US-Indonesia disputes in the spotlight

Bilateral tensions lurk behind American Vice President Mike Pence's upcoming visit to Jakarta, a three-day tour the US has billed as a 'goodwill' visit

April 17, 2017 5:24 PM (UTC+8)
Papuan students display placards during an anti-Freeport rally in front of the US giant Freeport-McMoRan office in Jakarta on April 7, 2017.
The students demanded an end to mining by Freeport in Papua and the freedom of Papua from Indonesia. / AFP PHOTO / Bay ISMOYO
Papuan students display placards during an anti-Freeport rally in front of the US giant Freeport-McMoRan office in Jakarta on April 7, 2017. The students demanded an end to mining by Freeport in Papua and the freedom of Papua from Indonesia. / AFP PHOTO / Bay ISMOYO

Washington has billed Vice President Mike Pence’s visit to Indonesia next week as a booster for the Strategic Partnership between the world’s second- and third-largest democracies, but a raft of bilateral tensions could sap the goodwill from his trip.

Pence’s counterpart in the world’s most populous Muslim country has voiced worries about US President Donald Trump’s immigration policy, which critics say is biased against Muslims, and about his “America First” mantra on trade and investment.

“We in Indonesia never change. The change is there. That’s why we’re asking them now, ‘what is your policy now on the economy, on democracy, now that Trump is in power?’,” Vice President Jusuf Kalla told Reuters on March 31.

“What does it mean, ‘America first’? I can say, too, ‘Indonesia first’ if you say ‘America first’.”

Republican U.S. presidential nominee Donald Trump (R) and vice presidential nominee Mike Pence (L) hold a campaign rally in Cleveland, Ohio, U.S. October 22, 2016. Phoo: Reuters/Jonathan Ernst
 US President Donald Trump (R) and Vice President Mike Pence (L) at a campaign rally before last year’s US presidential election. Photo: Reuters/Jonathan Ernst

Indonesia is one of 16 countries against which the United States runs a trade deficit that will be investigated by the Trump administration for possible trade abuses.

Trump’s combative approach will not sit easily with Indonesia, where economic nationalism and protectionist tendencies have flourished since a slump in commodity prices in recent years slammed the brakes on economic growth.

“Unfortunately I do see a hardening of attitudes on our side,” said a senior Indonesian government official, who declined to be named. “And it’s of particular concern because we’re on that list of 16 countries … that are going to be investigated.”

The official said a tougher stand by Indonesian authorities had also contributed to a series of disputes with US companies, including Alphabet Inc’s Google, miner Freeport-McMoRan Inc and financial services giant JP Morgan Chase & Co.

Indonesia has dueled with Google over back taxes and fines running into hundreds of millions of dollars, and with Freeport in a contract row that has crippled operations at the world’s second-largest copper mine, Grasberg.

Freeport McMoRan's Grasberg mining complex, one of the world's biggest gold and copper mines located in Indonesia's remote eastern Papua province. Photo:  AFP / Olivia Rondonuwu
Freeport McMoRan’s Grasberg mining complex, one of the world’s biggest gold and copper mines located in Indonesia’s remote eastern Papua province. Photo: AFP/Olivia Rondonuwu

It also dropped JP Morgan as a primary bond dealer after the bank’s research analysts issued a negative report on the country in November.

“It’s a very unfortunate series of issues which all happen to be American,” said the official, who expects them to come up in private during Pence’s visit. Indonesia is the third stop on an April 15-25 tour that includes South Korea, Japan and Australia.

Google declined to comment for this report, and JPMorgan did not respond to a request for comment.

Freeport Indonesia spokesman Riza Pratama said: “This visit is happening entirely independent of our current negotiations with the government of Indonesia.”

However, billionaire investor Carl Icahn, Freeport’s third-biggest shareholder and now a special adviser to Trump, has described Jakarta’s tactics over the mining contract as “disingenuous and insulting”, according to the New York Times.

Billionaire activist-investor Carl Icahn gives an interview on FOX Business Network's Neil Cavuto show in New York February 11, 2014.  Icahn has backed off from his campaign urging Apple to increase its stock buybacks, citing the company's recent repurchases as well as an influential proxy adviser's call against his proposal.   REUTERS/Brendan McDermid (UNITED STATES) - RTX18MUV
Billionaire investor and Freeport shareholder Carl Icahn believes Indonesia’s treatment of the mining giant has been “disingenuous.” Photo: Reuters/Brendan McDermid

Another potential irritant is biodiesel.

The US National Biodiesel Board (NBB), a producer group, has petitioned the US government to impose anti-dumping duties on biodiesel from Indonesia and Argentina, claiming they have flooded the US market.

“This is one of the issues that we have asked the trade ministry to bring to the meeting (with Pence),” Paulus Tjakrawan, a director at the Indonesia Biofuel Producers Association, told Reuters.

“Our hope is for the government to be firm … Otherwise we will be taken advantage of,” he said. “Not to act like thugs but, for example, if they put barriers to our exports, why not stop importing some of their goods?”

Despite the strains, the government official said Indonesia would be careful to start its relationship with the Trump administration on the right foot.

Indonesia's President Joko Widodo (L) speaks to US President Barack Obama as they take part in a dialogue with world leaders at the G7 Summit in Shima in Mie prefecture on May 27, 2016.A British secession from the European Union in next month's referendum could have disastrous economic consequences, G7 leaders warned on May 27 at the close of the summit in Japan. / AFP PHOTO / STEPHANE DE SAKUTIN
Indonesia’s President Joko Widodo (L) with former US President Barack Obama at a summit meeting on May 27, 2016. Photo: AFP/ Stephane De Sakutin 

Indonesian President Joko Widodo’s approach to foreign policy has been led more by economic interests than geopolitical considerations: he has pursued increased trade and investment from China but keeps a diplomatic distance from Beijing and established a strategic partnership with Washington under former President Barack Obama.

US ambassador to Indonesia, Joseph Donovan Jr, said in a statement last week that Pence’s visit reflected a continued commitment to that partnership, would deepen economic engagement and boost regional security cooperation.

“The US embassy here certainly is going to great lengths to make the visit a success,” said the Indonesian official. “My impression is he’s (Pence) not going to ruffle feathers in public, he’s not going to cause a ruckus.”

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