Germany and Indonesia expanding their ties

German Federal Chancellor Helmut Kohl's visit to Indonesia (Oct. 26 to Oct. 29, 1996) aims to herald a fresh focus on the enormous growth opportunities and prospects afforded by the Indonesian economy. Economic policy has been increasingly marked by the liberalization of trade, industry, investments, shipbuilding and taxation, with the aim of minimizing Indonesia's dependency on oil and gas exports, which have been the major sources of foreign exchange earnings for decades.

During his visit, Chancellor Kohl is expected to officially open several projects in Indonesia that have been initiated with German support in an increasingly friendly investment climate.

German investors invested more than $2 billion in East Java last year, reassured by Indonesia's racing economic growth and political stability.

According to Dr. F. Kleinsteuber, president of the German- Indonesian Business Council, "German investments will see still stronger growth in the coming years due to Indonesia's vastly improved investor-friendliness."

One of the pointers to this trend is the decision of PT Bayer Indonesia, a subsidiary of the German giant Bayer AG, to step up its investments in Indonesia due to "Indonesia's economic growth and domestic political stability".

Several German companies have been spurred on by Indonesia's new deregulation measures to set up a Trade and Industry Center in Bumi Serpong Damai (East Java) that is expected to be operational next year. A more aggressive move into Indonesia is now expected from German businesspeople as a whole, not only for imports and exports but also as a location for production facilities.

The German government has also committed 110 million deutschemarks this year to a "soft loan" package for Indonesia for various energy and health care projects. The agreement, signed in Jakarta in January, also provides credit for diesel- fired power stations and hospitals in Nusa Tenggara.

An additional technical cooperation agreement for 1.8 million deutschemarks in credit provides for the establishment of vocational and technical schools as well as educational centers in Indonesia.

Indonesia is also right on target under the German government's Asia Policy, which was initiated three years ago. The Asia-Pacific Committee, established by German industry, and the European Union's strategy for Asia, drawn up under the German presidency of the European Council, have sent strong signals that German-Indonesian economic relations will become more intense as Asia's rapidly-growing economies move towards becoming the economic powerhouses of the 21st century.

Germany now ranks as one of Indonesia's major trading partners. Indonesia has been cited by a German Institute for Economic Research study as one of the Asian countries whose share in the German market is rising steeply.

Indonesia's exports to Germany rose sharply from US$493 million in 1989 to $1.3 billion in 1995, while the country's imports from Germany also sharply increased, from $920 million to $2.3 billion during the same period, according to official sources.

Germany has displayed strong interest in Indonesian efforts to intensify its development of "strategic industries" by applying high technology in fields such as the manufacture of heavy machinery, telecommunications equipment, ships and railway stock and aircraft components.

Indonesia's diversification and industrialization program has drawn from German technological and technical assistance.

Indonesia's thrust into hi-tech fields was witnessed when the country became the first dynamic economy of the Asia-Pacific region to feature as "Partner Country" at the technological Show Window of the Industrial World at the 1995 Hanover Fair. The Indonesian pavilion, which was jointly inaugurated by Indonesia's President Soeharto and German Federal Chancellor Helmut Kohl, demonstrated Indonesia's industrial might and potential.

The vice-chairman of Indonesia's Agency for Strategic Industries, Giri S. Hadhihardjono, said, "Our economic progress definitely hinges on hi-tech areas because we believe that only through this avenue can our country increase its export earnings, with a high value-added content in our semifinished and finished goods, or in components."

This approach called for investments in Indonesia's capital goods industry and drew attention to the investment opportunities in the country. Some of the areas thrown open to foreign investors were telecommunications, energy, the environmental sector, shipbuilding and aviation engineering.

Indonesia's State Minister of Investment Sanyoto Sastrowardoyo said, "In short, the promising industries are in capital goods, infrastructure, small and medium-sized industry development and human resources development."

German industry has a fairly high profile in Indonesia. Some of the German multinationals already operating in the country include Schering, AEG, Daimler-Benz, Bayer, Siemens, Hoechst and BASF.

