ASEAN KEY DESTINATIONS
Indo VP goes after China investments
Indonesian Vice President Boediono has called on Chinese businesses to open factories in Indonesia to benefit from the country’s wealth of natural resources, favorable labor conditions and growing domestic market.
“This is the right moment for Chinese entrepreneurs to increase investment in Indonesia, as we have huge potential,” the vice president said on Saturday during a business dialogue at Hotel Grand Sahid Jaya in Central Jakarta, as part of Chinese Prime Minister Wen Jiabao’s visit.
The Chinese head of state’s first visit to Indonesia came as Southeast Asia’s largest economy has seen its balance of trade with China deteriorate over past years, with the implementation of the Asean-China Free Trade Agreement only accelerating the trend.
Local industries, especially in the textile, footwear and garment sector, have suffered as Chinese goods have flooded the market.
“We can use this opportunity to balance trade, as well as open up cooperation and investment,” Boediono said. “China ranks 13th in investment in Indonesia, far below other countries.”
Chinese investment of just $170 million last year will be dwarfed by an expected bilateral trade volume of $40 billion this year, which is expected to double by 2015.
China’s exports to Indonesia reached $20.4 billion last year, while Indonesia’s shipments to China totaled $15.7 billion — a trade deficit of $4.7 billion, according to government data. Aside from the poor showing against China, Indonesia has been a strong performer in global commerce, running an overall trade surplus of $22 billion.
“Indonesia expects that China will also be a locomotive of development here,” Boediono said. .
“Indonesia has a large, young population that over the next 10 to 30 years will be [extremely productive]. Meanwhile, census data in China shows a contrary situation that opens the way for complementary cooperation, mainly in industry.”
China has been actively seeking investment opportunities abroad as labor costs at home have been rising in line with growth, and the government is eyeing a transformation to a value-added economy rather than relying only on manufacturing.
“Labor costs in China are becoming less competitive compared to what Indonesia can offer. So, this is a strong reason for the Chinese to relocate their industries here,” said Poltak Hotradero, head of research at the Indonesia Stock Exchange.
Letters that do not contain full contact information cannot be published.
Letters become the property of AseanAffairs and may be republished in any format.
They typically run 150 words or less and may be edited
submit your comment in the box below