$12B Pertamina Corruption Case, Public Crisis & Government Policy Risks & Energy Market Reform with Gita Sjahrir - E546

Gita Sjahrir, Senior Advisor at TBS Energi Utama, and Jeremy Au talked about the complexities of corporate governance and accountability within emerging markets. They discussed the eFishery scandal, the Pertamina corruption case, and the broader implications for economic growth and investor trust.

1. Investor Due Diligence: Gita and Jeremy highlighted the need for investors to go beyond financial reports and conduct on-ground audits to detect fraud early.

2. Impact of Fraud: They discussed how fraud not only inflates financials but also demotivates teams by reducing the urgency for operational improvements.

3. Founder Accountability: They emphasize that while investors play a role, founders are ultimately responsible for corporate governance and ethical leadership.

4. Valuation Risks: High early valuations create unrealistic expectations, making it harder for startups to deliver sustainable growth.

5. Government and Public Roles: Citizens are increasingly pushing for consequences in corruption cases, as seen in the Pertamina scandal.

6. Fuel Subsidies vs. EV Adoption: They analyzed how fuel subsidies in countries like Indonesia and Malaysia slow down electric vehicle adoption and market competitiveness.

7. The Cost of Poor Communication: Governments that fail to clearly communicate policy shifts, like subsidy reductions, can trigger public backlash and economic uncertainty.

8. Strategic Energy Transitions: They argued that Southeast Asia needs a phased, well-communicated shift toward sustainable energy to ensure long-term stability.

(01:05) Jeremy Au: Hey Gita, how's life?

(01:07) Gita Sjahrir: I'm good. How are you?

(01:08) Jeremy Au: Yeah. I think it's another week, another month. And your last episode was very popular in terms of discussing the eFishery dynamic.

I think a lot of people appreciate that you are directly addressing the listeners questions and comments.

(01:22) Gita Sjahrir: Thank you so much. To be fair, I always can count on Indonesian netizens to give really entertaining comments.

(01:30) Jeremy Au: What was some positive feedback and thoughts about the eFishery perspective since it's been about a month since the whole scandal has unfolded?

(01:37) Gita Sjahrir: Right. I think a really big one that people kept telling me about is that we discussed how GPs actually is part of the fabric of this entire ecosystem and that investors also are responsible for making sure that companies have good corporate governance, that also we get down to the grassroots level To understand our audit numbers. So it's not enough anymore to just look at papers that a company gives, but we also need to get down to the grassroots and really check on the ground. So, for example, they said that there were some sensors and in eFishery that wasn't even installed. And it's one of those things, I guess, if you have to do the challenge of going to the place, like going to the site and physically checking, "Hey, is there a sensor here?" That could be helpful in the auditing part. But again, I think a lot of it is like, this is also the challenge of not even talking about auditing, but this is also the challenge of checking operations in a country that, one, still has developing infrastructure, but also, two, very, very big and very, very geographically decentralized.

(02:50) Jeremy Au: Yeah.

You know, I think one reflection I've had since then is that one of the problems with accounting fraud is that it reduces the incentives for you as a company to actually improve, right? Because if you're like, crushing it, 2x, because you're inflating revenues, then there's no natural mechanism to squeeze your team to push harder, to fix errors, clean up stuff, because I was going to be like, "Well, if I'm at 80% output level for the day, and we're still getting 2x growth for the year, then everybody doesn't put in the extra 20%. So I think one of the problems that founders kind of thing like, hey, they can get away with this fraud, and my team will still be the same. We'll still be as hardworking, and we'll catch up on it. But actually, because of the fraud, it actually decelerates your team's rate of learning and improvement. So it's actually worse, and the gap widens over time. So I think that's going to be something that I think it's a cognitive issue. It's like, oh, we'll just catch up with it next year. That's just not going to happen.

