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US-Indonesia Trade Relations: Partnership on Economic Improvement
The Start of Improving the Economy

Indonesia is one of the Southeast Asian nations which practically relied upon the Dutch's rule. Traditionally, its subsistence and trading atmosphere grew because of the help of the latter. Exporting crops were significantly emphasized and for a lot of years, their economic growth was binding with that of the Dutch. After its independence from the colonization, the centralized economic system was introduced. They have used the said scheme up until 1969 when the so-called New Order existed under President Suharto's term.

The New Order was designed to have dependence on an agricultural-based economy. It had worked both for the benefits of large-scale industrial projects as well as those of small-scale consumer and export-oriented industries. The development of its economy depended upon foreign aid.

Agriculture continues to be Indonesia's primary economic booster despite a very minimal 10% contribution to export earnings. Its government is one of the earliest advocates of the Green Revolution leading to its self-sufficiency on rice by the year 1984. Also raised in the country are fruits and vegetables and poultry. Cash crops include palm oil, rubber, sugar, coffee, cocoa and tobacco and are basically gown on very big estates.

On the mining and manufacturing side, Indonesia's principal good is that of petroleum. In fact, the latter accounts for more than half of all the country's exports earnings. It became the member of the Organization of Petroleum Exporting Countries (OPEC) since 1962 thus placing its oil industry under government management in 1965. Furthermore, this increased the refinery's capacity.

Indonesia is also the largest producer of liquefied natural gas. It is on third place with regards to production of world tin after Malaysia and Thailand. Its mining industry is prosperous with the presence of various minerals such as bauxite, nickel, coal and copper. Aside from petroleum refining, manufacturing industries in the country include fertilizers, pharmaceuticals, textiles, cement, iron and steel and plywood.

While Indonesia traded fairly with its sister nations in Asia, its market is open to other foreign traders from different continents in the world. As part of its economic improvement, it traded with the United States and for several years, statistics showed that bilateral trade increased in billions of dollars. These had intensified the ties between these two nations. American companies participated actively in Indonesia with major businesses creating their own branches in the latter. Famous clothing, coffee and chocolate manufacturers are but just some of the few foreign investors seen on Indonesia's territorial jurisdiction.

Major Exports and Imports between the Two Nations

The main exports of Indonesia to other countries in international trade include electrical appliances, plywood, rubber, textiles and oil and gas. The imports of Indonesia from other nations include chemicals, foodstuffs, fuels and machinery and equipment. Its major export partners are Japan, US, Singapore, South Korea, China and Malaysia while its major suppliers are Singapore, Japan, China, US, Thailand, South Korea, Saudi Arabia and Australia.

As of October 2008, the US Census Bureau recorded total exports from US to Indonesia at approximately $5.20 billion while the total imports from the latter to the former amounted to $13.44 billion. This creates a very good trading atmosphere between these two nations. To support this fact, the said agency also recorded data on trade between US and Indonesia with the following:

  • Indonesian Exports to US. The goods exported by Indonesia to US made a very remarkable statistical data for 2007. The total exports were noted at nearly $14.30 billion. Topping the list of these products were apparel and household goods from cotton which made $2.34 billion in terms of sales equivalent to 16.36% of the year's total. Other commodities found on top of the charts along this line were: apparel and household goods from other textiles; natural rubber and similar gums; fish and shellfish; furniture, household items and baskets; sporting and camping apparel; footwear and gear; other parts and accessories; computer accessories, peripherals and parts; crude; and television receivers, VCR's and other video equipment. The last product made sales of $354.49 which is 2.48% of the year's total.
  • Indonesian Imports from US. The products exported by US to Indonesia made waves in the Indonesian market as the amount went to as high as a total of $4.23 billion. Several goods were finding their way to the top with civilian aircraft on the lead at $538.17 million which is 12.72% of the year's total. Other prime commodities found on the list were: soybeans; raw cotton; wheat; other chemicals; dairy products and eggs; plastic materials; pulpwood and woodpulp; drilling and oilfield equipment; and corn. Corn was sold for a total of $88.75 million which is 2.10% of the imports from US to Indonesia in 2007.
  • Fastest-Growing US Exports to Indonesia. Sales increases were remarkably seen in the goods coming from US to Indonesia. The products widely gaining recognition in the market were led by other commercial vessels with sales of $2.06 billion which is 1,924.30% higher than its records for 2006. Other goods on top of the list were: nursery stock; civilian aircrafts; other precious metals; and pleasure boats and motors. Pleasure boats and motors made it to the list with an outstanding percentage increase of 503.40% at an amount of $1.33 million.
  • Fastest-Growing US Imports from Indonesia. Indonesian goods entering US grounds were commendable as there were several commodities which made it to remarkable sales increases from 2006 to 2007. Marine engines and parts topped the list with nearly $19.25 million sales at an increase of 481,150% from 2006. Other products which made their stint in the market were: records, tapes and disks; nickel; industrial engines, pumps, compressors and generators; and industrial organic chemicals. Industrial organic chemicals were remarkable because of the sales percentage increase equivalent to 244.74% with total amount of $245.59 million.
Indonesia Conditions for Market Access for Films and Videos

