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November 15, 2013

Indonesia and Japan – Walking Together
–Atsushi Sasaki, Chief Representative of the JICA Indonesia Office–

PhotoAtsushi Sasaki, chief representative of the JICA Indonesia Office

By Atsushi Sasaki
Chief Representative, JICA Indonesia Office

This year marks the 55th year of diplomatic relations between Japan and Indonesia, and the 40th anniversary of friendly cooperation between Japan and ASEAN. In this article I will discuss new challenges that Indonesia faces as it develops, and how Japan and Indonesia are cooperating to solve them.

A Love of Japan Expressed with Sumo Wrestling and a Japanese Festival

At the end of August, the first sumo wrestling tour in Southeast Asia was held in Jakarta to great acclaim. Following that, a Japanese festival was held in Jakarta for the fifth time, creating a great deal of excitement among Indonesians. This year marks the 55th year of diplomatic relations between Japan and Indonesia, and the 40th anniversary of friendship and cooperation between Japan and ASEAN. For both the sumo tour and the festival, the motto "Selalu Bersama" was used, an Indonesian expression meaning "together always."

PhotoA poster announcing the Japanese festival

Through the efforts of people laying a foundation through cultural exchange over those 55 years, Indonesia has become one of the most friendly countries to Japan in the world. More than 90 percent of the cars on the road are Japanese, and as of last year, when the most recent foreign language statistics were released, there were more than 870,000 people learning Japanese as of last year, overtaking South Korea to be number two (source: the Japan Foundation). A Japan-friendly democracy with the largest population and land area of ASEAN, Indonesia faces new challenges that come with development. As economic cooperation between the two countries is a win-win relationship that is vital to both, "Selalu Bersama" is important for Indonesia and Japan.

An Emerging Economy Growing and a Growing Relationship with Japan

After 1998 when the Asian financial crisis became very serious, Indonesia underwent a period of socioeconomic chaos, followed by stabilization that has resulted in an astounding level of development in recent years. As shown in the table below, the percentage of the population below the poverty line has, through continued economic growth, halved from 24 percent in 1998 at the height of the currency crisis to 12 percent in 2012. While the data must be considered carefully, keeping in mind the large population hovering just above the poverty line and disparities such as between cities and rural areas, progress has been made overall, steadily raising the standard overall. Holding immense purchasing power, the large demographic of young people is an important force not only for Indonesia, but for Asia overall, including Japan.

PhotoSource: Statistics Indonesia (Badan Pusat Statistik)

With 240 million people earning on average more than 3,500 US dollars per year, consumption is the primary force that drives growth, as exemplified in the sales of automobiles, which month after month exceeds 100,000 and continues to break sales records. To meet the needs of this demographic, as well as to maintain regional development and contribute to stability in Indonesia—the core of ASEAN with a focus on economic unity—the top priority is for the private industry sector of Indonesia to make improvements in productivity and added value. Further collaboration of Japan's public and private sector are needed in this area.

Global economic activity since the start of this year has seen volatility in natural resource prices and the economies of emerging nations, and that, along with changes in the monetary easing policies in developed nations, has brought about tremendous changes in the economic environment for Indonesia. Particularly at a time such as this, it is critical that the investment environment be steadily improved, including infrastructure development, and that investment continually grows in a productive way through direct foreign investment and other sources. As shown in the table below, foreign direct investment in Indonesia has grown steadily, except for a temporary period of stagnation in 2009 due to effects of the global recession. Indonesian investment from Japan in particular reached the highest of any country in the first half of this year, indicating the increasingly close economic relationship between the two countries.

PhotoSource: Investment Coordination Board of Indonesia

Collaborative Work on Issues with a Long-Term Perspective

With the aim of further long-term development, the Government of Indonesia has mapped out six economic corridors in the Masterplan to Accelerate and Expand Economic Development in Indonesia, its long-term vision through 2025. The core of those corridors is Jabodetabek (metropolitan Jakarta), and with the objective of improving the investment environment so the private sector can lead development, Japan is promoting the Metropolitan Priority Area concept with an emphasis on infrastructure improvement. That framework is a new model of cooperation in which many parties in the public and private sectors of both Japan and Indonesia participate, starting with the master plan, and ODA is provided under high-level leadership that includes meetings on the cabinet minister and vice-minister levels.

In addition to being a major ASEAN country, Indonesia is a member of G20, and has began to exhibit initiative on important global issues beyond its national boundaries, a front in which cooperation with Japan is also central. For example, Indonesia occupies an important position in the world for the size of its forest area and biodiversity, but such environmental destruction as well as the increasing amount of greenhouse gas emissions are critical problems for the world. Currently, a wide range of cooperation is underway to fight climate change. With respect to earthquakes and volcanoes, problems both Indonesia and Japan must contend with, research cooperation has begun on leading-edge technologies in addition to cooperation for long-term erosion control. The breadth of cooperation is also spreading such as in exchanges between residents in Indonesia's Aceh and the Tohoku Region of Japan, both of which have experienced tremendous earthquake damage.

After 55 years of diplomacy between Japan and Indonesia and 40 years of friendly cooperation between Japan and ASEAN, Japan and Indonesia can continue to contribute to regional stability and development through cooperation and moving ahead together.

About the Author

Atsushi Sasaki

Born in Tokyo, Sasaki worked as the director general of Development Assistance Department III at the former JBIC, in charge of Southwest Asia, the Middle East and Europe. After working as the director general of the Loan Administration and Information Systems Department at JBIC, he became director general of the Information Policy Department at JICA, then special advisor for financial risk management and director general of the Evaluation Department before taking his current post as chief representative of the JICA Indonesia Office in March 2013.


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