Jakarta, January 17, 2005

Aceh: Substantial pledges and commitments have been made by the European Union-Member States and the European Commission, for relief efforts and reconstruction. It is of paramount importance that humanitarian relief in Aceh be followed by integrated reconstruction activities. Any gap between the end of emergency aid and the beginning of reconstruction should be avoided. The EU is willing to mobilise its resources including the participation of the private sector.

During the EU-Troika visit last October, both Indonesia and the EU indicated their desire to strengthen co-operation. Indonesia showed interest in a bilateral agreement with the EU which will include Ministerial level meetings every half-year. The Tsunami disaster of December 26 triggers the EU to shape and intensify its economic and development relations towards reconstruction. Infrastructure development should now form part of EU-Indonesia dialogue, not only with respect to the reconstruction of Aceh, but across the country. The EU stands by to assist Indonesia in the implementation of the infrastructure roadmap and with the mobilisation of private capital.

The EU welcomes this summit as it will promote foreign investment and economic growth and will help to “create a more prosperous Indonesia”. Good Economic Governance will ensure that economic growth translates into improvements to the welfare and well-being of its people. A ‘pro-poor economic policy should be sustainable, particularly in terms of natural resource management and investment in human resources.

The EU welcomes that KADIN has invited EU private companies with cooperation of Member States in Jakarta, to take place in this Summit. A large presence of EU companies specialised in construction and financing of roads and bridges, water and sanitation, power and energy, ports and airports and telecommunication shows the renewed interest of the EU private sector for Indonesia. However this interest can only grow to full height if Indonesia is able to create and maintain the right momentum for private investment. It can not be repeated enough: words are good, deeds are better. Swift policy action is needed in order to create confidence by providing legal certainty to potential investors. The immediate revision of Kepres 7, the case of tariff setting mechanisms (important with regard to the commercial viability of investment) and the adoption of the new investment law are the most important actions. Let’s be clear: there is no lack of interesting projects in Indonesia, there is a lack of confidence in doing business. Only transparency and predictability will create the confidence to attract long-term investment.

The policy intentions of the Indonesian Government are very promising. Elimination of corruption, adjustment of laws and regulations and institutional reform in the area of taxation, customs and labour. There is much evidence that the strong role of state ownership and state bureaucracy is one of the root causes for the - relative – economic decline of Indonesia. However it is still not clear how government policy will be shaped in terms of private participation versus public interests in strategic sectors of the economy. One example is the recent judgements by the Constitutional Court in the cases of the Electricity Law and Oil and Gas Law. These verdicts are reasons for concern. How government and parliament will translate the respective guidelines of the Court into law will be critical for future of public-private investment partnerships.

The EU stands ready to work with the Indonesian Government. It will play its part in helping improve the business and investment climate. We are presently co-chairing, together with Japan, the US and the WB, the important CGI Workgroup on the Investment Climate. The Working Group is in open dialogue with the GoI and the private sector on implementing concrete measures and quick fixes to address business problems and pitfalls and in tackling "red tape". Suggestions by KADIN in its roadmap are included as part of the dialogue. EuroCham and bilateral chambers or Commercial Sections of Member State Embassies are available to undertake needs assessments and to facilitate co-operation between GoI and EU companies in strategic sectors of the economy, The EU will support contacts between the EU companies, Indonesian counterparts and the GoI. We hope that they will blossom and materialise.