(03:49) Gita Sjahrir: That's actually common with a lot of founders, not even we're talking about fraud. We're talking, let's say, just founders having the challenge of, oh, how am I going to set up all this infrastructure, but then I have to chase for growth and I have to do all of these things. Then this is why I also keep reminding founders that, people, technically your investors are not your boss. As in, in the end, if you don't execute something and things mess up, it's on you. As much as you want to point the finger and say it's 100% the investor's fault, it's actually a combination of lots of elements, but you're still the main player. You're still the main actor. And I think that's why, as a founder, it's so important to take care of yourself first. Prioritize your own corporate governance because in the end, if things fall apart, I hate to say it, yeah, you, you might end up being in a really bad spot, and it's very hard for you to switch the blame and say, "Oh, no, the, I'm 100 percent innocent. It's someone else's fault."

And that's where we are now. So another thing that happens with a lot of founders that I also realize and I've been getting actually feedback from founders is, what if we don't want to commit for or like, we don't have bad intentions, but we're just really bad with like data taking because there's just so much data. And then you want technology on top of that data, which costs money. And our runway is like a certain amount. And I'm like, "Oh, no. Super understand all of those things because I experienced that in the past," which is you want this very high level type of data analysis. I don't have the budget for it, but you also want me to expand? And I think that is the part where it's also important to communicate very well with your investor, but also know where you draw the boundaries in which you say it's physically impossible for me to do A, B, C, D, E with this amount of runway. With this amount of timeline and then achieve profitability in 12 months, like all of those are super duper, very hard. And if you're willing to invest more into me to get these things done, then let's do it. But here are the things that we probably should focus on, A, B, C. And to be honest, infrastructure and corporate governance should be a huge part of it.

(06:00) Jeremy Au: Yeah. So I think there's some also developments that are cases. Then I think two of them is one is the financial impact to the rest of the company, then two is the founders actually issued a public statement about his role. So there's two things. So let me just kind of like, recap the facts here. It's since our last discussion, I think the investors who have appointed FTA consulting, which is the forensic auditor to be lead the company.

And they have basically decided to lay off 98% of the workforce. So from 1,500 about 200 folks and less and they have decided that the company is commercially unviable. So they're going to shut down the operations, sell off the IP. And the end outcome is that investors will recover only about eight to ten cents on a dollar. So that means that eFishery is going to be gone effectively as a company. And I think that probably makes sense because to me, it's like the amount of leakage and fraud was about hundreds of millions of dollars over the years. So I just think that also you have a loss of customer trust and employee morale. I think it just might be like, let's call it a day and move on.

(07:05) Gita Sjahrir: Yeah. One thing though, that I really learned about this case and also from just my previous background as an investor and then a founder is it's so important, especially in emerging markets, to always question what assets do I own? So as a founder always wonder, what do I own? So for example, eFishery doesn't own fish. So then what is it? If you say technology, then be brutally honest, like, how valuable is this technology? Or is this technology basically just a simple upgrade in a user interface question so that it becomes easier? Just really question how easy it is to copy that technology, or how easy is it to execute that technology. And then if you can get higher than that, if you can say, "Oh, it's actually brand strength," then be brutally honest too like, how powerful is this brand? How valuable is this brand?

(07:58) Gita Sjahrir: And I think actually you can probably learn a lot from successful consumer companies in Indonesia. There's actually a lot of them where they've made a name for themselves due to a combination of achievements to have a very, very strong brand. But then again, this is like my ultimate question. It's like, okay, what do you own? Like what assets do you have and how valuable are they? And then really question if you want to push your valuation to be so high. And this is huge because a lot of people always assume higher valuation, the better off you are. Not always, because the higher valuation, especially at an early stage, you are responsible for that. So if you say and claim, "oh my gosh, look, I'm now up to $500 million," and your revenue is like a million or less, really ask yourself, okay, sure. Can you get to $500 million of value, not valuation in X amount of time? Because you're responsible for that and that is usually when you think of things falling apart. It's usually when things reach a very high level very very quickly and the expectations simply don't match what that company can perform.

(09:17) Jeremy Au: It makes a lot of sense and it reminds of that Silicon Valley episode, I don't know if you've watched that scene where someone was basically saying, "Hey I raised a lot of money and then my company imploded." And then, the protagonist was like, "What if you release this money?" And the guy was super pissed and it's like, "Oh my God, that's the solution."

(09:36) Gita Sjahrir: I really like that episode by the way. I am a Silicon Valley fan actually.

