Susilo wants closer relations with China

Primastuti Handayani, The Jakarta Post, Beijing

President Susilo Bambang Yudhoyono says Indonesia could benefit from forging closer ties with future superpower China.

Speaking to the Indonesian community in Beijing on Wednesday evening at the Diaoyutai State Guest House, Susilo pointed out that China had a gross domestic product of US$1 trillion, compared to Indonesia's $200 billion.

"After surpassing Germany and Japan and probably the United States, which had a GDP of $10 trillion last year, by 2050, China is becoming a real superpower," he said.

The President said his four-day visit to China was a follow up to Chinese President Hu Jintao's visit to Jakarta in April after the Asian-African Summit, where the two leaders signed a strategic partnership agreement.

Susilo said Indonesia's trade volume with China had grown significantly over the past few years and looked to continue rising.

"Last year, our exports to China stood at $4.6 billion while our imports were $4.1 billion," he said.

"In the first two months of this year, our trade volume increased by 47 percent. By 2008, we expect our trade volume with China to rise to $20 billion."

Indonesia's $4.6 billion in exports to China in 2004 comprised $1.17 billion in oil and gas exports and $3.44 billion in non-oil and gas exports. Those figures were a 21 percent increase from 2003.

The country's $4.1 billion in imports from China last year consisted of $743 million in oil and gas imports and $3.36 billion in non-oil and gas imports, a 38 percent raise from 2003.

Data from the Investment Coordinating Board shows that bilateral trade between the two countries stood at $13 billion last year, while Chinese investment in Indonesia amounted to $6.5 billion.

"If we can (increase trade ties), we can create more jobs back home as well as drive the real sector and increase tax revenue, while economic growth will also rise. Thus we can also improve the education sector, health services and increase people's purchasing power," Susilo said.

Indonesia's economy grew by 5.1 percent last year, with a projection of 5.5 percent growth this year. Growth in the first quarter of this year reached 6.4 percent.

During Susilo's visit to China, Indonesia will offer investment opportunities in its vast energy resources, infrastructure projects and other commodities such as palm oil and rubber.

Indonesia has estimated reserves of nine billion barrels of oil, 188 trillion standard cubic feet (tscf) of gas and 19.3 billion tons of coal.

However, despite the abundant reserves, Indonesia's rising energy consumption and recent fuel shortages are cause for concern.

"Our oil reserves will last 15 years, gas 60 years and coal 150 years, assuming there is no new exploration and exploitation," the President said.

To address the recent fuel shortages, which forced the President to delay his visit to China, which was originally scheduled to begin on July 13, Susilo said that in the short term the government was focusing on its energy conservation campaign.

"However, energy conservation is only one of the solutions," Susilo said.

"Saving fuel and the diversification into alternative fuels are only 30 percent of the energy conservation scheme. We must look for other ways to address the fuel problems," he said.

For the mid and long terms, the government will study its fuel subsidy policy and try to devise an acceptable fuel pricing scheme.

"When our oil output decreased to 1.1 million barrels per day (bpd) from 1.6 million bpd during the Soeharto era, we had to import oil when the price was at $62 per barrel. This will cause the fuel subsidy to balloon to Rp 120 trillion, which is 30 percent of the total state budget."

Susilo also raised concern over rampant oil smuggling due to the large disparity between domestic and global oil prices.