Indonesia official says Boeing should set up shop in country

Mr Luhut
Mr Luhut

He says US aircraft maker gets lots of business from Indonesia and should help spur economy

American aircraft maker Boeing should set up operations in Indonesia, given that it gets a lot of business from the country, a senior official has said.

Coordinating Minister for Maritime Affairs Luhut Pandjaitan said orders from Indonesia will help create thousands of jobs in the United States through to 2025, and Boeing should return the favour and help spur the local economy.

The deals include budget carrier Lion Air's reported order of 443 planes, which is Boeing's biggest this year. The Indonesian air force is also a major client, with orders of the CH-47 Chinook twin-engine helicopter manufactured by Boeing Vertol being planned.

"Now Boeing is operating an office in Singapore. They should also have it (in Indonesia). Then they also need to think about having an assembly plant here to build some parts of the planes," said Mr Luhut, who also oversees international trade negotiations.

Mr Luhut, a close aide of President Joko Widodo, was speaking to The Straits Times at his private residence last month. Mr Luhut's portfolio as Coordinating Minister covers strategic sectors such as transport, tourism and energy.

Boeing told The Straits Times on Tuesday that it "is continuously exploring potential win-win collaboration opportunities around the world, including through our supply chain". A company spokesman said: "We recognise and value Indonesia's interest in further developing its aerospace industry."

Mr Luhut cites Indonesia's growth rate, its growing middle class, lower inflation rates than previous years and its being the world's third largest democratic nation as reasons why Boeing should invest in the country.

Boeing did not commit to plans to have a representative office or assembly plant in Indonesia, saying: "In a global industry such as aerospace, supply chain opportunities are assessed based on Boeing's production needs, as well as industrial capability and competitiveness."

The spokesman added that Boeing and Indonesia have collaborated in areas such as commercial aviation safety, efficiency and aerospace industry development, to support the country's economic development and growth in its aerospace sector.

The request for Boeing to have a more significant presence in Indonesia was conveyed by Mr Luhut to US Commerce Secretary Wilbur Ross during a meeting in the United States earlier this year.

Observers say the request shows Indonesia wants more out of its relationship with Boeing, with airlines in the country set to be major buyers of jets from the American firm and its closest rival Airbus.

Lion Air, which flies mainly to destinations in Indonesia and neighbouring countries, is also the largest single buyer of Boeing's new 737 Max aircraft. It was the first to take delivery of the fuel-efficient jetliner, in May this year.

The Indonesian airline's aggressive expansion matches the country's ambitious plan to attract 19 million foreign tourists a year by 2019, from a targeted 15 million this year.

Mr Luhut said Boeing could offer work-orders to Dirgantara Indonesia, an Indonesian aerospace company which specialises in aircraft structure manufacturing. Dirgantara could build some of Boeing aircraft parts and, in turn, supply not only to the Indonesian market, but also to Japan and South Korea.

"The US should not only talk about their trade surplus. We do not want to only talk about one's interest, but both parties' interest," Mr Luhut said, referring to President Donald Trump's major campaign promise to boost US exports globally and lower trade deficits.

The US has been recording trade deficits with Indonesia every year since at least a decade ago. In the first 10 months of this year, the US had a trade deficit of US$11.3 billion (S$15.3 billion).

American exports to Indonesia include aircraft, machinery, food waste and animal feed, and cotton. US foreign direct investment in Indonesia was US$13.5 billion in 2015.

Mr Luhut cites Indonesia's growth rate - over 5 per cent this year - its growing middle class, lower inflation rates than previous years and its being the world's third-largest democratic nation as reasons why Boeing should invest in the country.

"And everything is transparent now in Indonesia. We have all the criteria for anyone to want to invest here," he said, referring to President Joko's reforms to cut red tape in business licensing processes.

Mr Luhut added that Indonesia is considering an order for Airbus' A400M military transport aircraft to replace its air force's ageing fleet of Lockheed C-130s.

A version of this article appeared in the print edition of The Straits Times on December 14, 2017, with the headline 'Indonesia official says Boeing should set up shop in country'. Print Edition | Subscribe