(09:42) Jeremy Au: What's interesting as well is that Gibran has come up with a public statement and I think he made a statement on around February 25th I think he expressed three things. One is, he apologized for the situation and expressed regret for the impact on employees, farms, and stakeholders and he acknowledges the severity of the allegations but did not admit to any personal wrongdoing. Two is, he said that he had returned to Bandung to support former employees and fish farmers. And then three is that he wanted to rebuild trust and those affected by the failure of eFishery. So, that's his statement. Any thoughts, Gita?

(10:16) Gita Sjahrir: Okay, yeah, when I saw that statement and that he did not admit to anything, I'm actually pretty disappointed because, look, I don't know what his future looks like. I really don't. Maybe he will follow on like other founders that have not performed. Let me just say perform well, and can bounce back, but so much of bouncing back is to create trust with your market, trust with your investors trust with, the people working for you and have supported you this far. And I guess I'm just trying to understand the part where it's, "Here's the audit report," and the part in which you say, "Oh, that's strange. I had no idea. Nothing happened." I'm trying to understand, like, I guess there's a gap there. And I don't know, maybe it's his idealism. Maybe it's just shirking away from responsibility. I don't know. And I can't tell, but one day he's just going to have to face the audit report, right? And bridge that gap between his understanding of what he thinks the company has been doing and operating and the literal facts. So, in the end, it's his life. It's, it's up to him how he wants to face these facts.

(11:36) Jeremy Au: Well, I think that if he was liable in a criminal sense for these allegations, then he shouldn't admit to it either from a defense perspective, especially because there's a good shot that first of all, that's Temasek, was somebody who's losing, .90 to 92 cents a dollar, number one. Secondly, there are reports suggesting that the Singaporean authorities may investigate him in the Singapore courts, that's number two. And then, so the question is whether, Temasek and other growth investors are going to bring it to court, right? I think that's the next issue. And after the last thing is if Singapore makes a ruling, then would Indonesia court system allow the enforcement and extradition of him to Singapore, right? So I think there may be, for the first time for founder fraud in Southeast Asia, some level of consequences, but I think, we don't know. I mean, there's still a lot of steps forward.

(12:30) Gita Sjahrir: Yeah, I mean, but some level of accountability is probably going to be asked in this case. Just because of the incredible impact it's had on not just Indonesia, probably the entire Southeast Asia, where investor trust is now much lower. And again, it goes back to not just your rule of law, but also the enforcement of everything like are you actually holding people accountable? Are people being punished or getting the consequences of their actions? And those all matter for investors. So I don't know what's going to happen to this guy. I completely understand also why he would say that he doesn't know of any wrongdoing, but again, I think some level of accountability will be asked.

(13:14) Jeremy Au: Yeah. I think Michael Smith Jr., who is at Oracle and has been a prior guest on this podcast, I think recently asked and said, "Hey, if we don't see criminal justice in the sense of like, jail time or some equivalent of that, then wouldn't those consequences, or the lack of those consequences incentivize bad behavior across the system. And I think there's a fair point, right? Because, right now I think people are concerned and some of our listener comments have been like, "Hey, if founders who are found guilty of actual fraud just only have a social reputation or loss and can get away from it by just moving to a different country, effectively and starting over, then is it really a big disincentive for future founders?"

(13:55) Gita Sjahrir: Yeah, again, one of these are, when people say, "Oh, but investors' fault that it happened because we should have done a better job auditing, blah, blah, blah." Okay. Yeah. Okay. We can talk all day long about whose fault is what. And I do believe that the entire ecosystem in a way have their faults which creates these questionable situations, but at the end of the rainbow, you need to have some kind of accountability, like some kind of consequence, because if not, we'll constantly be in this low trust environment.

(14:27) Jeremy Au: Yeah, so I think a comment that Tim found raised a good point, right? Which is that if you're US listed as a company, NASDAQ or New York Stock Exchange, then the SEC as enforcement agency can go after you and they have to extradition treaties and everything to kind of pull people out, right? So I think they pulled up a bunch of crypto founders, SBF from whatever they were. And everybody's just said, "you know what, America, you can take this person because we're going to let you." And so think there's that piece where it was enforced by the government directly without the need for VCs to sue the founder. And I think kind of like the crux of the issue that we have right now, which is that, in kind of like eFishery, for example, or even for example, Zilingo, there's actually a requirement for a VC and agree party to actually do the lawsuit, to then get a system going, versus the American government was like in the case of FTX, just like, okay, we started a process. We don't even wait for a lawsuit happen, right?

