The discussion highlights the Indonesian Minister of Finance's strategic approach to economic growth, focusing on stimulating domestic demand, improving the investment climate, and fostering human capital development through targeted fiscal and monetary policies, drawing lessons from past economic crises.
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GITA WIRJAWAN: Hi everyone.
Today we’re joined by the Minister of Finance,
Purbaya Yudhi Sadewa.
Pak Menteri, Bro Menteri, thank you.
PURBAYA YUDHI SADEWA: Thanks for having me,
Pak Gita Wirjawan—bro.
The “bro” comes last.
As usual, we always ask about background.
You studied electrical engineering at ITB, great school,
then went to Purdue for economics.
- I got into electrical engineering at ITB. I applied, got accepted,
mainly just to test myself.
I got accepted.
Studied there for a bit more than five years, then worked in the same field.
I wasn’t particularly smart; just average.
I saved my brain as capital, you could say.
I worked at Schlumberger Overseas for five years—same industry.
Why Schlumberger? It was the most sought-after job for ITB graduates.
I applied, pushed my way in, fortunately I got it.
After five years —great pay—
I finally had enough money for school.
To be honest, I wasn’t eager to study, but I thought,
“Well, good education wouldn’t hurt.”
After five years I got tired of fieldwork.
You’re out in the field constantly— great money, exhausting work.
Lots of all-nighters.
Working 24 hours straight was normal.
My record was not sleeping for five days onshore.
Offshore, two nights max—
after that you must switch out and rest.
I thought, “Okay… hard work, good money, but I’m completely worn out.”
Then I got a girlfriend— and that changed everything.
She said she’d only marry me if I quit that job.
So I quit. “Alright, I’m out.”
- Was she working?
- She was still in college, about to graduate.
She was about to finish study.
I said, “I’ve finished my study. Let’s get married.”
She said, “Not yet.”
Basically, “You’re working now, good. But I want you to study again.”
What's the degree? A PhD.
- Ouch.
- Not a master’s, straight to a PhD.
I thought, “Alright… what’s the easiest one?”
You know, I was arrogant as ITB graduate.
We thought economics would be easiest.
“I’ll just take economics.”
I didn’t know anything.
I thought it's all about memorization.
For those who don't understand economics.
So I applied. I applied to many schools.
Stanford and others.
I was gonna pay my own study, so I asked them how much the tuition was per year.
They told me how much.
“Oh wow, that’ll drain me in one year.”
So I chose something good but affordable.
Purdue seemed decent.
I’d heard of it—my former rector was from Purdue,
a nuclear physicist, very sharp.
So I applied widely, got several offers, and picked the most reasonable one.
I said, “Alright, let’s get married.”
We got married, then moved to the U.S. for economics.
I thought it would be easy— turned out brutal.
It was brutal.
It was very difficult, way harder than ITB.
At ITB I was a bit of a troublemaker, played around a lot.
In the U.S. I studied like crazy and still didn’t get it.
After the first month or two, I told my wife,
“This stuff is difficult I don’t understand it.
I’ve studied nonstop and still don’t get it.
Let’s go back to Indonesia in June.”
Arrogant guy like me—once reality hits—completely crumble.
What did she say? “Okay, we’ll go back in June.
But once we land in Jakarta, I’ll divorce you.”
My head spun.
I’d already quit my job, burned through savings,
and now risk losing my wife too. That’s total loss.
So we cut the loss. “Alright, I’ll study harder, but you help me.”
“Okay, I’ll help you,” she said.
After that, I studied even harder.
Every day at 8 a.m, I was already in the library,
as soon as the library opened, I'd be there until midnight."
We even cut meal times.
I didn’t leave the library for lunch—
my wife brought food in a lunchbox.
I ate for 15 minutes, then studied again.
Same for dinner, 15 minutes break and back to studying.
Only then could I catch up with the Koreans and Chinese—incredibly diligent students.
- That's crazy.
