Indonesia Problem on China US Trade War

Arif Abdullah A

Arif Abdullah A

IDRiS Institute - Regional & Public Policy Analyst

After success with ASIAN Games, Rupiah crash to 15,000 per US dollar, the lowest point in Jokowi cabinet. In 2012 rupiah start with optimistic value 12,000 per US dollar, some analyst said that was an effect of optimistic market with Jokowi 2012 cabinet, and then what happen now?

With current low value of rupiah most analyst explained this condition unlikely crisis on 1998, even though some people in different region of Indonesia already show uncomfortable with this situation, even some of them already make demonstration. But gladly after few days, rupiah continue to strength, until now rupiah value is 14,740 per US dollar.

In local press conference, cabinet stated that this condition as result by financial crisis on some countries like Turkey, Argentina, etc., they suffer a lot more inflation than Indonesia, and most local analyst agree with that. Just a few local insight that mention this condition was a result a global shifting and trade war between China and US., and it is quite obvious cabinet never stated this.

Indonesia as one of country that receive global investment made by China. A significant increase from $2.66 billion in 2016 to $5.5 billion in 2017 (combine China and Hongkong investment). This make China as second higher Foreign Direct Investment list after Singapore with $8.4 billion in 2017. (refer to Asia Nikkei‘s article).

With China’s One Belt One Road vision and put Indonesia as one of their hub port project, this trade war situation will drift and pressure Indonesia economic a lot. Many of Infrastructure project was hold by this condition since they funding was support by China’s FDI. This condition was also getting worse by China another option to persuade Thailand to open wide Mekong river to allow bigger cargo ship cross through it. And if this happen we gonna see how China investment gonna be slowing down and make Indonesia economic unstable.

Indonesia must realize more on global condition about One Belt One Road optional strategy in ASEAN made by China. Now day as Malaysia Government also hold some of China big project in Malaysia, and they are holding Mega Infrastructure project that have correlation with China investment, make Indonesia as the next hub after. as one of Malacca straits operator become more uncertain.

As for back up plan that Indonesia should prepare, alternative development plan on infrastructure project that backup by China investment should support with national projection plan, and Indonesia need to setup alternative fund from local investor.

Indonesia already had experience with unfinished mega project on Soekarno era that affected by trade and influenced war between China and US a long time ago, bring economic crisis, more debt and bound with non beneficial funding aggreement, one of it is Freeport. On that day, this mega infrastructure that not functional and not significant to solve public issues like monuments and sports center.

This current day, we hope for different approach, even the FDI is too good to be refused, we need more alternative from local funding.