Good Takeaways From Pence's Visit, But Can Indonesia Get Away From US Trade Hit List?

US Vice President Mike Pence, left, speaks with Indonesian President Joko 'Jokowi' Widodo during their meeting at the Presidential Palace in Central Jakarta on Thursday (20/04). (Reuters Photo/Dita Alangkara)

By : Muhamad Al Azhari | on 2:54 PM April 23, 2017
Category : Business, Economy, Featured

Jakarta. The United States Vice President Mike Pence's visit to Indonesia on Thursday (20/04) resulted in a number of significant takeaways, including common understanding between the two countries to reduce economic and political barriers, as well as improve trade and investment.

The visit yielded more than $10 billion in deals between Indonesian and US companies, but there is always a catch.

Iskandar Hadrianto, a foreign policy analyst and a former senior Indonesian diplomat, said in an article published in the Jakarta Globe on Friday that even though Pence's visit promised many good things for Indonesia, the old adage still holds: "there's no such thing as a free lunch."

"Pence's visit to Jakarta, apart from being carefully geared to secure US interests in Indonesia (primarily Freeport, though this was never made public), was also meant to convince Indonesians that the Trump administration will not leave Asean on its own devices to handle regional security," Iskandar, who has done some work for the Asia-Pacific Center for Security Studies — a US Department of Defense academic institute that seeks to address regional and global security issues — said.

When he mentioned Freeport, the former diplomat was referring to the dispute between the Indonesian government and US mining giant Freeport McMoran over rights to one of the world's biggest gold and copper mines in Grasberg, Papua.

Diplomacy worked its magic, and Freeport finally secured a permit to resume copper exports from Indonesia on Friday after a hiatus of more than three months, according to a Reuters report.

During Pence's visit to Indonesia — part of his 10-day Asian tour — Indonesian and US companies signed a total of 11 agreements, including for oil and gas giant Exxon Mobil to sell liquefied natural gas to Indonesia's state energy company Pertamina, aerospace and defense company Lockheed Martin to provide upgrades to the Indonesian Air Force's aging F-16s, and conglomerate General Electric to develop electricity infrastructure throughout the archipelago.

"The Americans showed they were still eager to make more trade and investment deals with Asean countries," Iskandar said.

However, one of the most highlighted issues that has made the headline since Pence's visit is that Indonesia was put on a list of 16 countries which US president Donald Trump said need to be reprimanded for causing significant trade deficit to the superpower.

Among members of the Association of Southeast Asian Nations, or Asean, two are on the US hit list: Vietnam, which enjoyed a $32 billion trade surplus with the US last year, and Indonesia, which enjoyed a trade surplus of $13 billion according to the US.

Trump's executive order placed China on top of the hit list with a $347 billion trade surplus, followed by Japan ($69 billion), Germany ($65 billion) and Mexico ($63 billion).

Indonesia's trade minister Enggartiasto Lukita responded to the news cautiously, saying Indonesia will respond by listing problematic export deals with the US and requesting the ministry's representative in Washington, D.C., to monitor development on the Trump policy,

Bank Indonesia Senior Deputy Governor Mirza Adityaswara had tried to defuse the conflict, arguing that Indonesia has done nothing to disadvantage US companies in trade deals.

Mirza, one of the speakers in the GlobeAsia business summit on April 6, said US authorities may scrutinize a country if it intervenes in the market to keep its currency low for at least a year, which will allow for cheaper export to the US market.

"Indonesia has never done that, whenever [the rupiah] falls, the central bank intervenes only to stabilize it. In many cases, this actually strengthened the value of the rupiah," Mirza said.

From left to right, the Indonesian Chambers of Commerce and Industry (Kadin) chairman Rosan P. Roeslani, Lippo Group President Theo L. Samuaga, Bank Indonesia Senior Deputy Governor Mirza Adityaswara, BeritaSatu Media Holding Chief Executive Sinyo Harry Sarundajang and GlobeAsia Editor-in-Chief Shoeb Kagda Zainuddin at the GlobeAsia Business Summit 2017 on April 6, celebrating the magazine's 10th anniversary. (GA Photo/Defrizal) From left to right, the Indonesian Chambers of Commerce and Industry (Kadin) chairman Rosan P. Roeslani, Lippo Group President Theo L. Samuaga, Bank Indonesia Senior Deputy Governor Mirza Adityaswara, BeritaSatu Media Holding Chief Executive Sinyo Harry Sarundajang and GlobeAsia Editor-in-Chief Shoeb Kagda Zainuddin at the GlobeAsia Business Summit 2017 on April 6, celebrating the magazine's 10th anniversary. (GA Photo/Defrizal)

Indonesia exports many agricultural products to the US, including rubber, tropical oils, coffee and spices. It also exports knit apparel, woven apparel, electrical machinery and footwear.

Meanwhile, the US's biggest exports to Southeast Asia are machinery, transportation equipment including aircraft, food and agricultural products, machinery and chemicals.

The chairman of the Indonesian Chambers of Commerce and Industry (Kadin) Rosan P. Roeslani said Indonesia needs not be alarmed as the US is not aiming to hurt trade relationship with the archipelago nation. He said the US is just seeking a way to balance the trade ledger.

"I have spoken with the trade attaché at the US embassy. This is not about reducing Indonesia's slice of the [export] pie or reducing trade with more barriers," he said.

Rosan was also one of the speakers at the GlobeAsia summit, which discussed "The Impact of Trumponomics on Indonesia" and took place at Museum Bank Indonesia in Central Jakarta.

Other speakers included Yoga Affandi, director of economic and monetary policy at Bank Indonesia, Adam Mulawarman Tugio, director of US-Indonesia relations at the Ministry of Foreign Affairs, and Indra Darmawan, international business cooperation director of Indonesia's Investment Coordinating Board, known as the BKPM.

Speaking to reporters at a separate event, Finance Minister Sri Mulyani Indrawati and Chief Economics Minister Darmin Nasution also said the US trade hit list is nothing Indonesia has to worry about.

"Let it be. Let's not bother ourselves with it," the economic tzar said on April 5 in Jakarta.

On the same day, Sri Mulyani told reporters that even though it is not yet time for the government to worry, it needs to remain cautious about the possible impact's of Trump's executive order.

While the US remains one of Indonesia's biggest trading partners, President Joko Widodo has instructed his ministries to expand Indonesia's export market to include countries in Africa, Central Asia, the Middle East and Eurasia and countries that are members of the Regional Comprehensive Economic Partnership (RCEP).

RCEP is a proposed free trade agreement (FTA) between Asean's ten member states.

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