My wife even became known as “Bu Tani” [farmer lady]
because she brought food at 11 every day to the library.
Her friends would say, “Hey, Bu Tani!”
But it was fun.
So that’s why I took economics— out of pressure and coincidence.
- Alhamdulillah.
What's after graduated?
- I entered the program as the least prepared.
I went straight from a bachelor’s to a PhD
without ever taking a master’s in economics.
Didn’t even know basic terms.
But I graduated faster than everyone else.
- Incredible.
- Not bad.
Seemed like I graduated at the top too.
The important thing is the gain.
They started here, ended there.
I started lower and ended higher.
So I gained more—that’s a good investment.
I returned and joined Danareksa.
- We met back when we were young.
I worked at the Danareksa Research Institute, doing economic research
from 2000 to 2014.
But by 2002 I’d already met your former boss, Pak SBY.
We helped when they set up their think tank. I supported from afar in 2004.
I was a Brighton Institute scholar.
I’d give input from time to time.
Whenever things got complicated, they’d come to me.
In 2010 I helped Pak Hatta Rajasa as special staff
and member of the National Economic Committee.
In 2015 I switched lanes and supported Pak Jokowi and Pak Luhut
up until 2020, when the economy was in turnoil
and I was assigned to LPS to safeguard the financial sector.
I was supposed to retire this September —was already preparing—
but luckily I didn’t retire. I was asked to be Minister of Finance.
So I accepted.
As long as there’s still a paycheck—not bad.
Salary and pension at the same time.
- Within a day or two after being appointed,
you made an out of the ordinary move to boost liquidity.
What was the thinking behind that?
- It was a fairly complex strategy —not a coincidence.
Part of a series of steps inspired by
Roger Farmer’s "The Macroeconomics of Self-Fulfilling Prophecies".
Fortunately I still remember it.
We create expectations, set the right strategies,
monitor them, and add more if needed.
At that time we were extremely pessimistic.
Protests everywhere. Everyone had lost hope in the economy—
the future looked bleak.
So step one was to reverse expectations.
How? I’ll admit—I said it boldly.
It was by design, not luck.
I said, “I can do this. I’m capable.”
People got upset—fine.
When I explained my strategy in Parliament,
they were surprised, “Oh, this guy’s not as clueless as we thought.”
Only then did they start believing and there's hope.
But hope is expectation.
If I didn’t provide the right tools, it would collapse within weeks.
So we moved government funds from the central bank into commercial banks.
The logic came from Milton Friedman —the Nobel laureate.
I like his work because it makes sense
and it explains our 1997–98 crisis very well.
I also read Ben Bernanke’s book on the Great Depression.
The simplest takeaway from Friedman is
tight or loose monetary policy isn’t about interest rates—
it’s about the growth of the money supply—
base money, primary money, M0.
Low growth means tight monetary policy.
If it’s too high, the monetary policy shifts looser
He goes back to the 1930s, when people were puzzled
the interest rates were near zero, but why was the economy collapsing?
Does monetary policy have no impact on the economy?
He studied that.
The book is quite thick— I read a few chapters.
Turns out that even with zero interest rates,
money growth was minus five percent or so.
Instead of adding stimulus, they were actually retracting it.
After that, everyone followed it.
I looked at U.S. economic history
—the effect of money on the economy became really clear.
When our economy was in turmoil,
people often say it’s because of global uncertainty.
It has nothing to do with global uncertainty.
From what I see, it was a domestic policy mistake.
Our money growth was nearly zero from May, June, July, August 2005.
Earlier in 2004 it was almost zero for most of the year.
In early 2005 it rose a little.
So for over a year the economy was strangled, given a little air, then strangled again.
The economy grew very slowly, and people started to feel it,
especially coming out of COVID.
It hadn’t recovered yet, and when it was played like that,
of course people got upset and took to the streets.
So the social unrest wasn’t just about politics,
not about global factors, but because we were braking the economy
since there wasn't enough money in the system.
