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NEWS UPDATES Asean Affairs        14  March 2011

Indo businessmen worry over Japanese investment

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While economists said in preliminary assessments that damage from Japan’s earthquake and tsunami would have a limited impact on world markets, some Indonesians were uncertain.

Businesspeople and government officials sounded a note of concern about a potential disruption to trade and investment commitments from Japan, one of the region’s economic powerhouses.

Franky Sibarani, deputy secretary general of the Indonesian Chamber of Commerce and Industry (Kadin), said Japan was Indonesia’s main export destination.

“Demand for Indonesian goods exported to Japan may fall,” he said. Among the top items exported are processed food, footwear and textiles.

According to Central Statistics Agency (BPS) data, Japan is one of Indonesia’s biggest trading partners. It was the biggest destination of Indonesia’s non-oil and gas exports last year and the second-biggest in terms of imports.

Indonesian exports to Japan were US$16.49 billion last year, while imports totaled $16.9 billion.

“However, and with all due respect, we may see an increase in exports for products such as cement and steel that are needed for reconstruction,” Franky said.

“Imports will heavily depend on how quick the electricity supply in Japan can be restored. If the electricity can be quickly restored, manufacturing can resume operations and it will minimize its impact on Indonesian imports.”

Imports of cars, chemicals and electronics would likely see a decline, he added.

Sony, Toyota, Honda and Nissan were among the companies that temporarily halted operations in the aftermath of Friday’s 8.9-magnitude earthquake.

Potential Japanese investment in Indonesia may also be disrupted as Japan recovers from the disaster. Toyota, through its subsidiary Daihatsu, said in February that it planned to invest 20 billion yen ($244 million) to construct a factory in Indonesia that would produce low-cost cars. The factory was scheduled to begin operations in 2013.

The Jakarta administration said on Sunday that construction for its 120 billion yen Mass Rapid Transportation project, funded by the Japan International Cooperation Agency, was still expected to start next year.

Hatta Rajasa, the coordinating minister for the economy, expressed optimism that the disaster would not affect the two countries’ economic relationship and hoped Japan’s commitment to investing in Indonesia would remain unchanged.

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