Indonesia Has Not Received Optimum Benefits from the US

The improvement in the status of Indonesia-US relations is expected to be followed by an increase in economic relations between the two countries. Currently, Indonesia is not yet the main destination for US investment in Southeast Asia.

The following article was translated using both Microsoft Azure Open AI and Google Translation AI. The original article can be found in Indonesia Belum Terima Manfaat Optimum dari AS

KOMPAS/KRIS MADA

Director of Regional Management of the ASEAN-US Business Council, Brian McFeeters (third from the left), and ASEAN Deputy Secretary General, Michael Tene (fourth from the left), during the ASEAN-US Business Council event on Monday (27/11/2023) in Jakarta. This presentation marks the launch of the 6th edition of ASEAN Matters for America, America Matters for ASEAN. The ASEAN-US Business Council collaborated with the East-West Center in Hawaii and the ISEAS-Yusof Ishak Institute in Singapore to compile the report.

JAKARTA, KOMPAS - The value of investment by the United States in Indonesia, and vice versa, is not yet comparable to that of other countries in the region. Indonesia needs to optimize its status as the largest economy in Southeast Asia.

The defeat of Indonesia against other countries in Southeast Asia is summarized in the 6th edition of ASEAN Matters for America, America Matters for ASEAN. The ASEAN-US Business Council collaborated with the East-West Center in Hawaii and the ISEAS-Yusof Ishak Institute in Singapore to compile the report.

The ASEAN-US Business Council (US-ABC) launched the sixth edition of its report in Jakarta on Monday (27/11/2023). "Jakarta is the home of the ASEAN Secretariat," said US-ABC's Regional Manager Director, Brian McFeeters.

Also Read: Tough Challenges Facing IPEF

The report outlines the economic, political, and cultural interactions and impacts of the US-ASEAN relationship. The analysis was conducted at both national and local levels in the US and each ASEAN member state.

The report revealed, among other things, that the leader of the US frequently visits Indonesia. Meanwhile, from the region, the leader of Singapore most often visits the US.

Singapore also frequently conducts military exercises with the United States. There have been 15 combined exercises between the US and Singapore from 2003 to 2023. Meanwhile, with Indonesia and Malaysia, there were only 12 each.

Economic relations

Singapore is not only the most frequent country to practice war with the US, but it is also the destination and biggest source of investment for the US compared to other countries in ASEAN.

Kompas

The meeting between Indonesian President Joko Widodo and US President Joe Biden at the White House in Washington DC on Monday (13/11/2023) US time or Tuesday (14/11) WIB, resulted in an agreement to enhance strategic partnership.

In the past 20 years, Singapore has invested nearly 20 billion US dollars in the US. Indonesia's investment in the US is the lowest, only 83 million US dollars in 2003-2023.

The number of American companies in Indonesia is also very low compared to Singapore, Malaysia, Thailand, and the Philippines. Only 455 US companies operate in Indonesia.

However, the US-ABC report indicates that the Indonesian economy is much larger than that of Singapore, Malaysia, Thailand, and the Philippines. Out of the $3.6 trillion US dollars in ASEAN's gross domestic product (GDP), according to the US-ABC report, Indonesia contributed $1.32 trillion US dollars. The remaining amount was contributed by the nine other members of ASEAN.

If the GDP of the region is combined, ASEAN will become the fourth economic power in the Indo-Pacific. ASEAN's GDP is below that of the United States, China, and Japan.

Also Read: IPEF, a Two-Bladed Sword for United States Influence

Regarding investment choices, according to McFeeters, every company and investor has their own considerations. Companies and investors make a thorough evaluation before deciding to do business in a particular country.

On the other hand, he sees the potential for economic relations between the US and Indonesia to further increase in the future. Various agreements have been made to enhance the relationship between the US and Indonesia.

On November 13, 2023, Indonesia and the United States officially upgraded their relationship status. From comprehensive, the US-Indonesia relationship is now at the level of comprehensive strategic or the highest level of relationship.

