Indonesia expected to benefit from US-China recovery – UOB

Economist at UOB Group Enrico Tanuwidjaja, Haris Handy and Jason Maslin commented on the prospects for Indonesia following a US-China recovery.

Key Quotes

“The world, particularly the US and China, seems to increasingly able to bring the COVID-19 pandemic more under control with vaccination drives everywhere a key game changer. This has helped, to a certain degree, forge a clearer path to recovery, again with the world’s two biggest economies, US and China, leading and supporting the global growth. The strong recovery from both countries can provide a tailwind for Indonesia’s FDI and exports going forward, provided that Indonesia is prepared to implement policy or structural adjustments to optimize the potential benefits from increasing trade and incoming FDI into the country.”

“Nonetheless, Indonesia might benefit more from China than US in terms of both FDI and exports. China has a greater economic focus for the region and at the same time, a more diversified focus of sectors when it comes to FDI in Indonesia than the US does. We might see a higher FDI in metal processing/products from China (notably nickel and steel), while US’ focus might seem to be more narrowly focused only in the mining sector.”

“There should not be a significant barrier for Indonesia to enjoy the full benefit on exports demand from China and US economic recovery; underpinned by China - ASEAN Free Trade Agreement (FTA) and RCEP, as well as direct and bilateral trade relationship between the two giants. Recent reforms such as Indonesia’s Omnibus Law and its first implementing regulation, Presidential Regulation No. 10 of 2021 will certainly help as an enabler to improve the investment climate, gaining more FDI going forward and hopefully increase trade flows as well.”