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Re-shaping the Future of Indonesia and the Netherlands Economic Relation


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‘Jakarta (20 November 2013) – President Yudhoyono and Prime Minister Rutte signed a Joint Declaration on a Comprehensive Partnership Agreement, a reflection from both countries wish for an equal and future-oriented relation’

The new round of Indonesia and the Netherlands bilateral relation has begun with the state-visit of Prime Minister Mark Rutte to Indonesia on 20-22 November 2013. The group consists of 2 Ministers, 15 CEO’s of multinationals and more than 106 companies; and they focus on several sectors including agriculture, horticulture, food processing, water management, infrastructure, and health care. Economists from both countries expected that this visit may beneficial to boost the economy and strengthen the political relation. In the end, the visit has resulted to 10 government to government agreements and 17 business to business cooperation’s. Currently, the trade volume of Indonesia and the Netherlands reached USD 5.5 Billion in 2012 with a surplus for Indonesia, and the Netherlands noted as the fifth largest investor to Indonesia with USD 1 Billion.

Indonesia and the Netherlands relation have a distinguished bound as result of shared history. The world might notice that Indonesia was colonized by the Netherlands for more than 3 centuries, but the situation has changes significantly today. The power has shifted gradually towards Indonesia as an emerging market, while the Netherlands is struggling to balance its economy and also the Euro zone after the global crises in 2008. In terms of GDP (Nominal), Indonesia reached USD 878 Billion in 2012 while the Netherlands are lower at USD 773 Billion on the same year. By mid-2013, Indonesia economic growth rate is positive 5.81%, while the Netherlands suffers negative 0.2%. Moreover, Indonesia vast middle-class has impacted to the country strong economic growth that makes them less-vulnerable to global economic shocks, while the Netherlands experience the opposite. Despite the economic depression in Europe, the Netherlands accounts for largest trade surplus (USD 198 Billion) in the euro zone

These facts shows that today Indonesia are propelling economies that had opportunities to become a player in the global market. It is the perfect time for Indonesian economist to re-invent economic approach to the Netherlands. The article suggests that currently Indonesia is less dependent with the Netherlands while the Netherlands needs Indonesia’s support to stabilize their economy. Therefore, an equal and future-oriented relation should be shaped as baseline for further economic agreements.

 

Indonesia

Netherlands

Unemployment Rate (2012)

6.7%

6.8%

GDP (Nominal) 2012

USD 878 Billion

USD 773 Billion

Growth Rate (mid-2013)

+ 5.81%

(-) 0.2%

Total Trade (2012)

USD 381.72 Billion

USD 1,055.9 Billion

Economy Comparison between Indonesia and Netherlands

Source: Directorate of National Export Development, Ministry of Foreign Affairs, the Netherlands

 One of major issues on Indonesia and Netherlands economic interest is to finalize the scoping paper on Indonesia-European Union Comprehensive Economic Partnership Agreement (CEPA). The extension of this agreement will allow Indonesia to export its strategic natural resource such as palm oil to the Netherlands and beyond. Series of meeting and roundtable discussion on sustainable palm oil has been conducted to smooth the plan. Indonesia is notable as the largest palm oil producers with 31 Million metric tonnes; however, the country is challenged by environmental and social issues that which made partnership with European countries difficult.

The article suggests three initial strategies that may be conducted by the Indonesian government and private sector to shape the economic relation between Indonesia and the Netherlands.

First, is to establish a special market intelligence agency that allows Indonesian prospective corporations to export or invest to the Netherlands, and vice versa.  The task for this agency is to collect updated data on market dynamics on both countries and inform it to prominent business partners and investors. As an example, currently the Netherlands is pursuing larger investment on energy and finance sector in addition to their massive infrastructure development. This agency can be formed similar to the Centre for the Promotion of Imports from developing countries (CBI) that has been developed by the Netherlands Ministry of Foreign Affairs.

Second, Indonesia may learn from the Netherlands on how they develop their global value chain. If we breakdown the economic structure of the Netherlands, we may understand that this country depends a lot on the global trading flow. Statistics noted that the Netherlands import and export rate are USD 501 Billion and USD 554 Billion respectively. The Netherlands developed a comprehensive global value chain that connects raw material in developing countries, advanced industries in the Netherlands, and prospective buyer from around the world. They also had a state-of-the-art port system that mainly emphasize to Schipol Airport and the Port of Rotterdam; Indonesia also use these port as an entry point of Indonesian products to Europe. Furthermore, another key success of the Netherlands global value chain enhancement is the triple-helix collaboration between the government, private sectors, and universities. For example in the agri-food sectors, the government established a dedicated agro-city named Westland where private enterprise may create their business there. The joint private companies then develop an independence auction as a hub for their products to the markets. And to support the agri-food sector, research result from the universities being applied directly.

Third, is bridging investors from both countries for joint investment cooperation. The state-visit by Prime Minister Mark Rutte along with the big group of companies is one of effective strategy to connect the private sectors in both countries. It is indeed a challenge for Indonesian companies to focus on two aspects; (i) think on how to bring more financial-flow from the Netherlands to Indonesia through export intensification; and (ii) as part of export intensification, the companies may shift from raw materials export to processed or semi-processed products export. Therefore, the mastering advanced technology to improve Indonesia’s competitive advantage is an urgent matter to be achieved.

 Lastly, the article suggests three strategic role of banking sector in re-shaping the relation of Indonesia and the Netherlands. (i) Banks promote capital formation by providing financial resources necessary for economic development. (ii) Banks may influence economic activities through credit creation and promoting investment to enterprises. And (iii) Establishment export promotion cells to increase the exports of a country that may provide information about trade and economic update in general.

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Tulisan ini dimuat di BNI Monthly Update Edisi Januari 2014

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2 comments on “Re-shaping the Future of Indonesia and the Netherlands Economic Relation

  1. Eliza Mardian
    January 19, 2014

    assalamualaikum

    Perkenalkan saya eliza mardian mahasiswi pertanian unpad. maaf kang menganggu, maksud dari email saya ini adalah untuk mengundang kang yusuf agar dapat berbagi semangat dan memberi motivasi untuk para calon pemimpin muda indonesia terutama di fakultas kami. sebelumnya saya mau bertanya, kira-kira sekarang akang sedang berada di belanda atau di bandung ?  

    terima kasih

  2. Ruli Ismawati
    April 7, 2014

    Reblogged this on Ruli Ismawati.

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This entry was posted on January 12, 2014 by in Sosial dan Politik.

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