Following is the transcript of a 'First On' CNBC interview with Sri Mulyani Indrawati, Indonesia's Finance Minister at the Annual Meetings of the Boards of Governors of the World Bank Group (WBG) and the International Monetary Fund (IMF) in Washington, DC. The interview was broadcast on CNBC on 12 October 2017.
All references must be sourced to a "CNBC Interview'.
Interviewed by Geoff Cutmore, Anchor, CNBC.
Sri Mulyani Indrawati: The Indonesian economy now is much more resilient and that has something to do with a much stronger foundation of the way we manage the economy. The growth is relatively stable around 5.6 percent in the decade. And that contributed very balanced between the domestic factors of gross consumption, robust investment is also growing despite we have a lot of shock, like commodities shock. That kind of issue now has been addressed. We have a much lower on the subsidy fuel subsidy. In fact the president did a very good decision back in 2015, when shifting the subsidy, fuel subsidy into infrastructure development. So a better credible fiscal policy in terms of the revenue. Balance of payment, current account deficit that's been reduced below two percent, even 1.5 percent. The Reserve has been actually increasing because of even with the contracting export, we have a very strong FDI. So we have a very good, and I think the most important, the Federal Reserve communication is much better. So they've already explaining and announcing and guiding the global economy where they want to go and how they are going to do it. That provide more understanding. And of course more rational behavior of the market. And actually expecting this policy to happen. So even when the interest rates increase in the United States we actually decrease the interest rate of Bank Indonesia reverse repo rate.
Geoff Cutmore (GC): But you yourself have expressed I think some frustration about the build up of debt in some government entities, like the utility company and there's obviously been that whole story of a leaked letter and so on and so forth. So are there some areas of vulnerability that do still need to be cleaned up like the energy sector.
Indrawati: Well first the president Jokowi is very clear that Indonesia is facing an infrastructure gap. This is because in the past two decades we are so busy in cleaning up balances after the Asian financial crisis. And that's why the space for really allocating resources both from public state owned enterprises very limited for us to actually build the right infrastructure. You can see in Jakarta it's very traffic jam. The demand for the electricity is always double digits, while the ability to grow the power sector is very limited. So it is not a question about whether you need it or not.
GC: So let me ask you then and this is a question a lot of our audience internationally are interested in hearing, should they put money into Indonesia, given what's happening with Freeport at this stage. Can you give us clarity on when the Freeport divestment is going to happen? Will it be before the end of this year? And should international investors be worried that that means foreign capital coming into Indonesia can always be taken by the government?
Indrawati: I think that was totally wrong in terms of describing what is happening with the Freeport. They actually have the period now in negotiating with the government and we've already announced the agreement of four things. And I think today it still continues. We both agree first that the Freeport, this is one package so it's not going to put it in separate. One package, four elements. First, the extension of the operation until 2041, second agreement to build smelters. The third, divestments for 51 percent and the fourth is actually investment certainty and the fiscal certainty what is the revenue tax regime that can govern until 2041. And we are working in more detail on that four elements. As of now, these agreements still hold and we continue respecting each other. I don't think that we have a very difficult relationship. I have a discussion with CEO Richard Adkerson, we discussed of course they proposed their thinking. The government also proposing our own thinking and we continue discussing what is the best way to achieve these four elements of agreement which I think both Freeport and government of Indonesia agreed to actually establish or to actually sign. And we are now working on that.
GC: Will the deal happen before the end of the year though? As the government hoped I think.
Indrawati: I think we will continue making our best effort to make it, hopefully even earlier than that. But we will try to do our best and I think the communication is continue better.
GC: Any chance that you'll rejoin OPEC with the current agreement in place?
Indrawati: We continue have to watch very carefully because the oil still an important part of our economy. Both from the economy this production attracting more investment from the budget point of view as well as the consumption in domestic consumption. So we didn't have to watch that and participate. We still engage. I think we are still in office because we are former OPEC fund and so we really have to be very careful in watching the development.