Wednesday, 16 November 2016

PM Lee, President Jokowi open township project in boost to ties

Leaders open joint venture development, witness signing of tourism cooperation pact
By Francis Chan, Indonesia Bureau Chief In Semarang (Central Java), The Straits Times, 15 Nov 2016

Strong economic ties between Singapore and Indonesia got another boost yesterday as Prime Minister Lee Hsien Loong and President Joko Widodo officially opened a joint venture township project and witnessed the signing of a memorandum of understanding (MOU) on tourism cooperation.

The leaders held up the 2,700ha Park by the Bay township project between SembCorp Development and Indonesian developer Jababeka in Kendal, Central Java, as an excellent example of mutually beneficial economic cooperation. The township is located 25km from Semarang.

They also welcomed the signing of three other MOUs and the setting up of an Indonesia-Singapore Business Council comprising business leaders from both sides.

"This (business council) will enable our businesses to network more deeply and understand opportunities on both sides," PM Lee said and suggested that it be co-chaired by the Economic Development Board and Indonesia's Investment Coordinating Board (BKPM).

The occasion was PM Lee's first Leaders' Retreat with President Joko, which is held in Indonesia this year. Yesterday morning, PM Lee and Mrs Lee were met by President Joko and First Lady Iriana at Wisma Perdamaian in Semarang, where the Singapore delegation was also treated to performances by a Chinese lion dance troupe and traditional Javanese dancers.

The retreat - held at Wisma Perdamaian, formerly the Central Java governor's residence - is a long- held tradition for the leaders of the two close neighbours to meet informally each year to boost ties.

At their meeting, the two leaders reaffirmed their commitment to strengthening ties and to further economic cooperation between their countries.

Indonesia, PM Lee told a joint press conference with Mr Joko after the retreat, is a close partner and neighbour of Singapore.

"Our bilateral relations are in good shape, we have close interactions at all levels," he said.

"I told the President we are keen to strengthen our economic cooperation with Indonesia and we would like Indonesia to succeed."

Turning to the perennial issue of the transboundary haze, he noted that combating it was high on Mr Joko's agenda and said Singapore was "very grateful".

Indonesia's efforts in tackling the haze "made a difference this year", he added. He offered Singapore's help to deal with the problem, which he said affects all the countries in South-east Asia.

The two leaders also discussed the terrorism threat, which both countries have been "cooperating, mostly quietly" to counter.

"I thank the President for Indonesia's initiative in identifying and tracking down and arresting Gigih's group in Batam," he said in reference to Gigih Rahmat Dewa, the leader of a Batam terrorist cell. His plot to fire a rocket from the Indonesian island of Batam to Marina Bay in Singapore was foiled by Indonesian police in August. "But there are other groups as well and we need to work together on this," he said.

Mr Joko agreed that the meetings at the retreat were productive and open, and said he looked forward to greater economic cooperation with Singapore.

He also acknowledged that Singapore - Indonesia's top foreign investor last year - had increased its investments in Indonesia despite the global economic slowdown. "We hope Singapore investment will continue to increase, including in Batam and Kendal," he added.

Singapore, Indonesia agree to form business council
It will help deepen economic ties at business-to-business level between both countries: PM Lee
By Francis Chan, Indonesia Bureau Chief In Semarang (Central Java), The Straits Times, 15 Nov 2016

Singapore is looking at ways to expand bilateral cooperation with Indonesia, said Prime Minister Lee Hsien Loong, as he announced that both countries have agreed to set up an Indonesia-Singapore Business Council yesterday.

Both countries are also looking to collaborate further in tourism, venture into new sectors such as the digital economy, as well as explore areas beyond Jakarta and the Batam-Bintan-Karimun special economic zones.

"Because our economies are closely intertwined, if Indonesia does well, so too will Singapore," said Mr Lee after meeting President Joko Widodo at their first Leaders' Retreat in Indonesia yesterday.

"Our firms are keen to invest in Indonesia and we encourage them to do more," he added.

The business council will help deepen the two countries' economic relationship at business-to-business levels, said Mr Lee.

