Ambassador of the Republic of Indonesia Warsaw SPEECH OF H.E. MR. PETER F. GONTHA AMBASSADOR OF THE REPUBLIC OF INDONESIA TO THE REPUBLIC OF POLAND AT XXXII INTERNATIONAL SCIENTIFIC CONFERENCE “APPLE DISCORD” A CONTEMPORARY PROBLEMS OF THE WORLD ECONOMY WROCLAW, 18 MAY 2015 • • • • Prof. Boguslawa Drelich-Skulska, Director of the Department of International Economic Relations, Wroclaw University of Economics, Representatives of State Administration and Business organizations, Distinguished Participants, Ladies and Gentlemen, Allow me to express my appreciation for inviting me to this prestigious forum. It gives me great pleasure to come to Wroclaw again. The “APPLE OF DISCORD”, THE CONTEMPORARY PROBLEMS OF THE WORLD, Obviously this very interesting Conference is to see how a common agreement about “the core of an argument, or a small matter that could lead to a bigger dispute” can be found among top Economist. This conference is a forum for people to gather and pool their wisdom for a “brain-storm”. Personally, I find this Conference more than relevant; because our world need to tackle new challenges that have emerged because of change. Why am I hear, I believe because I represent a Country, Indonesia, of which its GDP has surpassed the Economy of France to $2.7 Trillion, compared to France of 2.5 Trillion, but where its Per Capita GDP ranks only 102 @ $10.641 whereas France Ranks 24 at $ 40.375, based on its Purchasing Power Parity. Major economies are performing unevenly. Commodity prices are going through frequent fluctuations. In fact, many people are quite pessimistic about the future of the world. They believe that the guarantee of peace is weak, and the prospect of development is elusive. The world has become an un-Safe place because of the gap between the Poor and the Rich. In a world facing a volatile economic situation, we should all work to promote opening-up and innovate. What has happened since the outbreak of the international financial crisis seven years ago proves that to work in unity is the surest way for countries to get over the difficulties. We have become interdependent in this world. While we each have the right to adopt economic policies in line with national conditions. According to Mc.Kinsey Global Institute, where $26 trillion flow of goods, services, and finance in 2012, which equals to 36% of global GDP will be Up to $85 trillion flow of goods, services, and finance by 2025, three times the value in 2012. Skype Calls have increased by 500% since 2008, Growth in knowledge-intensive goods, trade 1.3x as fast as in labor-intensive goods; So where do economies like Indonesia go, and how will it survive in an ever changing world economy that will be driven by Technology change and advancements. How about Africa and the Middle Eastern Countries, where people standard of living are far beyond advanced economies that have great technologies. That was what Mc.Kinsey Global Institute predicts. But I just attended a Presentation that was made by the IMF; they predicted a completely different scenario, where world economies will be contracting. For me, someone that has a limited degree of Knowledge about Macro and World Economics, these are two confusing signals. That’s why I just believe that this Forum / Conference that is so well attended by top Economist must find a common agreement as to where the world will be in a decade from now. Technology has taken world economist by surprise. Just back by the spring of 1977 Computers were becoming rapidly smaller, a machine that was barely squeezed in a warehouse not fits on your desk. The undisputed king of the mountain was IBM. But the best company at that time to invest in would have been Intel. Intel only supplies one tiny little component for a computer, a component that is so sophisticated and essential for IBM, DELL, HP, Compac, and every $5000 dollar that was invested in that stock, today is worth $ 1million Dollar or 20.000% value increase or a 500% increase per annum in value. How do we explain that? We need to strengthen macro-policy coordination to expand the convergence of interests and achieve common development. We need to act along the trend of our time, firmly advance free trade, resolutely reject protectionism, and actively expand regional economic cooperation. An European proverb says: “When the wind of change blows, some build walls, while others build windmills.” We need to build global value chains, and seize the opportunity of a new technological revolution. While the international community agrees on the importance of macro-policies to the economy, they also recognize the urgency to go ahead with structural reform. Structural reform must be carried through, no matter how difficult it is, as it is an effective way to foster conditions conducive to global innovation and bring about new momentum for global development. I agree with the opinion that the world’s economic problems cannot only be solved through the World Bank, IMF and ADB and that it is obsolete and must be abandoned. I am of the view that the management of the global economy cannot be left only to these three international financial institutions. We must build a new global economic order that is open to new, emerging economic powers. When designing economic policy today and for tomorrow, we must take into account the lessons learnt from the previous crisis. At the outset of the crisis in 2008-2009 fiscal stimulus to increase aggregate demand was a central pillar of the crisis response in Europe and elsewhere. Last but not least, we need to focus on the competitiveness of our economies, which leans on innovation and skills, embraces the opportunities offered by expanding world trade and boosts productive investment and access to finance, so that SMEs and industrial bases can create jobs and prosperity, And above all, we need to focus on the problems and challenges facing the modern economy, in terms of regional and global as the invitation description indicated. We need to act along the trend of our time, firmly advance free trade, resolutely reject protectionism, and actively expand regional economic cooperation. As for Indonesia, we are also facing a tough challenge in boosting the growth of Southeast Asia's largest economy, Indonesia’s GDP growth has slowed to its lowest in 5 years and we must find ways to overcome this situation and avoid the middle income trap. The Asean Economic Community will go in effect on January 1, 2016; this will definitely change the World economic structure. The world is in a fundamental transition, for us in Indonesia, and for all emerging markets the condition is suddenly very challenging. But where we see challenges, I see opportunities. In fact: our challenges are opportunities for the World. Please forgive me for I am unable to comment on Polish structural Changes but I hope that indeed this conference might come up with views, agreements and possibly, “SOLLUTIONS” as to how we can predict the changes in the world economy vis a vis Regional and domestic economic changes. Finally, I wish the Conference a great success and result in fruitful outcomes to address the regional and global problems in the world economy. Thank you for your attention. 