Thu, 18 Mar 2010

The United States sees vast potential to expand trade with Indonesia but Jakarta needs to undertake economic reforms, a top official said ahead of President Barack Obama's visit next week.

Commerce Secretary Gary Locke said Wednesday the administration saw major opportunities in the energy sector as Indonesia seeks to meet a sharp rise in demand while curbing carbon emissions blamed for global warming.

"Indonesia is going to be a vast, steady market for green technologies. Ensuring that American companies play a lead role in this energy transformation is a priority for President Obama and his entire administration," Locke said.

Warning that China and other nations were also eyeing the market, Locke said he would lead a delegation of 10 to 15 US green technology firms to Indonesia in May to follow up on Obama's trip.

But Locke urged Indonesia to reform its economy, noting that smaller nations in Southeast Asia, such as Singapore, traded more with the United States.

"Economic nationalism, regulatory uncertainty, unresolved investment disputes and lack of transparency give pause to American companies seeking to do business in Indonesia," Locke said at the centre for Strategic and International Studies (CSIS).

"If Indonesia is looking for a partner to address these issues, the United States is eager to lend assistance."

Locke, without giving details, said Obama would sign a "comprehensive partnership" with Indonesia on expanding cooperation on trade, education and other areas. Obama will also visit Australia and Guam.

Despite being the fourth most populous nation, Indonesia is the 30th largest trading partner with the United States, according to the US Trade Representative's office.

The nations conducted 21.4 billion dollars in trade in 2008. Top US exports to Indonesia were soybeans, cotton, wheat and civilian airplanes, while Indonesian exports included rubber, apparel and machinery.

But Indonesia anticipates a 56 percent rise in energy investment in only four years, Locke said.

Indonesia has taken some of the developing world's most aggressive measures to fight global warming. The archipelago is the third largest carbon emitter after China and the United States, due largely to destruction of its forests.

Obama, who spent part of his childhood in Indonesia, is hoping to use his personal connection to forge a new partnership with the world's largest Muslim-majority nation.

The Obama administration has made Indonesia one of its top diplomatic priorities, pointing to its moderate brand of Islam and rapid democratization since the 1990s.

"There are certain forces in the world that would seek to drive a wedge between the United States and Indonesia, but the bonds of commerce and of people-to-people exchange can be even stronger," Locke said.

But some analysts doubted how much the two nations could bring to the table on economic issues.

Indonesian President Susilo Bambang Yudhoyono is embroiled in a major clash with lawmakers over a controversial 724-million-dollar bailout of a bank in 2008.

Obama's fellow Democrats in the Senate have held up ratification of free trade agreements with Colombia, Panama and South Korea on market access and labor rights concerns.

Yudhoyono "has become very cautious and his economic reformers are not able to mobilize the government to get agreements with the US to open up investment," said Michael Green, who was former president George W. Bush's top Asia adviser and is now a scholar at CSIS and Georgetown University.

"We're also, frankly, on the US side, not terribly interesting right now in terms of trade strategy."