Fedina S. Sundaryani, Jakarta – The United States has called on the Indonesian government to remove business barriers it claims are impeding its companies from fully penetrating the domestic market.
During a business meeting and agreement signing ceremony on Friday, US Vice President Mike Pence said that although the US was enthusiastic about investing in Southeast Asia's largest economy, many obstacles remained that held US companies back from truly pouring their money into the country.
"US companies face many barriers and difficulties in the Indonesian market, including intellectual property, the lack of transparency, requirements in manufacturing to include local content to be able to sell products in the Indonesian market," he said matter-of-factly.
While the US acknowledges President Joko "Jokowi" Widodo's efforts to reform the business and investment environment in Indonesia, it insists that "there must be more to be done."
"The truth is a stronger American economy is a stronger economy for Indonesia and all trading partners. The US is a driver for global growth, under President Donald Trump, we will be driving global growth like never before," he said.
Businesses are no stranger to the issues highlighted by Pence due to Indonesian government enforcement of increased use of local content in the oil and gas sector and telecommunications industry.
The US previously filed a complaint at the World Trade organization (WTO), challenging Indonesia's policies on the imports of horticulture and animals. The WTO sided with the US and fellow petitioner New Zealand.
Since taking office in late 2014, Jokowi has made deregulation part of his administration's focus. It has issued more than a dozen economic policy packages to improve the business climate and investment.
The packages helped Indonesia climb 15 places to 91st place in the World Bank's Doing Business 2017 report from 106th place a year prior.
However, despite the improvement, Investment Coordinating Board (BKPM) chairman Thomas Lembong agreed that Indonesia still had much to do to raise its competitiveness in the global market and to attract investments from across the globe, not just from US companies.
He said overregulation was bad even for local industries as they needed to import materials to enable them to produce goods that comply with international standards.
The BKPM will continue working to improve the economy and to cut red tape and is certain there will be more initiatives to simplify regulations and reduce trade barriers in the next few weeks.
While the US has traditionally invested in the mining and upstream oil and gas sectors, Thomas said the American Chamber of Commerce (AmCham) in Indonesia had indicated that it would increase investments in the manufacturing, technology and digital sectors.
Particular attention in the digital sector must be paid toward global data centers that use cloud computing, due to vague existing regulations, Thomas added.
On Friday, the US and Indonesia signed US$10 billion worth of agreements in trade and investment in the energy and defense sector.
The agreements included a $6 billion deal between US-based ExxonMobil and state-owned oil and gas giant Pertamina to provide liquefied natural gas (LNG) for the latter for 20 years, starting in 2025.
State-owned electricity firm PLN and US-based Pacific Infra Capital LLC signed a $2 billion deal as well to implement an advanced metering infrastructure system in Indonesia.
The US and Indonesia also saw technology and manufacturing firm Honeywell and state-owned aircraft manufacturer PT Dirgantara Indonesia (DI) secure a contract, in which the former will supply 34 TPE331 turboprop engines to DI over the next four years.
The value of Friday's agreements was lower compared to those made during former US president Barack Obama's visit in 2011.
Back then, Indonesia's biggest low-cost carrier PT Lion Mentari Airlines (Lion Air) made a $21.7 billion deal with US aircraft manufacturer Boeing for the purchase of 230 aircraft. This was Boeing's largest commercial order at the time.
According to data from the BKPM, the US invested $1.16 billion in 540 projects in Indonesia last year, an increase from $893.16 million and 261 projects in 2015.
In terms of trade, the Indonesia-US trade value stood at $23.4 billion in 2016, staying flat compared to 2015.
Pence's visit to Indonesia is highly significant as it was conducted not long after the Trump administration was established earlier this year and Indonesia was one of the first countries on Pence's Asia-Pacific tour.
Indonesian Employers Association (Apindo) deputy chairperson Shinta Widjaja Kamdani said the US was no longer interested in multilateral agreements and any trade deals must be done bilaterally.
"We already have a strategic partnership and now we have to develop that to specifically understand what both countries want from each other. We have to do it soon because [other countries] will also be competing [for investment]," she said.
Indonesia is now awaiting a follow-up to the US' generalized system of preference, which is expected to decrease duties for Indonesian manufactured goods exported to the US.
While Pence made only a brief mention of miner PT Freeport Indonesia, a subsidiary of US-based Freeport-McMoRan Inc., Coordinating Maritime Affairs Minister Luhut Pandjaitan confirmed on Thursday that the issue was briefly discussed between Pence and Jokowi.
Source: http://www.thejakartapost.com/news/2017/04/22/us-criticizes-ris-business-barriers.html