In the history of the Indonesian economy, and in fact in the history of modern world economy, oil price has never been that high. As if that is not enough, the price of food worldwide, for a variety of reasons, has also risen dramatically: the prices of rice, wheat, corn, and others staple food, have grown dramatically across much of the world. The present food shortage has the potential to spark social and political unrests in 33 countries, and could create a setback of seven lost years in the fight against poverty.

With a heavy heart and after much consideration, calculation and preparation, the Indonesian government announced the decision to reduce oil subsidies and raise the price of petroleum product by an average of 28.7 %. The Indonesian government realizes that this is a politically difficult decision, just as difficult as similar decision it took in 2005. But this is not a popularity contest, not when it comes to save national economy and protect the people. Leadership is not about taking the easy option; it is about making the necessary decisions, no matter how difficult it is.

The Indonesian government believes the difficult decision would help retain optimism about the future prospects. The Indonesian government remains as committed as ever to its triple track strategy of pro-growth, pro-job, and pro-poor. That means achieving higher growth through export and investment, stimulating the real sector to create employment, and promoting rural and agricultural development to reduce poverty.

On the brighter side, after the many years of crisis, Indonesian economy has been doing very well. As the World Bank mentioned in its recent report, the East Asian economies remain robust. True, Indonesia has been lagging behind but the situation is changing. The country is now better prepared to move ahead to catch up with the other East Asian economies.

The integration of the domestic economy with the global economy has brought benefits to Indonesia but in the same time, it has its risks; the country is becoming open and vulnerable to the negative effects of global economy. The world is now flooded with excess liquidity; there is the problem of the oil price hikes; and there is the so-called 'contagion effect'. All of these can have adverse consequences on the economies of developing countries.

With regard to Indonesia, almost all economic indicators closed the year 2007 with encouraging results: GDP growth, inflation, Rupiah (Rp) exchange rate, central bank benchmark rates, the balance of payments, and foreign exchange reserves. Growth in exports and investment plus increased consumption brought the GDP to the level of 6.3% in 2007.

Economy experts have expressed positive view of the economic prospects for 2008. The World Bank prediction on economic growth stands at 6.4%, while the government maintains that 6.8% is still a feasible target for the year 2008.

Of particular importance for Indonesia, after the economic crisis years, was achieving political and economic stability. This was brought about with great effort, sacrifice, and considerable time. The macro-economic situation and improvement in Indonesia's economic fundamentals make it now possible to enter a faster track in the economic development of the country.

Exports have gone up in a spectacular way, reaching the record level of US$ 100 billion in 2006. Preliminary assessments predict that the year 2007 has brought even better results; at the very least, the export target has been reached.

Indonesia's strong trade and current account surpluses combined with a continuous increase in foreign exchange (FX) reserves are strengthening the country's economy and its position in the world economy. FX reserves reached the high figure of US$30.5 billion in 2007.

Indonesia’s investment policy is very attractive. Indonesia has signed the Investment Protection Agreement with 60 countries and also has signed no-double-taxation agreements with 56 countries. It adheres to a level playing field policy, so that both foreign and domestic investors are given equal treatment and opportunities. Indonesia also has a Free Foreign Capital Policy, which means that foreign investors can repatriate their capital.

Foreign investment is now beginning to move up. According to the BKPM (Investment Coordinating Board), actual Foreign Direct Investments (FDls) reached a total of US$ 10.2 billion in mid-December 2007, the highest since 2002. Most of actual FDIs come from East Asian countries, namely Singapore, South Korea, Japan, Taiwan and the United Kingdom. The largest portion of FDIs went into the transportation, communications, chemical, and food-processing industries. Domestic investment reached about US$ 3.6 billion in mid-December 2007, going mostly into paper and plastic industries.

The unemployment rate went down slightly to 10.5% in 2007 and is expected to be 8%-9% in 2008. The Indonesian government is confident that poverty rate will be falling up to 15%. In terms of numbers, people living under US$2 per day will go down from 105.3 million to 100.7 million, out of a total population of 236.4 million.

The growth rate of Indonesian economy, even as it slows down a little to 6.3%, remains one of the fastest growing economies in the world, and it is the highest since the crisis. In fact, growth in non-oil and gas sector is higher at 6.8% last year. Foreign investment has increased some 73%, and domestic investment is equally robust. Poverty rate has been reduced from 17.8% in 2007 to 16.6% at present. The debt to GDP ratio at 32.7% in 2007- is the lowest in history, and so is debt to service ratio, which is at 21.5%. Country’s foreign reserves are the highest ever. The credit rating is the best ever since the crisis. The GDP per capita is also at the highest ever.

There are some very successful provinces in Indonesia. Another promising trend is that local governments are becoming more innovative and savvy. The local governments know very well that in order to draw investors, they must offer incentives. At the very least, this shows a vibrant civil society, one that thinks about its economic and social well-being. And these examples reflect the Indonesia today, a country that is trying its best to manifest its potential as not only a regional giant, but a global one.

Indonesians believe that their country can be a global giant. Indonesia’s market alone exceeds some 230 million people. That number also can be translated into energetic labor force. Indonesia is blessed with abundant natural resources, and also fully aware that Indonesia must take great care of the gifts of that nature has bestowed upon.

As per anti corruption policies, there are hundred-plus senior government officials – governors, ministers, mayors, and lawmakers who have been investigated and or prosecuted for corruption. Government has a no tolerance policy when it comes to graft. Changes will not happen overnight; bad habits are hard to break. But every day, more and more Indonesians are saying no to corruption. They are reporting it, they are refraining from taking bribes and they are walking away when asked for a “donation”.

The present international food crisis provides an opportunity for Indonesia. Indonesia is blessed with large areas of land and sea, especially arable land and fishing industry, and Indonesians for generations have known agriculture and fishery. With the right policy, the right technology, the right partnership and the right investment, within the medium term Indonesia can become a major food producer in the world economy. In this way, Indonesia can empower its farmers as well as its fishermen and also help the world economy to deal with the food crisis. Indonesian government is encouraging foreign investors to explore a healthy partnership for food security and help realize this golden opportunity.

With positive mind-set, Indonesia as a nation is ready to accelerate reformation and to continue with the democratization process. Reformation includes all economic, legal, and administrative sectors, is taken very seriously to pursue and move democratization in the right direction, to move with speedy and real actions to accelerate more political stability, economic growth and social welfare.