(15:28) Gita Sjahrir: We'll take them. Yeah. I agree, which is why, by the way, it's not emerging markets until you have very public and ginormous cases of graft and corruption, which, by the way, is what, the latest round of graft and corruption issue in Indonesia is showcasing, which is where people are saying, Oh, for example, we just had this Pertamina case where people are going, "Oh, people are being arrested. Great. Let's arrest more." So I think that is the part that the market, and also investors want to see that, are people facing the consequences of their own actions?

(16:04) Jeremy Au: Yeah. So let's talk about Pertamina, which is effectively national kind of oil and gas producer for Indonesia. So similar to, I think, Petronas in Malaysia in terms of the goal of like stewarding and being there. And so I'm happy to provide a high level details and I'm happy to hear Gita for you to explain more. So what is there is that again, a whistleblower emerged similar to the eFishery case, and it raised concerns about the irregularities in crude oil procurement and fuel blending, which is a nice way of saying that there was investigation by the attorney general's office and basically uncovered fraud and graft and accounting mistreatment. So now there is a huge court case. Gita, can you explain more about what happened there at Pertamina?

(16:47) Gita Sjahrir: Yeah, okay. Like, I always just cringe inside and just feel so sad every time these cases happen, but I guess this is the part where, as an emerging market, we really just need to crack down on terrible governance. And basically, in this case, where they say that the economic impact of the corruption is in the hundreds of trillions of rupiah, which is such an insane amount of money. And basically they created this roundabout way of saying, "Oh, we need to export oil," and because now we are at a, lower balance now we need to import oil in which they also blended the oils with lower quality oils and then claim it was a higher quality oil so that they can impose even more of a profit on top of that.

And basically, there are several people arrested, I think up to seven now where they're Pertamina employees, but there are also private sector employees from other related companies. And it's just an incredible amount of money and grafts. And this affects the average person because then the average person, I've been like, "Wait, have I been pumping my, Car with worst quality oil this entire time, but I have to pay that premium?" And it's so painful how Indonesia keeps coming up with these insane and ridiculously high corruption cases and I think that's why people have been posting nonstop about all the arrests and all these high ranking officers in their orange police arrested clothes and all these things because we're just waiting for accountability. We're waiting for something to happen, for you to experience the consequences of your actions.

(18:40) Jeremy Au: Yeah, it's crazy because I want to kind of like recap some of the statistics about Pertamina, about how big this company is, because I think even I myself was not really aware of this company until this scandal unfolded, right? So, Pertamina is a company that has about $76 billion of revenue, which is Indonesia's largest state owned enterprise. And one of the biggest companies in Southeast Asia. And it employs about 80,000 people. And basically it operates across the entire energy value chain from upstream oil and gas exploration, to refining, to fuel distribution retail. And there are six oil refineries with the capacity of 1 million barrels a day. And the amount of fraud that you just mentioned about, $12 billion USD, is about 20% of that revenue, depending, you know, so it's a nuts amount of money to have been final out. Obviously, $12 billion happened over a certain number of years between 2018 to 2023. So that's about six years, but still, that's a lot of, graft and fraud allegedly, so.

(19:38) Gita Sjahrir: Yeah. And that is why everybody's been asking for more people to be arrested, they're asking for people to get down to the nitty gritty of it and this is going to be big for the administration, right? Because again, we just had an entire demonstration in Jakarta, like in the heart of Jakarta, basically asking for the government to do a better job because the people are begging for the government to, I think two things actually, not just one, do a better job because right now a lot of Indonesians are asking, hey, are these budget efficiencies, are they cutting out the right things or are they cutting out the things that are actually important, let's say education budget, to make up for other things that we don't think is important? But actually that takes into account the second part, which is, Hey government, can you communicate with us better? If you're going to say that we don't have a real criticism for you, can you also explain what you're doing and what the impact is? Or if you think the impact is going to be longer term, can you explain to us what that longer term looks like?

