Discourse: RI-US economic relations: Small things can make a big difference

Posted on April 30, 2012


The Jakarta Post | Mon, 04/30/2012 8:10 AM

With the US economy showing clearer signs of recovery, Indonesia’s Ambassador to the US, Dino Patti Djalal, one of the most trusted aides of President Susilo Bambang Yudhoyono, says targets to double bilateral trade value in five years and increased US investment in Indonesia are both very likely scenarios. In a conversation in Washington with The Jakarta Post’s Linda Yulisman, he elaborated his optimism and highlighted existing challenges to achieving the targets. Below are excerpts from the conversation:

Question: What is the state of our current economic relations with the US, particularly in the trade and investment sector?

Answer: Economic relations are very good now, especially in trade and investment. If I’m not mistaken, our trade has reached US$26.5 billion in 2011 [up by 17 percent from 2010], which is perhaps one of the highest, if not the highest trade figure that we have in our relationship. And the growth is quite significant, especially since [US] President Barack Obama’s visit to Indonesia.

The rising investment is also significant. When Obama came to Indonesia, he said the US was not happy with being number three. US investment in Indonesia reached US$1.5 billion last year [third largest after Singapore and Japan].

A lot of American businesses have noticed that Indonesia has now reached investment grade and that has significantly boosted our reputation in the US, especially at a time when the global economic recovery is still somewhat fragile and a lot of countries and companies are being downgraded. Indonesia is being upgraded.

I do also notice a stronger business interest in Indonesia. Indonesia is seen as one of the success stories in Asia along with China and India, of course. Indonesia is seen as not just promising, but a dynamic and unique market by American businesses and with that, a number of business delegations to Indonesia have returned with very good impressions. So, I’m quite optimistic that the economic relationship for the future will be even better.

Trade and investment are also now a key part of the joint commission meeting [JCM] that has been held annually. We have six working groups and trade and investment is among them. For the first time, we also now have commercial dialogues for the first time between Indonesia and the US and this reflects the commitment of both sides to strengthen their commercial relationship with each other.

Is there any certain target set for trade in the next few years?

Yes, there’s a target to double the trade figure and it was mentioned in the joint statement between President Obama and President Yudhoyono when they met in 2010. So, there’s a target of doubling the figure in five years.

I’m not sure there’s a specific target on investment, we just said “enhance it”. We definitely want more American investment. President Obama stated he didn’t like being number three, so I’m sure America will want to be the number one investor again. But to do that, they have to really compete with the others and we also have to provide the corresponding facilities to get more American businesses to come in.

What is currently the biggest hurdle to American investment in Indonesia?

I don’t think there’s a major hurdle. I think it’s just a matter of getting more people to know about what the opportunities are. For example, on the master plan [for the acceleration and expansion of Indonesian economic growth, MP3EI], there are a lot of projects and capital needed. Some American companies are learning more about it and some are trying to take part in it.

I think an opportunity that Indonesians should see is the US Ex-Im [Export-Import] Bank. The Ex-Im Bank had a great success story with the Lion Air deal. It financed Lion Air’s purchase of Boeing and in fact, the last one was the biggest deal ever made by Boeing.

But the problem is the success story is very limited. There’s been only very few Indonesians who are taking the advantage of the financing facilities of the Ex-Im Bank. I hope more Indonesians will take advantage of this facility.

Are there any American companies that have expressed an interest in joining the master plan for economic development?

Well, there are a few, but I am not sure I should name them before everything is signed. Every time we see American companies we tell them about the project.

In what sectors are they most interested in?

There are some discussions on the industrial parks. I believe there’s something also in transportation, if I’m not mistaken, and infrastructure, obviously.

At this time they have been quite heavy in mining. Obviously we welcome their investment in mining, but we want their investment to be broader, more than just in mining. We want them to be in manufacturing, for example.

This is one thing that we’ve been trying to galvanize in terms of our relationship with American business. In agriculture and geothermal sectors, there are a lot of opportunities.

US business is also trying to get into the creative industries. I think this is one of the areas that need to be explored more: how American innovators can connect with Indonesian innovators. We’ve had the recent success story of Koprol, an Indonesian company that just joined Yahoo.

When I asked Yahoo how they saw Indonesians working in Koprol, they said they were as good as their own people in Silicon Valley. So again, the IT cooperation between the two is an exciting example, but getting together the innovation communities on both sides and trying to draw connections between them is one of the areas that we need to intensify.

How do you see the prospects for Indonesian exporters to boost their trade to the US in the near future?

The prospects are quite good. As I said, they need to be more aggressive and seek out more opportunities. There’s Ex-Im Bank when they need some financing and the GSP facilities can help them. There’s always opportunities to better penetrate the American market.

I think that we should take the benefits. The US palm oil market for example is 95 percent controlled by Malaysians and we are only using 5 percent. We have to do a lot more for it.

In the furniture sector, there are also many opportunities. Our furniture is first class but the problem is how we convey that message. We’re taking part in some trade fairs in the US this year, but we need to do better in how we handle those fairs. Sometimes when we do the trade fairs, we have the products but the companies don’t take part. And when the people want to buy the product, they can’t negotiate with the companies because no representatives from the company are taking part. Small things like that sometimes can make a big difference.

And again, one thing that we need to fix is that there are extremely few upscale Indonesian restaurants in the US. Again, I don’t know why. But Indonesian restaurants can function as a good ambassador for our country and even for tourism promotion. The Indonesian business community should be more aggressive in penetrating the American market. These may not be big investments, but yes, there are a rising number of Indonesians who are investing in the US.