Executive Briefings

U.S.-Indonesia Trade Could Swell to More Than $131Bn by 2019, But Reforms Are Necessary

The total value of the Indonesia-U.S. bilateral economic relationship exceeds $90bn per year, and a best-case scenario projects that it could grow to $131.7bn by 2019.

U.S.-Indonesia Trade Could Swell to More Than $131Bn by 2019, But Reforms Are Necessary

The estimates stem from a report entitled Vital & Growing: Adding up the US-Indonesia Economic Relationship released by the U.S. Chamber of Commerce and AmCham Indonesia at the U.S.-Indonesia Investment Summit.

According to the report, achieving the best-case scenario will depend largely on actions taken by both governments. The report notes that Indonesia has already undertaken certain economic reforms, but will need to continue and expand that process to achieve the desired outcome.

The report points out the following priorities:

Legal certainty is the foundation for business confidence and growth. Both U.S. and Indonesian companies will be able to invest, grow and create jobs if there is greater legal certainty in terms of contract sanctity, enforcement of existing laws and an impartial judiciary.

Collaboration and communication are vital for the creation of an enabling economic environment. Effective communication with the private will yield more effective and rational policies and regulations.

Innovation is the key to keeping pace in a dynamic global economy. Incentives for taking risks, investment in research and development, and human resource capacity building are the keys to innovation.

Bureaucratic and policy reforms must continue and expand. Specific examples include the ending of the Negative Investment List, rationalization of the work permit process, streamlining of permitting at all levels of government, and reform and proper incentivization of the civil service and judiciary.

The report also looks at nine industrial, extractive, and service sectors. Each one is at a different stage of development with U.S. companies playing different roles in each. The degree to which each sector is controlled by the government is a main factor in its performance. Based upon a ranking system developed in the report, the creative economy, finance, and infrastructure sectors have a high degree of future potential.

Several sectors in which U.S. companies have a significant presence have average prospects growing apace with GDP, such as oil and gas, consumer goods, and agriculture. Other sectors have lower potential partly due to restrictive government policies that inhibit investment and create uncertainty. These include extractive, pharmaceutical/healthcare/life sciences, and information communications technology.

Source: U.S. Chamber of Commerce

The estimates stem from a report entitled Vital & Growing: Adding up the US-Indonesia Economic Relationship released by the U.S. Chamber of Commerce and AmCham Indonesia at the U.S.-Indonesia Investment Summit.

According to the report, achieving the best-case scenario will depend largely on actions taken by both governments. The report notes that Indonesia has already undertaken certain economic reforms, but will need to continue and expand that process to achieve the desired outcome.

The report points out the following priorities:

Legal certainty is the foundation for business confidence and growth. Both U.S. and Indonesian companies will be able to invest, grow and create jobs if there is greater legal certainty in terms of contract sanctity, enforcement of existing laws and an impartial judiciary.

Collaboration and communication are vital for the creation of an enabling economic environment. Effective communication with the private will yield more effective and rational policies and regulations.

Innovation is the key to keeping pace in a dynamic global economy. Incentives for taking risks, investment in research and development, and human resource capacity building are the keys to innovation.

Bureaucratic and policy reforms must continue and expand. Specific examples include the ending of the Negative Investment List, rationalization of the work permit process, streamlining of permitting at all levels of government, and reform and proper incentivization of the civil service and judiciary.

The report also looks at nine industrial, extractive, and service sectors. Each one is at a different stage of development with U.S. companies playing different roles in each. The degree to which each sector is controlled by the government is a main factor in its performance. Based upon a ranking system developed in the report, the creative economy, finance, and infrastructure sectors have a high degree of future potential.

Several sectors in which U.S. companies have a significant presence have average prospects growing apace with GDP, such as oil and gas, consumer goods, and agriculture. Other sectors have lower potential partly due to restrictive government policies that inhibit investment and create uncertainty. These include extractive, pharmaceutical/healthcare/life sciences, and information communications technology.

Source: U.S. Chamber of Commerce

U.S.-Indonesia Trade Could Swell to More Than $131Bn by 2019, But Reforms Are Necessary