If you ask LPS, OJK, the Finance Ministry, BI—I was at LPS before,
so I knew what the situation looked like—they always say banking liquidity is abundant,
but not in the system—it’s at BI.
The system is dry.
That’s what Milton Friedman assessed.
I think that’s the best explanation.
So I moved my money from BI.
I had 425 trillion at the time, idle money at the central bank.
I moved 200.
People thought that was a massive amount,
but it was only half—we still have the other half.
And people said Purbaya changed the budget, it should have gone to Parliament first.
He uses the money, what do we do?
The money wasn’t used at all.
I simply moved my money from BI to the banking system. That's it. Period.
I actually didn’t want to set any conditions.
"Use it however you want, just don’t park it at BI, don’t buy rupiah. That’s it."
But due to our procedures—
Even set the interest rate down to zero. However, we have internal processes,
and if I set it to zero, I could be questioned by BPK (Audit Board).
It had to be comparable with the interest rate of the central bank.
So I matched it to the central bank's rate, which was low.
Just around 3.8%, 4%, then down to 3.8.
That was already pushing market rates down.
and at the same time added liquidity to the system.
And like Friedman said, that matters more than interest rates alone.
When a bank suddenly has money, it has to lend it out—
otherwise they [still] have to pay me 3.8%.
They lose. On 200 trillion, that’s big.
So they’ll lend it everywhere.
First to the interbank market— private banks benefit, rates fall.
Then they look for credit once the interbank market is full.
That’s what I expected.
Now it’s starting to grow gradually and economic activity is picking up.
What matters is monitoring how the public responds to the policy.
Did I succeed or not? That's what I value.
LPS has a consumer survey.
I’ve been looking at how public confidence has shifted over the past few months.
There’s another component in that survey:
the public confidence index in the government.
That one helps us see how stable the socio-political situation is—
how strong the support for President Prabowo is.
July–August dropped to a low point.
September was still below.
By October, it was back to where it was before the drop.
September was a danger zone—if it hadn’t been fixed, it would’ve slipped further.
We could’ve faced socio-political turmoil that might eventually
lead to a change in leadership —something like that.
But now it’s climbed back up.
I told the President, “Sir, things have stabilized.
In just two months you’ve managed to restore public confidence in you
and now people are happy with your leadership.”
- So how do we keep this on the right track, to the right direction?
in a consistent direction.
- First, I keep monitoring those indicators.
Even though technically it’s not supposed to be my job,
I’ll do whatever’s in my hands to keep us from falling.
I'll keep an eye on that —I’ll keep monitoring it.
I injected 200 (trillion), M0 grew to 13.3 in September,
but in October it dropped to 7.7.
I said, this isn’t enough.
I want double-digit growth, close to 20% or more.
So last Friday I injected another 76 trillion into the economy.
We’ll monitor again.
If it’s not enough, we inject more; if it’s still not enough, we inject even more—
to make sure money supply grows sufficiently
so the economy keeps moving.
That’s the policy side.
But at the same time, the economy itself has to grow.
If you look at how this works, the ones really moving
are mostly the private sector.
- Right.
- And here we have the government.
I make sure the government spends.
That’s why I went around visiting ministries,
meeting several ministers— before they started arguing—
to make sure they spend.
But I had already asked the President.
I asked, “Sir, I want to release 200 trillion.” “
Go ahead,” he said.
“Because this and that…” “Go ahead.”
“Sir, I'd like to visit the ministries
to make sure they spend so the economy keeps running.”
“Go.”
So nothing is done without approval. I always ask for permission.
I make sure the central government is spending, and the regions are spending as well.
Back then some regions complained to me, “We don’t have the money.”
Turns out when we checked, they had hundreds of trillions sitting there.
Some had 3–4 (trillion), but overall there were still over 200–230 trillion.
If that gets spent, the impact on the economy is huge.
When we’re down, and they spend, the economy should go back up,
people are happy again, no more unrest.
