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UK turns to Indonesia, Asian powerhouses as Brexit looms

As it prepares to leave the European Union next year, the United Kingdom may feel the need to look beyond its neighbors and seek new economic lifelines in Asia, where potential sources of growth remain largely untapped

Marchio Irfan Gorbiano (The Jakarta Post)
Jakarta
Tue, September 25, 2018

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UK turns to Indonesia, Asian powerhouses as Brexit looms

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s it prepares to leave the European Union next year, the United Kingdom may feel the need to look beyond its neighbors and seek new economic lifelines in Asia, where potential sources of growth remain largely untapped.

The sentiment was apparent in the statements of UK Economic Secretary to the Treasury and City Minister John Glen, who visited Jakarta on Monday in his first official trip to Indonesia, the first stop of his tour before he flies to Malaysia and Japan.

After meeting Finance Minister Sri Mulyani Indrawati at the latter’s office in Jakarta, Glen said he discussed the UK’s desire to deepen economic ties with Indonesia, particularly in opportunities to develop green finance and financial services through the UK’s Global Prosperity Fund.

“We have the prosperity fund, an infrastructure fund in which we have specific programs of support available, to work out how to look at green finance and how to enable that to prosper and grow,” he told reporters.

The UK’s Global Prosperity Fund is a five-year cross-government fund worth 1.2 billion pounds (US$1.57 billion) spanning from 2016 and 2017 to 2021 and 2022. The fund is aimed at removing barriers to economic growth in order to reduce poverty.

According to its website, the majority of the fund will be channeled through commercial contracts, which are open for bids through tender. One of its goals in the countries in which it operates is “making new trading partners of the future”, which means increasing opportunities for UK business.

In the area of financial services, Glen mentioned the possibility of having more Indonesian sovereign and corporate bonds issued at the London Stock Exchange, saying that there were opportunities “in the next year or two”, yet further details still needed to be discussed.

In February, the Indonesian government became the first in Asia to issue green sukuk, raising up to $1.25 billion in capital with a five-year maturity. The government also raised $1.75 billion through regular sukuk with a 10-year maturity. The bonds were listed on the Singapore Stock Exchange and NASDAQ Dubai in the United Arab Emirates.

On a separate occasion on Monday, Sri Mulyani said that her UK counterpart had expressed appreciation for February’s bonds issuance, while also expressing hope that the UK would support Indonesia’s efforts to tackle climate change.

Glen stressed that the UK would remain open to trade and business with the rest of the world, while London would maintain its status as a global financial hub.

While it would maintain a “strong” and “deep” relationship with its neighbors in the EU, the UK viewed Asia as an important partner post-Brexit, as the latter had a growing middle class and robust economic growth, Glen said.

Glen said UK Chancellor of the Exchequer Philip Hammond was scheduled to have further meetings with Sri Mulyani later this year to discuss efforts to deepen economic ties. One major issue that might receive further attention between the two countries post-Brexit was the timber trade.

British Ambassador to Indonesia, Timor Leste and ASEAN Moazzam Malik said the UK and Indonesia had agreed to continue the partnership in the trade of timber under the principles of Forest Law Enforcement, Governance and Trade (FLEGT) post-Brexit.

The FLEGT was set by the EU through the timber legality assurance system, which was designed to verify that Indonesia’s timber products adhere to legal standards and not a by-product of illegal logging.

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