Rattle off the fundamentals, and Indonesia’s potential seems impressive.
The country has some 270 million consumers with a median age of 29, steady growth rate eclipsing 5 percent, a burgeoning digital economy and status as one of the world’s top producers of palm oil, industrial metals, rubber and other commodities.
But for too long, the Southeast Asian nation’s trade relationship with the U.S. has failed to live up to its standing as the only ASEAN economy that has cracked into the Group of 20 Industrialized economies.
The $28 billion in bilateral trade volume pales in comparison even to tiny Singapore, the city-state that serves as a regional trade and logistics hub and a base for many U.S. multinationals in the region.
But that could change amid a new global trade climate that has pitted the world’s economic superpowers — the U.S. and China — against one another, Indonesian Ambassador Mahendra Siregar said during an Indonesia Business and Investment Forum in Atlanta Wednesday.
“China-U.S. trade relations have and will continue to cast a shadow over a the global economy,” he said in a keynote speech. “Yet the U.S. administration in my view is addressing what other trading partners in the past have failed to, which is to challenge an export-oriented economy whose industry is highly subsidized and relies on devalued currencies.”
China’s state-led growth model has created problems for economies that have provided less government support, he said.
“It has placed a considerable burden on trading partners like Indonesia whose industrial base is very much based on free and fair competition,” Mr. Siregar added. “We understand the view of the U.S. because for the last 15 years Indonesia has been experiencing structural and growing trade deficits with China.”
In a new era characterized by a skepticism of multilateral deals and the weaponization of tariffs, Indonesia is focusing heavily on positioning itself as an alternative sourcing base and buyer for U.S. companies.
That should please President Donald Trump, who has been preoccupied with trade deficits and has “ordered” U.S. firms to move out of China to prove the effectiveness of his signature trade war.
Indonesia, an exporter of tin, aluminum, nickel and other metals along with furniture, electronics and more, now enjoys a surplus with the U.S., but it has made progress in rebalancing the relationship by boosting its own imports of U.S. farm goods and other products, the ambassador said.
Plans are in the works to send buying missions to the U.S., even as the country seeks more American participants in an Oct. 16 trade expo in Jakarta that will be opened by recently re-elected President Joko Widodo.
Indonesia understands that trade fits into broader strategic calculations, especially at a time when the World Trade Organization is proving “ineffective” in its role as “the guardian of global trade,” Mr. Siregar said.
Better economic relations will complement growing cooperation on defense, counterterrorism, energy and education, he said. He hopes the U.S. will take that into account as the Office of the U.S. Trade Representative undertakes a review of Indonesia’s preferential trade treatment.
Billy Anugrah, head of the Indonesia Trade Promotion Center in Chicago, said the country hopes to nearly double bilateral trade to $50 billion by 2021, in part by employing a new strategy to offset China in certain products where Indonesia already does well.
The new 5-7-5 plan is directly tied to the trade war and calls out three tiers of export products with ripe replacement potential. The top five are apparel, rubber products, fo
otwear, electronics and furniture. In electronics, for instance, the U.S. imports $152 billion from China and only $1.3 billion from Indonesia.
“Both nations have been complementing each other in terms of trade,” Mr. Anugrah said, pointing out the use of Georgia cotton in Indonesia’s garment sector and the use of Indonesian rubber and metal in making cars in the U.S. “What we import from the U.S. we use in our supply chain.”
He added that at a time of muted global growth, Indonesia has signed more trade deals in the last five years than any other country, including three that are close to completion with Korea, the EU and the 16-country Regional Comprehensive Economic Partnership.
Prisetyo Singgih, who serves on the U.S. committee of Indonesia’s largest business chamber, KADIN, said during his presentation that the trade war presents an opportune moment in the economic relationship.
“We don’t get many second chances, and it’s hard to compete with the Chinese, but once there is such a situation, it makes a more level playing field for Indonesia and other ASEAN nations,” Mr. Singgih said.
Dwityapoetra Besar, Bank Indonesia’s representative in New York, underscored the desire to host more U.S. investment a list of 223 infrastructure projects, from power generation to waste processing to roads and airports, even as some projects receive funding from state-owned Chinese companies as part of China’s Belt and Road Initiative.
He added that the central bank is undertaking a broad payments initiative by 2025 that is designed to integrate fintech companies better with banks, encourage adoption of cross-border payment technology and ensure the central bank keeps up with the digital economy. That could entice some companies in “Transaction Alley,” Atlanta’s massive payments and financial technology ecosystem.
At the wide-ranging forum, two Georgia companies — Aventure Aviation and Orkin — provided anecdotes about their market entry into Indonesia, showing that the relationship goes both ways.
That’s the kind of connection Mr. Siregar, the ambassador, foresees happening more as this historic relationship matures. He noted that the U.S. was integral to a UN panel negotiating Indonesia’s independence from the Netherlands in the aftermath of World War II. The U.S. set up an embassy in Jakarta in 1949, 70 years ago this year.
Despite the fact that few Indonesian functionaries had visited the U.S. at the time, they were inspired by American ideals of governance. That again played out 20 years ago when Indonesia shifted to full-fledged democracy, pulling back from the brink of societal collapse under its authoritarian government.
“It was democracy that saved Indonesia,” the ambassador said.
He noted that closer ties with the U.S. will be critical as both Indonesia and the 10-country, 600 million-population ASEAN region, of which Jakarta hosts secretariat, begin to take a more prominent role globally.
“This is very critical for us who look at trade, investment and economic relations from a business perspective but also take into account the strategic conditions that we are now facing,” he said.
He added that the Indonesian government has set up a $3 billion fund to encourage outbound study and research exchanges by Indonesian students and faculty, whose numbers in the U.S. never recovered after plummeting in the years after 9/11.
“We can send more than 1,200 students every year to study all over the world, and we have to work hard so that more, if not most, of them come to the United States,” he said.
The morning forum at Miller & Martin PLLC’s Midtown office was followed by a Global Atlanta Consular Conversation interview and luncheon with Consul General Nana Yuliana, who was visiting from Houston and said Georgia is among the most active of the 12 states in her territory.
The state imported $1.35 billion in goods from Indonesia and exported $371 million there in 2018. Paper product exports nearly doubled to $133 million, largely thanks to Indonesia’s willingness to take waste and scrap products that China will no longer import, according to Commerce Department figures.
The consulate is hoping to host a trade mission from Georgia next year and invites participation in the Trade and Investment Expo Indonesia this year starting on Oct. 16.
WIN Indonesian Grill and Gastrobar, located in Buckhead, catered the event. It’s owned by Fify and Robert Manan, local Indonesian entrepreneurs and traders who played a key role in drawing the Indonesian roadshow to Atlanta. Along with the Manans, Wei Siong Tan, president of Atlanta-based AccuSentry Inc., has kept alive a local Indonesian chamber of commerce that has provided a consistent touch point for diplomats from the country.
Last year, Indonesia’s former ambassador visited WIN for the opening of the restaurant, which was covered by Global Atlanta.
During this trip, Mr. Siregar also was hosted during an evening reception at Emory University’s Goizueta Business School.