India and Indonesia step up trade ties

India and Indonesia step up trade ties

India and Indonesia hold the perfect foundation for amiable
trade and investment ties.

Cultural and trade relations harking back at least two
thousand years have paved the way for increasing closeness in the
two countries' relations. India and Indonesia possess enormous
potential for growth and expansion of their economies due to
their large populations and abundance of natural resources.

The next few years and the advent of the 21st century seem
destined to see significant growth in bilateral trade between the
two countries.

Trade and economic relations between India and Indonesia were
formalized by a Trade Agreement signed in June 1978. This
committed the countries to take "all appropriate measures to
facilitate, strengthen, maximize and diversify trade" within the
framework of their respective laws and regulations in force.

Discussions have been held over the years to strengthen
commercial ties within the framework of this agreement. Other
important developments include an agreement on the avoidance of
double taxation effected in 1986 and a Memorandum of
Understanding on agricultural cooperation signed in 1992. There
are also agreements for scientific and cultural cooperation and
utilization of nuclear energy for peaceful purposes.

Trade

Two-way trade relations, spurred by India's adoption of
sweeping economic reforms, soared from US$102.92 million in 1988
to $485 million in 1993. Among India's important export items to
Indonesia are animal feed, cotton, synthetic fiber, machinery and
equipment, chemicals, tobacco, spices and building material.

Its main imports are cement, fertilizer, tin, palm oil,
chemicals, glassware, coal, sponge iron, fruit and petroleum
products.

Indian companies are also prominent in setting up projects in
Indonesia. In the 1980s, three major projects were implemented on
a turn-key basis. These included a tool room cum training center
in Surabaya, East Java, set up by Hindustan Machine Tools; a
sugar project in Camming, South Sulawesi, executed by Triveni
Engineering Works; and a cement plant in Padang, West Sumatra,
established by Project and Equipment Corporation of India and
WIL.

At present the Indian Railway Construction company is working
on two major fly-overs -- Matraman and Senen -- in Central
Jakarta. They have also completed a railway electrification
project at Bekasi and Manggarai. Telecommunications Consultants
India Ltd was recently awarded a contract to set up a
telecommunications network in Java and Sulawesi.

There are 14 Indian-Indonesian joint ventures in Indonesia,
with direct Indian participation and financed by overseas
Indians. These joint ventures are in the fields of textiles,
garments and steel. The latest entrant in the Indonesian market
is Essar Gujarat, which is setting up a cold roll steel mill at
an estimated cost of $75 million. Joint investment by Indian
companies in Indonesia is $217.5 million and India ranks 18th
among the foreign countries investing in Indonesia.

These articles are written by Bruce Emond from materials
supplied by the Embassy of India.