President Joko Widodo (right) greeting Chinese President Xi Jinping during their bilateral meeting on the sidelines of the G20 Summit in Nusa Dua, Bali on Nov 16, 2022. - AFP
JAKARTA (The Jakarta Post/Asia News Network): President 'Jokowi' Widodo heads to Chengdu, China, on Thursday (July 27) to meet with frequent collaborator Xi Jinping and talk trade and investment, in line with his economic ambitions but amid outstanding debt to Beijing.
It is the second trip Jokowi has made to China in as many years, and it will likely see him try to woo more Chinese business to Indonesia.
Jokowi will arrive almost exactly one year after his last visit to Beijing, during which he discussed the continuity of Chinese infrastructure projects in the country.
Over the past decade, the government has leaned closer to the East Asian power, which it regards as a reliable partner willing to fund the nation’s continued development.
However, delays and ballooning costs from some mainline projects have fuelled criticism that Beijing’s international lending amounts to debt bondage. This has not deterred Jakarta from continuing to court Chinese investment, given that the nation is relatively insulated from financing pressures, some insiders contend.
During Jokowi’s visit, the economy will again be at the core of his engagements, with cooperation on electric vehicles (EV) expected to dominate the talks.
“The President’s main agenda will be holding a bilateral dialogue with [Xi], and he will also meet with many prominent Chinese businessmen,” Foreign Minister Retno LP Marsudi said in Jakarta on Tuesday.
Also on Tuesday, Coordinating Maritime Affairs and Investment Minister Luhut Pandjaitan told reporters that the President would visit BYD, an electric car manufacturer based in Chengdu that has previously expressed interest in investing in Indonesia.
After joining Jokowi on the China trip, Luhut is expected to journey onward to California, the United States, to meet with Tesla Inc founder Elon Musk.
In preparation for the business-focused tour, the senior minister said, the government was finalising a new raft of incentives to attract EV manufacturers such as BYD and Tesla, hoping to make itself more attractive than neighbouring automotive hubs Thailand and Vietnam, both of which have the competitive edge of being geographically closer to China.
“Tomorrow we are going to finalise incentives that we are going to give to any EV investment in Indonesia,” Luhut said, as quoted by Reuters. He did not provide further details.
Indonesia has ramped up its diplomatic and economic efforts in recent years to support its ambition to develop a downstream critical minerals industry. It is seeking to take advantage of its vast nickel resources to establish itself as an EV battery hub and make strides toward becoming a high-income country.
Last month, Jokowi secured a deal with the Western Australian government for the procurement of lithium, a key material for EV batteries that is rare in Indonesia but abundant in Australia. Yet winning investments from vehicle manufacturers continues to be a hurdle for the Jokowi administration.
Years of effort to court US company Tesla to open operations in Indonesia fell flat, partly over Indonesia’s costly customs regime and Musk’s interest in shopping elsewhere.
Senior officials have previously said that investments from either Tesla or BYD would jump-start the downstream critical minerals industry beyond nickel, making the two companies especially attractive.
“If either of them enters Indonesia, you can imagine just how many other components would need to be developed. The demand for tin, aluminum, nickel and so on – can you imagine it?” said the coordinating ministry’s deputy for investment and mining, Septian Hario Seto, in February.
While the EV industry is among Indonesia’s top economic priorities, Jokowi will also likely use his time in China to promote some of his other policy interests, including a review of transportation projects and the development of the Nusantara capital city (IKN) project, analysts say.
The IKN project, which is estimated to require some US$32 billion, has not seen any foreign funding despite Jokowi’s persistent sales pitches to a number of countries.
Meanwhile, concerns loom over the Chinese-funded high-speed railway project connecting Jakarta and Bandung in West Java, with fears that high interest rates will ensnare the Indonesian government in a debt trap
“I think that for the IKN project, specifically, Jokowi will likely just use the occasion to refresh his pitch from last year. I don’t think China would want to be the first investor to enter IKN,” Eko Listiyanto, an economist at the Institute for Development of Economics and Finance (Indef), told The Jakarta Post on Wednesday.
“But for other aspects, such as maybe asking China to lower their interest rates for the train project, or even appealing for EV manufacturing investment, I think that those topics would be very strategic for Jokowi to discuss.”
After his China trip, Jokowi is scheduled to attend South Africa’s BRICS Summit in late August, where he may meet Xi once again.