While the new body will be co-chaired by Singapore's Economic Development Board and the Indonesia Investment Coordinating Board, he expects businesses to take the lead. Both countries had signed an agreement during the retreat to collaborate on the cruise segment of tourism. Mr Lee said that projects such as this have to be pushed by the private sector.

"It's the government that provides the framework, but the private sector must make them work and assess where it is viable, where it is attractive, what's the best way to proceed with it," he added.

"So we think that the best way to do that is for our business people to get together and meet one another regularly; and a business council, I think, is well justified because we have this format with quite a number of our other partners but we have not had one with Indonesia yet. So I think it is timely."

Besides increasing tourism traffic between the two countries with more air and sea links, new agreements inked include plans to work together to boost activities in the Mice (meetings, incentive travel, conventions and exhibitions) segments as well as a smart city development by International Enterprise Singapore in Makassar, the provincial capital of South Sulawesi.

IE Singapore assistant chief executive Tan Soon Kim said the trade agency has identified Makassar city as a favourable place for Singapore businesses. It also "hopes to demonstrate Singapore's capacity to contribute to Indonesia's economic and social development beyond Java and the Riau Islands, which are the traditional regions for Singapore investments".

Mr Lee noted that despite Singapore's small size, the city state has been consistently among the top investors in Indonesia. "Recently we have gone beyond these areas to look at the non-traditional areas like Central Java," he said.

He added that the Kendal Industrial Estate (KIK), where he and Mr Joko launched Park by the Bay, a 2,700ha township development by Sembcorp Development and Indonesian developer Jababeka, reflected a Singapore company's confidence in Indonesia.

"I'm confident that under President Joko Widodo's leadership, our bilateral friendship will continue to flourish and there will be many more win-win projects like KIK to come," he added.

Mr Joko yesterday said that the joint venture in Kendal will be "a new icon" for Indonesia-Singapore economic cooperation.

Both leaders also announced that Singapore and Indonesia will celebrate the 50th anniversary of diplomatic relations next year.

Additional reporting by Wahyudi Soeriaatmadja

Hopes for deeper Indonesia-Singapore economic ties
By Siwage Dharma Negara, Published The Straits Times, 15 Nov 2016

Singapore's Prime Minister Lee Hsien Loong and Indonesia's President Joko Widodo held a Leaders' Retreat in Semarang yesterday to discuss future economic collaboration. President Joko's state visit to Singapore in July last year triggered an increase in Singapore investments in Indonesia and there is expectation that yesterday's meeting would keep the positive momentum going.

The two leaders inaugurated an industrial area in Kendal, Central Java. Kendal industrial park is some 25km from Tanjung Emas Port in Semarang, the third largest deep sea port in Indonesia after Tanjung Priok (Jakarta) and Tanjung Perak (Surabaya). The new park is developed by a joint venture between Sembcorp Development and Indonesian developer PT Jababeka, and designed to be a manufacturing hub for garment, automotive parts, food and beverage, cosmetics, and so on. Kendal offers strategic location, cheap land, cheap labour and better infrastructure than in other parts of the country.

The location of the industrial park hints at a new direction for Singapore companies, which are venturing beyond the two most popular investment destinations of Jakarta and Batam. The latter seems to be losing its competitive edge in recent years due to protracted legal uncertainty caused by the Batam regional authority challenging the administrative authority of the Batam Development Authority. Meanwhile, Jakarta and its surrounding areas have seen significant minimum wage hikes which have reduced their attractiveness to labour-intensive industries.

Four memoranda of understanding were signed to enhance cooperation in the digital economy, hospitality and tourism, and a smart city development. Singapore firms have the competitive advantage in these areas and are well placed to help Indonesia develop. After two decades of close economic partnership, it is timely that the two leaders reviewed the progress of bilateral ties, identified potential challenges and explored ways to address them and further cooperation.

Given the rising global and regional uncertainty, the two leaders need to communicate so that their countries can work jointly to respond to regional and international developments more effectively. As such, it is important for the two countries to promote mutual cooperation, in particular to address issues that have caused recent tensions - for example, transboundary haze, airspace management and tax amnesty.

