Indonesia’s Middle East point man
Yanto Soegiarto | April 25, 2011

With many nations in the Middle East engulfed in dramatic change, Dr. Alwi Shihab represents Indonesia’s primary link to the region and its investment power. He is President Susilo Bambang Yudhoyono’s special envoy to the area, topping a career in which he has assumed various government posts such as foreign minister and coordinating minister for people’s welfare.  He has been chairman of the National Awakening Party (PKB) and secretary general of the Islamic Chamber of Commerce and Industry. He has also served as an advisor to leading Indonesian companies such as Pertamina, Medco and Pupuk Sriwijaya. He studied at Al Azhar University in Cairo, Temple University in the US and Harvard University’s Center for the Study of World Religions.  Dr. Shihab is well recognized among leaders of the Arab nations and is especially knowledgeable on the Middle East. 

How will current political developments in the Middle East impact investments in Indonesia?  

Alwi Shihab: We have not felt the impact directly but indirectly, yes. Put it this way. In the countries where the uprisings are taking place, domestic investors are at a standstill and are adopting a wait-and-see stance. In Egypt for instance, conglomerates are temporarily halting domestic production and investment. This is also occurring in Libya and Tunisia, especially in state-owned companies. Meanwhile, Indonesian companies that have invested in the Middle East are worried about the stability of new governments and whether old contracts will be honored. This will be a new problem. In Egypt some ministers from the former regime were interrogated and assets were frozen. If these ministers happen to be in the sectors of oil or construction, there will be big concerns about whether contracts will be reviewed or cancelled, such as Medco’s operations in Libya.

What do we do then?  Indonesia’s credibility as a nation in the Arab world is the best we can expect. It is the last fortress that will prevent any attempts at breaching a contract. Indonesia is well respected by all the Arab nations, including Libya, as a true friend and as a country with the largest Muslim population in the world. Whoever rules will not see the companies as Indonesian but Indonesia as a state. It will not be easy for them to treat us differently because of our special relationship with the Arab world. Relations are very well maintained on a friendly basis and on legal grounds. We still see Oman, Qatar and the United Arab Emirates (UAE) as unaffected. We must not be discouraged as these countries have not shown any signs of halting or withdrawing investments. As for the Indonesian companies in the Middle East, they will not incur total losses as they have received down-payments for the projects.

Can you name some of the better prospects?

Qatar Mining has not considered ceasing its investments in Indonesia. We have Bakrie and Medco construction works in Yemen and Oman and they will continue. In Algeria and Libya we have to be cautious while in Morocco we will have to wait and see. Qatar is still the most aggressive when it comes to Arab nations investing in Indonesia. Although Qatar Mining has a low profile, it is keen to boost investments in Indonesia. The Qatar Investment Authority is another company. Qatar National Bank is already present in Indonesia. Then there is a Qatar and Bahrain consortium engaged in coal-to liquid-projects. Qatar Petroleum wants to invest in Indonesian oil fields and Qatar Albiar has taken over the Lombok project from Emaar Group and is eyeing a real estate project in Bali.

What about the UAE and Saudi Arabia?

The UAE is investing in coal acquisition and infrastructure building in East Kalimantan. A UAE consortium of many companies has started a real estate business with the Bakrie Group in Jakarta. The Saudis and the Yemenis are in oil palm plantations and they have built a refinery in Dumai as well as downstream CPO industries. Saudi Telcom is boosting its investment in Indonesia and a Saudi-Bahrain company is seeking partners to do business in Indonesia. A UAE company is in the lubricated oil market while Saudi Aramco and Kuwait are still working with the state oil company Pertamina. I would also like to add that the UAE is still interested in developing a rice estate in Indonesia.

What about rising oil prices?

That’s the main worry. They will affect Indonesia, but that is not going to be felt by Indonesia only. Many countries that are also dependent on oil from the Middle East will feel the pinch. Indonesia has to cope with high oil subsidies. The budget will be affected and the main concern is rising food and energy prices. Stable oil prices are essential to maintaining economic stability.

How long do you think we have to wait until the situation in the Middle East is conducive again?

