The Morotai Development Program’s Potential: An Interview with Andrew Hsia

Q: Mo­ro­tai is relatively remote and undisturbed. Why is the Indonesian government interested in developing it?

A: There are more than 10,000 islands in the Indonesian archipelago. If we take tourism-oriented Bali as roughly the midpoint between the eastern and western halves of the country, we find that the west is home to the capital, Jakarta, and is close to Singapore, while the east lacks a major transportation and shipping hub. It doesn’t even have anywhere to transship the rubber that that part of the country produces. Taiwanese fishermen operating in that area of the Pacific Ocean likewise must bring their catch all the way back to Jakarta or Su­ra­baya for shipment to neighboring nations, which wastes both time and fuel.

Developing eastern Indonesia is part of the Indonesian government’s economic policy. After taking office, Indonesian president Su­silo Bam­bang Yud­ho­yono proposed developing six economic corridors, one of which involved the eastern islands. The government hopes to establish Mo­ro­tai as the gateway to eastern Indonesia, turning it into the kind of hub that Singapore is in the west.

Indonesian developer Jababeka has already built a small resort on Morotai to better enable it to host international regattas. Such efforts have islanders looking forward to the island’s “rebirth.”

Q: Why did Indonesia choose Taiwan as its partner in this endeavor?

A: Fadel Muhammad, then Indonesia’s minister of maritime affairs and fisheries, made an official visit to Taiwan in late 2010 and proposed this cooperative endeavor to President Ma Ying-jeou. He noted that Taiwan had advanced fisheries technologies, that Taiwan’s fisheries businesses were large, and that the Pacific Ocean near Mo­ro­tai Island was an important deep-sea fishing ground. He suggested that we could perhaps use the fisheries industry as a starting point for cooperating on the development of Mo­ro­tai.

Q: How far along is the project?

A: The plan is running just a little bit behind schedule. The memorandum of understanding we signed requires both sides to form a steering committee. Taiwan’s includes representatives from the ministries of foreign affairs and economic affairs, the Council of Agriculture and the International Cooperation and Development Fund (ICDF). Indonesia has assembled a similar committee.

Both sides have also named entities to implement the program. Last year, we designated the ICDF to play this role for our side. Indonesia named Ja­ba­beka, a development company. Ja­ba­beka has submitted its proposal for developing Mo­ro­tai into a special economic zone to Indonesia’s Coordinating Ministry of Economic Affairs for approval. In the meantime, the company has assigned ten people to the island to begin construction of a resort.

Q: Morotai suffers from a shortage of both water and electricity, and its transportation infrastructure isn’t well developed. Doesn’t that make the investment risk too high for us?

A: Many people truly are concerned about these issues, which is why we will be carefully and pragmatically evaluating the finer points of our cooperation. Both sides agreed early on that this was to be a cooperative development project, not a one-sided aid program.

Our side also studied the cooperative economic development model Singapore and Indonesia used on Batam. In that case, Singapore didn’t promise to assist with the construction of infrastructure; it only agreed to handle training, marketing, and promotions.

The first stage of Taiwan’s plan will prioritize industries that don’t require energy or infrastructure, such as eco-tourism, as well as developing fisheries and forestry resources.

Andrew Hsia, a former ROC representative to Indonesia, laid out the blueprint for Taiwan and Indonesia’s cooperative development program on Morotai.

Q: Which Taiwanese firms are showing interest in the development project? How will this cooperation help bilateral trade and exchanges?

A: Aquaculture and tourism firms, as well as Taiwanese-owned Indonesian businesses, have all been showing interest. Manufacturers have been less interested.

But you can’t evaluate the Mo­ro­tai project just on the basis of the facilities, people, and resources on the island itself. You have to see it as a hub or gateway. If you view it from the standpoint of developing eastern Indonesia, the project is laying the groundwork for an economic corridor linking eastern and western Indonesia.

One of the difficulties Taiwanese businesses face in dealing with global competition is our lack of free trade zones. We don’t yet have a free trade agreement with Indonesia, so products we export to Indonesia are competing with tariff-free goods from other nations.

Taiwanese companies could potentially transfer the final stages of production—assembly, cutting, and packaging—to Indonesia, using Mo­ro­tai as a transshipment point to gain entry into Indonesia’s domestic market. Having a market incentive like this will increase Taiwanese businesses’ interest in developing Mo­ro­tai.

Taiwan’s 1990s “Go South” policy made us Indonesia’s second-largest foreign investor. Later, as Taiwanese businesses turned their attention to the mainland Chinese market, our investment in Indonesia declined. In more recent years, rising mainland Chinese labor costs have encouraged Taiwanese businesses to return to Indonesia. [Labor costs aside] we believe that the Morotai development project provides us with an opportunity to demonstrate Taiwan’s capabilities to the rest of the world, and to advance trade and exchanges between our two nations.