Indonesia Hopes to Export Goods, Not Workers, to Saudi Arabia


MARCH 07, 2017

Jakarta. Indonesian businesses should expect a steady increase in trade relations and closer cooperation on infrastructure development projects with Saudi Arabia following King Salman bin Abdulaziz Al Saud's visit to the country this month.

The two countries' governments agreed to develop closer economic ties last week, aiming to restore a $5 billion loss in trade in recent years.

"We have met with Saudi delegation and are currently exploring new opportunities for trade in the food and beverage sectors," Shinta Kamdani, deputy chairwoman of the Indonesian Chambers of Commerce and Industry (Kadin), told the Jakarta Globe on Tuesday (07/03).

Achmad Wijaya, another Kadin official, said the kingdom is looking to increase imports of nickel, gold and other related commodities from Indonesia.

"Other than migrant workers traveling to Saudi Arabia, the total export value between our countries is quite low," Achmad said.

Although the number of Indonesian migrant workers in Saudi Arabia has dropped to around 960,000 from a peak of 1.4 million in 2010, the value of remittances sent back to the archipelago has remained constant at $2.8 billion annually.

That is more than double the amount Indonesia exports to the kingdom, which amounted to $1.33 billion last year. Strikingly, Indonesia imports around $2.73 billion in goods from Saudi Arabia, while total trade between the two countries dropped 26 percent to $4 billion last year compared with 2015.

In an effort to boost mutual trade, Indonesian Trade Minister Enggartiasto Lukita and Saudi Arabia's State Minister Ibrahim bin Abdulaziz Al-Assaf signed a commerce cooperation agreement last week.

The agreement is aimed at help the countries develop new foreign trade strategies, conduct market research, encourage joint trade activities and share market information. The two governments also agreed to encourage business participation in regional forums, workshops and seminars.

Indonesia initially expressed interest in increasing trade cooperation with Saudi Arabia through a preferential trade agreement, which would allow preferred access to certain products from both countries through reduced tariffs.

However, Saudi Arabia is bound by regional political and economic alliances under the Gulf Cooperation Council (GCG), restricting the kingdom from entering into a PTA with Indonesia without the inclusion of the council.

Indonesia expects Saudi Arabia to conduct a joint feasibility study, which should accelerate cooperation between Indonesia and the GCG.

"Saudi Arabia is a key player in the GCG. Through this new agreement, we expect Indonesia and the kingdom to explore and foster better mutual relations," Enggartiasto said.