US President Donald Trump and Indonesia's President Joko Widodo shake hands during a meeting on the sidelines of the G20 Summit in Hamburg, Germany, July 8, 2017. Photo: AFP/Saul Loeb

Indonesia is quietly talking to the United States about the purchase of 32 new Lockheed Martin F-16 Viper jets and six C-130J cargo aircraft in what may partly be an effort to remove the country from any possible sanctions as the US-China trade war returns to a boil.

Well-placed Washington sources speculate that the Indonesians are seeking to protect their Generalized Scheme of Preferences (GSP) access, as well as to ward off possible US congressional retaliation against friendly countries that have recently purchased Russian military hardware.

Indonesia does not appear to be prominent on US President Donald Trump’s radar. But a US$12.6 billion bilateral trade imbalance and a rising trend of protectionism in Washington could change that, despite Indonesia just reporting its largest monthly trade deficit since 2013.

Two-way US-Indonesia trade last year hit $28.2 billion, a 7% increase over the previous year, with Indonesian exports outweighing US imports by $20.8 billion to $8.2 billion. Those flows only slightly closed the US’ deficit gap compared to 2017.

During a visit that year, US Vice President Mike Pence made it clear to President Joko Widodo that he had to do a lot more to “level the playing field and break down barriers” to ensure US exporters can fully participate in the Indonesian market.

Indonesian President Joko Widodo (R) and US Vice President Mike Pence at Merdeka Palace in Jakarta on April 20, 2017. Photo: AFP/Bay Ismoyo/Pool

While there is no timeline, Indonesia received another reminder of what is at stake with a visit last week by Bart Thanhauser, US Trade Representative Office director for Southeast Asia and the Pacific. His visit was part of an ongoing year-long GSP eligibility review related to Indonesia’s presence on a list of 16 trading partners with which the US has big trade deficits.

“I don’t think Indonesia is more on the radar than anyone else,” says one executive familiar with the talks. “I don’t think Trump actually knows where Indonesia is. But the State Department is certainly putting more emphasis on private sector trade and investment and overall economic growth.”

Most of the attention is focused on horticulture, beef imports and agricultural quotas in general, along with patent laws and draconian 2012 legislation which stipulates that all electronic data generated by foreign banks, insurance, e-commerce and credit card companies should be housed in Indonesia.

“There are large differences in how regulations are written and applied,” says one US government commercial guide. “Domestic interests often take advantage of the non-transparency of the legal and judicial systems to undermine regulations to the detriment of foreign partners.”

Indonesia’s protectionism has always been a sticking point. But while the resolution of the ownership battle over Phoenix-based Freeport McMoRan Copper and Gold’s Grasberg mine in Papua province has taken at least one irritant off the table, it has since been replaced by the de facto nationalization of the oil and gas industry.

State-owned oil company Pertamina took over the Mahakam block, the country’s second largest gas field, from French giant Total in 2017 and now has plans to assume control of Chevron’s 200,000-barrel-a-day Rokan oilfield in 2021, in addition to many other smaller producing blocks.

An Indonesian worker at a Chevron energy facility in her country. Photo: Chevron/Twitter

Overall, Trump and his advisers won’t find many US manufacturers have moved significant jobs and operations to Indonesia, which is still struggling to rationalize its nationalist economic policies with a desire for more foreign investment to revitalize its faltering manufacturing base.

Finance Minister Sri Mulyani Indrawati and other key figures in the Widodo administration clearly understand the contradiction, but it will take a dramatic change of policy direction by the president for foreign investors to start taking notice.

The latest target of Trump’s ire, blacklisted Chinese telecom giant Huawei, has made major inroads into the Indonesian market over the past eight years, supplying low-cost equipment to state-run Telkomsel and most of the other mobile phone providers.

Industry sources say that has been accomplished through generous financial packages, targeted inducements and the company’s proclivity for agreeing to most of the terms of a contract, including often rigid service performance indicators.

Indonesia is still five years away from making the transition to 5G, with government regulators wisely delaying the issuance of spectrum until they are satisfied existing 3G and 4G networks have been brought up to an acceptable standard.

That will also save the government from having to make any difficult decisions that could rile the US or China.

On the military front, it is still not clear whether Indonesia’s plans to buy 11 advanced Su-35 FlankerE multi-role fighters from Russia will run into the Countering America’s Adversaries Through Sanctions Act (CAATSA), which penalizes procurers of Russian military systems.

The air force has said it will have no option but to terminate the deal if US sanctions are enforced, but as a spokesman has noted: “We need to operate a combination of East-made and West-made fighters. Politics is uncertain, and we need balance because if we have problems with the West, we can use aircraft made in the East.”

A Lockheed Martin F-16 Vipor jet with weapons under its wings. Photo: Lockheed Martin

Ironically, the Indonesian military only went shopping in Russia in the early 2000s because of a US arms embargo which began with the Dili, East Timor, churchyard massacre by Indonesian troops in 1991 and was only strengthened following East Timor’s bloody separation from Indonesia eight years later.

Although Indonesia already has a squadron of twin-engine Sukhoi Su-27/30 jets, the subsequent lifting of the embargo has seen the delivery in the last two years of 24 refurbished US-made F-16s and eight Boeing AH-64E Apache attack helicopters worth an estimated $1.4 billion.

Indonesia’s intended purchases, including the $1.1 billion Su-35 deal, fit with an ambitious air force modernization plan, announced in June 2018, to bring its force level up to eight fighter squadrons and six refreshed transport squadrons by 2024.

It currently has six fighter squadrons spread across Java, Sumatra, Kalimantan and Sulawesi, with an inventory that includes 25 F-16C/Ds, 16 Su-27/30s and 24 British Aerospace BAE Hawk 200s.

