Ties That Need Remaking

So what are the steps that India and Indonesia can take to improve their bilateral engagement?

Written by Gurjit Singh | Published:January 8, 2016 12:04 am
India’s merchandise exports dipped 24.33% in Sept to .84 bn while the imports shrank 25.42% to .32 bn year-on-year, resulting in a trade deficit of .47 bn. Bilateral trade with Indonesia is on autopilot. It needs to be energised.

The links between India and Indonesia were built by traders who sailed with the monsoon winds. This led to a great cultural engagement between the two countries. In any 21st century partnership, the role of trade and investment is paramount. Bilateral trade between India and Indonesia crossed the $20 billion mark in 2012-13.

Broadly put, Indonesian exports to India are about $15bn and Indian exports to Indonesia are about $5 bn. At the same time, Indian investments in Indonesia, which began in the early 1970s, at a time when Indian overseas foreign direct investment was not widely known, have expanded rapidly and are currently pegged at over $15bn, with a similar amount in the pipeline.

The overall engagement between India and Indonesia — about $35bn at present, with a trade target of $25bn and FDI inflows expected to grow further — certainly looks robust. But neither country is in the top-five trading partner category of the other and, as such, this relationship needs greater nurturing so that its natural momentum can be enhanced.

An interesting feature of this bilateral trade is the dependence of Indonesia on commodities and the dependence of India on manufactured goods. The existing commerce is marked by consistent trade promotion by India in the growing Indonesian market. However, an Indonesian push to promote its trade and products in India is very limited and largely based on Indian invitations.

The main issue is that bilateral trade is largely on autopilot, with little guidance or support from governmental action on either side. The linkage of trade to investment is largely confined to the coal sector. As B2B relationships emerge, one can expect more Indonesian companies to look favourably at the opportunities in India under the Make in India programme, which is now well-
publicised in Indonesia.

So what are the steps that India and Indonesia can take to improve their bilateral engagement? My study of the market in both countries indicates the following.

First, a more regular G2G contact by activating existing inter-governmental mechanisms like the trade ministers’ forum, the energy forum and the high-level task force on economic matters, on a priority basis. These fora should not merely be at the level of government. They must always have business components present in order to make them more comprehensive and more effective compared to regular G2G contact groups.

Second, while both the Kamar Dagang dan Industri (Kadin), the Indonesian chamber of commerce, and Asosiasi Pengusaha Indonesia (Apindo), the employers federation, view India as an important trading partner, they are still looking for ways and means to have a consistent and productive engagement with their Indian counterparts. For instance, while the Kadin India committee has many Indian companies, there are yet just a few Indonesian companies in the mix. As such, it largely focuses on the existing trade instead of developing it further.

There is a need for greater engagement between the business people on both sides. This will also provide greater understanding and build confidence that, in turn, will generate ideas and opportunities for increasing business interaction.

Last, Indian and Indonesian CEOs rarely meet at the highest levels. Even the CEOs’ forum has not taken off because there’s
little mutual interest among the CEOs nominated to the forum by both countries.

Trying to organise a meeting of the CEOs forum, too, has been difficult because of the low interest shown in such an event by most of the nominees. This is essentially a manifestation of the lack of understanding at the highest B2B levels.

Thus a recasting of the CEOs’ forum is imperative and the participation of senior people in business conferences in India and Indonesia is necessary. Between 2013 and 2015, the three apex chambers of commerce in India — the CII, Ficci and Assocham — brought more than one delegation to Indonesia in order to pursue this very objective. However, a delegation of Indonesian CEOs is not frequently seen in India.

The writer, a former Indian ambassador to Indonesia, is India’s ambassador to Germany. Views are personal