Interview with James Budiono, Chairman, Indonesia-Hong Kong Business Association
1. Could you provide an overview of Indonesia’s reliance on trade and its overall domestic market structure?
Even with Indonesia’s abundance of natural resources, Indonesia is still quite reliant on China in terms of raw materials used for local manufacturing, and the United States for food and construction equipment. However Indonesia is trying to reduce its reliance on trade, especially with China, which Indonesia has an extreme trade deficit with, in order to be more self-sustained in raw goods.
Majority of the consumer products in Indonesia are still highly rely on import. The government is actively promoting domestic manufacturing to reduce the reliance on import. Nonetheless, Indonesia do welcome more investment from foreign countries particularly in manufacturing sectors, not only to draw in capital but also the manufacturing technology and know-how.
2. What do you see as the most exciting trends for Hong Kong and Indonesia in terms of trade?
May be around 10-20 years ago, Indonesia was not a popular destination for Hong Kong people, be it for travelling or business. In recent years, we are happy to see more interest from Hong Kong business sectors to explore Indonesia. In the last 5-6 years, we have received far more individual enquiries, business delegations, study missions etc from Hong Kong to Indonesia than ever. These cover different sectors from trading, factory relocation to investment. Vice versa, we also see more Indonesian businessmen consider Hong Kong as a gateway for expanding their international business. Very often they choose Hong Kong as a hub for business with mainland China and North Asia. Some may even use Hong Kong as a financing platform for business expansion.
In the last 5 years, in Indonesia we have set up the “Indonesia Hong Kong Business Association”, while in Hong Kong side the “Indonesia Chamber of Commerce in Hong Kong (INACHAMHK)” was also setup. While we are based in Jakarta and Hong Kong respectively, we carry the same mandate to facilitate the two-way mutual understanding and business facilitation. The setup of the two business associations is also a concrete proof that the business relationship between Indonesia and Hong Kong is growing more intense.
3. What are some of the recent developments in terms of projects, cooperation or infrastructure that you can highlight?
Indonesia is currently focusing heavily on economic development, taking up projects such as the 100 Smart City movement, meant to develop smart cities to improve the quality of life through the integration of technology. Improving its transport infrastructure, with the construction of high-speed railways from Jakarta to Bandung, and Jakarta to Semarang, highways connecting Indonesia to neighbouring countries, construction of new toll roads to better connect cities and provinces Indonesia.
Another hot topic will be the relocation of the Indonesian capital from Jakarta to East Kalimantan. This involves a huge amount of infrastructure development and also requires a massive amount of foreign investment.
4. How has COVID-19 changed things in the short run for business and trade? What do you think are the long-term implications?
This epidemic will bring a toll on Indonesia’s manufacturing sector, especially because China is Indonesia’s largest trading partner and supplier for raw materials. The tourism sector has also been disrupted with a significant decline in foreign tourists coming to Indonesia, and with Indonesia closing its borders to Chinese tourists, which make up a large percentage of foreign tourists visiting Indonesia. This will be bad for business and affects the Indonesian economy as a whole, hence economic growth would slow down compared to previous years.
5. Could you share one recent success story of a Hong Kong company making waves in Indonesia and vice versa?
As I mentioned earlier, in recent years there are more incoming study delegations from Hong Kong coming to Indonesia to explore different kinds of business and investment opportunities. Among all, factory relocation is one of the most popular topics. Indonesia is a country with huge population which is ideal for labour intensive industries. The domestic market is huge too so the factory can also explore domestic business.
We are glad to see that a few Hong Kong manufacturing companies have been setting up manufacturing base in Central Java in recent years. Some started a few years ago in 2017-2018 while some are setting up in 2020. I was told some of them are considering further expansion too.
I also mentioned earlier majority of the consumer products are indeed imported, and Hong Kong as a global trading and sourcing hub plays a very important role in this aspect. Many retailers and distributors are regular visitors of the international trade shows in Hong Kong for their product sourcing. Some of the large chains even set up a permanent sourcing office in Hong Kong to facilitate their huge sourcing need. We foresee there will be more and more Indonesian companies using Hong Kong as their stepping stones for different kinds of business expansion.