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em>Indonesia is closer with China in terms of economic relations than ever before. Both countries have set an ambitious target to boost trade to US$80 billion by 2015.

However, several issues, such as a trade deficit on the Indonesian side and fairly limited Chinese investment, are hindering a more balanced partnership between the two of the largest economies in Asia. The Jakarta Post’s Yohana Ririhena and Linda Yulisman recently talked to newly appointed Chinese Ambassador Liu Jianchao about such issues. Below are excerpts from the conversation.

Question: Can you give us your overview of our current bilateral economic relations?

Answer: Our trade is already very strong. It was US$60 billion last year and it’s on its way to $80 billion by 2015. It is going to be a big jump. The trade is more balanced between our two countries. For example, last year, trade reached a historical high of $60.5 billion.

According to our statistics, it is a little in favor of Indonesia, about a $2 billion surplus on the side of Indonesia. It is more or less a balanced one and we are happy with that. Both of us really benefit from that arrangement and the trade volume because trade provides jobs and local commodities to each other.

At the same time, we are working hard on the investment side. I have to be frank that Chinese investment in Indonesia is not very impressive at this moment, but it will come at a stage when China’s economy is doing well and is strong enough and Chinese companies are in a very good position to invest more overseas.

With its very vibrant and dynamic economy, Indonesia is one of the major destinations for Chinese investment. So, I am sure in the next decade, Chinese investment in this great country will certainly grow in a very effective and strong manner.

We also support your economic master plan and want to be a part of your drive with the plan. We want to work with you not only in trade and investment, but also in infrastructure construction. China has the advantage, expertise and financing ability in infrastructure, so definitely infrastructure is one of the areas that we will continue to work on.

Indonesia will soon ban the export of minerals to encourage domestic added-value creation. Many consider this as wayward protectionism. What do you think?

No, definitely not. I do understand that the purpose of the Indonesian government in introducing or reenforcing this policy is to extend the chain of industry to have more value-added products before they export them and give more jobs to people.

The only thing that concerns us is how this policy is going to be implemented. The timing and sequencing are also important because foreign investors and partners should be convinced of the consistency of the policy. I also expect the Indonesian government to show more understanding and concerns to their requests.

As far as Chinese concerns, Chinese companies are getting prepared to invest more in mining and also in the smelting sector here in Indonesia. But, I think Chinese companies, together with foreign companies, do need time. So, I think some kind of time allowance should be given to these mining companies.

Back to your question about protectionism, I believe, that due to the financial and economic crisis in the world, countries tend to be more protective of their own interests. However, China stands for open and free trade because over the years China has benefited from its openness and policy of free trade, so our market remains open for products from other countries.

If you want to have protectionism, you don’t really want to compete. But actually, competition is one of the major driving forces of any country’s economy. Don’t be afraid of competition. Only competition can give you more incentives and more urge to strengthen yourself, to give yourself more competitiveness.

You know, before China joined the WTO [World Trade Organization], there were also debates over whether China should join it. People were afraid of the impact of, for example, our automotive and agricultural industries. But then, we decided we had to join.

Now, China has already become one of the largest automobile-producing countries in the world despite the tremendous challenges that we suffered after we joined the WTO. But, we managed to survive and prosper. That’s the good thing about competition. So, we have to compete to make ourselves strong.

Recently, the government also restricted import gateways for horticulture products. How will this affect Chinese horticulture exporters?

As I said, more countries are showing more tendencies to be more protective, but I don’t believe this is a sign of protectionism measures. But all in all, I hope the Indonesian government will continue to move ahead with the free flow of trade to comply with the FTA arrangement with China and ASEAN countries.
I am sure that the Indonesian government also shares with us the aspiration that we will continue as well. But, at the same time, as I said, both sides should try our best to improve the structure of trade and at the same we expand our trade, we also expand our investment.

I believe in the short term, it will affect Chinese horticultural products, but the situation will improve because I know that the Indonesian government is in a good position in implementing the FTA agreement between China and ASEAN countries. I am sure that Indonesia will observe the obligations it has with the FTA arrangement.

Many business players in Indonesia say that the ASEAN-China free trade agreement has been detrimental to domestic industries. How do you respond to that?

I am not too sure about this observation because, of course, if you have free trade, competition is actually going to be difficult. However, protectionism is even worse for our interests.

But, on the other hand, things can change. Now, more Chinese manufactured goods are flowing into Indonesia, but as our labor costs are growing, the price of our products will be higher. More Chinese companies will be investing in Indonesia and that will provide jobs, management and expertise to Indonesia. This is also how economic cooperation really progresses.

Don’t worry too much about that. After all, our trade is more or less balanced, even according to your trade statistics.

Indonesia is very gifted. It is one of the most blessed countries in the world. That is part of your competitiveness. But, the only thing is how to save money from exporting the minerals. Put the money back and upgrade your manufacturing standards and ability.