INALAC Business Forum: Trade Cooperation and Investment to ComeBy Alessa Flores | Tue, 08/11/2020 - 09:15
Q: What are some of the great economic opportunities that Indonesia offers to Mexico?
A: The Bilateral relationship between Indonesia and Mexico since its diplomatic establishment in 1953 have been going well and harmoniously. This is reflected in mutual state visits, and visits among governmental and non government officials, including members of parliament. Apart from bilateral agreements in various fields, the good relationship between Indonesia and Mexico is also reflected at international forums, such as the United Nations, APEC, G-20, FEALAC and MIKTA (Mexico, Indonesia, South Korea, Turkey and Australia), which support each other's nominations in international organizations.
Moreover, I am particularly proud of Soekarno Park – Parque Soekarno – in Alcaldia Venustiano Carranza, Mexico City, which was inaugurated in September 2019. The park hosts a statue of Soekarno, Indonesia’s first president, and stands a symbol of how close our relations are.
On average, the bilateral trade volume between both countries in the past three years is about US$1.2 billion. In the first quarter of 2020, the volume was US$452.21 million, an increase of 7.91 percent compared to the same period last year. However, this figure is still far from our real potential.
Mexico is one of Indonesia’s largest emerging trading partners in North and Central America. In Latin America, Mexico is Indonesia’s third-biggest trade partner after Brazil and Argentina. Meanwhile, Indonesia could be Mexico’s gateway to Asia and ASEAN. In terms of investment, according to statistics from our Investment Coordinating Board, Mexico is the eighth-largest investor country in Indonesia from the Latin America region. During the 2014-2019 term, the total amount of Mexican investment in Indonesia was US$1.27 million, directed at the entertainment, food, trade, hotel and restaurant industries. We have Kidzania and Cinepolis in Indonesia. According to Mexico’s Ministry of Economy, the realization of Indonesian investment in Mexico since 2011 totals more than US$300 million, focused in the petrochemical sector. Based on the potential that we have, I always encourage prospective investors to explore the opportunities to expand their business in the two countries.
One of the opportunities for the Mexican business community is to invest in Indonesia’s cow ranches. Indonesia is now in the process of self fulfilling its beef consumption. Up to now, Indonesia is importing a big amount of beef and live cattles, especially from Australia. Therefore, I am inviting Mexico to invest and build ranches especially for Brahman cows, in the East Nusa Tenggara region.
Q: What particularities and features for doing business does Indonesia offer over other Asian countries?
A: Indonesia is a vast and dynamic country. For the last 10 years, Indonesia has maintained a stable economic growth of more than 5 percent annually. That is difficult to compete with, even among Asian countries.
Furthermore, you can find anything you need in Indonesia. We have abundant natural resources – minerals and gas, for instance; we have a surplus of agricultural products, including palm oil, coffee and cocoa. Our industry is also thriving, from simple industry to those that require the most sophisticated technology, such as aerospace. Basically, you can find everything.
Indonesia also offers a very competitive workforce and has an expanding middle class with increasing purchasing power. The country’s GDP per capita has steadily risen, from US$807 million in 2000 to US$3.88 billion in 2018. McKinsey & Company has forecasted that in 2030, Indonesia will be the seventh-largest economy in the world. PricewaterhouseCoopers forecasts that in 2050, Indonesia will be the fourth-largest economy in the world, after China, India, and the US.
Q: What actions are you taking at the Indonesian Embassy to facilitate trade between the two countries?
A: As an effort to improve trade relations, the Embassy of Indonesia in Mexico City conducts a variety of activities, such as meetings with businesspeople, chambers of commerce and associations, as well as participating in trade shows that take place in Mexico City and other cities around the country. We also promote Indonesian products, such as coffee, at social functions that take place at the embassy. To heighten awareness of Indonesia in Mexico, the embassy collaborates with the Indonesian Trade Promotion Center (ITPC) in Mexico City and supports the plan to open “House of Indonesia.”
We also invite business communities in Mexico to participate in our annual Trade Expo Indonesia – the biggest expo in Indonesia – and encourage and facilitate trade missions to Indonesia. All of these efforts are meant to open up the horizon of our business communities to the huge potential we offer.
