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NEWS UPDATES Asean Affairs  8 November 2010

Obama may discover sales resistance in Indonesia

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In boosting US exports, the Obama administration has looked to Indonesia and other Asean nations plans to spend on infrastructure, expecting it to boost American makers of heavy equipment and other top companies.

China, Japan and South Korea have made deep inroads into the Indonesian market during the past 15 years, even as the United States slipped as a source of its imports, and nearby countries such as Malaysia and Australia are aiming to benefit from increasingly tight regional ties.

Often backed by government financing, firms from other Asian nations already are putting up the power plants, building the roads and coordinating major projects.

Local energy companies boast of importing new bulldozers and machinery from China, and when Indonesia announced the first 10 exploration contracts under a major geothermal energy program, US firms were held to a minor role - a disappointing outcome in a market the White House has set as a priority.

As part of an effort to kindle the American presence, President Obama has scheduled a two-day stop here, beginning Tuesday, on his tour of Asian nations considered vital to the US economy.

The Obama administration hopes to double total US exports in the next few years to generate American jobs.

The administration has identified six countries where officials believe the United States can do better, and Indonesia is by far the biggest of those target markets.

US firms are long-established here in the energy and mining industries, and Boeing is in the midst of supplying upstart discount carrier Lion Air with dozens of new planes.

The latest group of 30 aircraft was financed with help from the Export-Import Bank.

But US officials say that recent regulations adopted by Indonesia - rather than opening the market in areas of US expertise - have heightened restrictions on industries important to US exports, such as pharmaceuticals, energy and telecommunications. Indonesia has long favored local companies over foreign ones.

It also coaxes foreign business partners to create jobs locally rather than back home.

Several new Indonesian policies aim at reinforcing those trends, according to a recent Commerce Department report.

"The Indonesian government has not really decided what role it wants the private sector to play," said James Castle, a longtime business consultant here and vice president of the American Chamber of Commerce in Indonesia.

He said Indonesia gives an edge to companies from countries willing to grant concessions.

Other nations "come with money to support their businesses. The US government does not, then we complain about access," Castle said, pointing to Japan's commitment of $54 billion to improve roads and shipping facilities.

As the world's largest Muslim country, Indonesia figures prominently in US thinking on Asia.

Indonesia's economic policy remains a work in progress. Some here describe it as "plutocrats versus technocrats" - with certain government agencies pushing to open the economy while others hew to economic nationalism or work to protect influential local interests.

"The Americans who come here are doing well," said Sofjan Wanandi, chairman of the Employers Association of Indonesia, a business lobby.

"But they only want to sell. We want investment and added value. Put a refinery here. Put a petrochemical plant here. Negotiate."

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