Trading facilities

Indonesia's focus after the increase in status, as stated in the written statement from the Indonesian Ministry of Coordinating Economic Affairs, includes improving economic cooperation with the US. Among other things, Indonesia hopes that the US Congress will soon approve the extension of the trade facility called the Generalized System of Preferences (GSP). GSP recipient countries can enjoy exemptions or at least reductions in export tariffs to the US.

KOMPAS/KRIS MADA

Director of the ASEAN-US Business Council Brian McFeeters presented on the ASEAN-US relationship on Monday (27/11/2023) in Jakarta. The presentation marked the launch of the 6th edition of ASEAN Matters for America, America Matters for ASEAN. The ASEAN-US Business Council partnered with the East-West Center in Hawaii and the ISEAS-Yusof Ishak Institute in Singapore to compile the report.

For Indonesia, the extension of GSP is important to enhance the supply chain relationship with the US. Indonesia stated that the extension will reduce the dependence on China's supply chain.

Since 2018, the US has also wanted to reduce its dependence on China. Indonesia hopes to become one of the substitute suppliers for the US market.

Indonesia hopes to be a vital supplier of minerals for the electric vehicle industry in the United States. According to the US Department of Energy's list, Indonesia has four out of the 50 critical minerals prioritized by the US. These include nickel, cobalt, copper, and aluminum. Indonesia also has reserves of various rare earth metals.

Also Read: IPEF Builds Early Warning Network for Supply Chain Disruption

US businessmen are expected to invest in the processing of minerals in Indonesia. So far, China dominates the mineral processing industry.

Cooperation

Indonesia's efforts to enhance its economic relationship with the US also includes joining the Indo-Pacific Economic Cooperation Framework (IPEF). Thus far, the US and its partners in the IPEF have agreed on pillar II or supply chain issues. As for the pillars of clean economy and energy transition, taxation, and anti-corruption, technical matters still need to be addressed. The substantial aspects of pillars III and IV of the IPEF have already been agreed upon.

While negotiations on pillar I, namely trade, have not been concluded. The Indonesian Ministry of Economy Affairs states that it is still necessary to discuss three issues in pillar I. The parties involved in IPEF are still negotiating about agriculture, labor, and the environment. These negotiations on this pillar will continue at the beginning of 2024.

Kompas

The Indo-Pacific region is receiving significant attention amidst China's rise as a major power capable of competing with the United States. The region is also becoming increasingly important because the world's growth epicenter is now in the Asia-Pacific. The combination of these two factors has made the Indo-Pacific the battleground for the two world powers, China and the US.

Indonesia, among others, raised concerns about subsidies regulated in the US Inflation Reduction Act (IRA). The law discusses, among other things, the US Government's subsidies to encourage energy transition.

Lots of opportunities

McFeeters stated that there are many opportunities offered by Indonesia and other ASEAN countries. Therefore, the US is committed to continuing its presence in ASEAN.

Deputy Secretary-General of ASEAN, Michael Tene, stated that the United States is an important partner for ASEAN in various fields. Economically, Washington has invested billions of US dollars in the region. American investment serves as one of the driving forces for the economy in the area.

Cooperation between the US and ASEAN has been established in various fields. Those various collaborations not only contribute to the welfare and stability of the region.

KOMPAS/KRIS MADA

The Deputy Secretary-General of ASEAN, Michael Tene, presented on the ASEAN-US relationship on Monday (27/11/2023) in Jakarta. The presentation marked the launch of the 6th edition of ASEAN Matters for America, America Matters for ASEAN. The ASEAN-US Business Council collaborated with the East-West Center in Hawaii and ISEAS-Yusof Ishak Institute in Singapore to compile the report.

The international community also benefits from the prosperity and stability of the region. This is partly due to Southeast Asia being an important market and trading route in the global economy.