Other than that, at the moment the Embassy is trying to connect companies from Indonesia and Mexico so that they can collaborate to make a joint venture to build access and supply chain for any kind of products from both countries.
Q: What are the economic areas in which Mexican companies or capital could benefit from investing in Indonesia?
A: In terms of investment opportunities, there are four major opportunities emerging in Indonesia, such as e-commerce, travel, manufacturing and infrastructure. Indonesia´s e-commerce segment is quite exciting to follow. In 2019, with sales volumes reaching US$2.7 billion, the country's online market transactions were the highest in Southeast Asia. This year, it is projected that the Indonesian e-commerce market rank closely behind China and Indonesia, [CN1] with an estimated US$1.13 trillion[CN2] . This opens a huge opportunity for investors to take part in the country’s development through infrastructure improvements. Better infrastructure will lead to an acceleration of Indonesia’s economic development, which also serves as another strong reason why infrastructure is becoming an emerging business opportunity in Indonesia.
Besides those four sectors, mining also has a great future in Indonesia. Nickel is one of the rising stars. Indonesia is one of the biggest nickel producers in the world, with production reaching 190,000 tons per year. Given environmental awareness, people are starting to replace their conventional vehicles with electric vehicles. The most important component in electric vehicles is the battery, for which nickel is a fundamental element.
Q: In addition to economic cooperation, what other types of cooperation have Indonesia and Mexico carried out that you would like to highlight?
A: Indonesia and Mexico are close partners in international organizations, especially at the United Nations and its bodies. The two countries are emerging middle powers with a strong conviction on the importance of multilateralism. Therefore, we are strengthening our partnership in this area.
In the bilateral context, we see that the two countries' relations are getting stronger politically. Early in January, we oversaw the inauguration of parliamentary friendship groups, both Indonesian and Mexican. On the occasion, the Mexican parliament underlined the importance of the two countries working together to confront contemporary global challenges. Mexico's interest in working with Indonesia is also evident at the level of states and municipalities. We received several proposals from Mexican municipalities and states to establish sister city or sister province cooperation with Indonesia's famous regions, such as Yogyakarta.
Q: Before members of the Asia-Pacific-Africa Foreign Relations Commission, Indonesian businessmen expressed their interest in working with the Mexican government to modernize the country´s port facilities, especially that of Lazaro Cardenas in Michoacan. How is the Indonesian Embassy participating in this goal and what has been the progress so far?
A: The embassy participated actively and facilitated the establishment of collaboration between the Indonesia Port Corporation (IPC) and the Port Authority of Lazaro Cardenas (API) with the signing of a Sister Port Agreement (Sister Port Cooperation between Port of Lazaro Cardenas, Mexico and PT. Pelabuhan Indonesia II, Indonesia) in November 2018. The collaboration opportunities consist of transfer of knowledge and business expansion. This transfer of knowledge consists of training, internships and benchmarking to increase human resource experiences and capabilities, especially in “smart port” technology. The business expansion entails joint port operations and trade cooperation as well as investment.
Q: What are some of the projects or initiatives that Indonesia plans to carry out in the medium term to promote relations between the two countries? How can companies and the government participate in these proposals?
A: This year, in November, the Ministry of Foreign Affairs of the Republic of Indonesia is planning to hold the 2nd Indonesia – Latin America and the Caribbean (INALAC) Business Forum. Due to the current pandemic, the event will be held virtually. INALAC Business Forum is a forum where business people from Indonesia can meet their counterparts from Latin America and the Caribbean to explore opportunities and to find solutions to the obstacles that they face in order to enhance economic cooperation. The first INALAC Business Forum was held last year in Jakarta, on October 14 and 15, and led to more than US$5 billion in business commitments. Thirteen Mexican business people participated in this event.
I am inviting the Mexican business community to participate in the next INALAC Business Forum. Since it will be done virtually, I hope that there will be many more participants from Mexico.
For 2021, the embassy is planning to host the Indonesia Expo en Mexico, which will be the first event to be held in Mexico that only showcases Indonesian products. The expo will be held by the end of October 2021, with the participation of around 300 Indonesian companies from all sectors, representing 10 provinces. To diversify the expo, the embassy will invite five to seven states from Mexico along with Mexican companies so they can promote Mexican products to the Indonesian delegations and to the public in general.