And I think this is the part, for example, where Singapore, the government often over communicates, right? So the Singapore government will say, "Hey guys, just FYI, the taxes will be this in 2027." And then they remind you often every step of the way, and then receive the people's reaction or feedback to it. Reaction is a nice way of saying it. But it's over communicated in order for people to really absorb and understand the message. But what Indonesia tends to do is, they don't really put a premium on communication to the people. So then, a new law comes up literally the next day, I'm not even making this up. The next day. And then the next day, everyone's like, what? Now we have to contend with this new law? We're freaking out. We're unhappy. And then the government's like, relax, we're doing it for your own good. And I think that is the kind of wonky communication that can be improved in the future. So that one, the people feel more taken care of and that they feel that they're being heard, but also two, so that there's less miscommunication and also less assumptions.

(21:59) Jeremy Au: Thanks for making Singapore sound like the gold standard for communication. I'm sure most Singaporeans would be looking at Singapore as bronze standard.

(22:06) Gita Sjahrir: No, I'm sure there's improvements. I'm sure. I'm dead sure. I'm not Singaporean. I can't say, like, I don't know. I've just lived there in the past, but you know, this is from my own, like, very very limited expat eyes.

(22:20) Jeremy Au: I know. I think it's true. And I think the Singapore government does do those things. I'm just saying that, Nobody's happy with a tax rise in any situation. I think what's interesting, of course, is when we contrast this, maybe with the eFishery case, I think there's some similarities and differences very quickly, right? I think the first of all is I do think there's going to be a court case because this is a state owned enterprise. So I do think that these people will go through the criminal and court justice system versus I think the eFishery case, which is still pending a growth investor to put together the court case, right?

So I think that's one. Two, of course, I think the big difference is that the cost of this is actually socialized across the whole country, right? I mean, eFishery obviously the losses are concentrated on growth investors and VCs. But at the end of the day, the net outcome of that loss, other than the graft was being used to subsidize an unprofitable business model. So employees got jobs that were not economically sustainable and fish farmers got support, right? That was not sustainable in the way they should have run it. Okay. So, so that's one side, but in this case, the entire country probably uses gas, right? If you to use energy or run a car or anything. So I think it must make everybody so angry.

(23:27) Gita Sjahrir: Yeah, I mean, again, it's a state owned enterprise. And so the impact is not just to 10 VCs or something, or three institutional investors. It's to actual people with real assets, and I think that's the part where it gets really crazy. And again, will people experience the consequences of their actions? And I think the more people experience these consequences the better off it is for the country's rule of law to show that, hey you can have faith and trust in us. And trust is a very tough fervency.

(24:03) Jeremy Au: Yeah. One potential, dimension I think about is that this was caught and the process happening pretty much pretty early in Prabowo's administration. So obviously this didn't happen during his watch. It happened years ago. So I guess, maybe it's an incentive for the current administration to go after it hard.

(24:21) Gita Sjahrir: They have that opportunity, but again, it will be about will the administration do the tough work of, taking on politically, probably politically disadvantageous cases? And then second is, can you communicate it well so that people feel that they are being taken care of by their government and that the government isn't always screwing them over or doing things that make them feel that their tax dollars are not being used well?

(24:51) Jeremy Au: Yeah. I think it's going to be a tough one. I mean, obviously we just have to see what actually happens. I think it's interesting because, also I think shines light on something that's quite interesting, which is the extent of petrol subsidies across Southeast Asia. So Malaysia has petrol subsidies because they export. And I think the Anwar administration has been looking to kind of like manage that downwards and obviously it's very politically sensitive to the middle class, and I mean, to everybody. I think Indonesia also has subsidies. I think Singapore is different. Singapore has a tax on petrol, which is actually quite interesting because obviously Singapore is a huge refinery hub for Southeast Asia with many assets from MNCs and regional players in Singapore as well. So, but Singapore has tax petrol as a way to increase revenues, which is quite different from other countries in Southeast Asia.

