UK and Indonesia trade and investment opportunities | Daily News Byte

The UK wants to build greater economic ties with the Indo-Pacific and Indonesia is one of its key partners in Southeast Asia. Both countries aim to strengthen trade and investment ties, particularly in the areas of education, healthcare and infrastructure development.

The UK and Indonesia have established diplomatic relations since 1949 and bilateral trade reached just over US $2 billion in 2021. Before the pandemic, annual bilateral trade reached about US$3.8 billion.

Indonesia enjoyed a trade surplus of more than US$2 billion in 2021, dominated by footwear products (US$231 million), wood and wood products (US$191 million), animal and vegetable fats and oils, (US$94 million). ), lighting signs and prefabricated buildings (US$78 million), and furniture (US$78 million).

UK exports to Indonesia in the same year included machinery, nuclear reactors and boilers (US$150 million), vehicles and tramways (US$104 million), wood pulp (US$99 million), pharmaceutical products (US$65 million) and iron and steel products (US$59 million).

The UK wants to build greater economic and security links with the Indo-Pacific region and plans to spend 500 million GBP (US$606 million) on green infrastructure projects in Indonesia, Vietnam, the Philippines, Cambodia and Laos in the near future. five years. Furthermore, the UK also wants to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and would be the first European country to do so if successful.

Britain sees Indonesia as an important partner in Southeast Asia, particularly as the archipelago is predicted to become the world’s seventh largest economy by 2030 with 135 million people expected to enter the middle-class demographic. Additionally, there are some US$1.8 trillion investment opportunities ranging from consumer services to agriculture.

Joint Economic and Trade Committee

Indonesia and the UK announced the formation of a Joint Economic and Trade Committee (JETCO) and a Joint Trade Review (JTR) to further strengthen trade and investment ties. The JTR identified nine key areas for enhanced cooperation, including renewable and green energy, food and beverage, healthcare and life sciences, education and training, agriculture, and financial and professional services.

Opportunities for British businesses in Indonesia

Indonesia presents a huge opportunity for British investors as it has the largest economy in ASEAN, a young workforce and a rapidly expanding middle class.

Healthcare and Pharmaceuticals

Given its huge market size, Indonesia’s healthcare sector presents an attractive opportunity for foreign investors.

Annual government spending on healthcare has skyrocketed since the implementation of the Universal Healthcare Program (BPJS) in 2014, now becoming the largest in the world covering nearly 200 million people. Every citizen and foreigner is required to join, and companies must enroll their employees in the program by paying a percentage of the premium.

Rising spending on healthcare will affect important sub-sectors such as the medical devices industry, which was valued at US$4.5 billion in 2019. Most of this, US$2.8 billion, was from imports. Indonesia mainly imports sophisticated medical equipment such as PET-CT scanners and ICU equipment and exports low-tech equipment such as gloves and syringes.

The pharmaceutical industry is dominated by generic drugs (70 percent) and the rest by over-the-counter (OTC) drugs. The BPJS program has increased sales of generic drugs in the country, valued at over US$700 million.

Infrastructure development

Infrastructure has been at the forefront of the Joko Widodo government since 2014. The President said at the end of 2021 that in the last six years, his government has built 1,640 km of highways and 4,600 km of non-highway roads. In addition, there are now 15 new airports undergoing expansion work and a further 38 undergoing renovation. In addition, the government has constructed 22 dams and is in the process of developing 124 new ports. By 2024, 65 new dams will be built across the country.

Between 2022 and 2024, Indonesia needs about US$445 billion for infrastructure investment.

Indonesia’s Digital Economy

Indonesia is also keen to use the forum to push for equal access to technology and capital, especially for growing tech startups; Indonesia’s digital economy is expected to reach US$125 billion by 2025.

The country is Southeast Asia’s largest and fastest-growing internet economy – more than 170 million Indonesians used the internet in 2020, with 10 percent engaging in online shopping. E-commerce has been the driving force behind the transformation of Indonesia’s retail landscape and the country’s gross merchandise value (GMV) ranked third in the world at US$40 billion, beating India at US$38 billion.

Indonesia thus presents ample and scalable digital opportunities for foreign investors, particularly in e-commerce, fintech and the Internet of Things (IoT). In an effort to take full advantage of this growth potential, the Indonesian government issued new digital and e-commerce tax laws in 2020, a sign of an improving regulatory landscape. This will be facilitated by the country’s vibrant technology sector, backed by one of the largest number of startups in the world.

Education

Indonesia has the largest education system in the world with about 55 million students. Additionally, with a strong economy, public appetite for higher education is increasing as Indonesians have more disposable income to spend on education.

The country’s higher education sector is expected to be worth US$118 billion by 2025. This presents ample opportunities for British education institutions to enter the Indonesian education market, especially as the UK is known for the quality of its universities and vocational schools.

Indonesian companies have cited difficulties in recruiting employees for managerial and professional levels. An OECD report in 2020 found that only 11.9 percent of adults had completed tertiary education, well below the OECD average of 44 percent.

Improving the outcomes of its higher education institutions will be key for Indonesia to address this issue. As such, the government plans to add 57 million skilled workers to the economy by 2030. To achieve this, the government has set specific targets for its education sector which include:

• increasing the number of science and engineering graduates;
• Improving the science and technology of local universities through international cooperation;
• improving the employability of graduates in the higher education and vocational education sectors; And
• Improving the quality of research and innovation activities.

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