Trade between Indonesia and Finland

Trade between Indonesia and Finland

Indonesia is one of the most important trading partners for Finland in Southeast Asia. Finnish exports to Indonesia increased steadily in the late 1980s and reached FIM 150 million (US$30 million). In the early 1990s, this rapid trade expansion continued. In 1993, Finnish exports reached a record level of FIM 1,300 million ($255 million). This was not the end, however. After several good years, Finnish companies exported FIM 2,550 million ($500 million) worth of goods to Indonesia.

The crisis which has hit Indonesia has, without doubt, influenced the trade between the two countries. It is estimated that Finnish exports to Indonesia may contract 30 percent to 40 percent in 1998 compared to the level in 1997. Even with lower volumes, predominant products in Finland's exports in 1997 to Indonesia included machinery for forest industries, various kinds of power generating equipment and telecommunications technology.

During the 1980s, Finnish exports to Indonesia consisted mainly of pulp and paper products. Since then, the role of pulp and paper products has steadily decreased, and in 1997, their contribution to Finland's exports to Indonesia was only 7 percent. The bulk of the goods exported nowadays are used by the pulp-and-paper mills and by the plywood and wood-based panel producers. A significant part of the business consists of big project deliveries.

Trade between Indonesia and Finland has traditionally been in Finland's favour. Last year, the ratio was about 4 to 1. The largest categories in Indonesia's exports to Finland include scrap metal, clothing and footwear. There has also been a slight decrease in Finnish imports from Indonesia. It is likely, though, that once the political, economic and social stability is restored, Indonesia will again embark on a track of vigorous growth in its exports and its imports.

The forest is important for both the Indonesian and the Finnish economy. It is not surprising that the forestry sector is the bedrock of the bilateral economic relations between the two countries. Indonesia and Finland are engaged in a mutually beneficial cooperation within the framework of the bilateral Economic, Industrial and Technological Cooperation Agreement. Besides regular joint-commission meetings, this framework includes a Working Group on Forestry and Forest Industries. Other agreements signed between Indonesia and Finland are a Tax Agreement, an Investment Agreement and an Air Service Agreement.

There are more than 20 Finnish companies established in Indonesia, in the form of representative offices, PT companies and some joint ventures. Interest toward Indonesia as a business partner has remained strong. There is no reason not to expect a substantial increase in the number of businesses once the Indonesian economy again starts to grow.

Reforms in investment regulations as well as the current process of upgrading and streamlining the legislative framework for business operations are encouraging signals for Finnish companies.

The Indonesia-Finland Business Council (IFBC) was established in 1995 to bring Finnish business representatives together with their Indonesian counterparts. The IFBC seeks to promote trade between Indonesia and Finland by organizing luncheon and breakfast meetings with prominent speakers. IFBC also cooperates with similar bodies established by other European Union member states in Indonesia.