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Improving trade and investment relations between Indonesia and Israel

There are practical ways of improving bilateral relations, while minimizing public resentment in Indonesia.

09 Oktober 2015 14:40

The lack of diplomatic relations between the two countries imposed by political constraints in Jakarta have had a significant adverse impact on the development of business ties between the two countries. The absence of a regulated relationship and governmental support has compounded the difficulty inherent in conducting the commercial, legal and logistical aspects of potential cooperative ventures preventing direct Israeli investment in Indonesia.

At present, companies incorporated in Israel cannot have their corporate documents verified or product specifications certified by Indonesian embassies because the State of Israel is not officially recognized. Thus joint-ventures or direct acquisitions and some exports to Indonesia (cosmetics) are not possible. A single-entry business visa for Israeli citizens costs almost $500, which is another way of saying “don’t come” and visas are rarely granted for more than 7 days and require troublesome bureaucracy.

This situation puts Indonesia, which ostensibly wants foreign investment, at a critical disadvantage when compared to other Asian countries. Myanmar, Thailand, Vietnam, Taiwan, Cambodia, Laos, and the Philippines, not to mention China and India, all of which have open, dynamic and mutually beneficial relations with Israel including diplomatic ones and have attracted Israeli investment.

Though political factors have limited the development of Israel-Indonesia relations, cooperation and trade have grown over the years and bilateral trade is now estimated to be in the range of $400-500 million, about 80% of which is Indonesian exports, mostly commodities. Indonesian imports from Israel consist mainly of high-tech products, a large portion of which are procured through third countries (e.g. Singapore, Europe, and Jordan).

Notwithstanding these accomplishments, there are several areas where enhanced cooperation could pay significant dividends, most notably the agricultural sector, in which Israel, having developed many applicable technologies, is a world leader. Applying Israeli technology and know-how could help effect a huge change in Indonesian agriculture, one that must be accompanied by government action to reach out to the rural farming community.

Israel can be of assistance in the medical field as well, both in technology and methodology. Collaboration in Tele-medicine to serve Indonesia’s widely dispersed population and public health would also be beneficial, given that Israel has one of the world’s most advanced health insurance systems.

Indonesia's energy sector could also use a boost and Israeli engineering know-how could help increase electricity production capacity to keep pace with rising domestic demand.

The sector that probably has the greatest influence on the development of Indonesia is education. Yet, the quality of instruction is low in many parts of Indonesia. As a consequence, the educational system is unable to generate the number of qualified teachers, engineers and doctors that the country desperately needs. Partnering with Israel, which has developed effective distance learning methods and software, could be useful.

All these technological possibilities are supported by Israel’s IT sector, which is already well established in the Indonesian market, mainly in mobile and satellite communications and WIFI, sometimes through non-Israeli proxy companies.

Finally, bilateral tourism has great untapped potential. Presently, only about 20,000 Indonesians visit Israel every year, usually on Christian pilgrimages. The number of Israelis visiting Indonesia is much smaller, as tourists Israeli citizens can only enter the country on group visas. If the many tens of thousands of Indonesians who go on Ummrah or the Hajj would add Jerusalem to their itinerary, the impact at many levels would be considerable.

The potential for cooperation based on the complementary nature of the two economies and Israeli predilection to take risk and initiative, has been limited by political considerations.

Overcoming this impediment requires the understanding on the part of Indonesia that access to Palestine and thus the channel through which support to the Palestinians can be provided lies mainly through Israel. Thus, supporting the Palestinians in concrete ways and improving official relations with Israel and trade go hand in hand. The latter requires not just bold political leadership but also a broad domestic political consensus.

What, then, can be done to develop a more productive Israel-Indonesia relationship? An important initial step would be for Indonesia to improve commercial access for Israeli companies through a more liberal visa policy and the appointment of a single assigned Indonesian embassy (e.g., Singapore, Bangkok or Amman) where such firms could have their documents vetted in order to make cooperative ventures with Indonesian counterparts legally feasible. This initiative could be followed by a more liberal policy accepting Israeli tourists on individual visas, maybe in the beginning restricted to Bali.

At a later stage, Indonesia could propose the adoption of the “Taiwan solution” (i.e., the establishment of commercial but not diplomatic representation), possibly as an enticement to prod Israel to be more forthcoming in its dealings with the Palestinians to revive the peace process.

Thus, there are practical ways of improving bilateral relations, while minimizing public resentment in Indonesia. The timing of any such initiatives will be crucial. Developments in the Middle East, specifically the resumption of and progress in Israeli-Palestinian peace negotiations could create an opportunity to move the Israel-Indonesia relationship further along. The potential is certainly big enough to make it worth-while.

Sent to Albalad.co via faisalassegaf@yahoo.com

Deputy Chairman of the Israeli-Indonesian Chamber of Commerce Emanuel Shahaf. (Emanuel Shahaf for Albalad.co)

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