SPEECH BY GEORGE YEO, MINISTER FOR TRADE AND INDUSTRY OF SINGAPORE, AT THE LAUNCH OF NETWORK INDONESIA AT GRAND HYATT, JAKARTA ON TUESDAY, 20 MAY 2003

Your Excellency Dorodjatun Kuntjoro-Jakti, Indonesia's Coordinating Minister for Economic Affairs

Distinguished Guests

Ladies and Gentlemen

The Singapore Business Federation and International Enterprise Singapore have organised for us to be here this evening to launch Network Indonesia, which will strengthen the ties between the private sectors of Indonesia and Singapore. 128 business executives representing 92 companies from Singapore asked to be included for this evening's event, including 16 foreign companies based in Singapore. Their enthusiasm is a good reflection of the economic opportunities they see in Indonesia, and their confidence in Indonesia's future.

I would like to thank Pak Dorodjatun for honouring us with his presence at this event. His presence here today underscores the efforts that both governments have made to deepen the already close relationship between our two countries.

Since the Asian financial crisis, Indonesia has gone through a difficult period of political and economic reform. For a while, foreign investor confidence in Indonesia was badly affected. The terrorist bombings in Bali on 12 Oct last year further affected investor sentiment. But the decisiveness with which the Indonesian Government has acted against terrorist networks in Indonesia after that, and the way the Indonesian government and people have responded to the Iraqi issue, have given investors a renewed sense of confidence that the political and economic situation is getting better.

Singapore and Indonesia as Partners

The bilateral economic ties between Indonesia and Singapore go back a long time to the pre-colonial period. Looking at the map, Singapore is located deep in the Indonesian archipelago and linked to the many islands by ties of history, culture, economics and blood. Our histories are intertwined. Singaporeans supported Indonesians in their struggle for independence, which in turn inspired the struggle for independence in Singapore.

Against this backdrop, the large turnout this evening for the launch of Network Indonesia is perhaps not surprising. Singapore companies have been very active in Indonesia. Last year, Singapore was Indonesia's largest foreign investor, contributing some US$3.3 billion worth of investments. Temasek Holdings' participation in the consortium that won the recent tender for Bank Danamon is the latest of a series of high-profile Singapore-linked investments in Indonesia. These investments, which are based on commercial considerations, reflect these companies' faith in Indonesia's potential. In recent years, our bilateral account has also grown substantially with the long-term purchase of large amounts of natural gas from West Natuna and Asamara, and the economic cooperation projects in Batam, Bintam and Karimun.

As a result of our deepening ties, our two economies are becoming more integrated. Between Indonesia and Singapore, we are seeing greater interdependence in many fields. For example, when the gas from Asamera is piped to Singapore next year adding to the gas we are receiving from West Natuna, Indonesian natural gas will be the main fuel for Singapore's power stations. Within a few years, every home in Singapore will be cooking with Indonesian gas.

Over twenty-two years, these two projects will generate revenues of over US$ 17 billion for Indonesia. Both sides benefit. Indonesia gets a good price by selling to its closest neighbour. Singapore gets a stable supply of clean natural gas which will be less polluting to our environment.

Batam & Bintan

In Batam and Bintan, our economic cooperation projects have also been mutually beneficial. These projects have attracted significant foreign investments in the manufacturing and tourism sectors, and have created thousands of new jobs for Indonesia.

Multinational companies based in Singapore and Singapore SMEs have benefited from the relocation of production facilities to Batam and Bintan. They enjoy lower production costs while retaining quick and easy access to Singapore's international transportation network. The factories in Batam and Bintan are globally competitive facilities producing for the global marketplace.

This relationship will receive a significant boost when the Integrated Sourcing Initiative under the US-Singapore FTA comes into operation. The FTA was signed two weeks ago between President Bush and Prime Minister Goh Chok Tong. The USSFTA is likely to lead to more companies investing in Indonesia.

Network Indonesia

With devolution, it is natural that the provinces and regencies of Indonesia should now be competing for trade and investment. This can be a healthy development, opening up new economic opportunities. In this period of transition, however, the business environment can be complicated.

Network Indonesia can help Singapore businessmen navigate through a complex environment by finding them good Indonesian partners. With a highly competitive rate of exchange, there are many new opportunities to look at.

The Singapore businessmen who have come for this evening's launch are not only interested in established areas like electronics, energy and industrial parks but also in new sectors like retail, agriculture and business services.

For example, Singapore SMEs in the food retail services sector are looking at the middle-class market in Indonesia which has been growing strongly. We have Bread Talk which has just set up a branch shop in Jakarta. Apex-Pal, with its "Sakae Sushi" Japanese fast food concept, will be rolling out a chain of outlets in the major cities of Indonesia.

Network Indonesia follows Network China and Network India. It is the first network which we have formed for Southeast Asia. As Indonesia is a large country, we may have to form sub-groups as well in the future. Tomorrow, I will be in Batam to meet the nine governors of Sumatra. They have invited me and Ibu Rini to join them for the ground-breaking of a new Sumatra Centre and for a discussion on how the economic relationship between Sumatra and Singapore can be strengthened.

Network Indonesia has great promise. I believe that the launch of Network Indonesia will complement and contribute to our bilateral relationship. I would like to thank Mr Tony Chew and his dedicated Steering Committee members for driving this initiative. I would also like to acknowledge the contributions of Singapore Business Federation (SBF) and IE Singapore in co-hosting this Launch and serving as joint secretariat to Network Indonesia. SBF, through its vast membership, represents wide-ranging interests of Singapore companies for Indonesia. Finally, I would like to thank all our Indonesian friends here for your support and encouragement, especially Pak Dorodjatun. At a time when our region faces great challenges from terrorism and the SARs epidemic, it is even more important for Singapore and Indonesia to work together to revive investor confidence in the region. I wish all of you good meetings and follow-up