The United States is concerned about a rising trade deficit with Indonesia, local content requirements and foreign ownership restrictions that could undermine business opportunities, US Ambassador to Indonesia Joseph R. Donovan Jr. said on Thursday (02/11). (JG Photo/Sheany)

US Ambassador Highlights Trade, Foreign Ownership Restrictions at Business Summit

BY :TABITA DIELA

NOVEMBER 02, 2017

Jakarta. The United States is concerned about a rising trade deficit with Indonesia, local content requirements and foreign ownership restrictions that could undermine business opportunities, US Ambassador to Indonesia Joseph R. Donovan Jr. said on Thursday (02/11).

Donovan spoke at the US-Indonesia Investment Summit in Jakarta, where businesses from both countries met with government officials and policymakers.

"We are concerned that US exports to Indonesia are declining, while Indonesia's exports to the United States are increasing," Donovan said.

US exporters sent over $6 billion worth of agricultural products, aircraft parts, machinery and other products to Indonesia last year, while Indonesia sent more than $19 billion worth of textiles, shoes, rubber products, electronics, machinery, seafood and furniture to the US.

US President Donald Trump called for an investigation and put Indonesia on a "hit" list of 16 countries in April that have significant trade imbalances with the US.

"It is a mistake to hinder this healthy trade with import restrictions [...] US firms are eager to sell more goods in Indonesia if the circumstances are right," Donovan said.

Local Content Requirements

According to Donovan, local content requirements — which apply to energy and technology industries — contribute to a persistent trade imbalance between the two countries.

The ambassador said there are US solar companies interested in helping Indonesia's renewable energy industry, but their intentions have been halted by a Ministry of Industry regulation that demands 60 percent local content in solar modules by 2019 and 100 percent of local content for services rendered.

"Government regulations can have unintended consequences that stifle innovation," he said, noting that such regulations will also take a toll on the country's blooming startups.

Ownership Restriction

Donovan also complained about restrictions over foreign ownership in the payments sector. The ambassador did not name names, but he was likely referring to a Bank Indonesia regulation issued last year that only allows up to 20 percent foreign ownership in companies that process payment transactions.

"We understand the desire for interoperability in domestic payment systems, but we ask that Indonesia consider other approaches that permit robust private sector participation and maximize consumer choice," he said.

Trump's America First

Ambassador Donovan's complaints come on the eve of Trump's first official visit to Asia, where he will join other Asia-Pacific leaders at the APEC Leaders' Week in Vietnam, the 50th Anniversary of Asean and the 40th anniversary of US-Asean relations. Trump is not scheduled to visit Indonesia on his tour.

Despite Trump's protectionist America First policy initiatives, American businesses remain pragmatic towards opportunities in Asia, including in Indonesia, Southeast Asia's biggest economy.

"The president will make clear that the United States is committed to working with our partners to advance an economic and trade architecture that opens markets, promotes high standards and achieves free and fair trade," Donovan said.

Other Markets

Diono Nurjadin, the head of the permanent committee of the Americas at Indonesian Chamber of Commerce and Industry, admitted that despite the rhetoric, Indonesian businesses have yet to see real policies implemented that lean toward US protectionism.

However, he said local businesses have been looking towards China and Africa for partnerships in mining, infrastructure and consumer product investment.

Same Concern, Different Outcome

"The American businesses concern is similar to ours. [The government] must follow up on this," Hariyadi Sukamdani, the chairman of the Indonesian Employers Association, told the Jakarta Globe.

According to Hariyadi, Jokowi's instructions have often been translated incorrectly by his own administration. Hariyadi, a seasoned businessman, cited the controversial tobacco ban as an example.

"The trade minister banned tobacco imports but local production is insufficient, so are we supposed to lower the capacity? Did he consider two major effects, such as massive layoff and lower excise collection?" he asked.

SHARE