That’s mainly the central and local governments.
And later, to add more support to the economy, I always say
our domestic demand is strong.
Based on certain formulas, it’s around 90%.
Only ten percent is foreign.
Let’s say my calculation is off—maybe the foreign share in exports to GDP is 20%,
I still have 80%.
If I maintain domestic demand well with these policies,
we should still be able to hold up.
But if the domestic market is big and it’s controlled by foreigners
—especially illegally— it’s useless for us.
- True.
- That’s why I started shutting the door on illegal imports,
so domestic players can dominate.
Why did I start with the illegal ones first? Because nobody complains about that.
Next we’ll look at imports from China, for example,
that unfairly disrupt the domestic market,
and then we’ll see whether tariffs or other measures can be applied.
But we start with the easy part—the illegal stuff—there’s already a lot of that.
That’s one way to make sure this becomes sustainable.
- That’s M0, but if we look at M2, it’s still around 40% of GDP.
Compared to developed countries, they’re above 200%.
So with a monetarist approach, how do we push M2 higher?
- Well, in my view, we keep driving M0 growth to double digits
while keeping an eye on inflation.
Because if the money supply gets too big, inflation might rise.
- We factor in the velocity and the inflation.
- If we let M0 continue growing, gradually M2 will rise too.
M2 is basically the multiplier of M0—M0 times the economy, roughly speaking.
So what the regulator controls is M0.
The rest depends on the system.
So we’ll keep pushing it. But if growth stays at zero, we’re in trouble.
- Right.
Now let me shift to our aspiration to grow at 8%.
Our baseline is 5%, and thankfully quarter-on-quarter we’re already up in Q3.
Year-on-year is up too because of the liquidity injection last September.
If we want to move from 5 to 8%, that’s a delta of 3%.
Three percent of a 1.5 trillion economy is around 45 billion dollars.
So what can the Finance Ministry do to help boost foreign investment,
so FDI rises from the 30-billion range to 75 billion dollars?
- So here’s the thing: don’t use 5 as the base. Use 6.5.
- Okay, sorry.
So the increase is only around 20–30 billion dollars.
- During your time as minister, our economy grew at 6%.
As I mentioned, most of the growth came from the private sector.
Why? Because M0 grew by around 17%,
and credit grew by more than 23%.
So the private sector was running, the economy grew 6%,
but the government sector was fairly relaxed at that time.
On the other hand, during President Jokowi’s era, the government was active,
but the private sector grew very slowly because money growth was only 7%,
and credit was also in the single digits, 5–7%,
even going negative in M0 at certain points, and the economy struggled.
That’s the first difference—during your time, during SBY’s time
the growth... - Also your era.
- I was behind the scene.
...growth was driven by the private sector, the government took it easy.
During Jokowi’s time, the government drove growth,
and the private sector didn’t get enough room.
So we had five—six and five on average—that’s the growth rate.
Now, if I combine both engines so both sectors run together,
I can capture the 6, plus what’s left of the 5.
So reaching 6.5 shouldn’t be too difficult
without changing market or economic structure—
<i>ceteris paribus,</i> roughly speaking.
- From there to eight, what do we need to do?
- To reach eight, that alone is not enough—that’s all I have.
- It has to come from abroad.
- Yes.
Once we hit 6.5, foreign investors will come on their own.
I won’t have to beg them.
They’ll be interested anyway.
But still, we need improvements to the investment climate, right?
- Yes.
- On paper, in the regulations,
everything looks clear now because the rules were newly made.
“To avoid this, we make this rule, and this rule, and this rule.”
On paper, it looks seamless, like there are no barriers—
but out in the field, there are plenty of obstacles.
So what we’ll do is make sure we carry out debottlenecking
in industry, investment, and the business sector.
Easy to say, not easy to fix.
But I have experience from 2016–2019,
I was the deputy chair of the debottlenecking team,
the chair was Yasonna Laoly,
and the secretary was from the police…
But it worked pretty well.