I think it will take six months. The Arab nations have finally realized that changes will eventually take place in the Middle East. I see a change in Libya in the near future. The Arab League has taken a stance. It supports a no-fly zone in Libya. The political climate in Egypt influenced Libya and other neighboring countries. Benghazi, where the democratic movement is centered, is close to the Egyptian border. The democratic movements began a long time ago but the Arab nations neglected them. Now they are beginning to realize that the people genuinely want to be free and dictatorships will no longer be tolerated. Turkey warned the Arab states seven years ago but they didn’t listen. Morocco has just amended its constitution.  So I don’t see a prolonged (battle for) democratization of the Middle East. It will soon be over.

So the democratization process in the Middle East is not attributed to Western intervention?

No, it’s the genuine aspiration of the people. If one says that it is due to Western intervention, I think that is not true. It is the same when people say democracy is not compatible with Islam which is not true either. It’s not Islam but Islamic culture which also recognizes transparency and freedom of expression. In the past, people in the Middle East used to express their freedom through jokes at cafés and food stalls but now they express it outright on the streets. People there pray five times a day but they don’t want an Islamic state. Islam is compatible with democracy. It also encompasses universal values and human rights. Democratic idealism has long since existed in Arab nations but they have been late in implementing and expressing it. Turkey and Indonesia are examples of countries with a Muslim majority that have successfully implemented democratic reforms. Now the Arab world sees that dictatorships can no longer rule against the will of the people.

How does that relate to Indonesia?

Indonesia is seen as a role model by Arab nations and by Egypt especially. Hosni Mubarak and Suharto were alike except that Suharto conceded to the people’s wishes and stepped down while Hosni Mubarak insisted on clinging to power. Now Indonesia is seen as a successful role model of democracy. This is why President Yudhoyono wrote to President Hosni Mubarak on the Indonesian experience. Indonesia and Egypt have been friends for a very long time. Many of our scholars were educated in Egypt and much of our culture is alike. The uprisings in the Middle East have boosted Indonesia’s image. This is why we have to maintain good relations with the Middle East. We have to send a delegation there. We will see in April whether a high-level Indonesian delegation will visit the Middle East.

Can Indonesia play a bigger role in the Middle East?

Of course. Indonesia should play a leading role in the Organization of Islamic Conference (OIC). We are looking forward to hosting the OIC conference in Indonesia. Indonesia maintains good relations with the Arab League and the OIC. We know the Arab leaders, such as Arab League Secretary General Amr Moussa who will run for the presidency in Egypt. I think Indonesia’s representation is significant as it is now the largest Muslim democracy in the world. Once again I would like to reiterate that Indonesia is very well respected by the Middle East nations.

How do you assess the Indonesian government now in regard to foreign investments?

In my view the central government has done its best. However there are still problems with regional governments. Foreign direct investment is supposed to be in the regions, but if the local governments are still abusing power that is problematic. This is why President Yudhoyono complained about most of the proposed projects. Sometimes when it’s already OK with the central government, the local government “torpedoes” the central government’s go ahead. At the end of the day the projects get stalled. To limit the regional governments’ power would seem undemocratic. What we need is to educate them. I have experienced it myself. The PLN project in Indragiri, South Sumatra, was supposed to be guaranteed by the Qatar National Bank. For some reason, regional officials disputed the foreign bank and the investment was withdrawn. If only Dahlan Iskan was around at that time, the project could have been saved.

What about the Tanjung Siapi Api railway project in South Sumatra?

The project was supposed to be financed by an Emirates company. It is now stalled due to uncertainty in the licensing of a private railway due to a lack of laws and regulations. The investors have relocated themselves to another project in East Kalimantan. It’s a matter of coordination between the central government and regional authorities. In the past when Jusuf Kalla was vice president we would all go to his office. He would push things to move, but now we have Gita Wirjawan as the investment coordination chief. He is a problem solver. He will go to any minister’s office and push things if they aren’t moving.  For Pak Gita mission accomplished means an answer to all impending problems.

What are your own plans, and are you satisfied with your work for Indonesia? 

I plan to launch my book Islam and the West which is now being translated into English in the United States. I hope my book will be useful as it will show how Islam is compatible with democracy. In April hopefully I will depart for the Middle East accompanying a high-level entourage led by Coordinating Minister for the Economy Hatta Rajasa. Yes, I am happy with my job serving the nation and the people. GA    

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