Jakarta, 14 December 2023 – Indian businesses have shown keen interest in Nusantara, Indonesia’s ambitious new capital project, Malvika Priyadarshini, first secretary for trade and commerce at the Indian embassy in Jakarta, said.
Nusantara is Indonesia’s planned new capital city, intended to replace Jakarta as the administrative and political center of the country.
Indian hospital chain Apollo is already collaborating with Indonesia’s Mayapada Hospital Group to set up a hospital in the new capital that is coming up on Borneo Island, Priyadarshini said in an interview, adding that plans are afoot to organize a delegation-level visit to gain a deeper understanding of the project.
India is also actively engaged with Indonesia to overhaul the latter’s healthcare system, she said, while highlighting that both countries are looking to scale up bilateral trade to about $50 billion from about $40 billion now.
On the socio-cultural front, New Delhi is also looking to highlight and strengthen the deep-rooted connection between Indian and Indonesian cultures, Priyadarshini added.
Edited excerpts (questions and responses have been edited and condensed):
Could you give a brief overview of the business and economic climate in Indonesia?
Since 2018, our relations with Jakarta were elevated to a comprehensive strategic partnership following Prime Minister Narendra Modi’s visit to Indonesia. Prime Minister Modi and Indonesian President Joko Widodo are known for promoting progressive economic policies, which have significantly bolstered our trade and economic ties, including investments.
In the past three years, our bilateral trade has almost trebled (from about $14 billion in 2020 to almost $40 billion in 2023). Indonesia has become our largest trading partner in the Asean (Association of Southeast Asian Nations), recently overtaking Singapore. While Singapore acts primarily as a transshipment hub, with many goods and investments eventually reaching other Asean countries, including Indonesia, it’s Indonesia that has emerged as the larger exporter in our bilateral relations. We export around $10 billion to Indonesia, while they export about $29 billion to us. This has created a trade deficit that favors Indonesia, primarily driven by our imports of commodities such as palm oil and coal from them. We are making efforts to increase Indian exports in food commodities like bovine meat, auto, machinery, chemicals and auto to make trade more balanced. We’ve set a target of reaching $50 billion in trade by 2025, and I’m confident we’ll soon achieve it.
How do you see the evolving economic dynamics in the context of global geopolitical tensions and the post-covid emphasis on supply chain resilience? How significant is the ‘China plus one’ strategy in shaping this relationship?
Indonesia is the largest economy in Asean and the fourth largest country globally, nearing a population of 300 million. Both India and Indonesia are increasingly seen as pivotal future markets. There’s a notable surge in interest from Indian companies towards Indonesia, reflecting Indonesia’s progressive policies towards India. Indonesia recognizes India not only as a significant market but also as a partner for technology and investment.
In this era marked by geopolitical tensions and the post-covid landscape, discussions about supply chain resilience and the ‘China plus one’ strategy are gaining momentum. We are both adapting to this new reality, acknowledging the potential and importance of our bilateral relationship in these changing times.
(The “China Plus One” strategy involves companies diversifying their manufacturing beyond China to mitigate risks like rising labor costs, geopolitical tensions, and supply chain disruptions. While maintaining operations in China for its market and infrastructure, firms also expand into other countries, seeking benefits like lower costs and new markets. This approach, growing in popularity, particularly favors regions like Southeast Asia, India, and Mexico for their unique labor, market, and production advantages.)
With Indonesia building its new capital, Nusantara, on Borneo Island, what are the perspectives of Indian businesses? Are there concerns about policy continuity?
The development of Nusantara, which started late last year, is a significant undertaking. It’s scheduled for inauguration in 2024. I visited Nusantara last month. Construction of government buildings, toll roads, water reservoirs, national palace, and other infrastructure is on at a rapid pace. The Indonesian government aims to host their next Independence Day in Nusantara and has passed constitutional reforms to ensure policy continuity, regardless of future leadership changes.
Indian hospital chain Apollo is collaborating with Indonesia’s renowned Mayapada Hospital Group to set up a hospital in Nusantara, marking the first such Indo-Indonesian collaboration in healthcare. This partnership, which is actively backed by President Joko Widodo and the Indonesian health minister, signifies our growing healthcare collaboration. It’s just not symbolic. It also bodes well for our future collaboration in the healthcare sector. We are working on many such collaborations and looking forward to more healthcare collaboration in the future.
