Thursday, 21 June 2012

Indonesia’s Outreach to Latin America

(Repost of article published in The Jakarta Post, 20 June 2012) 

Appraisals of Indonesian foreign policy have frequently highlighted the 1955 Asian-African Conference, when Indonesia was considered to be at the forefront of an emerging force in international politics.

Often claimed as a fine era in Indonesian diplomacy, this account has imprinted the need to continuously cultivate relations with Africa.

Of course, such traditional ties should be seen in a positive light. However, it is important that they do not condition Indonesia into overlooking ties with “less traditional” partners elsewhere, such as Latin America.

The distance between Indonesia and Latin America may be enough to dishearten even the keenest proponent for stronger ties. A distance of 12,000 kilometers separates Jakarta and Quito, Ecuador’s capital city, twice farther than between Jakarta and Cape Town at the southern tip of Africa.

Furthermore, the lack of direct flights means it takes Indonesians 24 hours or more to get to most Latin American cities. However, such trips may be well worth it.

For long the home of countries constantly in need of IMF sustenance, Latin America now hosts some of the most dynamic economies in the world. They offer an expanding market and purchasing power as well as a young and growing population.

And with poverty levels at their lowest in history, the region is demonstrating commendable resilience due to its stable macroeconomic policies and prudent fiscal measures.

From 2003, Latin America experienced an average annual gross domestic product (GDP) growth rate of almost 5 percent until the 2008 recession hit the region.

However, while many continue to suffer from the repercussions of the crisis, Latin American economies bounced back in 2010, and are predicted to expand by 3.7 percent in 2012.

Brazil and Mexico are members of the G20. And this year G20 Summit host Mexico has invited Colombia and Chile, thus further showcasing Latin America’s economic progress and its demand to be heard more in the global economy.

The Monroe Doctrine had reduced Latin America to being viewed only as the United States’ backyard for almost two centuries. Furthermore, emotional ties to “the Old Continent” have remained prevalent.

However, as these countries have adopted more independent approaches in diplomacy, many have recently gained a fondness for irritating the old establishments in the West.

In its place, outreach to the East has gained considerable popularity.

With this as a backdrop, surely there must be advantages ripe for Indonesia’s picking. As more traditional economic partners in Europe and North America remain troubled by financial crises, Indonesia must develop alternatives, exploring and capitalizing on new markets. There seems no better time to take Indonesia’s cooperation with Latin America to a higher level.

Although Indonesia’s ties with Latin America have existed since the start of the Republic, such ties have not been maximized, for example in trade and investment. In 2010, Indonesia-Latin America trade amounted to US$6.7 billion, or just around 2.9 percent of Indonesia’s total.

Indonesia’s trade with Japan alone that same year was $47.7 billion. But if we compare these statistics to those related to Africa ($4.2 billion in 2010), then the prospect of Indonesia’s cooperation with Latin America seems promising.

Undeniably, there is continuous progress, as in 2011, Indonesia-Latin American trade went up to $8.3 billion — a staggering 24 percent increase. Indonesia’s relations with Latin America have evolved predominantly at the government-to-government level.

However, in order to step up such cooperation, efforts must also be targeted at enhancing people-to-people contacts, especially cooperation among businesses.

Therefore, it comes as a breath of fresh air that Indonesia’s Trade Minister led a trade delegation in March 2012 to Brazil, Chile and Peru to expand markets for Indonesian products.

This becomes an urgent matter especially when observing that other Southeast Asian neighbors have already had a head start in building economic ties with Latin America.

In 2010, Thailand’s trade with South America (not including regional powerhouse Mexico and a handful of Central American countries) stood at $6.84 billion, which then jumped to $8.55 billion the following year. These all indicated numbers superior to those of Indonesia.

Not only that, this year Thailand launched a free trade agreement (FTA) with Peru, one of the world’s mining superpowers, with a banking sector considered as among the healthiest in Latin America.

This deal is expected to further boost Thailand’s trade numbers within the region. A free trade agreement with Chile, the only OECD country south of the Panama Canal, is also scheduled to be completed before the end of the year.

In the case of Malaysia, which also has an FTA with Chile, officials have lauded the benefits of dealing with Latin American economies that are growing faster than the US, Europe or Japan.

Turning to Latin America provides a means to diversify Malaysia’s export markets, thus lessening the dependence on economies presently suffering from crises.

Not only that, there is a growing belief that many Malaysian products — such as electronics, clothing, machinery and metal and rubber products — are suited to the demands and requirements of markets in Latin America.

Undoubtedly, Latin America’s interest in Asia has largely been dedicated to “the usual suspects”: China, Japan, and South Korea. While Japan remains Latin America’s leading investor, there aren’t too many that can resist China’s growing economic lure these days.

However, as Asia is poised to overtake the US and Europe as Latin America’s top trading partner over the next decade, the economic pie may be big enough for other Asian countries to enjoy as well. At the end of the day, the onus is on Indonesia to ensure that it is not left without a seat at the table.

Indonesia has attempted to push for greater cross-Pacific cooperation through dialogues between ASEAN and MERCOSUR, the most dominant economic sub-grouping in Latin America.

Indonesia also tries to take advantage of its involvement in the Forum for East Asia Latin America Cooperation (FEALAC). As well, other forums containing Latin American countries (such as APEC) have been used to generate greater interaction.

At the bilateral level, while the larger Latin American countries have long had representations in Indonesia, others are only recently following suit.

In 2009, Ecuador reopened its embassy in Jakarta; Paraguay has also revealed plans to do the same. The opening of these embassies not only symbolizes Latin America’s interest in Asia’s growing economy, but also as appreciation of Indonesia’s role in this positive trend. In 2010, Indonesia opened its embassies in Quito and Panama City.

President Susilo Bambang Yudhoyono’s visit to Latin America on June 18-25 to, among other things, attend the G20 Summit in Mexico and the Rio+20 Summit in Brazil, respectively, will also provide an occasion to enhance Indonesia’s exposure in Latin America and its people. Meanwhile, in Ecuador, President Yudhoyono will dedicate his visit — one of the first by any ASEAN leader — toward enhancing bilateral ties with this oil-rich country.

Indeed, more significant than the barrier of distance, the strengthening of Indonesia-Latin America ties requires the overcoming of barriers of the mind. Most Indonesians know of Latin America’s footballing prowess; however, stronger economic ties with the region may be an idea too vague for many to imagine.

Then again, if it is possible to form a lasting brotherhood with Africa on the basis of a historical event 57 years ago, then current trends are pointing at how sensible it is to imagine a brotherhood with Latin America and maximize on it too.