Economists at UOB Group are expecting constructive prospects for Indonesia following a US-China recovery.
Bringing the COVID-19 pandemic under control with vaccination drives is a key game changer and the world’s two biggest economies are not lagging behind. The strong recovery from both countries can provide a tailwind for Indonesia’s Foreign Direct Investments (FDI) and Exports going forward.
On Indonesia’s part, practical policies or structural adjustments are needed in order to fully optimize the potential benefits from increasing trade and incoming FDI into the country.
Nonetheless, Indonesia is expected to 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.
China’s interest is in metal processing/products (notably nickel and steel), while US focus is more narrow to the mining sector.
Indonesia’s exports are expected to enjoy the full benefit from high demand in China and US economic recovery; underpinned by China – ASEAN Free Trade Agreement (FTA) and Regional Comprehensive Economic Partnership (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 and increasing trade flows.