Germany and Indonesia expanding their ties

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.