Every time we received complaints from businesses in any sector,
We pick the cases that can actually be brought to a hearing, and we bring them in.
Every Monday, I review seven cases.
In three years, we resolved 193 out of 300.
The total investment linked to those cases reached 830 trillion rupiah.
The impact is huge—
that’s why the Ministry of Investment was moved under Pak Luhut.
With that experience, we’re going to apply the same approach again.
A team will be formed—a task force to accelerate economic programs.
Basically, in the middle of it all there will be Task Force 1, 2, and 3.
Task Force 2, the debottlenecking team, will receive input
and complaints from businesses across Indonesia,
we’ll select them, and review them every week.
I’ll personally chair one of the hearings, just so things actually get done.
- The reality is, this is tempting.
Global liquidity is over 140 trillion dollars,
and risk premiums in advanced economies are rising, so they have to diversify.
But that diversification still hasn’t happened at the scale it should,
because they’re still a bit hesitant about developing countries.
Southeast Asia receives around 200–230 billion dollars of FDI per year.
But out of that, Singapore gets 100–140 billion,
Indonesia gets 30–40,
and Malaysia, Thailand, the Philippines, and Vietnam each get around 10–20.
There are two variables that influence how capital
from advanced economies gets allocated to us: first, law enforcement;
second—and this is what they often want—the ability to translate
uncertainty into risk.
Risk can be measured and priced: AAA, BB, C–.
But uncertainty can’t be priced.
So in my view, Indonesia has to train itself to better translate
uncertainty into risk.
Take uncertainty like: "God willing, the electricity won’t go out."
That’s uncertainty.
But if an Indonesian could say, "There’s a 58% probability of outages
over the next 2.5 months; if that happens, revenue will drop 22%,
bottom line 24%, and the IRR will fall to this level."
Now that’s a measurable probability.
That will help shift capital allocations from abroad.
- So, what am I supposed to say? I agree.
If you want to lecture, fine, I agree.
But the Minister of Finance could be the lever that drives
law enforcement and that translation process.
- Look, some people say the Minister of Finance is just the ‘paymaster.’
Right?
And it’s true—I can pressure others through budget politics.
If they don’t cooperate, we cut their budget.
Or I don’t transfer the funds—done.
Sure, we can play that game.
But the framework has to be multi-ministry.
That’s where I’m coming in.
I’ll make sure it’s sorted out within a year.
Because whenever a regulation is problematic,
it’ll be thrown to the third task force.
That task force is specifically for fixing regulations.
There are three task forces, each different.
This one issues regulations—
the first ensures government spending
and government priority programs run well.
This one is the debottlenecking for the private sector;
and over here is the regulatory team.
Right now no cases have started yet, but I think
in a week or two we’ll begin.
Eventually, this will improve the investment climate here.
I’m in that team—I know exactly which regulations aren’t working.
If it’s at tax or customs, that’s easy—I can fix that fast. But it’s not always there—
sometimes it’s somewhere else.
We’ll send them to the relevant ministry,
and if they don’t want to work, I cut their budget.
Well—not cut, I just quietly don’t send the money.
Then people get mad at me again, but without that, nothing moves.
We’ll report to the president regularly on situations like that.
But still—without a real threat, they’ll stay slow.
Because once—during Jokowi’s time, not yours—
there was a regulation that needed to be changed to remove trade barriers.
We met at the Coordinating Ministry for the Economy.
They said, "One week, it’s done, easy."
Until now, it still hasn’t changed.
So yes, we need special treatment to make sure everything
aligns with the decisions of the top leadership.
If you leave it as is, without a real threat, it just drags on.
I think the current position is ideal for President Prabowo and his team
to improve the investment climate quickly.
I expect we’ll see results within a year—maybe even sooner.
- God willing.
There’s a golden opportunity because liquidity is so abundant.
- FDI will not come into a country that’s unstable
and doesn’t offer strong returns.