Total German approved investment value in Indonesia is of the order of $3,556 million, spread over 76 projects (as of April, 1995), covering mostly chemical industries (nine projects) and metal goods industries (24 projects).

Indonesia is among the countries that have been selected for joint-policy initiatives towards new resources to meet electricity demand in the wake of a Round Table, chaired by Germany in Cologne, June 1996. Chairmen of 15 electric utilities pooled ideas at the Round Table for the improvement of energy capacities in developing countries. Indonesia was represented by Djiteng Marsudi, chairman of PT PLN. Among the first concrete projects agreed upon for joint implementation was the establishment of an electricity generating station in remote areas of Indonesia, costing approximately US$4.3 million. Germany will be among the contributors.

Indonesia is also part of a growing focus on the German Academic Exchange Service on Asia as an "intellectual bridge" among nations. It has become a significant player in this exercise, demonstrating its academic edge by drawing 462 Indonesian and German scholars to delve into the areas of the humanities, natural sciences, medicine and technical subjects.

Indonesia is one of the few countries where a special program, aimed towards advanced training of a new generation of university teachers, continues to be implemented. The German "dual" system of education -- theory linked with practice -- has been an inspiration to the Indonesian educational system, where basic research has had little application in practice.

German-Indonesian cooperation in the science and technology has also been following a steady and successful course since the intergovernmental agreement of June 14, 1976 came into effect on the peaceful uses of nuclear energy and prospecting of uranium.

This was followed by a 1979 agreement on scientific research and technological cooperation and a 1987 mutual agreement on aeronautical research and technology, followed by more individual agreements between German and Indonesian research institutions. The following areas indicate some of the individual areas of cooperation.

* Production engineering: Cooperation here focuses on building of an institute for production engineering, to be called MEPPO. This is aimed at supporting the modernization of production, material research and quality control, with particular relevance for small and medium-sized industries wishing to conform to German technical standards.

* Biotechnology: The BioTechnology Indonesia-Germany (BTIG) project focuses on biotechnological industrial waste management, including animal wastes of slaughterhouses, biotechnical processing techniques and similar methods in plant breeding.

* Aeronautical research: This pertains to the fly-by-wire aircraft steering system development project of aircraft type N- 250.

* Ocean technology: Termed INDOSAIL, the project relates to the production of vessels for transportation through a novel modular system.

* Renewable energies: This cooperation focuses on the production and marketing of solar thermal pumps, the widened field tests of photovoltaic pumps and photovoltaic-television- converter stations as well as solar drying units. Notable is Indonesia's own "small photovoltaic program", known as Solar-Home-Program, initiated by President Soeharto. Germany's Ministry of Research and Technology continues to support this ambitious project.

In a sign of intensified bilateral cooperation in the field, Germany's Federal Economic Minister Gunter Rexroth and Indonesia's State Minister of Research and Technology B.J. Habibie entered into an agreement during last year's Hanover Fair to establish a German-Indonesian Forum for Science and Technology for promoting dialog between firms on both sides.

Indonesia has demonstrated its successful export marketing strategy through the trade fair route by regular participation at the highly-specialized German trade fairs held throughout the year in various parts of Germany. It has also recognized Germany as a champion of free trade as well as its role as one of the world's leading export nations.

Indonesia will have another opportunity to be in the spotlight when a special workshop is held during the forthcoming Asia- Pacific Conference of Industry in New Delhi (Nov. 1) focusing on Access to Trade and Industry in Indonesia. Some 300 German delegates are expected to attend.

Germany's development cooperation policy has also addressed itself to the emerging development needs of Indonesia. It has focused on rural development and regional planning, environmental protection, with emphasis on forestry and water management, education, infrastructure (transport, energy and drinking water supplies) and human resources development.

Special attention has also been devoted to the health care sector and to promotion of small and medium-sized industries. A total of 5.6 billion deutschemarks has been extended by Germany as official development assistance to Indonesia between 1950 and 1995.

The globalizing world has not left the world of tourism untouched either. The booming German market continued to lead tourist arrivals from Europe into Indonesia, sending more than 180,000 visitors to the lush archipelago in 1995, up from 171,000 the previous year, contributing to Indonesia's foreign exchange coffers substantially.