Jokowi′s maiden US trip to bolster trade, defense ties | Asia| An in-depth look at news from across the continent | DW | 22.10.2015
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Jokowi's maiden US trip to bolster trade, defense ties

Indonesian President Joko Widodo is set to embark on his first US visit. On top of his agenda during the five-day trip are strengthening economic ties and developing a joint approach to regional security issues.

Starting on October 25, Indonesian President Joko "Jokowi" Widodo will travel to Washington and San Francisco in a bid to boost security ties and lure foreign investment in sectors such as mining, manufacturing and information technology to revive Southeast Asia's largest economy.

"President Jokowi will be trying to persuade US businesses about Indonesia's attractiveness as an investment destination, particularly due to its rapidly growing domestic consumer market and fast-growing urban middle class," Rajiv Biswas, Asia-Pacific Chief Economist at global analytics firm IHS, told DW.

The trip comes as Indonesia struggles to come out of its worst economic slowdown in six years, and the president - who recently marked his first year in office - is under intense pressure to kick-start the faltering economy.

"Indonesians expected Jokowi to make good on his pledges to slash red tape and create a more investor-friendly climate. He has failed to do this and has actually been waving the protectionist flag, Zachary Abuza, a Southeast Asia expert and professor at the Washington-based National War College, told DW.

"The president therefore needs US investment, in particular in the manufacturing sector as the country is being left behind by its neighbors in terms of high tech and software investment," Abuza added.

Indonesien Autofabrik 2014

Indonesia's economy has seen slowing growth over the past several years

Strengthening human capital

In fact, one of Jokowi's key objectives during his visit is to get greater bilateral investment and technology cooperation from large US technology firms such as Apple and Google. According to media reports, the president plans to visit Apple's headquarters and meet CEO Tim Cook to discuss investment opportunities in the Southeast Asian nation.

A visit to Google's headquarters is also planned during which Jokowi is expected to discuss improving wireless Internet access to Papua and other remote Indonesian regions by using smart balloons, according to Reuters.

And just like Indian Prime Minister Narendra Modi a few weeks earlier, the Indonesian leader is also set to meet with senior executives from Facebook and Microsoft to try to help make Indonesia a tech hub and establish research centers at major Indonesian universities.

"One of Indonesia's economic weaknesses since independence has been its relatively weak development of human capital and information technology skills compared with other Asian countries such as South Korea, China and India, and Jokowi has set a high priority on strengthening Indonesian human capital and improving its industrial competitiveness," said Biswas.

Reviving growth

Other key priorities for Jokowi will be to attract US direct investment into Indonesian manufacturing and infrastructure projects. One area where there have been challenges, relates to new Indonesian requirements for value-added processing of some mineral ores, which have resulted in new rules requiring foreign mining companies with existing mining operations in Indonesia to establish new processing facilities for certain mineral ores.

As analyst Biswas points out, President Jokowi is expected to meet senior executives from Freeport-McMoRan, a large US mining company with major copper mining operations in Indonesia. "Indonesia will be keen to encourage Freeport to invest in expanding its copper project, which is reported to involve additional investment of up to $18 billion," he said.

In this context, analyst Abuza noted that the Indonesian government is not just trying to get Freeport to expand its operations, but also to increase the royalties the company pays, from 4 percent to around 6 to 7 percent.

In fact, manufacturing, mining and the development of key infrastructure are all sectors which are increasingly important for Indonesia at a time when its economic growth momentum has been moderating. The Indonesian economy has been slowing since 2012, with GDP growth softening from around 6.5 percent in 2012 to around 4.7 percent in the first half of 2015.

According to IHS, the slump in global commodity prices and weakening Chinese demand for Indonesian raw materials are among the factors contributing to this slowdown.

Given the economic downturn, Indonesia is now mulling to join the recently agreed Trans-Pacific Partnership or TPP, a far-reaching pact between 12 Pacific Rim nations - which excludes China - designed to dismantle tariff and non-tariff barriers to trade and investment between the participant countries.

President Jokowi has signaled that Indonesia may be prepared to join the TPP if it is ratified by the 12 member countries. Nevertheless, economist Biswas expects that such negotiations may be protracted, since Jakarta would need to make significant reforms to meet the TPP standards.

Boosting defense partnership

But trade and investment will not be the only issues on the agenda. Another key priority will be the strengthening of bilateral security ties, with both the US and Indonesia expected to issue a statement outlining a roadmap for a more strategic defense and security cooperation.

Symbolbild Soziale Netze

Jokowi is meeting CEOs of US tech giants to seek their help to make Indonesia a technology hub

"This close bilateral defense relationship looks set to be further enhanced under President Jokowi, who recognizes the need for further modernization of the Indonesian armed forces during his term of office," said Biswas.

Analyst Abuza agrees that defense ties are going to be a key component of the trip, adding that Indonesia will likely push for a full restoration of defense ties with the US - which are still limited due to claims of human rights abuses and a culture of impunity attributed to the Indonesian armed forces.

"But this might be difficult to achieve given the recent attempts by the military to reassert themselves in civil affairs and administration," said the security expert.

In Washington, Jokowi will meet US President Barack Obama and congressional leaders to discuss issues regarding climate, as well as the fight to contain "Islamic State" and territorial disputes between neighboring Southeast Asian countries and China.

Competing maritime claims

Tensions between Washington and Beijing have been rising over China's territorial claims in the South China Sea. The US accuses China of creating islands that could be used as airstrips in the Spratly Islands and has vowed to continue sending military aircraft and ships to the tense region to protect navigation rights.

Karte Südchinesisches Meer Besitzanspruch China Englisch

Beijing's territorial claims in the South China Sea have led to rising tensions between China and its neighbors

Beijing claims most of the potentially energy-rich waterway, through which about $5 trillion in ship-borne trade passes every year, arguing that it is asserting its so-called "historic rights" to maritime resources in the area.

As analyst Biswas explains, Indonesia is particularly concerned about potential geopolitical risks and competing territorial claims in the area, and aims to become a regional maritime power to protect its interests given that it is an archipelago comprising around 17,000 islands.

"After years of trying to stay out of the South China Sea disputes, Indonesian officials have grown anxious over the last two years or so by the aggressiveness China has shown toward other claimant nations," Gregory Poling, director of the Asia Maritime Transparency Initiative at the Washington-based Center for Strategic and International Studies, told DW.

"They know that Indonesia’s maritime claims overlap with those of China and Indonesian naval and coast guard capabilities are woefully inadequate, so now some in Jakarta are wondering how long before they too face Chinese bullying."

In this context, analyst Abuza said that Jakarta's recent pledge to increase its military presence in the Natuna Islands archipelago - near the contested Spratly Islands - was welcomed in Washington, though "there is still concern that Indonesia does not have the capabilities to really defend its maritime claims."

Also in terms of security, some broad agreement is expected on supporting Indonesian counter-terrorism efforts, and in particular in terms of countering violent extremism.