENCE Arifin Panigoro

Fengler, Wolfgang, ”Underrated Indonesia Poised
to Enter Global Stage,” February 25, 2009,
http://blogs.worldbank.org/eastasiapacific/underra
ted-indonesia-poised-to-enter-global-stage
Gore, Al., “The Assault on Reason,” the Penguin

Press, New York, 2007
Krishnamurty, BV., “The Global Food Crisis: Facts

and Opportunities,” 2009
Mr. Panigoro is the founder of the
The World Bank, “Papua New Guinea: Country
Medco Group, an energy company
Report,” presented for ESCAP at the Third Sub-
operating in Indonesia, North America,
regional Training Workshop on Environment
the Middle East, and Africa. He started
Statistics, Vanuatu, 2001
Medco in the early 1980s and has
managed it to become one of the very
Papua New Guinea: Environmental Profile, Rain
few Indonesian corporations operating
Forest, http://rainforest.mongabay.com/20png.htm
globally. He has also been known as
an activist since his university student
Prahalad, Ram Nidumolu, C.K. and M.R.
years in the late 1960s, and has served
Rangaswami, “Why Sustainability is Now the Key
as a member of the Indonesian House
Driver of Innovation,” Harvard Business Review,
of Representatives from the PDIP
Boston, Volume 87, Number 9, September 2009
Party (1999-2005). Currently, Mr.
Panigoro is active as a Board member
Ramo, Joshua Cooper., “Unemployment Nation,”
o f C o n s e r v a t i o n
Time, October 5, 2009
International–Indonesia and has
unveiled a number of initiatives in
World Resources Institute, United Nations
conjunction with business and
Environment Programme, World Business Council
environmental collaborative efforts,
for Sustainable Development, “Tomorrow's Market:
such as establishing a biodiversity
Global Trends and Their Implications for Business,”
survey of Merauke in the southern part
Paris, 2002
of West Papua; promoting organic rice
for Indonesian farmers; pioneering
Zakaria, Fareed, “The Post-American World, And
renewable energy resources
the Rise of the Rest,” Penguin Books, Great Britain,
development; and distributing trees
2009
from his nursery facility to support
various replanting programs
throughout the country. Besides
writing books and articles, Mr.
Panigoro has frequently spoken
publicly to share his knowledge and
experience in business at various
leading institutions, including the
Harvard Business School.

Indonesia's Prospects and Challenges: A Cause For Hope On The Resurrection of An Asian Economic Tiger

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Indonesia's Prospects and Challenges: A Cause For Hope On The Resurrection of An Asian Economic Tiger

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Indonesia's Prospects and Challenges:

A Cause for Hope on the Resurrection

Indonesia has transformed itself into a more stable and

This paper examines the fact that Indonesia and its

“For the first time ever, we are witnessing genuinely

A story of Economic Resilience

A similar voice has been raised by The Path to

We provided a government guarantee over all bank liabilities and established a

A story of of Political Stability

A Rough Road Ahead: Challenges

O pportunity awaits in Food,

WRI reports also reveal that the

F EW and Carbon Credit:

Source: Agriculture Dept. (2006)

Unfortunately, constraints to the application of this advanced organic cultivation

Renewable energy production initiatives in the form of biomass or cellulose-

In the light of developing sustainable business it is imperative for all stakeholders

R EFERENCE Arifin Panigoro

Gore, Al., “The Assault on Reason,” the Penguin

Krishnamurty, BV., “The Global Food Crisis: Facts

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