Clearly, Singapore-Indonesia economic ties have reached a level that is too significant to overlook. Bilateral trade grew significantly from US$10.4 billion in 2000 to US$41.5 billion (S$58.7 billion) last year. For years, Singapore has been Indonesia's top foreign investor. Last year, Singapore-realised investment reached US$5.9 billion or 20.2 per cent of total foreign direct investment (FDI) realisation in Indonesia. Likewise, Indonesia's outward direct investment to Singapore has increased from $638 million in 2010 to $2.4 billion in 2014.

Even though economic ties between Singapore and Indonesia are expected to remain strong, challenges remain and a key one is the growing trade deficit on the Indonesian side. Its net trade balance has changed from a surplus of US$2.8 billion in 2000 to a deficit of US$8.5 billion in 2014. The turning point came after the 2008 global financial crisis. Most of the deficit comes from the oil sector as Indonesia imports most of its oil and fuel from Singapore.

One way to address this trade imbalance is by increasing investment from Singapore to Indonesia. However, that would first require Indonesia to improve its business climate. The World Bank's ease-of-doing-business report this year ranked Indonesia 91 out of 190 countries. The report puts Indonesia among the top five most improved nations, together with Brunei, Kazakhstan, Kenya, and Belarus, with regard to improvements in the ease of doing business.

However, on the ground, there remains much room for improvement. Businesses still struggle with illegal levies, cumbersome bureaucracy and regulatory overkill by regional governments. The government's effort to reform the bureaucracy remains a work in progress. There are manpower and infrastructure constraints that hurt the country's ability to use comprehensive IT systems to implement e-government. That is one area in which Indonesia can tap Singapore's experience and expertise to expedite licensing processes and streamline bureaucracy.

The hope is that yesterday's meeting between the two leaders will translate into real actions and enhanced cooperation that boosts future growth in both economies. Indonesia remains an attractive investment destination to Singapore due to its relatively high GDP growth of 5-6 per cent in the next few years, which in turn will grow the number of middle-income consumers who aspire to higher living standards. A second reason is Indonesia's efforts to attract more foreign investments by making it easier for investors to do so.

What Singapore offers Indonesia are expertise and financial resources to support both manufacturing and services through the use of modern technology. The hope is that Singapore's new venture in Central Java will pave the way for more such investments in other parts of Indonesia.

The writer is a fellow at the Iseas - Yusof Ishak Institute.

Singapore firm is 1st tenant in joint-venture township
By Wahyudi Soeriaatmadja, Indonesia Correspondent In Semarang (Central Java), The Straits Times, 15 Nov 2016

A Singapore company, Tat Wai Enterprise, is the first to have finished building a factory in the new Park by the Bay township in Kendal Industrial Estate in Central Java province. The company expects the factory to be fully operational next year.

The interior furnishing firm's founder, Mr Alfred Tan, yesterday had the double honour of taking Prime Minister Lee Hsien Loong and Indonesian President Joko Widodo on a tour of his new plant, after the two leaders inaugurated the joint venture project in Semarang.

"I'm glad that Singapore SME furniture manufacturer Tat Wai is the first tenant," Mr Lee said earlier in his speech at the opening ceremony of Park by the Bay.

Located about half an hour's drive from Semarang, the provincial capital of Central Java, Park by the Bay sits on the coast facing the Java Sea.

The joint venture between Sembcorp Development and Indonesian developer Jababeka marks a new trend of Singapore companies venturing beyond places such as Jakarta and Batam.

Park by the Bay will be a self-contained industrial township with ready-built factories, land parcels for commercial and residential development, and resort projects.

The 2,700ha site has attracted a total investment value of more than 4.3 trillion rupiah (S$451 million) so far. This could create some 4,000 jobs in Semarang.

Mr Lee said the joint venture is an excellent example of how Indonesia and Singapore can work together for mutual benefit.

Mr Joko noted that it is important to ensure that basic infrastructure such as roads, communications and electricity are available to support such projects.

The Kendal Industrial Park is just one in a long line of investments in Indonesia by Singapore companies. The Republic has been consistently among the top five investors in Indonesia since 2001.


Value of direct investments from Singapore to Indonesia from January to September this year. That is one-third of Indonesia's total foreign investments and higher than the amounts from Japan (US$4.5 billion), China and Hong Kong (US$1.6 billion each), over the same period.


