Indonesia Boosts Economic Diplomacy amid Pandemic

Indonesia continues to strengthen its economic diplomacy to support the country’s recovery efforts in the midst of the COVID-19 pandemic.

KOMPAS/MUSTHAFA ABD RAHMAN

The Indonesian Pavilion at the supermarket expo in Cairo - Egypt on Sunday, April 11, 2021. A number of visitors visited the Indonesian pavilion which occupies an area of 40 square meters.

JAKARTA, KOMPAS — In the midst of the COVID-19 pandemic, Indonesian diplomats abroad are working hand in hand with representatives of the Trade Ministry to improve the country’s trade performance. This diplomatic effort is intended to support the recovery of the national economy hit by the pandemic.

As the result of the pandemic, many countries have become more protective and have tended to prioritize their domestic interests, causing a slowdown in global trade growth. In the second year of the pandemic, a number of countries have the potential to recover more quickly, and they will give Indonesia an opportunity to further boost its exports.

Indonesia\'s trade balance again recorded a surplus in July 2021. Statistics Indonesia (BPS) reported that Indonesia’s trade surplus had reached a total of US$2.59 billion in the month. This means that the country has recorded a trade surplus for 15 consecutive months since May, or two months after the COVID-19 pandemic hit the country.

Cumulatively, Indonesia\'s trade surplus reached a total of $ 14.42 billion throughout the year. The figure is larger than the surplus of $8.65 billion recorded in the same period in 2020.

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Indonesia\'s exports totaled $17.70 billion in July 2021, a 4.53 percent drop from the amount booked in June 2021. However, compared to July 2020, the exports rose 29.32 percent. Non-oil and gas exports reached $16.71 billion in July 2021, a 3.46 percent decline compared to June 2021 but a 28.26 percent increase compared to July 2020.

Referring to the BPS report, Indonesia recorded a trade surplus with a number of countries in July, such as the United States ($1.27 billion), the Philippines ($533 million) and Malaysia ($397.5 million). However, Indonesia suffered a deficit in its trade with a number of trading partners, such as China ($844.5 million), Australia ($448.1 million) and Thailand ($271.1 million). The largest non-oil and gas exports in July 2021 were shipped to China, which reached $3.57 billion, followed by the US ($2.02 billion) and Japan ($1.19 billion).

The improvement of Indonesia\'s foreign trade performance in the midst of the pandemic was partly due to the hard work carried out by government agencies, especially the Foreign Ministry and the Trade Ministry .

"According to Jakarta\'s guidelines, we direct Chinese investment to Indonesia to economic sectors that provide added value," said the Indonesian ambassador to China Djauhari Oratmangun in a virtual interview with Kompas from Beijing on Sunday (29/8/2021).

KOMPAS/DIDIT PUTRA ERLANGGA RAHARDJO

The Indonesian ambassador to China Djauhari Oratmangun

He said the economic diplomacy strategy had been adjusted to the dynamics of the China-US trade war, which was continuing amid the pandemic. The trade war has also resulted in the reallocation of global investment, particularly from the US, away from China. The COVID-19 pandemic has put pressure on the world economy.

However, the quick economic recovery in China has provided a great opportunity for exporters, including in Indonesia, to sell more products to the country. China\'s customs data shown by Djauhari indicated a surge in Indonesian exports to the country during the first half of 2021 on an annual basis.

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Exports of Indonesia’s manufactured products to China skyrocketed 36 times compared to the same period in 2020; processed meat and fish increased 8 times; and ceramic products doubled. The increase was in line with the surge in exports of processed mining products, such as nickel, iron and steel.

The Indonesian consul general in Mumbai (India) Agus P Saptono said that the Indonesian Consulate General in Mumbai had also actively approached Indonesian companies in India to promote investment. The country is one of Indonesia’s main trading partners.

Indonesia\'s largest non-oil and gas trade surplus was obtained from Indonesia-India trade. According to BPS data, Indonesia\'s main exports to India are coal, palm oil, copper, rubber and chemical fertilizers.

Meanwhile, Zamroni Salim, a researcher from the Economic Research Center at the Indonesian Institute of Sciences (LIPI) and the National Research and Innovation Agency (BRIN), has noted that Indonesia must have a balanced policy between orientation toward the domestic market and expansion of foreign markets.

DOKUMENTASI KEMENTERIAN PERDAGANGAN

The Indonesian Minister of Trade, Muhammad Lutfi (left) attends a panel discussion at the St Petersburg International Economic Forum (SPIEF) which took place in St. Petersburg, Russia, Thursday (3/6/2021). The panel discussion raised the theme "World Expos and International Cooperation as a Driver of Sustainable Global Development".

The market expansion abroad should be carried out when domestic demand can be fulfilled. "The important task is to diversify the market along with the diversification of processed products to boost the Indonesian economy, which is still sluggish," he said.

The head of research for industry, trade and investment at the Institute for Development of Economics and Finance (Indef), Andry Satrio, hoped that Indonesia\'s economic diplomacy could be further strengthened. He highlighted the process of resolving a number of trade disputes at the World Trade Organization (WTO). It is hoped that the COVID-19 pandemic will not hinder the negotiation process.

Trade agreement

Efforts to increase exports are also carried out through comprehensive trade and economic agreements, both bilaterally and multilaterally.

In a comprehensive economic agreement, not only trade in goods and services is encouraged, but also investment and technology transfer.

The government has also asked the House of Representatives to quickly complete the ratification of the ASEAN Trade in Services Agreement (ATISA), the Regional Comprehensive Economic Partnership (RCEP) and the Indonesia-South Korea Comprehensive Economic Partnership Agreement (IK-CEPA). In a working meeting with House Commission VI on Aug. 25, Trade Mister Muhammad Lutfi said the RCEP agreement should be immediately ratified so that it could be implemented in August as initially targeted.

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Increasing exports of non-oil and gas goods and services with high added value is one of the main trade strategies of the Trade Ministry for the 2020-2024 period. The ratio of the country’s exports of services to gross domestic product (GDP) is targeted to increase to 2.8 percent in 2021 and to 3.0 percent by the end of 2024.

According to Lutfi, in order to further increase trade cooperation and expand export markets, the Trade Ministry is strengthening and reviewing trade representatives abroad. Trade attachés and the Indonesian Trade Promotion Center are also working together with the Indonesian diaspora through the establishment of the Indonesia Circle, which will be launched at the opening of the international trade exhibition Trade Expo Indonesia on Oct. 19. (JOS/LAS/HEN/BEN)

This article was translated by Hendarsyah Tarmizi.