So first I fix the growth, then the investment climate.
Almost certainly after that, they’ll be competing to enter.
But without those two, I won’t be able to invite them in.
- Agreed.
The second factor is translating uncertainty into risk.
This connects to STEM.
You’re a STEM product.
- STEM what?
I only know ‘stem’ as in…
- Not that stem, bro.
- Which stem?
- Science, technology, engineering, mathematics.
It teaches people how to calculate.
The better people can calculate, the more they can quantify,
predict, measure, and assess.
Indonesia can only produce around 250,000 STEM graduates per year—
including ITB, ITS, and other tech schools.
China produces 4.5 million, India around 2 to 2.5 million,
Southeast Asia 750,000,
and even the U.S. produces 800,000.
The more STEM graduates we can produce,
the better we can translate uncertainty into risk.
China’s president himself is a Tsinghua graduate—chemistry,
his thesis was on polymers.
So I believe that people who study science, like you,
are better at translating uncertainty into risk.
And the more people we have doing that, beyond just 250 thousand,
the more it ties into capital inflows.
- I agree we need to invest more in that.
But right now, even ITB graduates struggle to find jobs in their field.
Like me—I worked at Schlumberger, but my wife told me to switch.
And many people don’t have that option.
So we need to create demand for them first.
I need to revive the economy.
Once the economy grows at 6–6.5%,
I’ll have room to expand the supply
because the expectation is that FDI will come in.
Then I can produce more and more talent.
There are efforts being made now, but I still don’t see
a sustainable STEM pathway— meaning the people exist,
and when they graduate, they’re actually employed.
So it all has to be integrated there.
Once we’re growing at 6–6.5%, we’ll scale up investment in that direction.
- God willing.
- For example? We don’t even have enough good economists.
Why do I say that?
I only realized it during the COVID crisis.
We submitted our final recommendations in March 2020.
After we finished, the President and Pak Luhut
asked me something that I honestly didn’t know how to answer.
They asked, “Pur, why is it only you who knows this?”
And I was confused.
If I say I’m smart, people won’t believe me.
They kept asking, “Why is it only you?”
“Really, Sir?”
“Yes, only you.”
I said, “Well, if that’s the case,
then maybe we don’t have enough smart economists.”
“So how do we fix it?”
Because in the future, what if we face another situation like this?
It turns out we’re lacking.
That was the moment I realized it was serious.
I thought everyone was top-notch,
but apparently, according to them, they didn’t know.
So they couldn’t give good advice to the leadership at the time—
that’s what they said.
So I suggested, “Well then, you need to produce more smart people.”
“Alright then, let’s produce economists.”
They invested through me.
“You pick 10 brilliant students from ITB,
place them at the Deposit Insurance Corporation for three months,
then transfer them to the Coordinating Ministry for Maritime Affairs for a year,
and after that we’ll send them to the best schools in the U.S.
to produce new economists.”
I talked to the ITB rector— he gave me ten.
But unfortunately, they dropped out one by one, until all of them withdrew.
- Why did they withdraw?
- I didn’t know at first. Turns out they’re Gen Z.
This is a generational gap.
We think differently.
Back then, that would've thrilled us.
But Gen Z thinks, “Oh, the uncertainty is high,
five or six years of study, and success isn’t guaranteed.”
They don’t want to take that risk.
So we need a different approach.
I didn’t believe Gen Z operated like that at first,
but at the LPS I offered the same thing:
“Anyone want to go straight into a PhD program? We’ll fund it.”
Not a single person applied.
So we have to play around a bit and understand Gen Z psychology
before we can send more people abroad and produce more talent.
The point is, we still don’t have enough smart people.
- True.
- So we shouldn’t ever get tired of sending people overseas.
At the LPS, they used to only send people to the UK
because the master’s programs were just one year.
The goal was simply to save money.
I told them, “Why save? We have more than 200 trillion.”
So I changed it. I sent them to America.
