Strong Partnership Potential: Türkiye-Indonesia

The participation banking sector, which is advancing with immediate and confident steps in Türkiye, is an opportunity for both Indonesia and Türkiye.

COUNTRY PANORAMA 07.04.2022, 15:28 07.04.2022, 15:48
Strong Partnership Potential: Türkiye-Indonesia

Indonesia and TÜRKİYE are two friendly countries that have the potential to expand their bilateral relations, especially in the economic field. While Indonesia can benefit from TÜRKİYE's strategic position in finding a place for itself in new markets, TÜRKİYE also intends to establish a strong partnership with Indonesia within the scope of the Asia Anew strategy. As DEİK/TÜRKİYEIndonesia Business Council, we are working to develop solid and sustainable bilateral relations through the process we carry out jointly with our Embassy and Commercial Counselors. Despite the pandemic, we continue to do our homework through online meetings with a significant determination regarding what needs to be done to embody the 10 billion dollar trade volume figure, which was determined as the target by the two countries' leaders.

Including Indonesia among the target countries in the export action plan announced by our Ministry of Commerce is very valuable for us. Indonesia, the world's 16th and Southeast Asia's largest economy is an important country with a population of nearly 270 million and a location that opens to an Asian market of approximately 650 million. In addition to the diversity of its natural resources and raw materials, cheap labour makes the country's potential investment areas attractive for foreign investors. New policy decisions are taken to increase foreign investments in Indonesia and create an investment environment that can compete with neighbouring and surrounding countries. According to the estimations of many international institutions, by 2050, it will be among the top 5 strongest economies in the world.

According to the data released by the Indonesian Statistical Institute, Indonesia's Gross Domestic Product (GDP) increased by 3.69% in 2021 compared to the previous year. In this context, the per capita income in 2021 was 4,349.5 dollars. The Java island made the largest contribution to GDP in 2021 (57.89%). According to Indonesian data, TÜRKİYE-Indonesia's foreign trade volume is 1.5 billion dollars as of September 2021. Indonesia's export to TÜRKİYE is 1.196 billion dollars, and Indonesia's import from TÜRKİYE is 300 million dollars.

ASEAN's Regional Comprehensive Economic Partnership Agreement (RCEP), of which Indonesia is a member, has become the world's most significant free trade agreement. This agreement covers sectors and areas such as trade, services, investments, e-commerce, telecommunications and intellectual property rights. It aims to gradually reduce the customs duties between a total of 15 Asia- Pacific countries in the coming years, facilitate trade with the standard trade rules to be determined, remove non-tariff barriers, and facilitate trade between the group countries through practices such as logistics facilitation. The agreement is expected to be ratified by Indonesia in 2022. Because, if it is approved, the Indonesian market will find serious buyers, and it will gain experience in expanding this market internationally.

Considering the prominent sectors in Indonesia, its contribution to exports, and its employment, it is seen that the agricultural sector has an important place in the country's economy. Although Indonesia is a significant agricultural producer, it is also a country that has to import to meet its food needs since its production is limited to specific products and is not self-sufficient. Since food and agriculture are defined as sensitive sectors, these are also the most protected sectors. However, even though this situation protects the domestic industry, it also prevents foreign investment and, therefore, advanced technology from coming to the country in these sectors. It is important for sustainable relations that an agricultural country like TÜRKİYE exports its goods to Indonesia, buys goods from Indonesia while establishing trust by maintaining this balance.

One of the prominent sectors in Indonesia is industry. While the industry is adversely affected by the competition of cheap industrial goods based on cheap labour and konularge- scale investment and production advantages of countries with Free Trade Agreements over ASEAN with Indonesia, such as China and India. On the other hand, it is positively affected by the benefits such as technology transfer and financing facilities created by foreign capital inflows. Having the fourth largest population globally, Indonesia has an extensive workforce and significantly diverse natural resource volumes. Automotive, power generation, chemicals, textile, machinery, metalworking, mining products processing, machinery and electronics, food, cocoa, palm oil and rubber processing industries stand out in the Indonesian industry. Considering both the workforce and multi-faceted industries, the relations they will develop with TÜRKİYE are likely to yield positive results in different sectors.

The process of relocating the capital of Indonesia presents excellent opportunities for the Turkish construction industry, especially for the reconstruction and improvement of infrastructure, roads and buildings in the new capital. Lack of infrastructure is one of Indonesia's biggest problems. To improve the country's infrastructure conditions, largebudget infrastructure programs, which can be defined as infrastructure mobilisation, came to the agenda as of 2015-2019 and 2020-2024 periods. In this way, significant investments are made in all areas, including highways, seaways, railways and airways.

There are significant opportunities in the healthcare and construction sectors, especially in line with PPP projects between the two countries. There are studies on city hospitals. There are very valuable partnerships with Indonesia in the defence sector. As DEİK/TÜRKİYE-Indonesia Business Council, we have created a working group plan in the fields of energy, defence, food, infrastructure - construction and textile with our Counterpart Organisation KADIN, and we will ensure that these working groups are put into practice as soon as possible.

Despite Indonesia's highly dynamic economy and one of the world's largest Muslim populations, it has a small percentage in the global Islamic finance and participation banking system. Although it has improved itself since 2018, especially alongside Saudi Arabia and Malaysia, it can be said that it is still behind. The participation banking sector, which is advancing with fast and confident steps in TÜRKİYE, should be an opportunity for both Indonesia and TÜRKİYE to conduct the commercial relations to be established through this channel.

The general opinion of foreign investors investing in Indonesia, as well as exporting and importing companies is that the working patterns and tempo of Indonesians are relatively slow compared to the expectations of our country's businesspeople, rapid progress cannot be achieved, and difficulties are encountered in establishing mutual trust. It is imperative to develop the banking diaspora and work more closely with trade consultancy for Turkish business people to carry out their work more comfortably and safely in Indonesia.

The pandemic has affected Indonesia's foreign trade in oil and gas exports, raw materials, and capital goods imports. To improve this situation, I think that they should limit the export/import bans on certain goods affected by the epidemic and stimulate trade by providing subsidies to the affected companies and investors who want to invest. In this way, it can be more articulated to international trade.

TÜRKİYE and Indonesia should harmonise with the new generation of global trends while developing their relations. The two countries' partnerships in net-zero carbon will provide additional opportunities for developing bilateral and multilateral socio-economic cooperation. A comprehensive plan must be designed to ensure that people and communities benefit from the transition to a greener economy. Strengthening institutions in the electricity sector, aligning utilities with net-zero carbon strategies, reforming renewable energy price controls and controlling coal subsidies will help attract the private sector. Improving the income adequacy of large companies will also be necessary to finance their investment needs.

The COVID-19 pandemic has challenged the world's economy. It allowed countries that are geographically distant from each other to improve their interactions through virtual platforms. TÜRKİYE and Indonesia can benefit from the opportunities created by this challenging situati.

İlhan Erdal

Chairman of DEİK/Türkiye-Indonesia Business Council 

Comments (0)
In order to comment, please login