Indonesia can serve as a production base for Taiwan

02 July, 2012 | Source: The Jakarta Post

A high level business delegation from Taiwan last week visited Indonesia to explore trade and investment opportunities in Southeast Asia’s largest economy. Apart from bilateral trade talks, the visit included the signing of a memorandum of understanding (MoU) between Taiwan’s Chinese National Federation of Industries and Indonesia’s Association of Indonesian Employers (Apindo) with a vow to further strengthen economic cooperation.

 

The event, reportedly creating US$29.3 million in business opportunities for Taiwan manufacturers, highlights numerous economic potentials that can be developed by both countries in the future despite an absence of formal diplomatic relations due to Indonesia’s one-China policy.

The Jakarta Post’s Linda Yulisman talked to Taiwan Bureau of Foreign Trade Director General Cho Shih-chao about trade and investment issues on the sidelines of the visit. Below are excerpts from the interview.

Question: How do you view the current economic relations between Taiwan and Indonesia and how do you project it in the future?

Answer: The economic structure of Taiwan and Indonesia is mutually complementary, which means we can produce what Indonesia needs, especially now as a very large portion of the population belongs to the middle class. Those middle class consumers require good and reliableproducts with fine design — but sold at a fair price — and Taiwan is very good on producing such products.

We also import a lot from Indonesia, but mainly raw materials and intermediary materials. Last year, total bilateral trade reached US$12.2 billion, but we only exported $4.7 billion. However, Indonesia is becoming more and more important. The economic performance is quite well and impressive, and we believe Indonesia will very soon become one of the top 10 markets in the world. That is why we want to invest and trade with Indonesia.

What is your target for bilateral trade this year?

We believe Indonesia is a very important emerging market and this year, we target trade can increase by at least 15 percent, which is reasonable. We believe we can reach that.

How do you see the investment prospects in Indonesia right now?

Now, more and more Taiwanese investors come and look into investment opportunities in Indonesia. I believe they must have reasons for that.

In general, Indonesia has an abundant labor supply and labor skills are good. In terms of attitude, Indonesian workers are willing to work hard and are less demanding than other places. Indonesia is also rich in natural resources. That is very important because for any kind of investment, you will need many kinds of raw materials and Indonesia can supply them. So, Indonesia is really an ideal place.

In what areas are Taiwan’s firms keen to invest?

In the early days, investment from Taiwan mainly concentrated in the sort of traditional industry which is labor intensive, such as footwear and garments. It has now changed. Investors from Taiwan are looking into opportunities in the machinery, electronics information and communication technology, textiles, agriculture and food processing sectors.

The shift of investment from labor-intensive to the higher level is important because if we stay at that level, we cannot compete with many countries such as India, Bangladesh, or China. We are good at research and development, at technology advancement, because we spend a lot of effort and money on that. The new kind of investment will help us compete in the world market.

Which market do you aim to grab with the investments?

We are talking not only about the domestic market. We are also hoping to export from Indonesia to the rest of the world.

So you want to make Indonesia as an industrial production base for Taiwan companies?

Yes. By doing so, we believe we can help bring the technology in the production in Indonesia. This is a win-win situation for both of us. The new investment from Taiwan to Indonesia will definitely improve the quality of our relations.

You have a large number of small and medium enterprises. How do you see the possibility for future collaboration?

Yes, 97 percent of Taiwanese companies belong to small and medium enterprises scale [SMEs], which is also the case of Indonesia. Therefore, I believe that we can work together in a lot of areas, particularly in terms of sharing assistance for SMEs, to further develop SMEs in both countries.

Indonesia and Taiwan are conducting a joint feasibility study for an economic cooperation agreement. How is the progress and how do you view the prospects?

Indonesian Institute of Sciences (LIPI) and Chung-Hua Institution for Economic Research (CIER) have already concluded the first stage of the study and they are now working on the second stage with outcomes expected to finish by the end of this year. The preliminary research result shows that it is very positive for both sides — as investment is beneficial for both sides.

 

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