(25:41) Gita Sjahrir: Subsidies is probably one of the most politically sensitive, if not the most sensitive topic. We've had it for decades. It's so hard to contend with it. Everyone knows the reality of what subsidies do to the national budget everyone, it just doesn't matter if you're more conservative thinking politically if you're you know more liberal or everyone knows the effect and the impact. But again, it is wildly popular. It is very populist. And it's one of those things that over time have also been used to justify lots of campaigning. So this is a tough call. It's a tough one because you could easily be the most unpopular person if you've even tried to touch this. Easily. But then again, the question is, okay, how long will this go? How sustainable is it, especially for an emerging market that doesn't have a very high GDP per capita to begin with, and how competitive will it make your economy and your market? And like I said, anything where you're taking away a populist policy is just not going to be easy.

(26:50) Jeremy Au: Yeah, it's almost interesting because it's almost the inverse for Singapore because Singapore has a tax on petrol, right? And obviously car ownership is also tightened by a certain quota called the Certificate of Entitlement, which means that a certain number of cars, and basically it's an auction where people have to buy the right to own a car on top of buying a car, which is taxed as well as the gas is taxed as well as some usage congestion pricing that's there. So there's a lot of taxes on the entire car ownership. And what's been interesting is that electric vehicles has been accelerated because motorists, seeing a double benefit from Chinese manufacturers like BYD because first of all, BYD is selling the car at cheaper because it's the whole China supply chain. So the cost of the car goes down. And then secondly is using electricity instead of the petrol tax. And so the cost of running that car is also lower as well. So I think BYD is now like the biggest brand and, a year ago it was nowhere and now it's just like huge.

And so I think what's also interesting is that all these motorists are the opposite, which is instead of trying to get subsidies, they're trying to avoid tax. And because the certificate of entitlement only gives you the right to ownership for 10 years, it means that there's very high accelerated turnover of these vehicles. And so, that means that in 10 years time, every car would have to be renewed effectively. And most people would choose to trash a car or have to buy a new car. So it is interesting because it means that by 2030, the majority of car patches probably be electric vehicles. And by 2040, I think it'll be the vast majority might be seeing like 80, 90% electric vehicles on cars.

So it's quite interesting where basically Singapore never had the massive government subsidies for electric vehicles at the front. So it was very slow in terms of getting the EV curve. But then because of this, now that we've hit the inflection point, I think there's going to be a hockey shape for the next 10 years because if they've hit the crossover point and they will plateau at 80%, 90 percent range from my perspective. Anyway, so I'm just kind of curious about how you think about EVs in the context of Indonesia.

(28:56) Gita Sjahrir: Oh, that's super interesting. By the way when I used to live in Singapore, I definitely didn't have a car and we always looked at people who had cars and go, "wow, they must be doing so well to have a car," and it didn't matter. It was like any car. And now I understand because there's three things you're buying the certificate of entitlement, the car, and then also the tax on the petrol. And so, for us, because everything is subsidied, when it comes to EV adoption mind you, two wheel is like four to five X more than like a four wheel here, a.k.a. we are the land of two wheels.

You're constantly competing with the macros. So you're constantly competing with the price of gas, which sorry to say, lots of people cannot compete with because it's so subsidized. So again, this is why this can get very messy because you're talking about literal decades of subsidies that have made certain products just be more economically efficient for people. And so, I think that's why EV adoption might still be slower. And I think Singapore is also proof that definitely, your public sector, policies affect your private sector consumption, I mean, it's very like, no duh, but I mean, here's the difference, right? And that is one of those things where that's going to be tough because again, you're competing with macros. So I think last year, I don't even think they sold 100,000 EV 2 wheels in total, like in the entire country, of like 285 million people. And again, because you're competing with subsidized petrol. That's very, very hard to beat. It's extremely hard to beat. And I'm pretty sure Malaysia is in a similar boat because they're also just, I think they're even more higher subsidized than us. But again, what are you going to do if the macros simply don't show that switching pays?

