Bilateral cooperation, investment top focus as S'pore, Indonesia mark 50 years of ties

Prime Minister Lee Hsien Loong with Indonesian President Joko Widodo, Mrs Lee Hsien Loong and Mrs Iriana Joko Widodo in Semarang, Indonesia during the Singapore-Indonesia Leaders' Retreat in 2016. PHOTO: LIANHE ZAOBAO

Singapore and Indonesia have a shared history dating beyond the ancient kingdoms of the Majapahit era and, today, their fates are still closely intertwined, with close economic cooperation a key plank in regional prosperity.

As the two Asean nations mark 50 years of diplomatic ties next month, questions remain over how the relationship will evolve in the next half-century.

As South-east Asia's largest economy with a booming youth population hungry for success, Indonesia is undergoing sweeping reforms under President Joko Widodo.

Its economy is expected to grow by around 5 per cent this year for the third year in a row, and the World Bank says Indonesia needs US$500 billion (S$679 billion) in the next five years to expand its infrastructure if it is to continue its rapid expansion.

"Indonesia's infrastructure needs are massive, whether in (terms of) roads, ports or utilities. To attract more foreign direct investment, the Indonesian government has gradually liberalised restrictions and increased foreign participation," said Ms Selena Ling, head of treasury research and strategy at OCBC Bank.

"Involvement in the Belt and Road Initiative, namely the Maritime Road portion, also offers opportunities to increase infrastructure financing and investments, and expand new potential markets."

On the domestic front too, President Joko is facing challenges in navigating his country against a rising tide of Islamic conservatism and radicalism.

Meanwhile, next-door neighbour Singapore is Indonesia's largest foreign investor, with investments amounting to more than $13 billion and bilateral trade reaching $56.1 billion.

Singapore is keen to further tap into Indonesia's growth, not just in infrastructure but also in areas such as energy, tourism and funding.

Trade and Industry (Trade) Minister Lim Hng Kiang said during a visit to Indonesia last week: "Indonesia's urbanisation is growing and the infrastructure need is very big, and you need to leverage private capital to provide solutions and not just depend on public investment."

The two Asean neighbours are preparing to mark 50 years of diplomatic ties at the next retreat between President Joko and Prime Minister Lee Hsien Loong.

Equally important, Singapore and Indonesia work closely in defence and counter-terrorism. The city-state also shares Jakarta's call for parties in the South China Sea dispute to respect the rule of law.

"We are not competitors. Both countries should synergise political, economic and security cooperation, leveraging on each other's strength," said associate professor Leonard Sebastian, coordinator of the Indonesia programme at the Institute of Defence and Strategic Studies, S. Rajaratnam School of International Studies.

He said the two neighbours need to understand each other better. "We must find ways to address this perception gap. Otherwise, we will never be able to maximise the potential evident in the bilateral relationship," he added.

Bilateral relations are at times tested by issues such as the transboundary haze, and claims that many wealthy Indonesians use Singapore as a safe haven to evade their taxman.

To discuss these bilateral matters, three experts have been invited to The Straits Times Global Outlook Forum panel discussion on Aug 29. The speakers are Prof Sebastian, Ms Ling and Mr Francis Chan, The Straits Times' Indonesia bureau chief.

The forum, sponsored by OCBC Premier Banking, is titled Singapore-Indonesia Ties At 50: What Lies Ahead. It will be held at OCBC Centre in Chulia Street.

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A version of this article appeared in the print edition of The Straits Times on August 02, 2017, with the headline Bilateral cooperation, investment top focus as S'pore, Indonesia mark 50 years of ties. Subscribe