Remarks by President Megawati Soekarnoputri Of the Republic of Indonesia at the AICC Breakfast Meeting

September 23, 2003
Manhattan Ballroom
Grand Hyatt Hotel
New York City

Distinguished Ladies and Gentlemen,

Two years ago, a week after the tragedy of September 11th 2001, as the President of the largest Moslem country in the world, I came to the United States to extend the deepest condolences of the Indonesian people. Since then, we too have suffered a series of terrorist attacks starting with the Bali bombings of 12 October 2002, with the latest being the bombing attack at the J. W. Marriott Hotel in Jakarta, both of which claimed many lives.

What I told this forum two years ago came true: Terror may happen anytime, anywhere and may be committed by anyone. We feel the same sorrow and anger that you feel. In view of its nature, form and consequences, which constitute a scourge to humanity, terror must be defeated through law enforcement and preventive measures. We have been working very hard to clean our house and courtyard, and are closely cooperating with other countries to fight the global network of terrorism. At the national level, we continue tracking down the perpetrators, dismantling their cells, and bringing them to trial in accordance with our national laws. In the process, some of those responsible have been meted sentences befitting their crimes.

Now, I am here again with you who are friends of Indonesia. Allow me, therefore, to express my profound gratitude and appreciation to the organizers who have untiringly and continuously strived to promote relations between the United States and Indonesia. I am fully aware that you are looking forward to what I have to say about what Indonesia has achieved during the last two years.

Let me start by saying that we have made significant improvement. In the political sphere, we have been able to achieve stability, which is a necessary condition before we can proceed to address other issues. Horizontal conflicts between ethnic groups in several regions have diminished. Separatism, which has threatened our national integrity, and security disturbances by armed groups that bring about public disorder have all been neutralized and kept under control. Relations between the central government and local administrations, which in the past were filled with tension due to certain circumstances, nowadays are quite normal.

With regard to the threat of separatism in Aceh and Papua, I wish to say that we continue to seek a solution through a comprehensive and integrated political approach, including through dialogue, acceleration of economic development, social rehabilitation, law enforcement and respect for human rights, restoration of local administration and security, and information and communication. The two provinces have been granted special autonomy within the framework of the Unitary State of the Republic of Indonesia. The declaration of a status of military emergency in Aceh last May is intended to facilitate the implementation of combined operations involving humanitarian activities, law enforcement, restoration of local administration, and defense of the integrity of the Republic with a view to bringing an end to the protracted dialogue as well as the intensified security disturbances by the separatist Free Aceh Movement. Like any other country, we will not and never will let any group or movement break up our Unitary State. This is a non-negotiable principle.

The relatively stable condition prevailing in the country has bolstered our efforts to build a more prosperous democratic system that respects human rights and to reform all aspects of our national life. We have also managed to gradually improve our economic situation. Though slow, our hard work has enhanced our macro-economy. The inflation rate has dropped from 60 percent in 1998 and we hope that it will be down to six percent by the end of this year. We have maintained a stable exchange rate of around Rp. 8,500 to 1 US$ in comparison to Rp. 17,000 in 1998. The three-month 581 interest rate has been averaging below 9 percent. Our national reserves, which during the crisis was enough only to pay for three months of imports, has now reached US$ 35 billion, which can pay for six months of imports. The stock exchange rate continues to improve, reaching above 580 points after suffering a fall of 300 points three years ago. Our budget deficit has decreased from 4.8 percent of the GDP in 2000 to 1.8 percent of the GDP in 2003. Similarly, official debt has decreased from 100 percent of the GDP in 2000 to below 70 percent of the GDP in 2003.

Against the background of such an improved macro-economic condition, I declared before the House of Representatives on 15 August 2003 my decision to terminate our program with the IMF at the end of this year. Accordingly, we have prepared a program for our national economic recovery, which will be implemented within the time frame we have set. The role of the IMF in 2004 will only focus on providing assessment and suggestion on the implementation of economic policy through Post Program Monitoring, which constitutes a consultation process usually applicable to countries that have concluded their programs with the IMF.

For that purpose, we have set three main objectives as a package of our economic and financial policy, as follows:

1.To sustain and strengthen macro-economic stability;
2.To continue restructuring and reforming the financial sector; and
3.To promote investments and exports and to increase job opportunities.

In addition to sustaining our momentum, this policy package, together with the guidelines for its schedule and determination of its implementing institutions, is intended to prevent wide-spread concern over the termination of our IMF program and its implications on the conduct of the forthcoming general election in 2004.

Ladies and Gentlemen,

In order to improve our balance of trade after experiencing severe difficulties during the crisis, we have resorted to a counter-trade mechanism. Aside from saving on revenues, this step is also aimed at promoting trade of our primary commodities such as palm oil, textile, and furniture products.

In the financial sector, despite the progress being made in our recovery, there remain many things to be done before it can fully function as an intermediary and promoter of national growth. Some policies designed to push the reform process in this sector have been undertaken through the strengthening of the Financial Sector Safety Net, the continued restructuring of the banking system and enhancement of the governance of state-owned banks, and improvement of the monitoring of the capital market.

We are fully aware that in spite of these efforts, our capacity remains limited. We still have a massive problem of unemployment. Certainly we need a higher rate of economic growth than the predicted levels so that we can create more job opportunities. But as I have admitted earlier, our capacity is still limited. Therefore, we place our hopes in the investment sector.

Our primary constraints lie in our limited capacity to finance the construction of various infrastructures, which are very much needed to attract investors. Obviously, our need for infrastructures like seaports, roads, electricity, clean water, telecommunication services, and other basic infrastructures, particularly in the eastern part of Indonesia, is considerable. In these sectors, we are indeed in need of investment; hence, we are opening our doors much wider to investors.

I am equally aware that there are still numerous factors that hinder us from creating a more conducive climate for investment. We are sparing no effort to make things better. The uncertainties arising from the implementation of regional autonomy have diminished. In the labor sector, the environment has improved following the resolution of several labor disputes. In this regard, we continue improving the labor situation while revising our labor laws. The security situation, which previously raised much concern, is now also much improved.

We have done a lot of housekeeping work, but much remains to be done. Among the many outstanding issues are the problems of corruption and law enforcement. I am personally unhappy with the progress being made so far. But we will persevere in our efforts to solve these problems. We will focus on them.

At the same time, we continue to accelerate the passage of a revised law on investments, to review the negative list of investments, and to expedite the payment of tax returns to exporters.

Ladies and Gentlemen,

Another development that would significantly affect our national life, including business and investment planning, is the general election to be conducted in 2004. In the 2004 election, not only will the people directly elect members of Parliament and Council of Regional Representatives, but also the President and the Vice-President. Necessary preparations are being made. The fund for its implementation has also been allocated.

Ladies and Gentlemen,

We know that we do not have much time. During the last two or three years, we have managed to address many problems, but still a great deal of work has to be done. We are determined to complete them as soon as possible, though we know we should proceed very carefully so that new problems are not created.

We will meet all those challenges. If we have so far been successful in addressing previous challenges while preserving our national integrity, and fortifying the sense of nationhood and statehood, I believe today and tomorrow we will always be able to overcome these challenges.

We are fully aware of our tremendous potential. I am confident that with the help of our friends, such as you, we will be able to build a better future for us in Indonesia, and for our friends here, and God willing, for all humankind.

Thank you and may God Almighty bestow upon us His blessings.

New York, 23 September 2003
THE PRESIDENT OF THE REPUBLIC OF INDONESIA
MEGAWATI SOEKARNOPUTRI

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