Managing Uncertainty

1 year ago . 9 min read
Marella Putri
Writer at Forbes Indonesia
Managing Uncertainty
Mari Elka Pangestu, currently the managing director of development policy and partnerships of The World Bank. Photograph by Ully Zoelkarnain for Forbes Indonesia

 by Ulisari Eslita

After graduating from the University of California, Davis in 1986, Mari Elka Pangestu (63) remembers telling her father that she did not want to go back to Indonesia. She planned to stay in the United States and work at the World Bank. Mari’s father Prof. J.E. Pangestu, a renowned economist, disapproved of his daughter’s plans.

“Why do you want to work at the World Bank and help other countries, while your country needs you more? You have to come back and help your country first!” says Mari, recalling her father’s statement.

Life comes with its twists and turns. In January, World Bank Group president David Malpass appointed Mari as managing director of development policy and partnerships for the international financial institution. In his statement, David highlighted her extensive leadership experience and engagement in key international forums on crucial development issues. The appointment makes her the second Indonesian woman to be posted to such a strategic position after Sri Mulyani Indrawati. For Mari personally, the appointment is a dream came true.

“After 30 years, I finally landed at the World Bank. My father in heaven probably thinks now is the right time for me to work there, after 30 years working for development in Indonesia,” she laughs.

Mari was the first Chinese-Indonesian woman minister in Indonesia. She served as Trade Minister (2004-2011) and Tourism and Creative Economy Minister (2011-2014). Over time, Mari has accrued vast experience in academic, international organization, and government spheres. She has worked in areas related to international trade, investment and development in multilateral, regional, and national settings.

Despite this, she faces a challenging time ahead. As of March 2, Mari’s first day in office at the World Bank, nearly 100,000 people had been infected with the coronavirus disease COVID-19 and more than 3,000 had died of the disease, with the number rising globally. The impact so far, including its economic impact, can be compared with some of the worst crises previously. Markets have suffered routs unseen since the 2008 financial debacle, the S&P 500 dropped by 20%, while the Jakarta Composite Index fell by 31% in the past month.

Forbes Indonesia got the chance to talk with Mari on various topics back in February, before she left for Washington DC. Here are edited excerpts of the interview.

Forbes Indonesia (FI): Congratulations on your appointment as the managing director of development policy and partnerships at the World Bank. In this current situation with the COVID-19 outbreak, as a new managing director at the World Bank, what will you do?

Mari Elka Pangestu (MEP): On the COVID-19 pandemic, I think one of the issues we will study is what are the after-effects of the epidemic, how to prevent it in the future, and evaluating the current responses. However, for the current situation, we will study the impact on China and other countries, and what should be done as a response.

It’s a bit like how we deal with an economic crisis, or probably like the Bali bombing affecting tourism. In my opinion, the tourist sector deserves to get special attention. After the pandemic is over, given that foreign tourists will be hesitant about coming, the government should encourage domestic tourism by creating events and exhibitions.

I think we can also learn from what happened during the SARS outbreak in 2003. SARS started to disappear in the summertime. My prediction, next June it will begin to disappear. But this is still a few months away, and we should figure out what we should do in the next few months

FI: The COVID-19 virus started in China. As a significant part of the world supply chain, how big will be the impact of this outbreak on Indonesia?

MEP: According to the World Bank’s research, if China’s economy falls by 1%, Indonesia’s economy will drop by 0.3% following a drop in commodity prices. It means that we have to look for new markets, including the domestic market. On the import side, to be able to export manufactured products, we must import raw and auxiliary materials.

The impact on the supply chain also becomes an issue. Many companies depend on raw materials from China, and they will be hampered by the pandemic. The pandemic may cause layoffs, exports to decline, just like what happened during the 2008 crisis. To maintain people’s purchasing power, at that time, the government provided several stimulus packages, such as deferring income taxes for labor-intensive industries to avoid layoffs.

FI: In general, what will be your roles and responsibilities as a new managing director in the World Bank?

MEP: As the managing director of development and partnership policies, my scope of work is to manage the research and knowledge available at the World Bank. The research that I will conduct is related to development programs that are carried out all over the world. So, it’s not just research, the studies will have recommendations on how to engage in proper development.

On the partnership aspect, my scope of work will be in managing the external relations of the World Bank, namely with donors, international institutions. I will also represent the World Bank at every international meeting, such as at the United Nations or the G-20.

FI: What issues will be your focus?

MEP: As a managing director at the World Bank, I will take care of four main issues, namely: 
1. Infrastructure
2. Human capital, which includes education and health care
3. Sustainable development goals and climate change 
4. Macroeconomics, which covers poverty reduction, institutional, trade, and other mainstream economic issues.

