Southeast Asian and American corporations announced billions of dollars in trade deals during President Barack Obama’s visit to the Indonesian island of Bali, where issues such as trade and security have dominated meetings between the 10-member Association of Southeast Asian Nations (ASEAN).
President Obama spoke briefly Friday at the signing of a multibillion dollar deal between Indonesia’s Lion Air and Boeing, the US firm’s largest ever commercial agreement, calling it a “win-win” solution for Southeast Asia’s growing middle class and American workers.
Boeing’s plan to sell 230 aircraft valued at $21.7 billion to Lion Air, the largest airline in Indonesia, could produce more than 110,000 US jobs. GE also agreed to sell 50 CFM56 engines to Indonesia’s state-owned airline Garuda for $1.3 billion.
Announcements of big private sector trade agreements are typically made during US presidential visits, though the deals have often been in the works for months or years and may never come to full fruition.
Obama has put export promotion at the center of his nine-day tour of the Asia-Pacific, where strong growth is expected.
Analysts say Indonesia is a key part of Obama's hopes for an Asia-driven US economic recovery. The country's $700-billion or so in annual gross domestic product (GDP) accounts for roughly 40 percent of all of ASEAN. The country of 240 million people is set to grow by 6.5 percent this year, even amid global economic turmoil, thanks largely to a low reliance on exports coupled with buoyant domestic demand from a young and rapidly growing middle class.
Trade still has room to expand between Indonesia and the US, its No. 4 trade partner, behind China, Singapore, and Japan. In 2010, the US only exported about $6.9 billion worth of goods to the country, about the same level as tiny Costa Rica.
But while US investments in oil and gas remain high, Indonesia’s Asian neighbors have already gained a foothold here in manufacturing and consumer goods. Japan’s 7-Eleven convenience stores have multiplied across Jakarta since the company teamed up with local firm PT Modern Internasional in 2009. China currently supplies mining companies with heavy machinery and, along with South Korea, is investing in much-need infrastructure projects and energy.
The China-ASEAN free trade agreement that took effect in 2010 has helped power growth in the region, finds a recent study by the Center for Strategic and International Studies (CSIS), a Washington DC-based think-tank. But the perception that the US lacks a proactive trade and investment policy limits American engagement.
“When Obama came here [last November] he gave a really good speech, but not a commitment,” said Umar Juoro, an economist at the Jakarta-based Habibie Center and a member of Indonesia’s national economic committee. Obama's speech contrasted with the visit in April by Chinese Premier Wen Jiabao, who promised $19 billion of investment credit as a trust-building measure to an economy many describe as “compelling.”
The latest outreach by the US is “really backing up rhetoric with action,” says Ernest Bower, an analyst at CSIS and co-author of the study. He says despite the high level of trade and investment from Beijing, Indonesia is wary of too strong a Chinese presence.
Indonesia’s seeks “balance,” he explained. But human rights groups say that balance must come in the form of constructive engagement that includes not just economic dimensions, but holding the Indonesian government accountable for its muted response to mob violence against minority religions and brutality by soldiers against peaceful protesters.
“The Obama administration’s deepening relationship with Indonesia means being frank about Indonesia’s serious human rights challenges,” Elaine Pearson, New York-based Human Rights Watch’s deputy Asia director, wrote in a recent statement.
Mr. Bower says Indonesia recognizes and appreciates where the US stands on human rights and transparency, calling governance one of the strongest factors linking together the world’s second- and third-largest democracies.
“China may undercut its own interests,” he says, by drafting loans for infrastructure projects contingent upon the use of Chinese contractors and labor. “That causes a lot of resentment."
Mr. Juoro says it also leads to problems with unreliable equipment. But move beyond heavy equipment and he remains skeptical about how much of a market Indonesia can offer US goods. “I don’t think the US could be number one here,” he says.