High-tech and training are in demand
Interview with Frank Malerius, Jakarta correspondent, Germany Trade & Invest2 Mar. 2020
Indonesia wants to become an industrial country and therefore needs technology. Germany has an excellent reputation as a supplier to the island kingdom. Nevertheless, trade between the two countries is comparatively small. Thus far, many German companies have shy away from on-site engagement because of legal uncertainty and excessive bureaucracy. Ambitious reforms should now significantly improve investment conditions.
Indonesia is a rapidly growing emerging country. What does its industry need from German suppliers?
Everything, actually, because the country hardly produces any technology or intermediate products. For this to change, it requires modern production technology. "Made in Germany" has an excellent reputation in Indonesia. But economic relations have to be expanded: German exports to Indonesia are half those from Luxembourg. Only one percent of Indonesia's foreign direct investment comes from Germany.
What are Indonesia's strengths?
The Indonesian economy is still dependent on raw materials. The export of coal, gas, palm oil and ores enables expansion of manufacturing. Food processing, automotive, textiles, electronics and chemicals are the most advanced sectors. They are therefore at the heart of the government strategy “Making Indonesia 4.0,” which was drafted in 2018.
What are the prospects for digitally networked production processes in Indonesia?
There are a few ultra-modern factories. Nevertheless, Industry 4.0 is still a long way away. There is a lack of specialists who can set up, maintain and operate the corresponding systems. In addition, wages are low, so in many places there is no incentive to implement expensive high-end production technologies. For this reason, the focus will be less on the networked factory and more on the expanded automation of production processes. But for this the country also needs technology partners.
Why have so few German companies been active in Indonesia so far?
Many avoid the country because the investment conditions are significantly worse than in neighboring nations such as Malaysia or Thailand. But President Joko Widodo promised extensive reforms at the beginning of his second and final term. His courageous legislative initiative, designed to loosen rigid labor laws, makes it easier for foreign companies to acquire licenses and creates more legal security. It is currently being debated in parliament. It’s difficult to say right now what will be left of it at the end of the ratification process.
Aside from technology, how can Germany support Indonesia?
The biggest obstacle to Indonesia's further development is the low level of education and training. The country must qualify roughly 60 million workers by 2030 to achieve its development goals. Some dual training paths have been initiated with German help. However, we are only talking about a few hundred graduates. The challenges are enormous and take a lot of time.
How far along is Indonesia on its development path?
The country has been in an economic upswing for two decades, has developed into a democratic lighthouse in Southeast Asia with a largely free press and has remained largely peaceful in the process. If you look at the geography and ethnic heterogeneity of the country, you will see what a tremendous achievement that is.
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