Value of direct investments from Singapore to Indonesia last year, making the city-state Indonesia's largest foreign investor in 2015.


Amount of bilateral trade between the two countries last year.


The number of tourist arrivals from Indonesia to Singapore last year.


The number of tourist arrivals from Singapore to Indonesia over the same period.

These figures mean the two countries were also each other's top source of tourist arrivals last year.


Joint venture in nod to Singapore landmarks
Kendal Industrial Park in Central Java will be opened by PM Lee and Jokowi tomorrow
By Wahyudi Soeriaatmadja, Indonesia Correspondent In Semarang (Central Java), The Sunday Times, 13 Nov 2016

Once completed, Kendal Industrial Park (KIP) in Central Java will bear the name "Park by the Bay".

Chief executive Ling Poon Lim said that the name was a nod to landmarks in Singapore such as Gardens by the Bay, and that the development will reflect characteristics the city-state is known for.

These will include, among others, a 2km pedestrian street similar to Orchard Road, a golf course, a 42km cycling track and a spot to view the sunset, just like the waterfront gardens in Marina Bay.

Kendal is about half an hour's drive from Semarang, Central Java's capital, and sits on the coast facing the Java Sea. The Indonesia-Singapore joint venture will be a self-contained industrial township with modern facilities such as ready-built factories, land parcels for commercial and residential development, and resort projects.

Mr Hyanto Wihadi, a director of Jababeka, which is jointly developing the park with Sembcorp Development, said the KIP is integrated with Kendal Port and connected by railway to the larger Tanjung Emas Port in Semarang.

Indonesia's Industry Minister Airlangga Hartarto said last week that President Joko Widodo and Prime Minister Lee Hsien Loong would officially open the KIP tomorrow.

The 2,700ha site is the first major industrial investment in Indonesia by a Singapore company outside of Batam. The first phase of the project, which covers 860ha, should be completed by 2020, but Mr Ling said on Friday that 21 firms, including three from Singapore, had already secured land in the KIP.

Mr Hyanto said as well as Singapore, there were investors from Japan and Malaysia, including industry players in the furniture, food, steel and garment sectors.

The total investment value by the companies is expected to exceed 4.3 trillion rupiah (S$453 million) and Mr Airlangga said the KIP could potentially create some 4,000 jobs for people in Semarang.

Jababeka chairman S. D. Darmono said partnering Sembcorp was an easy choice because the firm had a proven record in developing industrial estates all over the world.

"We were looking for a foreign partner who understands Indonesia and has a similar background with us in industrial estate development," he said. "Of course, a Singapore firm was my first choice."

PM Lee disappointed TPP unlikely to be passed
By Francis Chan, Indonesia Bureau Chief, The Straits Times, 15 Nov 2016

SEMARANG (Central Java) • Prime Minister Lee Hsien Loong has expressed his disappointment that the Trans-Pacific Partnership (TPP) is unlikely to be ratified by the United States Congress.

"Well, we feel disappointed that the TPP looks very unlikely, or will not be passed, or ratified now before Jan 21," Mr Lee said on the sidelines of his first Leaders' Retreat here with Indonesian President Joko Widodo.

Mr Lee said that US President-elect Donald Trump's opposition to the TPP "was quite well known". Mr Trump will be sworn in on Jan 20.

"He had no sympathy for the TPP at all and I think that's a disappointment to all of us who worked so hard to negotiate the TPP," Mr Lee said.

"But that's where it stands; we will be meeting in APEC in Peru later this week and the TPP members, including President (Barack) Obama, will be meeting to exchange notes to see what we can do in this situation."

The TPP is a landmark trade deal that the United States signed with 11 Pacific Rim nations, including Singapore.

Its 12 signatories make up 40 per cent of the world's trade, and it would enter into force once six of them ratify it.

However, the six must include the US and Japan. Japan's Lower House has approved the pact, and it is now before its Upper House.

Singapore would have been able to enjoy lower tariff and non-tariff barriers for both goods and services, but observers say it is unlikely to be pushed through in a Trump administration.

