Merkel's first trip to the fourth most populous country in the world - Indonesia - highlights the importance of Germany's economic ties with the Southeast Asian nation, especially amid the euro crisis.
Germany and Indonesia have had diplomatic ties since 1952. Considering the Southeast Asian island nation's strong economic growth (which is over six percent) and its young population, the spotlight is on economic ties - especially against the backdrop of the euro crisis.
German exports to Indonesia rose in the year 2011 to 5.3 percent, while the volume of Indonesian imports to Germany even rose by 16.8 percent.
Haryo Aswicahyono of the Centre for Strategic and International Studies (CSIS) in Jakarta is convinced that Indonesia is becoming an increasingly attractive destination for foreign investors - especially for ones from Germany.
"Because of its high growth rates, Indonesia needs a lot of capital goods - for example for the construction of factories and machines. Considering quality, this is where Germany has a strong advantage. In the energy and mining sectors, there are many promising possibilities for investment," Aswicahyono told DW.
Made in Germany
Indonesia appreciates the quality of products made in Germany. The Businessman Hendri Kusdian said that while prices for German machines were higher than comparable products from other countries, the German-made ones were more dependable. His company Kwarsindo imports used biological waste processing plants from Germany. Asia competitors manufactured similar machines but they were all less efficient and lower in quality, Kusdian said.
Around 250 German companies are operating in Indonesia. Among them are larger corporations like Siemens, BASF, Beiersdorf, Merck, Henkel, DHL, Schenker, Lufthansa, BMW und Mercedes.
Foreign investors in Indonesia, however, often complain of bureaucratic obstacles and corruption. Aswicahyono, however, believes that they will continue to go to Indonesia.
"Investors go to Indonesia because they have higher profit margins there. Many German companies have been operating out of Indonesia for a long time and know the situation there quite well."
Not afraid of Islamists
Over one fourth of Indonesia's 240 million people are under the age of 15
For foreign investors, political stability is an important factor. Recently, Islamist groups have become more active in trying to spread anti-West sentiment.
But they don't have much influence on politics or on society. Most Indonesians are opposed to Islamist fundamentalism. Jan Rönnfeld, managing director of the German-Indonesian Chamber of Industry and Commerce (EKONID) in Jakarta, has a positive outlook on the future. He said Indonesia had a stable government and society. Thus when it came to Islamist tendencies, there was no real threat for foreign investors.
German Chancellor Angela Merkel's visit to Indonesia on July 10 aims at improving political and economic cooperation. Both sides are also considering forming a strategic partnership - the next logical step, according to Rönnfeld.
Germany, as the largest economy in the EU and Indonesia, as the largest economy in ASEAN, could create alliances to back common interests, for example within the G20.
Author: Ayu Purwaningsih / sb
Editor: Arun Chowdhury