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Special Report – India-Indonesia: A Timeless Bond

Special Report – India-Indonesia: A Timeless Bond


Vice-president Hamid Ansari recently visited Indonesia. He termed this visit as- An old and deep friendship to be renewed. The visit was about taking the relationship forward – the political aspects, business links and the inherent human warmth. The closest distance between India and Indonesia is about 17 nautical miles. Strategically, and security and trade-wise, the Indonesian archipelago of more than 18,000 islands is of vital importance to India. Four vital straits running through Indonesia control so much of India’s links to South East Asia. In trade and business terms, Indonesia is India’s second largest trading partner in ASEAN and bilateral trade stands at 20 billion dollars. The glorious past and shared cultural ties of both nations create a strong platform for cooperation in the future.

In 2005 both the countries agreed to become Strategic Partners and in 2013 India and Indonesia have jointly assessed its potential through the Five Initiatives for Strengthening the India–Indonesia Strategic Partnership based on shared commitment to values of democracy, pluralism and diversity and having economies with strong complementarities and challenges. Since the new government took over in 2014 the engagement between the two countries have been enhanced. The current economic relationship between India and ASEAN countries presents a multitude of industrial, commercial, and investment opportunities. Both the countries have welcomed ASEAN’s plans to establish economic and political relationships with neighboring nations, and have worked on increasing bilateral trade, promoted foreign investment, and strengthened diplomatic relations with all ASEAN members. The India – ASEAN relations now are poised to scale new heights.

As the largest ASEAN state accounting for over 37% of population and over 33% of combined GDP, and as a fellow member of G-20, Indonesia is of particular interest to India. Bilateral relationship between the two countries is a key element for entire ASEAN region. India and Indonesia have similar aspirations to have an open trading system through global organizations like the WTO. Both the countries have shown a strong commitment, based on the principle of common but differentiated responsibility. Indonesia has joined hands with India to reform the United Nations, particularly its Security Council. The role of the United Nations particularly its Security Council needs to reflect the requirement of developing countries to have a greater say in decision making.

Despite the large size and rapid growth, the trade and investment between India and Indonesia remains modest. There is a need to synergize our efforts in the areas of economy and business to correct the sectoral and directional imbalance of our trade and to further diversify it. The vast consumer market, youthful and skilled human resources and expertise in the field of information technology of India coupled with Indonesia’s natural resources, youthful population and strategic location would provide a platform for enhanced economic engagement. The innovative spirit of Indian industry, backed by a strong government research and development push and a network of quality education institutions, make India and the Indian companies the most promising business partners today.

India is the largest buyer of crude palm oil from Indonesia and also imports coal, minerals, rubber, pulp and hydrocarbon in significant quantities. India exports refined petroleum products, maize, commercial vehicles, telecommunication equipment, oil seeds to Indonesia. There is a need to balance our bilateral trade as India’s import from Indonesia was US$ 15 billion against an export of US$ 4 billion in 2014-15.

India has active cultural centres in Jakarta and Bali. From time to time, the Indian Government has also offered training under ITEC and TCS of Colombo Plan and Indonesia is a major recipient of the scholarships. In 2015-16, 100 ITEC and Colombo Plan slots have been allocated Indonesia. Over 1300 Indonesian officials have attended training programmes in India under these schemes over the past decade. The Indian Council of Cultural Relations (ICCR) also offers 20 to 22 scholarships every year to Indonesian students for pursuing higher studies at undergraduate, postgraduate, doctoral and post doctoral levels, under its general cultural scholarship scheme; and this has been happening since 1994-95. So far, over 200 Indonesian students have availed the ICCR scholarship.

The spreading tide of extremism and terrorism is a threat both nations face and successfully dealing with such threats requires strong cooperation among like-minded partners. Both nations also face similar economic development issues and governance challenges. The Asia Pacific region and the world as whole would benefit from having greater cooperation between India and Indonesia. There is a considerable potential for expanding trade in the areas of automotive components, automobiles, engineering products, IT, pharmaceuticals, bio-technology and healthcare sectors. Given their strategic significance, Infrastructure development and energy, both traditional and renewable, are key areas for enhancing the bilateral cooperation.

Both the countries should put in place suitable policies to encourage private sectors to make investments in infrastructure and manufacturing sectors and for this the two governments must be willing to provide a predictable and comprehensive legal and taxation frame-work.

There is tremendous potential for enhancing our defence ties. Indonesia has played host to ships of the Indian Navy and the Indian Coast Guard on several occasions in recent years. This cooperation should be continued through technical, human resource development, capacity building and contributing to the development of Indonesian capacities both physical and human. The economic and geo-political centre of gravity of the world has shifted towards the Asia-Pacific in the 21st century, with the region showing unparalleled dynamism in economic, political, security and demographic terms. The Indian Ocean littoral states have also witnessed sustained growth over the past few years. Given the growing volume of bilateral maritime trade and a common maritime boundary along the Andaman Sea, India and Indonesia are natural partners in ensuring the development and security of the Indian Ocean and the pacific littoral region. All trade routes and the sea lanes must be protected from traditional and non-traditional threats and all countries using these international waters must act with responsibility and restraint. Indonesia’s idea of a Maritime Axis and India’s commitment to the Mausam Project which links the countries of the Indian Ocean can bring benefit to all the Indian Ocean Countries.

India and Indonesia are one of the founder members of the Indian Ocean Rim Association, the apex pan-Indian Ocean multilateral forum and Indonesia is its current chair. Indonesia, given its strategic location, can be a bridge between the Indian and the Pacific Oceans. As one of the most important countries of the Asia-Pacific rim- Indonesia is in an advantageous position to connect a vibrant South Asia to the Pacific region. Non-traditional threats such as piracy, smuggling, transnational crimes and drug-trafficking are on the rise and pose a challenge for both the countries and require strong and determined, coordinated action to control.

The Asia Pacific region and the world as whole would benefit from having greater cooperation between India and Indonesia to positively shape a fluid regional security environment, including through partnerships with other like-minded countries and by strengthening regional institutions like ASEAN. Infrastructure development and energy security are also key areas for cooperation for emerging economies like India and Indonesia. These sectors allow for both our countries to collaborate and benefit from each other’s expertise. Infrastructure stimulation programmes launched by the Government of India, like the mission to develop 100 Smart Cities, upgrade infrastructure development in urban and rural areas and enhance nationwide connectivity through the ‘Digital India’ programme, have created massive opportunities for foreign partners in the Indian economy.