While Indonesia and US are still eyeing for future free trade agreements, the conditions for market access for films and videos were set by the former. On several occasions, government officials and representatives coming from both countries have met to tackle several issues on Indonesia's access to motion pictures and video cassettes. Specifically, the following facts were seen on the letter of Indonesia to US containing vital steps to improve conditions on market access related to the said products:

  • Issuance of video and film import licenses. Indonesia's Department of Information was tasked to make a review and a decision on the issuance of video import licenses to three of its companies which cater to this type of business. Include on the list of the businesses are P.T. Tobama Mustika film and video, P.T. kreasi video Hedkwarter for VHQ and P.T. Primera Multi Video. For film, the said department will be issuing licenses to two qualified applicants depending on who passes as soon as the applications are completed.
  • Distribution of imported motion pictures. Direct distribution of imported motion pictures is confirmed by the Government of Indonesia with respect to all US foreign-owned companies doing such type of business with the country. Furthermore, the government is willing to cooperate with subtitling and duplicating films and videos entering Indonesia. Dubbing motion pictures in Bahasa, Indonesia was also specified for children's viewing purposes.
US Threatens Indonesia's Trade Privileges

Some barriers were seen between the trade relations of Indonesia and the United States. The future of Free Trade Agreement is yet to be seen hence problems seem to be interfering along the way. In fact, the following threats were set by the US on Indonesia's trade privileges with them:

  • On improvement of worker's conditions. In 1993, issues on improvement of worker's conditions were found under the regime of President Suharto. In said instance, the US threatened of withdrawing its Generalized System of Preferences (GSP) if the Indonesian rule will not improve workers conditions. The GSP is very vital for tariff concessions between the two nations. Among the primary concern of the US government was the permission given to workers to organize outside that of the Indonesian government's official trade union which is the All Indonesian Worker's Union.
  • Open Access to the Indonesian Market for US films. It was in 1987, when the US government warned of withdrawing GSP privileges if the open access to this particular market will not be granted. In return though, Jakarta eradicated all control on US film imports under the condition that the latter will be willing to reduce tariffs on US imports of textiles from Indonesia.
  • Losing GSP privileges meant a lot to the Indonesian market. If they lose the trust given by US, they will definitely decrease their export earnings by 15%. This means a lot for someone who is gaining a market share in world economy. Different opinions come from various groups and along this line; all the concerns were studied intently to avoid the GSP withdrawal.
Future Trade Opportunities between the Two Nations

After coming up with concrete trade agreements that addressed the above concerns on GSP privileges, the future is still at stake between these two nations. A good opportunity for the US to build-up better and stronger ties with Indonesia is through the FTA that they are both eyeing for. It was in April 2006 when the launching of the talks began and more of this is to be seen in the future.

Other than putting attention on the FTA, trade for the future may be opened for both sides with prospects focusing not only on businesses but with other aspects of society such as culture, education and job opportunities for locals of both nations. The site www.SIAnews.org speaks so much about the possibilities of putting up stronger relations between the US and Indonesia in more ways than one. Other future trade opportunities are geared to solve issues on health and nutrition, education, environmental services, agribusiness, financial sector safety and soundness and food.

US-Indonesia Trade References

Note: Trade statistics, industry links, economic projections and global business resources on this page have been compiled from hundreds of trade related websites, government guides and resources on the Internet. We provide this valuable information for industrial suppliers, manufacturers, exporters and importers seeking to enter or expland business opportunities in Indonesia.

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Major Goods Exported

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Industrial Outlook

Indonesia's primary industries include petroleum and natural gas; textiles, apparel, and footwear; mining, cement, chemical fertilizers, plywood; rubber; food; tourism

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