I challenged them—if they could get into the U.S., I would fund them.
Now there are many. Is there someone at Stanford?
There’s someone at Yale…
- From LPS?
- From LPS.
There’s someone at Chicago, someone at Harvard.
- I met the one at Harvard.
Lots of great schools… - Stanford, I think none yet.
- I don’t think we have anyone at Stanford yet.
- In the U.S., there are only about 8,500 Indonesians.
India has 350,000, China has 280,000
at one point 350–400 thousand.
- We’re even behind Malaysia, I think.
- In the UK, there are nearly 200,000 Chinese students,
and only about 4,000 Indonesians.
Now, LPDP is incredibly noble.
LPDP can become the catalyst for…
- People in power.
- Of course, yours truly.
- That’s why we want to push it further.
- Exactly, bro.
-So LPDP has been strengthened by the President.
Its capital was increased by 25 trillion this year, and next year we’ll add more.
But we want to invest where the returns are high.
Meaning, don’t put too much money into questionable places.
We’ll pick top-tier ones and place the funds in the best institutions.
When they return, we’ll harvest the results —assign them work at strategic places
or have them teach.
At LPS—even though LPS is a deposit insurance agency
and has nothing to do with education—
I partnered with UI’s Faculty of Engineering.
We sent three people to Berkeley every year for one-year research stints.
They returned three years later.
The latest one even got into Mechanical Engineering at Berkeley,
which is incredibly hard to get into.
I promised to fund them, “Alright, just stay there for six years.”
I funded it through completion.
"If within those six years you get a scholarship,
a teaching assistantship, or a research assistantship, that’s a bonus.”
Just to motivate them.
But after I left LPS, the program wasn’t continued.
So we really need vision like that.
We need more smart people.
It’s not that we don’t have them—we need far more.
- Much more, because it’s scary comparing ourselves to India and China.
- Yes, we’re behind.
When I was in the U.S., in my Economics PhD program,
there was only one Indonesian.
Korea had dozens.
- There’s data from the U.S. from two years ago—if I’m not mistaken,
6,000 PhDs were awarded to Chinese students, around 2,000 to Indians,
1,300 to Koreans, Ghana got 104.
- Indonesia?
- Around 80, I think.
- That’s a shame.
On average, we’re still not bold enough to invest—government-wise.
I don’t know which branch or who exactly,
but in my view the government has to invest.
For example, BI could invest there; LPS has plenty of funds—invest.
Not just in economics—engineering too, so the impact spreads everywhere.
I’ll review LPDP later and see what’s possible.
If we can send more people, we should do that.
But of course, to get into top-tier programs, people must be well-prepared here first.
- That’s exactly what China, Japan, Korea, even Singapore have been doing.
Their model isn’t retail—it’s wholesale.
Their quasi-government institutions partner
with top schools in Europe, the U.S., and Australia.
They fund fellowships and professorships—big numbers.
But because there’s a professor who knows they’re funded by China, Korea,
Taiwan, Japan, Singapore, they work around the clock
about how to increase representation from those countries.
That’s wholesale upgrading.
So maybe LPDP could partner with Stanford, Oxford, Tsinghua
for fellowships and professorships.
- If we wanted to partner with Stanford, how much would that cost?
- For a professorship? Six million dollars.
But it’s a permanent endowment.
With those figures, we can decide which professor to appoint—
Some say I have a bias against the central bank or government.
I don’t care.
What matters is avoiding a repeat of ’97–’98.
We can’t afford another crisis like that; our debt is already too high.
- Let me push this further:
should we do quantitative easing to boost M0?
- Like printing more money?
- Yes, with attention to velocity to prevent hyperinflation.
- From what I see, M0 is still too low,
especially after years of near-zero growth.
If we could reach double-digit growth and maintain velocity around 20–30%,
it would be excellent for the economy.
I don’t have unlimited funds; I only manage what we have.
I make sure policies don’t disrupt the economy—they should even support growth.
