As the UK Pivots to ASEAN, Indonesia’s President Jokowi Visits London

Indonesia’s President Joko Widodo (Jokowi) has completed his first UK trip as President on an EU tour also taking in Germany, Belgium and the Netherlands. The visit saw several deals signed, including a £4 billion (US$5.75 billion) aerospace deal for Airbus and Rolls Royce to upgrade the fleet of Indonesia’s flagship airline Garuda Indonesia.

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Indonesia is the world’s third largest democracy, and the world’s largest Muslim majority nation. The UK is a significant investor in the country, with UK companies investing in 267 projects in the country in 2015, realizing annual investment of US$503.22 million.

When the UK’s Prime Minister Cameron visited Indonesia in July 2015, four memoranda of understanding (MoUs) were signed relating to aviation, maritime affairs, research and innovation, and terrorism and transnational crime. During that visit, Cameron announced that the two countries would cooperate in constructing a microsatellite as a part of the countries’ bilateral maritime cooperation.

Jokowi represents the 16th largest economy in the world, which is forecast to be the seventh largest by 2030. The archipelago of 250 million residents grows by 4.5 million people each year, equivalent to the entire population of the Republic of Ireland.

Indonesia’s economy is forecast to grow at 5.3% in 2016, just below the average of 5.4% GDP growth over the 2000-2015 period. The economy has recently been hit by the global commodity slump and slowdown in China, which led to 2016 growth being downgraded from 5.5% by the World Bank.

Indonesia’s Maritime Security

Indonesia’s ambassador to the UK Dr Rizal Sukma mentioned in March in an interview with Asia House, that the issue on the top of his agenda as ambassador was to build maritime cooperation.

His Excellency revealed that Indonesia intends “to build ports and increase our capacity in port management. It’s also about ship building, ship repairing, maritime safety, fishing, and security cooperation between the UK and Indonesia such as coastguards and defence cooperation.”

Indonesia and the UK signed an MoU in September 2014 to enhance bilateral cooperation between their navies in information sharing, exercises, education training, logistics support and exchanges of visits.

Maritime cooperation has been at the top of the agenda of late, with several visits to the UK by Indonesia’s Minister of Maritime Affairs and Fisheries Susi Pudjiastuti. Since the Minister assumed office, there has been a mixture of a tough crackdown on foreign fishing in Indonesian waters involving sinking captured vessels, and encouragement of investment in the country’s seafood processing industry.

Opportunities for UK Education

Indonesia represents a large market for British higher educational organisations within Britain, and for British investors in the country’s education sector. According to British Council estimates, Indonesia will have 7.7 million enrolled in tertiary education courses by 2020, over double that of Japan.

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The Council expects Indonesia to be the fourth fastest growing tertiary education market in the world, and to have the world’s fifth largest such markets by 2020. The Council also predicts that the UK will be the world’s second most significant host for international students in 2020.

Companies in the UK education sector would do well by capitalizing on the opportunities in secondary and tertiary education in Indonesia.

UK Exports to Indonesia

UK businesses exporting to Indonesia benefit from the country’s membership of the Association of Southeast Asian Nations (ASEAN), a regional free trade area.

In 2015, some of the fastest growing UK exports to Indonesia were:
–           US$4.08 million in machinery for plants and laboratories excluding heating implements, a 76.29% increase from 2014;
–           US$2.85 million in electric generating sets and rotary converters, a 190.13% increase from 2014; and
–           US$2.86 million in machinery for use in the manufacture of rubber, plastic and other products, a 262.15% increase from 2014.

Indonesia’s domestic consumption is responsible for 55.8% of the country’s GDP, which has helped to protect it from the global economic crisis.

Indonesia’s Improving Infrastructure

President Jokowi was able to put into place much needed energy subsidy reforms in the country, and as such has benefited from the global oil price crash. Reducing subsidies has allowed the government to pursue its infrastructure investment programme, focusing on the ports and roads which connect this archipelago of over 17,000 islands.

Related: Indonesia: World Bank Pledges $10bn for Infrastructure, Poverty Reduction

On his UK visit, he highlighted the openness of the country to large scale foreign investment in infrastructure projects, using the example of a US$5.5 billion Chinese-invested high speed rail link between Jakarta and Bandung.

Practical Steps to Investing in Indonesia

President Widodo explained the vision behind the country’s reform process in his address to the 2016 UK-Indonesia Business Forum, explaining that it was defined by the concepts of “openness and competition”.

If you are considering investing in open Indonesia, it pays to have local assistance in the investment process. Most foreign investment is administered by the Investment Coordinating Board (BKPM). Investment processes vary by industry, and separate licenses are issued for investors in banking and finance, insurance, and oil and gas. BKPM is currently pioneering it’s one-stop shop three hour investment license service for special cases, though most should expect the licensing process to take significantly longer.

For a free consultation on investing in Indonesia, get in touch with Charles at: charles@csmall.co.uk

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