FI: From your perspective, how to improve human capital?

MEP: This global economic slowdown has caused productivity to decline throughout the world, both in developed and developing countries. The key to increasing productivity is human capital: how to improve efficiency, investment in education, and upgrading skills, particularly in technological transformation. Various short-medium/long-term issues must be addressed when we talk about human capital.

For Indonesia, the current government program is in the right direction. However, many issues need to be addressed soon, among other things, is transforming the education system for the medium and long term. I think it will be very challenging to change the curriculum to improve teacher quality, teaching methods, and teaching materials. Our current education minister has prepared many good ideas for our education system. However, the results can only be seen in the long term. Consistency should be maintained.

FI: How will you make recommendations on a specific development issue?

MEP: Countries like Indonesia, which are classified as middle-income countries, have indeed succeeded in reducing poverty but have not yet succeeded in alleviating it. These countries still have problems in carrying out sustainable development. The development issues are different depending on the level of a country’s development, its endowment factors, its institutions. In short, we must understand many parameters before we analyze and make recommendations on what are the right policies.

Poverty rate across Indonesia. Source: National Socio-Economic Survey, March 2019

FI: In your opinion, how will the digital economy help development in the world?

MEP: The digital economy is one of the significant themes that are a priority at the World Bank. Since 2016, the World Bank has issued a world development report called “Digital Dividends''.. The report examines the role of the digital economy and digital technology in increasing inclusiveness, economic improvement, and innovation. For example, a small-medium enterprise in Labuan Bajo has a market in Jakarta enabled by online commerce. The digital economy also expands the potential of people who work from home, such as designers, creative workers, architects, and animators. They can participate in the process of growth and development.

FI: For years, you have been an active angel investor in startups. When did this start and why?

MEP: When I was the Tourism and Creative Economy Minister (2011-2014), the digital economy was one of my responsibilities. At that time, not many people were involved in this field. There were only Go-Jek and six startups, including Kejora Ventures.

The reason why I decided to become an angel investor was merely to learn about the startup ecosystem, which I think was very different from the traditional business model. It was fascinating and I learned a lot and watched the process myself: starting from the pitch, throwing basic questions at the founders on how they would scale up, how to monetize, and so on. I learned a lot from these young people, even though as a mentor, my job is to provide guidance, network and links, but I am still learning.

FI: How many startups do you have in your portfolio at the moment?

MEP: Basically, there used to be four startups. Unfortunately, two went kaput, and the rest are still ongoing: Algoritma and Nusantara Technology. I prefer to invest in startups that are inclusive and have a social impact. [Algoritma is a data science education center founded by Samuel Chan and Nayoko Wicaksono. Nusantara Technology is a consumer tech company founded by Steven Wongsoredjo]

FI: From your perspective, what kind of startups can help support UN Sustainable Development Goals (SDGs)?

MEP: I think startups that focus on agriculture and fisheries, such as HARA and eFishery are among those that can help us to achieve SDGs. I believe data can help improve this sector, increase productivity, provide a link to the market, and set quality standards. The impact will be huge, as our largest labor-intensive industry is agriculture. Another sector that is compatible with SDGs is health care. I believe health care can help make health services more accessible, especially for those on low incomes. On the preventive side, there is an opportunity to develop a platform that can raise awareness about healthy living, for example, using a calorie tracker. As many are aware, Indonesia has a high prevalence of diabetes. Hopefully, technology can help reduce the government’s health budget with preventive measures. Above all, it’s all about data. With big data, we can learn about people’s lifestyles to help improve the quality of life.

Digital technology helps business, people & government. Source: The World Bank Research

FI: You met President Joko Widodo recently. Did he have any particular message?

MEP: When I met him, he asked me to keep him updated on any global development issues regularly. One of the things that we talked about was about uncertainties from external factors, which can affect Indonesia, so the government can anticipate them. However, this is also my responsibility for all World Bank members. 

FI: On climate change, countries all around the world are starting to pay attention to renewable energy and green energy. What is your comment on that?

MEP: At the end of the day, if we can’t handle the climate change issue, the poor will be the most affected The World Bank’s vision is poverty alleviation. How we deal with climate change must be comprehensive. In a sense, it must be reflected in the development programs in each country. For example, if we have to build infrastructure for development, we should build infrastructure that doesn’t harm the environment. The World Bank, and also private banks, are all going in the same direction. We do not provide loans to sectors or projects that are believed to pollute the environment or increase CO2 emissions

Written By
Marella Putri
Writer at Forbes Indonesia
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