11 October 2019 (closed)
USD/IDR (14,140) +14.00 +0.10%
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Mike Pence, the Vice President of the United States, visited Indonesian President Joko Widodo on Thursday morning (20/04) at the presidential palace in Jakarta as part of Pence's Asia-Pacific tour (15-25 April 2017). Main goals of Pence's visit to several Asia-Pacific nations are to enhance diplomatic relations, improve regional security cooperation, and seek fairer trade. Pence arrived in Jakarta on Wednesday evening, directly from Japan where he emphasized US commitment to rein in North Korea's nuclear and missile ambitions.
In March 2017 US President Donald Trump ordered a comprehensive review into the trade imbalances between the USA and 16 nations, including Indonesia. According to Trump there could be cases of trade abuse that cause a US trade deficit with these 16 countries, a blunt statement that caused feelings of resentment in Indonesia.
In full-year 2016 Indonesia had the upper hand in terms of trade with the USA, recording a USD $8.8 billion trade surplus primarily on the back of exports of textiles, footwear, fishery products and natural resources. However, a trade deficit is not in line with Trump's protectionist "America First policy". Total trade between both nations reached USD $23.4 billion in 2016.
The USA is also committed to enhance the defense partnership with Indonesia to combat terrorism, and guarantee freedom of navigation in the South China Sea, the waters where Indonesian and Chinese fishing vessels have clashed recently.
US-Indonesia trade and relations had been under some pressure after the USA filed a complaint at the World Trade Organization (WTO) over the importation of horticultural products, animals and animal products from Indonesia. Moreover, the US National Biodiesel Board urges the US government to impose anti-dumping duties on biodiesel from Indonesia, as it is believed Indonesian biodiesel is being sold below production costs because Indonesian producers can enjoy "illegal subsidies" at home.
Meanwhile, there is the ongoing dispute between Freeport Indonesia, the local unit of American mining giant Freeport McMoRan, and the Indonesian government about the new divestment requirement, exports of copper concentrate, higher taxes & royalties and extension of the contract to operate the Grasberg mine on Papua.
Thirdly, Indonesia's Tax Office has taken a tough stance against Alphabet's Google, demanding more than USD $400 million in back taxes and fines, as Google earns a lot from digital advertising in Indonesia but pays few taxes in the country as most of Google's Asia-Pacific revenue goes through its regional headquarters in Singapore.
Another (small) incident occurred when Indonesian authorities deleted JP Morgan from its list of primary bond dealers after the US bank released a rather negative research report about Indonesia. In November 2016 JP Morgan's emerging markets equity strategists double downgraded Indonesia from overweight to underweight without elaborating on the exact motives.
Pence also visited the Istiqlal mosque in Central Jakarta, arguably the biggest mosque in Indonesia and Southeast Asia, in an effort to pay his respect to Islam. This was needed after the Trump administration banned travelers from several Muslim-majority nations, while Trump also made some hostile pronouncements on Islam and Muslims. At the tour around the mosque Pence was accompanied by his wife and two daughters who were all wearing headscarves. Afterwards Pence said Indonesia's moderate Islam is a source of inspiration.
Ironically, one day earlier, the Christian candidate for the highest position in Jakarta was defeated by his Muslim rival in the Jakarta gubernatorial election. Religious sentiments, instigated by hardline Muslims, played a major role in this defeat.
Pence also held an interfaith dialogue (behind closed doors) with several representatives of the Muslim, Christian, Buddhist, Confucian, and Hindu communities.
There are also business links between Trump and Indonesia (which are not linked to the visit of Pence). The Trump Organization plans to develop and operate luxury resorts in West Java and on the tourist island of Bali. Meanwhile, Trump's Indonesian business partner, Hary Tanoesoedibjo, is an aspiring politician who may run for president in Indonesia's 2019 presidential election.