17 October 2019 (closed)
USD/IDR (14,140) -32.00 -0.23%
EUR/IDR (15,731) +30.31 +0.19%
Jakarta Composite Index (6,181.01) +11.42 +0.19%
Although the United States continues its traditional focus on direct investments in developed countries, primarily in Western Europe, there has been a significant rise in US investments in Indonesia in recent years. Whereas US investments in the developed economies of Western Europe is mostly found in the financial sector and through holding companies, in developing Asia, the US is more focused on the manufacturing sector due to lower production costs. In the last two years, the US emerged as the second-largest investor in Indonesia after Japan.
Moreover, there is an interesting development visible in the distributional pattern of US investment in Indonesia. Previously, it had been heavily focused on Indonesia's mining sector (such as Freeport, Newmont, and Exxon). Recently, however, the investments have been more and more directed toward other sectors of the Indonesian economy as well, such as the automotive or food industry and Indonesia's financial sector. Important to note is that through these investments the USA does not merely think of Indonesia as a cheap production hub, but also as a consumer market in its own right. Indonesia's expanding middle class and rising per capita GDP have made the country an interesting and growing market for US companies.
USA direct investment in Indonesia
|| Number of
Source: Indonesia Investment Coordinating Board (BKPM)
If we take a closer look at the import and export numbers between Indonesia and the United States, we find that Indonesia always posts an annual trade surplus.
Trade between Indonesia and USA
|| Indonesian Export
| Indonesian Import
in USD billion
Popular export products from Indonesia to the US are fish, coffee, tea, natural rubber, apparel and household goods-cotton, as well as textiles. Most products that are imported by Indonesia from the US are aircrafts, oil seed, machines, engines, pumps, cotton, ans cereals.
In general, the relationship between the USA and Indonesia is good (which can also be seen in the close cooperation between the two countries in terms of the battle against international terrorism). However, as in all relationships, there sometimes occur issues. Also related to trade. For example, in January 2012, the US had placed import barriers on Indonesian crude palm oil products as the US Environmental Protection Agency (EPA) claimed that Indonesia’s crude palm oil (CPO) produced higher carbon emissions than the agency’s regulations allowed. Later that year, Indonesia drastically limited imports of horticultural products (including those imported from the USA), which made the US decide to file a complaint to the World Trade Organization. However, these issues seem to have negligible or limited impact on relations between both countries.
Important for US-Indonesia trade relations will be the APEC CEO Summit Indonesia in Bali (5 to 7 October 2013), the premier business event in the Asia-Pacific. President Barack Obama, who spent some of his formative years in Indonesia, is said to return to Indonesia to attend the summit. A large number of CEOs is expected to follow him to Bali.