American Indonesian Chamber of Commerce


Bridges Not Barriers

Bridges Not Barriers

February 2021

by Wayne Forrest

I often hear the idea that during the past 4 years the US government, apart from its Navy, has not been as engaged with Indonesia or Southeast Asia as many would like. The message: China’s influence grows in the vacuum of a lack of US engagement. While there may be some truth to this notion, in my opinion the US never “went away”. Although President Trump did not pay much attention to SEA and Indonesia, some in his Cabinet did. Indonesia received Vice President Pence, Secretary of State Pompeo, Commerce Secretary Ross, as well as the heads of US Ex-Im Bank and the Development Finance Corporation, to name a few. Indonesia’s Defense Minister, Coordinating Minister for Investment and Maritime Affairs, Minister of Industry, Minister of Finance, and others visited Washington as well. Many Indonesians welcomed President’s Trump’s policies, especially the hike in Chinese tariffs which made their products more competitive. They also raised the opportunity that Indonesia could capture significant investment from US companies relocating their production. Some Indonesians found the more transactional, bilateral nature of the Trump Administration appealing.

However, for those who may think our influence has diminished I submit that all is not lost. An American citizen was recently elected as a bupati (district head) in Sabu Raijua, a region in one of Indonesia’s poorest regions, East Nusa Tenggara. Who knows, if his US passport hadn’t been discovered we might have had a “Manchurian Candidate” working the inside. Of course, I’m just kidding. Our “American” is merely an Indonesian who emigrated to the US and obtained a US passport and never revealed it to his home country upon his return. Indonesians cannot hold two passports simultaneously.

But signs are positive that once the US overcomes the COVID crisis, we may see an uptick in US engagement with Indonesia. Much will not occur until the vaccines are widely distributed but the groundwork for more diplomacy and multilateral cooperation is being set. Just this week, President Biden highlighted the important role ASEAN can play in responding to the coup in Myanmar. I would expect that Biden himself will make an annual visit to one of the southeast Asia leadership forums beginning in 2022. Meanwhile some of the benefits of Trump’s approach to trade and investment such as revamping Ex-Im Bank and Development Finance Corporation, will begin to roll out. In January Ex-Im Bank announced it would support US exports by matching Chinese financing offers. The DFC expects to have a Managing Director in Indonesia by mid-February.

Although Indonesia’s has deals with Sinovac (from China) and access to worldwide vaccines at reasonable prices through its membership in the Covax facility, I do expect bumps in the road such as logistics and cold storage capacity. We also can’t predict vaccine acceptance even though they will be declared halal. But I am optimistic Indonesia will overcome these challenges to achieve herd immunity. Notwithstanding the blessings of on-line meeting technologies and their boost to the digital economy, the physical return of tourists and traveling business people (who may account for 10% of GDP) is going to be crucial.

I am concerned that Indonesia’s priority on investment promotion and front-end reform, as valid and helpful as that has been, takes emphasis away from the trade window and their own health sector and pharma policies. The US has an opioid epidemic that is being assisted by an herbal product substitute (kratom) worth $billions in revenue that Indonesia officially wants to ban in 2022. 95% of US imports of the product come from Indonesia. Meanwhile other countries such as Thailand may eventually come on-stream as a supplier. The government should put a greater effort into researching and regulating kratom as well as other natural products from its rain forests. Hopefully it will back away from banning a product that is legally sold in the US.

Similarly, local content regulations for imported drugs, high tariffs on medical devices, opposition to licensing foreign educated medical professionals, and other roadblocks to hospital investment, should be seriously re-evaluated. Twelve years ago, this uncooperative spirit led Indonesia to close the US Navy Research Lab in Jakarta, a tremendous early warning system for flus such as COVID. Although COVID transmission rates are well below those in the US, mortality rates in Indonesia are much higher due to lower per thousand rates of doctors, hospital beds, and equipment. Notwithstanding the mistakes our government has made during the pandemic, I do hope the Biden administration’s diplomacy with Indonesia prioritizes a greater openness for healthcare. Similarly Indonesia can seek a similar openness in the US for its own healthcare products. The future health of our planet requires more not less cooperation, bridges not barriers.

(These views are the author’s and may not reflect those of AICC or its members.)