Loading Now

Strengthening India-Indonesia ties – Firstpost

Strengthening India-Indonesia ties – Firstpost



Indonesian President Prabowo Subianto’s visit to India as the chief guest for Republic Day marks a historic milestone. This will be the fourth such occasion for an Indonesian President, placing Indonesia behind only France, which has received the honour seven times, and on par with Bhutan, which has also been invited four times. Expectations are high for this visit, given the strategic and economic importance of India-Indonesia relations.

A Robust Economic Foundation

The cornerstone of India-Indonesia ties is their economic partnership. Indonesia is India’s largest trading partner within ASEAN. Bilateral trade surged from $4.33 billion in 2005-06 to a peak of $38.84 billion in 2022-23, though it dipped slightly to $29.4 billion in 2023-24. Indonesia enjoys a significant trade surplus, primarily due to its exports of coal and crude palm oil. India is the largest buyer of Indonesian palm oil and the second-largest importer of coal. Other Indonesian exports to India include minerals, rubber, pulp, and paper.

Conversely, India exports refined petroleum products, commercial vehicles, telecom equipment, agricultural commodities, pharmaceuticals, bovine meat, and plastics. However, coal and palm oil dominate the trade dynamic, making them central to future economic engagement.

Barriers To Trade Expansion

Despite the extensive trade relationship, Indian exports to Indonesia face significant non-tariff barriers. Under the ASEAN-India Trade in Goods Agreement (AITIGA), Indonesia poses the toughest market access challenges among the original ASEAN-6 members. While other ASEAN nations import Indian pharmaceuticals, bovine meat, and agricultural products more freely, Indonesia imposes stringent phytosanitary standards that restrict Indian exports.

Achieving the leaders’ envisioned $50 billion trade target requires diversifying trade and reducing these barriers. The AITIGA review must prioritise improved market access for Indian goods while ensuring mutual respect in trade policies.

Investment Landscape: Untapped Potential

Indian investment in Indonesia is substantial but often underreported. While official Indonesian figures estimate Indian investment at $1.56 billion, much of it flows indirectly through Singapore, a key hub for ASEAN investments. In reality, Indian investments in Indonesia exceed $10 billion, spanning infrastructure, power equipment, textiles, steel, motorcycles, coal mining, banking, and consumer goods.

In contrast, Indonesian investments in India are modest, totalling around $650 million, primarily in agriculture, poultry feed, processed foods, paper products, IT, and logistics. Strengthening business ties between Indian and Indonesian CEOs is essential to unlock the full potential of bilateral investments. The India-Indonesia CEOs Forum, first convened in 2013 and subsequently in 2018, needs to meet regularly and foster consistent engagement, independent of high-level diplomatic visits.

Similarly, the Biennial Trade Ministers Forum, established in 2011, has met sporadically, with sessions in 2017 and 2020. Revitalising such forums, along with Joint Working Groups (JWGs) on coal, renewable energy, agriculture, oil and gas, and the overarching Energy Forum, can provide much-needed direction and government support for trade and investment.

Healthcare, Agriculture And Strategic Cooperation

Indonesia seeks Indian support in public healthcare, food security, and digital economy initiatives. While Indian pharmaceuticals are highly sought after, Indonesia’s demand for domestic API production complicates matters. Significant non-tariff barriers and limited market access for Indian medicines deter Indian companies from investing in Indonesia. Easing these restrictions could lower healthcare costs for Indonesians and encourage Indian investments, similar to successful ventures in African markets.

Indian hospitals, such as Apollo and Artemis, are already collaborating with Indonesian counterparts to establish greenfield hospitals and improve healthcare infrastructure. These efforts highlight the potential for deeper cooperation in healthcare, which could become a new pillar of the bilateral partnership.

In agriculture, India consistently seeks better access to the Indonesian market for its rice, sugar, and bovine meat. However, Indonesia’s policies often restrict these imports, offering access only during domestic shortages. A more consistent approach would stabilise Indonesia’s food security while addressing India’s trade deficit.

Tourism And Defence: Emerging Areas Of Collaboration

Tourism is another area where Indonesia benefits significantly, with Indian tourists flocking to destinations like Bali and Jakarta. Direct flights by Indian carriers such as Vistara, Air India, and IndiGo have facilitated this surge. However, reciprocal efforts to promote Indonesian tourism to India remain limited.

In defence, Indonesia has expressed interest in acquiring Indian equipment, including the BrahMos missile. Extending rupee-based credit lines for defence exports could support Indonesia’s welfare-driven budget priorities and enhance bilateral defence cooperation. Expanding this partnership beyond missile systems to include other defence technologies would be mutually beneficial.

A Balanced Partnership

India and Indonesia must adopt policies that foster equilibrium in trade and investments. For example, a minimum trade threshold could ensure stable supplies of coal and palm oil while mitigating market disruptions caused by fluctuating global prices or domestic policies.

To fully realise the potential of this relationship, both nations must overcome challenges such as inconsistent market access, regulatory barriers, and limited engagement between business leaders. Greater regularity in forums, enhanced mutual trust, and a focus on emerging sectors like healthcare and digital economy are critical steps toward a robust and balanced partnership.

With President Prabowo Subianto’s visit, India and Indonesia have an opportunity to not only celebrate their shared history but also pave the way for a dynamic future partnership that benefits both nations.

The author is a former ambassador to Germany, Indonesia, Ethiopia, ASEAN and the African Union. He tweets @AmbGurjitSingh. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.



Source link

Post Comment