Indonesia is forgoing billions of dollars in investment: US

Bloomberg

Indonesia is foregoing billions of dollars on offer from American companies eager to invest in Southeast Asia’s biggest economy, US Ambassador to Indonesia Joseph Donovan said.
As the US tries to arrest a deteriorating trade balance with Indonesia, which in 2017 found itself in President Donald Trump’s cross-hairs, Donovan has also rejected complaints of increasing American protectionism. Indonesia had made significant progress on macroeconomic stability, improving the business environment, education and infrastructure,
yet more must be done to encourage trade as well as foreign investment, he said.
“Those that caution the United States about being trade protectionist, I would respectfully suggest that they look at their own markets and they might find a good deal of ingrained protectionism there,” he said.
Indonesian officials such as Finance Minister Sri Mulyani Indrawati have consistently criticised the protectionist tone sounded by Trump, who in 2017 accused a host of nations, including Indonesia, of potentially abusing their trade relationship with the world’s biggest economy.
Since then, the US trade deficit with Indonesia has worsened to $13.3 billion from $13.2 billion in 2016, according to the US Census Bureau.
“The current protectionist language is definitely going to create concern about whether globally there will be a setback in the progress that has been made over the past three decades,” Indrawati said in an interview.
Indonesia’s economy has been growing at about 5 percent. At the same time, however, the government has been struggling for revenue to fund Widodo’s ambitious infrastructure plans.
Oke Nurwan, director-general of Foreign Trade at the Trade Ministry, did not respond to questions about protectionism.
He said Indonesia had made progress in terms of ease of doing business and was seeking to better manage imports, as well as targeting export growth of 11 percent in 2018.
Donovan said the US’s average tariff rate was less than 3 percent and half of Indonesia’s average applied tariff rate. Despite the imbalance, he said trade in goods between the two nations had increased in 2017 by about 7 percent to approximately $27 billion in bilateral terms, with US exports to Indonesia increasing about 14 percent.
Indonesia must do more to encourage foreign businesses to invest and trade, he said, adding that the US wants to see more access granted to American companies, particularly in the agriculture sector, including dairy, cotton, soybean, fruit and vegetables.
“Indonesia is leaving billions of dollars on the table right now in the field of power generation by not following through on offers by American companies,” he said, declining to reveal any specifics.
Ekoputro Adijayanto, the chief of the Indonesian Planning Ministry’s Centre for Private Investment, said a number of US private equity firms had shown interest in Indonesia, including one that’s “seriously looking” to invest in greenfield power generation.
But there also appeared to be a “Trump effect,” he said.
“He’s trying to lure investors in the US to invest back in America, make America great again.”
“China is a bit different from other countries,” Adijayanto said.
Figures show that in the space of three years, the US has lost significant ground to China in terms of foreign direct investment in Indonesia. In 2017, direct investment from the US was worth $2 billion, according to the Indonesia Investment Coordinating Board, while Chinese foreign direct investment was $3.4 billion.
“It’s not a competition between America and China,” Donovan said. “What I look for are opportunities for American businesses to compete on a level and fair trade ground here. Rather than look at China, what I’m interested in doing is helping American businesses to do more here.”
Donovan said Indonesia must maintain the pace of economic reform established under President Joko Widodo and “stand up to protectionist voices who advocate for special interest under the guise of nationalism”.