Indonesia-China Partnership: New Alternatives, Besides Devaluation Policy？

 

Kevin Tan, Jakarta

Recently, China decides to devaluate its currency until around 3,3%. This policy has destabilized most of the parts in the world, including BRICS (Brazil, Russia, India, China and South Africa), European countries, and Asian region, including Indonesia. As Indonesia is China’s strategic partner, China should be mindful to execute this policy.   

There are two reasons behind this.

First, according to Minister of Trade Republic of Indonesia, Indonesia has a deficit trade to China with the total amount of 13 billion USD until May 2015. In this sector, China has maximized its profit from Indonesia, during Indonesia’s hard time to increase its economic growth.  It shows that Indonesia cannot get its chance to get more profit with their cooperation to China.

Second, China’s devaluation will jeopardize the competitiveness of Indonesia local products. When Indonesia still in a dilemma to strengthen its currency to USD, the devaluation will bring Indonesia’s economy going nowhere.

Devaluation policy will lead China to decrease its good’s value to be exported to other countries. Since Indonesia’s fundamental economy is not as stronger as China, in term of industry development. Indonesia will import more good from China, where our local products will not be bought to our local people.

In this period of time, China’s devaluation policy is hardly to be considered as a right time to be executed to Indonesia.  When Indonesia is in the struggle in inviting investors to help Indonesia in its infrastructure program, Indonesia has to swallow second bitter pill from China. 

Rather than bringing a benefit to Indonesia, it creates fear to our small-and-medium enterprises to sell their product locally and internationally for their product competitiveness with China, especially on the price.

When Indonesia has not a strong economic sector nowadays, the reasons above will put Indonesia’s economy remain in the crisis.

It is regrettable that this policy will only bring benefit to China, without thinking further to a longer term of Indonesia-China partnership. Partnership should bring a benefit to all party, not only one party.

China should bear in mind that Indonesia is one of China’s strategic partner in the Southeast Asia. Since Indonesia’s position in the geographically and politically important to China, they should not be too harsh to Indonesia. Executing this devaluation policy will imply to both countries relations.

It should be noticed that China is not the only country that Indonesia can cooperate for. There are also Japan and Korea that has developed their economic better. If Indonesia can take benefit with cooperation with both countries, why should Indonesia keep its cooperation with China that ruins Indonesia’s economy?

Instead of forcing this policy, there are both ways that China can do to increase the partnership between Indonesia and China in the next following years.

First, China has to help Indonesia to build its manufacture industry as what Japan has done before in Indonesia. Currently, Indonesia needs a stronger economic sector in our country. If China can build more manufacture industry, Indonesia can reduce its unemployment rate during this hard time. In the other side, Indonesian can learn new technologies in building its manufacture industry.

Second, China needs to help Indonesia to open its manufacturing industry in China. China has enjoyed its economic from Western companies that moves its factory to China. From this policy, China can grow its economic rapidly. Since China’s growth is decreasing, China can open the chance for Southeast Asia conglomerates to open its factory in China, by China’s support.

The second policy will bring a benefit to both countries. In one side, this policy can help China to maintain its economic growth in the next following years. In the other side, Indonesia can get some new alternatives, by opening new factories in China. Both economies will have a chance to develop in the next following years.

Both policies cannot be executed without China‘s contribution. If China can help both, Indonesia will seriously prioritize China as its strategic partner in the future. 

Rather than taking a policy that will harm the interest of other countries, China should consider the importance of giving benefits to other countries in their policies, in order to show to the world that China will “peacefully rise” as a developed countries. It will give a chance for China to gain many countries‘s support for their existence in the world.

If China can really consider this principle as important, China can have a bigger probability to  enjoy more beneficial relations with their trading partner not only in term of economic relations, but also in political relations.

 

The writer is founder of the Indonesia Berbicara http://indonesiabicara.weebly.com/