Government sources say the C-130 workhorses are a higher priority than the costly, state-of-the-art Vipers because of the steady depletion of its current 18-strong fleet, invaluable in flying troops and relief supplies to remote parts of the archipelago.

Indonesia’s Defense Minister Ryamizard Ryacudu and then US Secretary of Defense Jim Mattis at a ceremony in Jakarta, January 23, 2018. Photo: Government Handout

Apart from its normal transport role, the Super Hercules C-130 can also be quickly configured for prolonged maritime surveillance duties with belly-mounted radar and roll-on, roll-off sensor stations in place of cargo.

The Indonesians have yet to publicly announce their interest in the F-16V, which was first demonstrated at the Singapore Air Show in 2012 and only went into service with Taiwan’s Air Force this year.

Developed to inter-operate with Lockheed’s fifth-generation F-35 and F-22 fighters, the latest F-16 variant can be deployed against enemy air defenses and also in air-to-air, air-to-ground and deep interdiction and maritime missions.

US analysts advise Indonesia to continue conducting business as usual and say there is no need for Jakarta to make any major announcements on military procurements or highlight joint military exercises or other unilateral endeavors.

High-level US visits in the recent past by Pence and then Defense Secretary James Mattis went a long way, they say, to establishing Indonesia’s value to the US as a democracy of strategic importance. But whether that assessment extends to the mercurial and unpredictable Trump is a different matter.

Asia Times Financial is now live. Linking accurate news, insightful analysis and local knowledge with the ATF China Bond 50 Index, the world's first benchmark cross sector Chinese Bond Indices. Read ATF now. 

Join the Conversation

35 Comments

  1. Greеtings I am ѕo glad I found your blog, І rеally found you by accident, ԝhile I was looking on Askjeeve for something elsе, Regardless I
    amm here now and would just like to say many thanks foor a fantastic post and a all round thrilling blog (I also
    love the theme/design), Ι don’t have time to browse it all at the
    moment but I have saved it and aⅼso added yߋujr RSS feeds,
    so when I have tіme I wiⅼl be bacҝ to read much mօre, Please do kеep up
    the great work. http://www.saeromtop.com/?document_srl=3738857

  2. Plеase let me knokw if you’re looking for a athor for your blog.
    You have some really օod рostys and I think I would be a good
    asset. If yoou ever ѡant to takе some of the loаd off, I’d absolutely lkve tο write ѕomе
    content fоr your blog in exchange for a link back too mine.
    Please send me аn еmail if interested. Thank you! http://hanpaijiaju.com/comment/html/?149310.html

  3. You actually make it seem so easy with your presentation but I find this matter to be actually something which I think I would never understand. It seems too complicated and extremely broad for me. I’m looking forward for your next post, I will try to get the hang of it!

  4. I just like the valuable information you provide for your articles.
    I’ll bookmark your weblog and check again right here frequently.
    I’m reasonably certain I will learn plenty of new stuff proper here!
    Best of luck for the following!

  5. Oh my goodness! Awesome article dude! Thank you, However I am
    encountering difficulties with your RSS. I don’t
    know the reason why I can’t join it. Is there anyone else getting identical RSS issues?
    Anyone that knows the answer can you kindly respond? Thanks!!

  6. Hello there I am so happy I found your web site, I really found you
    by accident, while I was browsing on Digg for something else, Regardless I
    am here now and would just like to say thanks
    a lot for a tremendous post and a all round interesting blog (I also
    love the theme/design), I don’t have time to read it all at
    the minute but I have saved it and also added in your RSS feeds,
    so when I have time I will be back to read a great deal more,
    Please do keep up the great job.

  7. of course like your web site however you have to check the spelling on several of your posts. Several of them are rife with spelling problems and I to find it very bothersome to inform the reality on the other hand I will definitely come back again.|

  8. We still can’t quite believe that I could possibly be one of those studying the
    important points found on this blog. My family and I are really thankful
    for the generosity and for providing me the chance to pursue the chosen career path.

    Thanks for the important information I obtained from your site.

  9. I’m extremely impressed with your writing skills and also with
    the layout on your weblog. Is this a paid theme
    or did you modify it yourself? Either way keep up the excellent quality
    writing, it is rare to see a nice blog like this one these days.

  10. Hi there! I understand this is kind of off-topic however I needed to ask.
    Does operating a well-established blog such as yours take
    a lot of work? I’m completely new to writing a blog however I
    do write in my diary every day. I’d like to start a
    blog so I will be able to share my personal experience
    and feelings online. Please let me know if you have any kind
    of suggestions or tips for new aspiring blog owners.
    Appreciate it!

  11. Hi! Quick question that’s entirely off topic.
    Do you know how to make your site mobile friendly?
    My blog looks weird when browsing from my iphone 4. I’m trying to find a theme or
    plugin that might be able to correct this issue.

    If you have any suggestions, please share.
    With thanks!

  12. It’s the best time to make some plans for the future and it’s time to be happy.
    I’ve learn this post and if I may just I desire to recommend you some
    attention-grabbing things or suggestions. Perhaps you can write subsequent articles relating to this article.
    I wish to read even more things approximately it!

  13. Hello There. I found your blog using msn. This is
    a really well written article. I will be sure to bookmark it and come back to read more of your useful information. Thanks for
    the post. I will certainly comeback.

  14. This is really interesting, You are a very skilled
    blogger. I’ve joined your feed and look forward to seeking more of your fantastic post.
    Also, I’ve shared your site in my social networks!

Leave a comment

Your email address will not be published. Required fields are marked *