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New Indonesia-US partnership unlikely to get off ground without reforms, analysts say

Jakarta Post - November 17, 2023

Yvette Tanamal, Jakarta – Indonesia's recently elevated status as the United States' comprehensive strategic partner remains insufficient as a means to boost Jakarta's standing among Washington's trading partners, analysts have said.

Indonesia was still in dire need of reforming some of its trading mechanisms, and the freshly announced Comprehensive Strategic Partnership (CSP) offered little concrete cooperation that could upgrade the scanty bilateral trade value between Indonesia and the US, analysts said.

Earlier this week, President Joko "Jokowi" Widodo visited the White House in Washington, DC, where he met with his US counterpart Joe Biden in preparation for the Asia-Pacific Economic Cooperation (APEC) forum. The visit saw the two leaders announce a "new era" of cooperation through the CSP, which entails cooperation at the highest level of government.

Twenty-two programs were included in the CSP, including economic cooperation bolstering Jakarta's emerging enterprises, climate and energy sectors, defense cooperation and people-to-people collaboration. Over US$15 billion in pledges have also been made.

But these fresh commitments to strengthen the economic relationship between Indonesia and the US were still lackluster, economists said at a briefing at the Jakarta-based Centre for Strategic and International Studies (CSIS) on Wednesday. They called for restraint against any early celebrations.

For one, economic cooperation with the US is typically heavy on business-to-business (B2B) agreements, instead of government-to-government (G2G) pacts, the former of which are scarcely seen in the new CSP.

Of the 22 programs announced with the CSP, the vast majority of agreements involved the US government and its agencies, except for the partnership plan between Jakarta and ExxonMobil, the world's largest private petrochemical company, for an investment of up to US$15 billion on decarbonization.

The rest of the agreements were mainly made with, among others, the US International Development Finance Corporation (DFC), US Department of Commerce and the US Trade and Development Agency (USTDA).

"Without involving the private sector, these agreements would typically end up as mere pacts. It's very rare that they would actually be realized or implemented optimally," said CSIS executive director Yose Rizal Damuri.

The weaknesses of Indonesia's CSP were further highlighted when put in contrast with a similar agreement made between the US and Vietnam, the only other Southeast Asian country with such a partnership, other economists pointed out.

"In [Hanoi's] case, the CSP was succeeded by the American private sector relocating their supply chains, such as research centers and manufacturers, to Vietnam. This includes [tech companies] Microsoft and Nvidia, for example, which are highly competitive companies," said CSIS economist M. Habib Abiyan Dzakwan.

The primary reason for Indonesia scoring a lesser deal than Vietnam, the economists pointed out, lay in Jakarta's lack of logistics performance, facilities for trade and import, as well as poor ease of investment, all of which could act as repelling forces against interested private companies.

Yet with deepening geopolitical divides and an increasingly fragmented global economy, the experts said, it was in Indonesia's interest to ensure that the country could have a stronger trade relationship with the US, especially considering Jakarta's much greater bilateral trade value with Beijing.

In 2022, the total bilateral trade value between Indonesia and the US totaled at some $47 billion, while Indonesia's figure with China was more than double at $122 billion.

"Let the CSP [provide an impetus] for the reform of Indonesian trade mechanisms and facilities," another CSIS economist, Dandy Rafitrandi, said.

Source: https://asianews.network/new-indonesia-us-partnership-unlikely-to-get-off-ground-without-reforms-analysts-say