In October, Indonesia’s ambassador to India (Ina Krisnamurthi) led an investment delegation to Nusantara, including prominent Indian businesses like the Adani and GMR groups. While there’s initial interest, many are adopting a wait-and-watch approach, considering the project’s scale and investment opportunities.
With the upcoming elections and the ambitious project of developing Nusantara into a fully functional, green, and smart city by 2045, how is the Indian business community planning its involvement, considering the project’s long timeline and vast opportunities in various sectors?
Elections are important for any nation and influence business decisions. There’s a sense of anticipation about the elections scheduled for February. Nusantara, which is expected to house a population of 10 million, is envisioned as a 10-minute smart city, boasting green initiatives and advanced urban e-mobility infrastructure. While the opportunities are vast, the project’s extensive timeline is also a significant factor.
We maintain regular contact with the body overseeing the project’s development, which operates independently under the president’s direct oversight. Plans are underway to organize a delegation visit to Nusantara, either before or shortly after the elections, to gain a deeper understanding of the project. Currently, we are engaging with various ministries to gather insights and explore opportunities. We foresee potential Indian investments in infrastructure, telecom, e-mobility solutions, healthcare, and education. Additionally, the service sector, including hospitality, consultancy, and environmental project management like solid and water waste management, presents substantial opportunities for Indian enterprises. I look at it as definitely a positive opportunity for India.
What are the emerging sectors in Indonesia that Indian businesses are considering for investment?
Health is our top priority. Indonesia is looking to India for a comprehensive overhaul of its healthcare system. We are actively involved in consultations on digitalization and policy frameworks, with MoUs (memoranda of association) being discussed for setting up pharmaceutical companies and hospital collaborations, doctor training, and medical tourism. The Omnibus Health Law, which was passed in July, aims for a complete health system reform and presents an opportunity, especially considering Indonesia’s need for technology, diagnostics, manufacturing, and higher education in healthcare – areas where India excels.
Another key sector is digitalization. We’re exploring ways to integrate Indian digital infrastructure with Indonesian systems, promoting the concept of India stack here. There’s also a focus on manufacturing, supported by Indonesia’s policy on downstreaming (or adding value to raw materials through further processing or manufacturing) in various sectors, including palm oil and critical mineral reserves for electric vehicles and battery systems. Indian companies like TVS are already making strides in the electric two-wheeler market in Indonesia. TVS plans to start electric two-wheeler production here next year. A couple of other Indian companies have also evinced interest.
Renewable energy is also a significant area of interest, with Indonesia signing up for energy transition partnerships and seeking funding for transitioning from coal to renewable energy sources. India’s expertise in solar energy positions us well to contribute to and benefit from these opportunities in Indonesia.
A recent survey among Asean populations indicate that India’s presence is perceived as relatively quiet except in the socio-cultural realm, possibly influenced by Bollywood’s popularity. What are your thoughts on India’s role and visibility in the region, especially in light of these findings?
China, as a traditional key player and economic giant, particularly with its influential Chinese diaspora, is undoubtedly prominent here. India, with a different structure, cannot compete with China’s visible projects like the BRI. However, we are focusing on our unique strengths.
We’re building a new narrative, especially as we approach the 75th year of India-Indonesia friendship. Our celebration starting this January will highlight the contributions of nearly 200 Indian companies in Indonesia, including major diaspora-led firms like Lakshmi Mittal’s steel plant and Indorama. Additionally, over 300 Indian professionals are in leading roles in multinational companies or successful startups here.
Our cultural influence, particularly through Bollywood, is significant yet understated. The deep-rooted connection between our cultures, evident in the Indonesian language and local culture, needs more recognition. We’ve recently launched direct flights between our major cities, enhancing connectivity and mutual discovery.
The top four media companies in Indonesia, owned by the Indian diaspora, significantly influence the media landscape. These are aspects of our relationship we’re looking to highlight and strengthen.
Moreover, the historical political goodwill towards Indians in Indonesia remains strong. We enjoy greater acceptance here than most other foreigners. This conversation is part of our ongoing effort to deepen our ties and showcase India’s role in Indonesia.
Editorial note: The bilateral trade figures have been updated in the beginning of the interview, along with added information about India’s efforts to increase exports in various sectors.
This interview is part of “Look East To Act East”, a special series on India’s relations with the countries in the Asean grouping.