Mr Lee had said previously that the US risks injuring its standing and credibility with countries around the world if the TPP is rejected by its lawmakers.

Asked yesterday whether the TPP could be salvaged if its terms are reviewed or possibly changed to include countries such as Russia and China, Mr Lee said it would be "a completely new animal".

"It's not so easy to say, we change the terms. What are you going to change?" he said.

"And if you bring in a new country, it would be a completely new deal altogether because a new country, particularly if it's a big one, is not going to sign on to everything which has already been agreed before they were participants.

"They will want to reopen everything, so effectively you'll be talking about a new exercise, but I think it's premature to pursue very definite alternative possibilities for now.

"Let's first assess how everybody feels and what they think could be done as a practical second best or solution for the time being."

Consequences of TPP demise go beyond trade
Trade pact's collapse hurts US' credibility, undermines its Asia rebalance: Analysts
By Jeremy Au Yong, US Bureau Chief, The Straits Times, 16 Nov 2016

The now near-certain demise of the Trans-Pacific Partnership (TPP) free trade deal will have long-lasting ramifications for US foreign policy, said Asia experts in Washington, reiterating warnings from world leaders about the fallout from the deal's failure.

At a time when some Americans are holding out hope that the US President-elect might end up deviating from his campaign rhetoric, few see much hope in the one issue where he has been most consistent.

While the impending failure of the TPP does not appear to have had an impact on global markets, experts stress that the problems are just beginning for the United States.

"Obviously, the failure of the TPP has no significant immediate economic impact. It wasn't in force so these were just prospective rules, but it is still a very costly failure," said Mr Edward Alden, a senior fellow at the Council on Foreign Relations who recently authored Failure To Adjust, a book about the US government's handling of trade.

He, and many others, say the TPP debacle hurts US credibility, undermines the Asia rebalance and leaves a leadership vacuum in shaping the standards of future trade deals. "The US philosophy since the end of World War II was that trade liberalisation is a good thing for the US and it is a good thing for the world.

"But we have moved from a world where the US believed that trade was largely positive sum to a world in which the US believes that trade is zero sum," added Mr Alden.

And with President-elect Donald Trump also talking about going back on the deal that scaled back Iran's nuclear programme in exchange for sanctions relief, it is questionable how much effort countries will continue to put into negotiations with the US.

The TPP was the result of five years of intense negotiation by its 12 member nations, including Singapore. The deal was signed last year but requires ratification by all 12 domestic legislatures before coming into force.

Last week, the Obama administration announced that it would no longer try getting it through Congress, leaving the issue to Mr Trump.

Whatever the fate of the TPP, perhaps one key thing that will die with it is what US President Barack Obama called the 21st century components. He had constantly stressed that for the US to turn its back on the deal would be to allow China to write the rules of the road.

Unlike most other trade deals, the TPP had some unusual provisions on things such as labour standards, governance and transparency standards, environmental regulation and intellectual property protection. Countries such as Vietnam and Malaysia, which made substantial compromises on issues such as labour rights, will now move on to other deals.

A China-led free trade deal named the Regional Comprehensive Economic Partnership (RCEP) will receive a boost with the end of the TPP. Japan has already said that it intends to focus on the RCEP if the TPP fails.

Mr Murray Hiebert, senior adviser at the Centre for Strategic and International Studies, said the RCEP would have none of the special provisions of the TPP.

"RCEP is mainly a tariff reducing, rule harmonisation kind of a trade agreement. There won't be any emphasis on things the TPP has, like protecting intellectual property, allowing free flow of information or levelling the playing field between the private sector and state-owned enterprises," he said.

"And if the US comes back later with these demands, people will still consider it because they want market access, but there will be some pause given how the US failed to deliver."

Analysts say there is a chance the incoming Trump administration will take a pragmatic approach to Asia, even if it cannot undo the damage done by the TPP failure.

Said Dr Patrick Cronin, a senior adviser at the Centre for a New American Security: "Is there a path forward to make sense out of this?

"The answer is yes. We can recover a lot of our trade economic strength; we cannot trash all the good things that exist and have been done... The politics is just as poisonous as ever but we can hope that the pragmatism, the actions, are much more aligned than they are apart - until proven otherwise."

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