Japan must show why it should stay Indonesia’s partner of choice
Two nations have much room to take advantage of commonality and complementarity
（Nikkei Asia 、2月16日）
Kenji Kanasugi is Japan's ambassador to Indonesia.
Indonesia's successful hosting of the Group of 20 Summit last November in Bali has led to a series of accolades from the international media.
The Financial Times praised the country as an "overlooked giant." The Economist published a story on "Why Indonesia matters."
While some may feel Indonesia is overlooked, those of us living and working in the country have long seen it as a giant, and for those of us from Japan, one of our most important partners.
With a population of more than 270 million that has been growing annually by more than 3 million, Indonesia is the world's third-largest democratic country and has a median age of only around 29. Although close to 90% of the population is Muslim, five other religions are equally recognized.
Indonesia's 700 ethnic groups are bound together by the common national language Bahasa Indonesia and the slogan "unity in diversity."
Economic growth over the past 30 years has generally ranged between 5% and 8% a year, with Indonesia rebounding from the COVID-19 pandemic to record a 5.3% gain in gross domestic product in 2022.
Combined, Indonesia's territorial waters and exclusive economic zone are the third largest in the world. The nation is also rich in natural resources such as nickel.
The country's goal is to become one of the world's four largest economies by 2045 when it celebrates the 100th anniversary of its independence.
Much commonality and complementarity exist between Japan and Indonesia. Both are Indo-Pacific democracies and maritime archipelagic countries in a region Indonesian Foreign Minister Retno Marsudi has called an "epicentrum" of growth.
The two countries face many of the same challenges at home and abroad. That is exactly why they are working together to carry out a smooth energy transition in the region based on the "Asia Zero Emissions Community" concept that Japanese Prime Minister Fumio Kishida announced a year ago.
Their complementarity stems from Japan's status as a rapidly aging society with a declining population while Indonesia is a growing economy with a young, energetic and growing citizenry. This also creates plenty of room for cooperation.
In the industrial sector, Japanese companies, particularly in the automotive industry, have heavily invested in Indonesia as a production and export hub. Under the specified skills work visa program introduced in 2019, around 10,000 Indonesians are helping to address labor shortfalls in Japan. Another 40,000 Indonesians are learning and working as technical interns in Japan, further contributing to enhanced bilateral economic ties.
Indonesia today, though, is an entirely different country from what it was in the past. Chinese and South Korean companies have improved their competitive position in the country, forcing Japanese companies to struggle to maintain market share in Indonesia and to win infrastructure contracts.
To put it bluntly, Japanese companies are no longer the obvious choice when Indonesians are looking for partners. On the contrary, Japan must make an extra effort to be chosen as a viable economic partner.
Instead, Indonesians often complain that the Japanese government and Japanese organizations are too slow in their decision-making and tend to overestimate risks. The Japanese side, on the other hand, is seeking improvements in Indonesia's investment environment, noting the challenge posed by the abrupt introduction of export and import restrictions, unclear taxation practices and highly frequent rule changes.
Despite all this, it is critically important for Japan to ensure Indonesia continues on its path of sustainable economic growth as a democracy and to strengthen the win-win relationship that benefits both countries.
With Indonesia aiming to become a fully developed country by 2045, President Joko Widodo said in his 2021 State of the Nation address, "Amid today's disruptive world, the spirit to change, the spirit to make changes and the spirit to innovate have become the foundation to build an advanced Indonesia."
Based on the resolve of the president, Indonesia has been trying to adapt to change with so much agility and acting as if frequent rule changes would have no ill effects.
Given this situation, Japan's private and public sectors alike must walk hand-in-hand with Indonesia with a view to continuing sustainable development together.