Right now, only half the engine is running;
once the other half starts, growth becomes easy.
- The U.S., Western Europe, Japan, Korea, and China
have all used quantitative easing to stimulate demand.
- Do you know why the U.S. didn’t fall into recession?
In 2023, many predicted a recession. Rates were rising.
SVB collapsed in March 2023
because they tried to slow the economy too aggressively.
Rates were rising, but M0 had already dropped 15%.
When the crash came, rates kept rising.
They reversed course and injected liquidity.
That’s why I said the U.S. had already loosened policy
—they weren’t tightening anymore.
At least growth was 1–2%, not negative, even with high rates.
What’s odd is we followed suit,
assuming their policy was tight, so we tightened as well.
But I kept rates low at LPS.
Growth slowed, but not catastrophically, leaving room to expand.
If we went to zero again, we’d be stuck.
Even the U.S. made a serious error but has corrected.
They claim a recession, but it’s impossible—
they’ve already injected money, quietly.
Earlier quantitative easing was really just large-scale monetary operations.
To boost the economy, you lower rates and add liquidity.
You can’t lower rates without adding money;
that’s how you reduce borrowing costs.
That’s essentially how it should be done.
It’s not "haram"—you do it and monitor inflation.
Before our growth exceeds potential, around 6.5–6.7%,
it’s fine for the economy to grow quickly.
Some fear growth above 5% triggers inflation.
- But velocity can be monitored and managed,
- And we control money supply, rates, and fiscal policy.
I always say, global turmoil? That’s beyond my control.
But domestic demand is strong—80–90%.
As long as I manage this with the right policies, the economy should be fine.
- Agreed.
- That’s what I'm working on, focusing on all domestic levers tuned
to avoid disruption and even stimulate the market.
- Here’s an interesting fact about John Maynard Keynes.
In 1914, when Britain entered World War I,
he issued bonds that didn’t sell at all.
That was the first time The Bank of England decided to print money
to ensure full subscription.
Keynes congratulated the governor in a letter.
I see that as Keynes being a monetarist, long before Friedman.
We were taught they opposed each other,
but ideologically, Keynes might have been a monetarist all along.
- So the central bank was effectively monetizing fiscal policy,
and in some cases, that’s fine.
- Exactly.
Using fiscal space financially is okay, as long as it’s accountable.
- Right.
Why, then, are the central bank and government separate?
Because the government has a short-term horizon,
while the central bank’s policies impact the economy for a long time.
there’s a concern that the government’s short-term policies could interfere
with the central bank’s long-term plans.
That doesn’t work, so they have to be separated.
We’re told we shouldn’t monetize fiscal policy—
but everyone does it nowadays, right?
In emergency situations, it’s fine —it’s not forbidden.
The important thing is to make sure monetization isn’t done
just to satisfy political interests.
That’s what must be protected.
Because of this, the central bank is independent from the government.
During the last crisis, when we issued bonds bought by
the central bank in the primary market, or zero-interest bonds,
people made a fuss. My view was: let it be.
It may seem unusual, but circumstances forced it.
Still, it can’t be done continuously, or credibility will be lost.
This is all about credibility.
Yet they aren’t fair to us— they can do it, but we can’t.
- That’s clear hypocrisy.
Bro, Minister, this has already gone over an hour and a half.
Any final message for the public?
- Not much, really.
The main point is we don’t need to worry or be anxious about our future.
Our future is in our own hands.
We decide whether we want to be rich or poor.
And we have plenty of experience from the crises in 1997–98, 2008,
2015, 2020, and 2021 to handle both global and domestic economic shocks.
With that knowledge, we can grow faster.
Eight percent is very high, but it’s not impossible.
- Agreed.
- So, let’s all be ready to grow rich together.
- Amen.
Let’s hope for the best.
- Amen. Thank you.
- Thank you very much.
Friends, that was the Minister of Finance of the Republic of Indonesia.
Thank you.
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