(30:50) Jeremy Au: I think that's actually a really good point, right? Which is, I think a lot of folks who have been investing in the electrification of Southeast Asia hasn't taken into account the fact that gas is cheaper and subsidized by the government which just makes it a structural advantage for internal combustion engines. I mean, I was just looking up some numbers and, for example, in Singapore, obviously it's the other way around because a Toyota car, in America, will cost about $25,000. In Singapore, it'll about $120,000. So it's like a five times difference, so then, the amount of gas to run, would probably be about double the cost. So in America would be about 2,000 per year for Singapore, it'll be closer to like 3,000, 4,000. I mean, is this, there's a lot of penalties on combustion engines. It basically, so a BYD simplified car that's cheaper to all this stuff will allow Singapore. I think the hit it's like. goals sooner rather later. So I think it's been interesting to see, of course, the energy has been all the way around, right? There's all these EV startups that have gone after Indonesia and Malaysia, right? So we have Sleek EV, we have MAKA Motors, we have ION Mobility. There's a lot of other folks. So it's been interesting to see that dimension.

(31:58) Gita Sjahrir: Yeah, but again, even with all those EVs, the question will always be, can you compete with macros? Can you compete with subsidized petrol? And if you can't compete with subsidized petrol, then who is your market? Which could be a different market altogether, right? It'll be people who don't feel that they need to compete with petrol because they're of a different market segment. They're a different socio economic background. But then if that is the case, how are you distributing it? Like what's your go to market? How are you pricing it? Like price being number one. And then how are you designing it? How are you making the entire cycle, including end of life cycle? How long is the end of life cycle? How are you contending with that? What does insurance look like? I mean, all of these are ecosystem questions, which I think could shift over time depending on the public policy. Because again, subsidies are wildly popular, and the country is emerging and don't have a high GDP per capita. Those are two things that co-exist.

(32:59) Jeremy Au: Yeah. And I think it's also interesting because, I was in the Philippines and there was a big protest by Jeepney drivers, which is the local version of local taxis and micro buses. And the reason why is that they run very old buses and cars that are 15 to 20 years old, maybe even older. And they're very fuel inefficient, I would say, but also a lot of emissions as well. And they were protesting because the government wanted to basically phase them out over time by replacing them with either electric or better emissions standards vehicles. So I think it was a big protest because obviously, if you're a driver, you're like, wait, I'm losing this vehicle that's still good. And then I have to chip in towards a new vehicle. So basically it's a tax on me. So obviously it's a financial burden for them, versus I think Singapore is like every car effectively gets scrapped after 10 years, which also, by the way, doubles the cost of ownership because a Toyota car can easily last 20 years or more, but in Singapore, you basically have to trash the car after 10 years. It's kind of bonkers as well.

(33:56) Gita Sjahrir: That is bonkers, and it's a fun fact I just learned right now. And proves to show that I really never had a car when I was in Singapore.

(34:03) Jeremy Au: Yeah, but yeah, I think it's been interesting to see that. So how do you think about that as well? I mean, for the broader region, when you think about electrification.

(34:10) Gita Sjahrir: I think in the end, lots of countries will have to question how long do they subsidize oil and gas for. I think in the end, that's really the question, right? And they'll just have to eventually follow whatever global movement there is. And I think eventually, everyone will have to start questioning, hey, some resources are, when I say limited, it means it will run out, but might not run out for a very long time at the same time, right? Like, so, I'm not saying that it's one or the other. But also start thinking of energy transition on a case by case basis.

(34:43) Gita Sjahrir: So, not simply having a binary world where we we completely ban one thing, but just being very honest with the reality on the ground, which is the reality on the ground is, conditions in the US versus conditions in Asia are two very different things. Like one, the economy is still at its earlier stage. So it's still growing. It still needs to grow even more to create a more robust energy transition future. And in the meantime, it's about creating that blueprint and just working on it so that people can comfortably transition because it's also not realistic to completely take off subsidies and allow people to suffer like that is, that shouldn't be a thing because it's very different than Singapore where I guess a lot of these policies have been around for quite a long time. We can't do that very binary equation tomorrow. We can't do that. We have to over communicate and create like a 10, 20, 30-year blueprint, and then over communicate along the way so that the society can transition. And I think that's the thing, right? Like it's not just one, what you do, but it's two, communicate what you do in a way that people can absorb and understand, and also allow feedback and allow citizens' voices to be heard.

(36:06) Jeremy Au: On that note, let's wrap up and I'll see you next time, Gita.

(36:09) Gita Sjahrir: All right. See you soon.