According to US media reports, in order to mitigate the negative impact of the Sino-US trade war, Indonesia plans to impose tariffs of up to 200% on Chinese goods. Indonesia's trade minister, Hassan, said Indonesia would restart its plan to protect domestic industries by imposing 100 to 200 percent safeguard tariffs on imports ranging from footwear to ceramics. He claimed that if Indonesia were inundated with imports, their micro, small and medium-sized businesses could face closure. He explained that the current "oversupply" situation in the Chinese market due to the trade war has forced Chinese products to be exported to other markets, including Indonesia, after being rejected by Western countries. So after seeing the U.S. impose 200% tariffs on Chinese products, Indonesia intends to follow suit.
A senior Indonesian trade ministry official also said Indonesia's Trade Guarantee Commission was investigating to determine tariff rates. According to data from the country's statistics office, Indonesia mainly imports clothing and apparel accessories from China, Vietnam, and Bangladesh. At the end of last year, Indonesia enacted a regulation to tighten regulations on more than 3,000 imported goods, but at the time, Indonesian industry felt that the regulation hindered the flow of imported materials needed by domestic industry and was withdrawn. Indonesia is currently drafting a new ministerial regulation to address stakeholders' concerns about protecting local industries from Chinese products. The currently announced tariffs may have a negative impact on imports of footwear, clothing, textiles, cosmetics and ceramics.
In recent years, Chinese investment in Indonesia has increased significantly. In March this year, Indonesia's ambassador to China said that Indonesia has become one of China's largest investment destinations along the "Belt and Road". In just five years, China's total investment in Indonesia has increased from less than $1 billion to more than $7 billion. At that time, the Indonesian ambassador to China also said that Indonesia is launching a series of incentive policies, including tax exemptions, investment exemptions and other measures. Indonesia also needs to focus more on building a green economy and promoting digital transformation to attract more foreign investment. But I didn't expect that after less than half a year, Indonesia would start with Chinese products.
As the largest economy in Southeast Asia, Indonesia needs foreign investment to drive its development. Jakarta, the capital of Indonesia, is currently congested, polluted and prone to earthquakes. Back in 2019, Indonesia announced plans to move its capital to Borneo, and Indonesian authorities hope to attract $32 billion in overseas investment to advance the project. With the first phase of the project unveiled just a few months away, China is becoming one of the largest investors in the project. In addition, countries such as Singapore and Japan have also shown interest.
At present, China has become the largest foreign direct investment country in Indonesia, and its investment in Indonesia is mainly focused on infrastructure and industrial projects. For example, the $7.3 billion Bandung high-speed rail project, and the Montalangyin hydropower project. For the new capital project, Indonesia hopes that a consortium led by CITIC Limited can build 60 residential towers. China Railway Construction Company is also interested in developing the transportation system of the new capital. At present, only China has the financial resources and the ability to help Indonesia realize this plan, and the project will benefit both countries.
However, Indonesia's current move to impose tariffs may increase China's doubts about the safety of investment. You must know that the Philippines has stopped its cooperation projects with China because of the South China Sea issue. If relations between China and Indonesia deteriorate in the future, there is also a risk that the project will be stalled. Although Indonesia has not taken a tough stance on China on the South China Sea issue. However, this is not because Indonesia is friendly to China, but because the number of islands and reefs occupied by Indonesia is very small, and there is no need to contradict China because of this. Indonesia is not a country worthy of China's high trust, and China should be more cautious about investing in Indonesia.