During his recent visit to Indonesia in November 2019, U.S. Secretary of Commerce Wilbur Ross asserted that U.S.-Indonesia economic relations are underperforming relative to their potential. In 2018, goods trade between U.S. and Indonesia was only $29 billion with a $12.6 billion trade surplus for Indonesia. In contrast, U.S. two-way trade with some of Indonesia’s ASEAN neighbors is twice as much. As a result, Indonesia was the U.S.’s 34th largest export market and 23rd largest import source. Given the size of the two economies, Indonesia’s expanding middle class, strong market demographics, and abundance of natural resources, more needs to be done to expand two-way trade.
Although Indonesia remains attractive for many U.S. investors, it is also a difficult environment in which to navigate, and U.S. businesses experience challenges in doing business. Despite President Jokowi’s continued efforts to attract more FDI, many factors such as a decentralized decision-making process, legal uncertainty, economic nationalism, the role of state-owned or locally-owned enterprises, and powerful domestic vested interests in the private and public sectors create a complex investment climate. Other commonly cited barriers to trade and investment include: foreign ownership restrictions; local content requirements; restrictions or licensing and permit requirements for some imports and exports; and pressure to make substantial long-term investment commitments.
For Indonesia, U.S.-China trade tensions present an opportunity to attract FDI as companies manufacturing goods destined for the U.S. market seek to diversify their supply chains and avoid increased U.S. duties for products manufactured in China. In addition, the U.S. Generalized System of Preferences (GSP) provided it is kept in force potentially increases Indonesia’s attractiveness for FDI transitioning out of China as the program permits certain goods duty-free entry into the U.S. Approximately 12% of Indonesian exports to the United States benefit from this program. However, many observers agree that to take advantage of shifting supply chains, and resulting trade and investment opportunities, Indonesia needs to move quickly on a reform agenda. President Jokowi has highlighted attracting more investment as a second term priority.
Given the complementarity between the U.S. and Indonesian economies, what are key opportunities and challenges to boost economic relations of the two countries? What government policies can President Jokowi pursue to attract more direct investment in Indonesia? How to grow trade and investment between the two countries in a free, fair, and reciprocal manner?
Three eminent experts on trade and investment appraised these issues in our December 13 Open Forum, followed by Q and A and discussion.
Muhammad Lutfi is one of the youngest Indonesians to be appointed Minister of Trade of the Republic of Indonesia (February – October 2014). The appointment shortly came after he ended his term as the Indonesian Ambassador to Japan and Federated States of Micronesia from 2010 to 2013, where he showed his fluency in the art and craft of diplomacy.
Ambassador Lutfi helped strengthening the relationship between Indonesia and Japan, by leveraging his previous experience in direct investment matters as Chairman of Indonesia Investment Coordinating Board (BKPM) since 2005.
Presently, Ambassador Lutfi is back in the private sector and sits as the President Commissioner/ Chairman of PT Medco Energy Tbk, a public-listed Oil & Gas and integrated energy company in Indonesia, Member of the Board of Directors in Sime Darby Plantation Bhd, a multi-national palm plantation company based in Malaysia, and he also serves as adviser to several global firms. Ambassador Lutfi studied economics at Purdue University in West Lafayette, Indiana, USA
Sunny J. Park currently leads the Corporate, External & Legal Affairs (CELA) Department for Microsoft Asia Pacific with a team of professionals across the region. Her responsibilities span a wide variety of cutting edge-issues synonymous with 4th industrial revolution technology, such as Artificial Intelligence and ethics, cybersecurity, privacy, data governance, anti-trust, trade, e-commerce, telecommunication regulations, cloud computing and internet governance, as companies and governments digitally transform. In addition to supporting digital transformation of Microsoft’s customers within the Asia Pacific region, her responsibilities include advancing Microsoft’s IT policy, ensuring regulatory compliance and anti-corruption, and representing Microsoft externally with governments, academia and industry associations.
Prior to joining Microsoft in 2010, she practiced law at firms such as Kim & Chang and Jipyoung & Jisung, and has hands-on business experience in the IT industry having served as the Managing Director of Mobile Internet business unit at Locus Technologies. She is a strong advocate of women’s issues and female leadership and has served in many capacities to advance women’s issues and advancement including as the Chair of Microsoft’s Global Diversity & Inclusion Initiative.
Douglas Ramage is the founding Managing Director of BowerGroupAsia Indonesia and has 30 years experience in Indonesia. He currently also serves as the Vice President of the American Chamber of Commerce in Indonesia.
He works with multinational companies and the Indonesian government to find solutions to regulations that reduce Indonesia’s competitiveness, restrict foreign investment opportunities or hinder market entry. He has helped companies overcome business and reputational challenges in Indonesia across diverse sectors, including healthcare, financial services, information technology, fast moving consumer goods, energy, agriculture and heavy industry. He is particularly adept at helping companies craft advocacy efforts so that client companies meet government expectations in ways that are simultaneously commercially viable and help advance Indonesia’s growth and development.
Mr. Ramage previously worked in several senior Indonesia-based roles, including in the Australian development program (AusAID), the World Bank and The Asia Foundation. He holds a PhD from the University of South Carolina and has also studied at the Australian National University (ANU) and the University of Maryland.
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