1 The Future Challenges of Indonesia Sandiaga S. Uno Vice President Indonesian Chamber of Commerce and Industry for Micro Small and Medium Enterprises and Cooperatives Ernst & Young and ICWA Panel Discussions Monday, 10 May 2010

22 Indonesia’s Economic Overview Economic Fundamentals Remain Solid  Decreasing trend of debt-to- GDP ratio  Prudent fiscal policies  Record foreign reserves of US$75 billion as of end April 2010  Recent IMF projections for Indonesian growth outperforming the rest of Asia Source : UBS, 2009 Key Facts

33 Indonesia’s Economic Overview Robust GDP Growth Source : CIA World Factbook Real GDP Growth Rate (%)

44 Indonesia’s Economic Overview Strong Stock Market Performance Source : UBS, 2009 Regional Indices Performance (2009) JCI Performance (2009) In 2009, the Jakarta Composite Index performance outperformed those of other regional indices

55 Economic Problems Current Challenges Human Capital Human Development Index: 111 out of 182 countries (Source: UNDP Human Development Report, 2009) Corruption Most corrupted country in the world, corruption level scored 9.1 out of 10 in 2010, up from 7.7 in 2009 (Source: PERC, 2009) Infrastructure Infrastructure competitiveness ranks 84 out of 133 countries (Source: PERC, 2009) Ease of Doing Business Ranks 122 out of 183 countries (Source: Doing Business Report 2009)

66 Future Challenges of Indonesia Deindustrialization in the Globalization Era …Is this a sign of deindustrialization??? The Growth: Industry vs GDP Source : BPS, 2009 “Growth is targeted to reach 6.7% to 6.8% in the next five years” (SBY, at APEC CEO Summit, Nov 2009)

77 Solution Considering SME’s role in the economy Does SME’s activity lead to economic growth?

million business units or 99.9% of total businesses Most labor absorber: 90.9 million labors or 97.1% of total labor SME’s contribution to GDP: 55.6%Creation of foreign trade : 20.2% Solution: Bottom Up Approach SME’s as the Backbone of National Economy

99 Solution: Bottom Up Approach The Importance of Entrepreneurship Necessity vs Opportunity

10 Great Prospect for Indonesia International Response towards Indonesia The N-11 Country in 2050 (Goldman Sachs) Indonesia’s economy will rank 6 th in 2050 (PricewaterhouseCoopers) Indonesia will be a part of “BRIC” in 2050 (Morgan Stanley) “Chindonesia” (CLSA) S&P has increased Indonesia’s sovereign debt rating to BB, the highest level in the past 12 years

11 Thank You